Document:

exhibit10_19.htm

     

    EXHIBIT 10.19

     

    

     

    AMENDED
AND RESTATED

    EXECUTIVE
EMPLOYMENT AGREEMENT

     

    This
Amended and Restated Executive Employment Agreement (this "Agreement") is
entered into as of February 8, 2008 by and between Donald T. Johnson Jr., a
natural person ("Executive"), and Aftermarket Technology Corp., a Delaware
corporation (“ATC”).  As used herein, the “Company” refers to ATC
and/or any subsidiary of ATC.  The parties hereto agree as
follows:

     

    1.           Employment.

     

    (a)           Full Time and Best
Efforts.  Subject to the terms set forth herein, the Company
agrees to employ Executive as Chairman, President and Chief Executive Officer of
ATC and Executive hereby accepts such employment.  While employed by
the Company, Executive will devote his full time, best efforts and attention to
the performance of his duties hereunder and to the business and affairs of ATC
and its subsidiaries.

     

    (b)           Duties.  Executive
shall perform such duties for the Company as are customarily associated with the
above management positions, consistent with the Bylaws of the Company and as
required by the Board of Directors of ATC.

     

    (c)           Company
Policies.  The employment relationship between the parties
shall be governed by the general employment policies and practices of the
Company, except that when the terms of this Agreement differ from or are in
conflict with such employment policies and practices, this Agreement shall
control.

     

    2.           Compensation and
Benefits.

     

    (a)           Salary.  Executive
shall receive for services to be rendered hereunder an annual base salary of
$560,000 payable on the Company’s regular payroll dates, subject to increase at
the discretion of the Company, and subject to standard withholdings for taxes
and social security and the like.

     

    (b)           Incentive
Plans.  Executive shall participate in the Company’s incentive
plans as follows: (i) the 2008 Incentive Compensation Plan at a target
bonus of 90% of base salary, (ii) subsequent annual Incentive Compensation
Plans at a target bonus to be established by the Board of Directors,
(iii) the 2008-2010 Long-Term Incentive Plan through (A) a grant of
22,231 shares of restricted stock, (B) a grant of 71,275 options to
purchase common stock, and (C) a cash bonus targeted at $540,000, and
(iv) subsequent Long-Term Incentive Plans at levels to be established by
the Board of Directors.  Such participation shall be subject to and on
a basis consistent with the terms, conditions and administration of the
incentive plans.  Executive understands that (x) the Company
shall have discretion to establish incentive plan objectives for Executive and
to determine his level of achievement of those objectives, and (y) any such
plan may be modified or eliminated in the Company’s sole discretion in
accordance with applicable law and the terms of such plan, provided that any
such modification or elimination shall not apply to Executive unless such
modification or elimination also applies to all other plan participants on a
substantially comparable basis.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (c)           Participation in Benefit
Plans.  While employed by the Company, Executive shall be
entitled to participate in any group medical, dental, health and accident,
disability insurance, life insurance (at a minimum of $1.5 million in
Company-paid coverage), retirement income, deferred compensation or similar plan
or program of the Company to the extent that he is eligible under the general
provisions thereof.  The Company may, in its discretion and from time
to time, establish additional management benefit programs as it deems
appropriate.  Executive understands that any such plans may be
modified or eliminated in the Company's discretion in accordance with applicable
law.

     

    (d)           Vacation.  Executive
shall be entitled to five weeks paid vacation.  The days selected for
Executive's vacation must be mutually agreeable to the Company and
Executive.

     

    3.           Perquisites.

     

    (a)           Financial Planning/Club Dues
Allowance.  Executive will receive reimbursement for up to
$20,000 of expenses incurred during a calendar year for (i) personal
financial/tax planning, (ii) estate planning (including legal fees),
(iii) club (e.g.,
country club, health club, social club) dues, (iv) home office and internet
service, and (v) other matters similar to the foregoing.

     

    (b)           Automobile.  Executive
shall be entitled to an annual automobile allowance of $24,000, retroactive to
January 1, 2008, subject to applicable withholding.

     

    4.           Business
Expenses.  Executive shall
be reimbursed for documented and reasonable business expenses in connection with
the performance of his duties hereunder.

     

    5.           Termination
of Employment.  The date on which
Executive's employment by the Company ceases, under any of the circumstances
provided in Section 5(a)-(g), shall be defined herein as the "Termination
Date."  All capitalized terms used in this Section 5 without
definition will have the meanings set forth in Section 5(l).

     

    (a)           End of Employment
Term.  Unless terminated earlier pursuant to
Section 5(b)-(g), Executive’s employment will terminate on
December 31, 2008, provided that on December 31, 2008 the employment
term shall automatically renew until December 31, 2009 unless the Company
gives Executive written notice of nonrenewal on or before September 30,
2008.  Within ten business days after the Termination Date, Executive
shall receive payment for all accrued salary through the Termination Date and
the Earned Benefits.  Executive shall also receive the LTIP Payment
under a particular Long-Term Incentive Plan upon the completion of the Company’s
audited consolidated financial statements for the last year of such Long-Term
Incentive Plan (e.g., 2008 in the case of the 2006-2008 Long-Term Incentive
Plan).  Except as provided above, no compensation of any kind or
severance payment will be payable under this Agreement due to a termination
pursuant to this Section 5(a), except that if a Change in Control occurs
within 18 months prior to Executive’s termination pursuant to this
Section 5(a), such termination shall be treated as a Company termination
without Cause and Executive shall be entitled to the payments and benefits
provided in Section 5(f).

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    (b)           Termination for
Cause.  The Company may terminate Executive's employment at any
time for Cause immediately upon written notice to Executive of the circumstances
leading to such termination for Cause.  If Executive's employment is
terminated for Cause, Executive shall receive payment for all accrued salary
through the Termination Date (which in this event shall be the date upon which
notice of termination is given) and the Earned Benefits.  The Company
shall have no obligation to pay severance of any kind nor to make any payment in
lieu of notice if Executive is terminated for Cause.

     

    (c)           Voluntary
Termination.  Executive may voluntarily terminate his
employment with the Company at any time upon 90 days’ prior written
notice.  Within ten business days after the Termination Date,
Executive shall receive payment for all accrued salary through the Termination
Date and the Earned Benefits, after which no further compensation of any kind or
severance payment will be payable under this Agreement.  If the Board
determines that Executive has provided all services and cooperation required by
the Board to transition Executive’s position to a successor (regardless of
whether an orderly transition has actually occurred), Executive shall also
receive the LTIP Payment under a particular Long-Term Incentive Plan upon the
completion of the Company’s audited consolidated financial statements for the
last year of such Long-Term Incentive Plan (e.g., 2008 in the case of the
2006-2008 Long-Term Incentive Plan).

     

    (d)           Termination Upon
Death.  Executive’s employment will terminate upon his
death.  Within ten business days after the Termination Date,
Executive’s estate shall receive payment for all accrued salary through the
Termination Date and the Earned Benefits.  Executive’s estate shall
also receive the LTIP Payment under a particular Long-Term Incentive Plan upon
the completion of the Company’s audited consolidated financial statements for
the last year of such Long-Term Incentive Plan.  Except as provided
above, no compensation of any kind or severance payment will be payable under
this Agreement due to a termination pursuant to this
Section 5(d).

     

    (e)           Termination Upon
Disability.  The Company may terminate Executive's employment
in the event Executive suffers a disability that renders Executive unable to
perform the essential functions of his position, even with reasonable
accommodation in compliance with the Americans with Disabilities Act, for three
consecutive months.  A termination in such circumstances shall be
treated as a Company termination without Cause and Executive shall be entitled
to the payments and benefits provided in Section 5(f) and
Section 5(i)(i).  The foregoing shall not affect any rights that
Executive may have under applicable workers’ compensation laws or any disability
plan of the Company.

     

    (f)           Termination Without
Cause.  The Company may terminate Executive's employment
without Cause at any time upon 30 days’ prior written notice.  Within
ten business days after the Termination Date, Executive shall receive payment
for all accrued salary through the Termination Date and the Earned
Benefits.  Executive shall also receive the LTIP Payment under a
particular Long-Term Incentive Plan upon the completion of the Company’s audited
consolidated financial statements for the last year of such Long-Term Incentive
Plan.  In addition, the Company shall pay Executive as severance an
amount equal to 200% of the sum of Executive’s annual base salary and his target
bonus under the Company’s Incentive Compensation Plan for the year in which the
Termination Date occurs, provided that if the Termination Date occurs within 18
months after a Change in Control 

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    the
severance amount will equal 300% of the sum of such annual base salary and
target bonus.  Subject to Section 11, the severance shall be paid
in equal installments on each of the Company’s regular payroll dates during the
two-year period following the Termination Date, unless the Termination Date
occurs within 18 months after a Change in Control, in which case the severance
will be paid in a single lump sum within ten business days after the Termination
Date.  The Company will pay up to $25,000 of the cost of an
executive level individualized career transition program through a professional
outplacement firm mutually selected by the Company and the Executive if such
program is initiated within 30 days after the Termination Date.  If
Executive dies after the Termination Date, the payment or payments due
thereafter under this Section 5(f) shall be made to Executive’s estate but
the career transition benefits shall terminate as of the date of
death.  As a condition to receiving the payments and benefits provided
by this Section 5(f) (other than payment for all accrued salary through the
Termination Date and the Earned Benefits, which shall be payable in any case),
Executive shall execute and deliver to the Company on the Termination Date a
general release in the form attached hereto as Exhibit A.

     

    (g)           Fundamental
Changes.  If the Company (i) materially diminishes
Executive's duties, authority, responsibility or compensation without
performance justification, or (ii) breaches this Agreement in any material
respect, Executive may terminate his employment, provided that Executive has
given the Company 30 days’ written notice prior to such termination and the
Company has not cured such diminution or breach, as the case may be, by the end
of such 30-day period.  A termination in such circumstances shall be
treated as a Company termination without Cause and Executive shall be entitled
to the payments and benefits provided in Section 5(f) and
Section 5(i)(i).

     

    (h)           Medical
Coverage.  Except in the case of Executive’s death or
termination for Cause, until the fifth anniversary of the Termination Date (such
five-year period being the “Coverage Period”) the Company will provide continued
medical-related insurance coverage to Executive and his spouse at the levels and
at the rates applicable from time to time to comparable active employees and
spouses of the Company.  Medical-related insurance coverage includes
health, dental, vision and/or cancer.  COBRA continuation coverage
eligibility shall commence as of the day following the end of the Coverage
Period.  Notwithstanding the above, coverage under each of these plans
shall cease on the date (i) Executive (or his spouse in the event Executive
dies during the Coverage Period) fails to pay timely the premium required by
such plan, (ii) Executive (or his spouse in the event Executive dies during
the Coverage Period) becomes eligible for coverage under Medicare or the group
health plan of any other employer, or (iii) the Company terminates such
plan as to all its employees, provided, however, that if the Company terminates
such plan, the Company shall make a lump sum payment to Executive (or to his
spouse in the event Executive dies during the Coverage Period) equal to
(x) the Company’s contribution to such plan with respect to Executive and
his spouse (or just his spouse if Executive is then no longer alive) for the
last full month during which coverage was provided under such plan multiplied by
(y) the number of months remaining in the Coverage Period.

     

    (i)           Vesting of Restricted Stock
and Stock Options.  All of Executive’s restricted stock and
unvested stock options that are outstanding as of the Termination Date will be
treated as follows following the Termination Date:

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    (i)           In
the case of termination pursuant to Section 5(a) or Company termination
without Cause, such restricted stock and unvested options will continue to vest
after the Termination Date according to their vesting schedules notwithstanding
the fact that Executive has ceased to be an employee of the
Company.

     

    (ii)           In
the case of Executive’s death, such restricted stock and unvested options shall
fully vest as of the Termination Date.

     

    (iii)           In
the case of voluntary resignation, such restricted stock and unvested options
will terminate on the Termination Date unless the Board determines that
Executive has provided prior to the termination of Executive’s employment all
services and cooperation required by the Board to transition Executive’s
position to a successor (regardless of whether an orderly transition has
actually occurred), in which case such restricted stock and unvested options
will continue to vest after the Termination Date according to their vesting
schedules notwithstanding the fact that Executive has ceased to be an employee
of the Company.

     

    (iv)           In
the case of termination for Cause, restricted stock and unvested options will
terminate on the Termination Date.

     

    (v)           Except
in the case of termination for Cause, options that are vested as of the
Termination Date or subsequently vest pursuant to this Section 5(i) shall
remain in effect and be exercisable until the tenth anniversary of the date of
grant.

     

    (j)           No Other Payments or
Benefits.  Except as otherwise expressly provided in this
Agreement, (i) after the Termination Date Executive will not be entitled to
any payments from the Company and (ii) on the Termination Date Executive’s
participation in and coverage under the Company’s benefit programs (including
the ATC Retirement Savings Plan (i.e., the 401(k) plan) and
the Company’s group life and disability insurance plans) shall cease; provided
that Executive shall retain any right to convert to individual coverage as
permitted under these insurance plans and to any vested benefits under the
401(k) plan and the Company’s stock option plans.

     

    (k)           Withholding.  Any
amounts payable under this Section 5 shall be subject to standard withholdings
for taxes and social security and the like.

     

    (l)           Definitions.

     

    (i)           "Cause" means the occurrence
or existence of any of the following with respect to Executive, as determined by
the Company in its sole discretion:

     

    (A)           a
material breach by Executive of (x) his duty not to engage in any
transaction that represents, directly or indirectly, self-dealing with the
Company or any of its affiliates that has not been approved by the Company, or
(y) the terms of this Agreement, if in any such case such material breach
remains uncured after the lapse of 30 days following the date that the Company
has given Executive written notice thereof;

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    (B)           the
material breach by Executive of any duty referred to in clause (A) above as to
which at least one written notice has been given pursuant to clause
(A);

     

    (C)           any
act of dishonesty, misappropriation, embezzlement, intentional fraud or similar
conduct involving the Company or any of its affiliates;

     

    (D)           the
conviction or the plea of nolo contendere or the equivalent in respect of a
felony involving moral turpitude;

     

    (E)           any
intentional damage of a material nature to any property of the Company or any of
its affiliates; or

     

    (F)           the
repeated non-prescription use of any controlled substance or the repeated use of
alcohol or any other non-controlled substance that, in the reasonable
determination of the Company renders Executive unfit to serve in his capacity as
an employee of the Company or its affiliates.

     

    (ii)           “Change in Control” means the
first to occur of the following:

     

    (A)           any
sale or transfer or other conveyance, whether direct or indirect, of all or
substantially all of the assets of the Company, on a consolidated basis, in one
transaction or a series of related transactions, unless, immediately after
giving effect to such transaction, at least 85% of the total voting power
normally entitled to vote in the election of directors, managers or trustees, as
applicable, of the transferee is “beneficially owned” by persons who,
immediately prior to the transaction, beneficially owned 100% of the total
voting power normally entitled to vote in the election of directors of the
Company;

     

    (B)           any
Person or Group is or becomes the "beneficial owner," directly or indirectly, of
more than 35% of the total voting power in the aggregate of all classes of
capital stock of the Company then outstanding normally entitled to vote in
elections of directors;

     

    (C)           during
any period of 12 consecutive months, individuals who at the beginning of such
12-month period constituted the Company’s Board of Directors (together with any
new directors whose election by such Board or whose nomination for election by
the shareholders of the Company was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Company’s Board
of Directors then in office; or

     

    (D)           a
reorganization, merger or consolidation of the Company the consummation of which
results in the outstanding securities of any class of the Company’s capital
stock being exchanged for or converted into cash, property and/or a different
kind of securities, unless, immediately after giving effect to such

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    transaction,
at least 85% of the total voting power normally entitled to vote in the election
of directors, managers or trustees, as applicable, of the entity surviving or
resulting from such reorganization, merger or consolidation is “beneficially
owned” by persons who, immediately prior to the transaction, beneficially owned
100% of the total voting power normally entitled to vote in the election of
directors of the Company.

     

    (iii)           “Earned Benefits” means any
(A) bonus that is payable to Executive pursuant to the terms of
(x) any annual Incentive Compensation Plan for a year ended prior to the
Termination Date that has not been paid prior to the Termination Date and
(y) the annual Incentive Compensation Plan for any subsequent years in the
case of a termination pursuant to Section 5(a) if the Termination Date
occurs on or before the last day of such annual Incentive Plan,
(B) vacation time that has accrued and not been used as of the Termination
Date, (C) other entitlements to cash payments that have accrued and not
been paid as of the Termination Date, and (D) any deferred compensation earned
by Executive prior to termination.  Notwithstanding other provisions
of this Agreement regarding the timing of payment of Earned Benefits,
(x) any annual Incentive Compensation Plan bonus will not be paid until the
completion of audited consolidated financial statements for the year to which
such Incentive Compensation Plan relates, and (y) deferred compensation
will be paid as provided in the Company’s deferred compensation
plan.

     

    (iv)           “LTIP Payment” means the
amount, if any, that would have been payable to Executive under the cash award
component of any Long-Term Incentive Plan if he had remained employed by the
Company through December 31 of the last year of such Plan multiplied by a
fraction (A) the numerator of which is the number of days starting
January 1 of the first year of such Long-Term Incentive Plan (e.g.,
January 31, 2006 in the case of the 2006-2008 Long-Term Incentive Plan)
through the Termination Date and (B) the denominator of which is the number
of days in such Long-Term Incentive Plan (e.g., 1,095 in the case of the
2006-2008 Long-Term Incentive Plan).

     

    (v)           “Person” and “Group” have the meanings
used for purposes of Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended, whether or not such sections apply to the transaction in
question.

     

    6.           Proprietary
Information Obligations.  Prior to and/or
while employed by the Company, Executive has had and/or will have access to and
has become and/or will become acquainted with the confidential and proprietary
information of the Business (as defined in Section 8) and the Company and
its affiliates, including but not limited to confidential and proprietary
information or plans regarding customer relationships; personnel; sales,
marketing, and financial operations and methods; trade secrets; formulas;
devices; secret inventions; processes and other compilations of information,
records, and specifications (collectively "Proprietary
Information").  Executive shall not disclose any of the Proprietary
Information directly or indirectly, or use it in any way, either while employed
by the Company, or at any time thereafter, except as required in the course of
his employment hereunder or as authorized in writing by the
Company.  All files, records, documents, computer-recorded
information, drawings, specifications, equipment and similar items relating to
the Business or the Company or its affiliates, whether prepared by Executive or
otherwise coming into his possession prior to or while employed by the Company,
shall remain the 

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    exclusive
property of the Company or such affiliate and shall not be removed from the
premises of the Company or its affiliate under any circumstances whatsoever
without the prior written consent of the Company, except when (and only for the
period) necessary to carry out Executive's duties hereunder, and if removed
shall be immediately returned upon any termination of his employment and no
copies thereof shall be kept by Executive.

     

    7.           Noninterference.  While employed by
the Company and for a period of three years thereafter, Executive shall not,
without the prior written consent of the Company, interfere with the Company or
any of its affiliates by directly or indirectly soliciting, attempting to
solicit, inducing, or otherwise causing or assisting any person who is then
employed by the Company or any of its affiliates to terminate such employment in
order to become an employee, consultant or independent contractor to or for any
employer other than the Company or such affiliate.

     

    8.           Noncompetition.  Executive agrees
that while employed by the Company and during the 24 months after the
Termination Date, he will not, without the prior consent of the Company,
directly or indirectly, have an interest in, be employed by, be connected with,
or have an interest in (as an employee (whether full-time, part-time or
temporary), consultant, officer, director, partner, stockholder, joint venturer,
promoter or lender), any person or entity owning, managing, controlling,
operating or otherwise participating or assisting in any business that is either
(i) similar to the Business (or any portion thereof) and would benefit from
the disclosure of the Company’s trade secrets or (ii) in competition with
the Business (or any portion thereof) in any of the 50 states in the United
States of America; provided, however, that the foregoing shall not prevent
Executive from being a stockholder of less than 1% of the issued and outstanding
securities of any class of a corporation listed on a national securities
exchange or designated as national market system securities on an interdealer
quotation system by the National Association of Securities Dealers,
Inc.  Without limiting the generality of the foregoing, a business
will be deemed to be in competition with the Business at a given point in time
if any of the customers of such business were customers of the Business at any
time during the 18 months preceding the time in question.  As
used herein, “Business” means any and all of the businesses in which the Company
is engaged as of the Termination Date.

     

    9.           Remedies.  Executive
acknowledges that a breach or threatened breach by Executive of any the
provisions of Sections 6, 7 or 8 will result in the Business and the
Company and its affiliates suffering irreparable harm that cannot be calculated
or fully or adequately compensated by recovery of damages
alone.  Accordingly, Executive agrees that the Company shall be
entitled to interim, interlocutory and permanent injunctive relief, specific
performance and other equitable remedies, in addition to any other relief to
which the Company may become entitled should there be such a breach or
threatened breach.

     

    10.           Excise
Tax Gross-Up Payment.  If Executive’s
employment is terminated by the Company without Cause within 18 months after a
Change in Control and Executive becomes subject to the excise tax imposed by
Internal Revenue Code (“Code”) Section 4999 (the “Parachute Excise Tax”) with
respect to any amounts paid or payable to Executive under this Agreement, then
the Company and Executive agree that:

     

    (a)           If
the aggregate of all “parachute payments” (as such term is used under Code
Section 280G) exceeds 300% of the “base amount” (as such term is used under Code
Section 280G), then the Company shall pay to Executive a tax gross-up payment so
that after payment by or on behalf of Executive of all federal, state and local
excise, 

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

    

     

    income,
employment, Medicare and any other taxes (including any related penalties and
interest) resulting from the payment of the parachute payments and the tax
gross-up payments to Executive by the Company, Executive retains on an after-tax
basis an amount equal to the amount that Executive would have retained if
Executive had not been subject to the Parachute Excise Tax; provided, however,
that the Company’s maximum tax gross-up payment under this Section 10 shall
not exceed $5,000,000.

     

    (b)           The
computation of the excess parachute payment in accordance with Code Section 280G
shall be done by a nationally recognized and reputable independent accounting or
valuation firm selected and paid for by the Company.

     

    (c)           Executive
shall notify the Company in writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the Company of any tax
gross-up payments.  Such notification shall be given as soon as
practicable but no later than ten (10) business days after Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be
paid.  Executive shall not pay such claim prior to the expiration of
the thirty (30)-day period following the date on which Executive gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due).  If the Company
notifies Executive in writing prior to the expiration of such period that it
desires to contest such claim, Executive shall:

     

    (i)           give
the Company any information reasonably requested by the Company relating to such
claim,

     

    (ii)           take
such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company,

     

    (iii)           cooperate
with the Company in good faith in order effectively to contest such claim,
and

     

    (iv)           permit
the Company to participate in any proceedings relating to such
claim;

     

    provided,
however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold Executive harmless, on an after-tax basis,
for any excise tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of costs and
expenses.  Without limitation on the foregoing provisions of this
Section 10, the Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
Executive to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and Executive agrees to prosecute 

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to pay such
claim and sue for a refund, the Company shall advance the amount of such payment
to Executive, on an interest-free basis and shall indemnify and hold Executive
harmless, on an after-tax basis, from any excise tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested
amount.  Furthermore, the Company’s control of the contest shall be
limited to issues with respect to which a gross-up payment would be payable
hereunder and Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.

     

    (d)           If,
after the receipt by Executive of an amount advanced by the Company pursuant to
this Section 10, Executive becomes entitled to receive any refund with respect
to such claim, Executive shall (subject to the Company’s complying with the
requirements of this Section 10) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto).  If, after the receipt by Executive of an amount
advanced by the Company pursuant to this Section 10, a determination is made
that Executive shall not be entitled to any refund with respect to such claim
and the Company does not notify Executive in writing of its intent to contest
such denial of refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of gross-up payment required to be paid.

     

    11.           Code
Section 409A.  Notwithstanding
anything in this Agreement or elsewhere to the contrary:

     

    (a)           If
payment or provision of any amount or other benefit that is “deferred
compensation” subject to Section 409A of the Code at the time otherwise
specified in this Agreement or elsewhere would subject such amount or benefit to
additional tax pursuant to Section 409A(a)(1)(B) of the Code, and if payment or
provision thereof at a later date would avoid any such additional tax, then the
payment or provision thereof shall be postponed to the earliest date on which
such amount or benefit can be paid or provided without incurring any such
additional tax.  In the event this Section 11 requires a deferral of
any payment, such payment shall be accumulated and paid in a single lump sum on
such earliest date without interest.

     

    (b)           If
any payment or benefit permitted or required under this Agreement, or otherwise,
is reasonably determined by either party to be subject for any reason to a
material risk of additional tax pursuant to Section 409A(a)(1)(B) of the Code,
including when final regulations are issued thereunder, then the parties shall
negotiate in good faith on appropriate provisions to avoid such risk without
materially changing the economic value of this Agreement to either
party.

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    12.           Miscellaneous.

     

    (a)           Notices.  Any
notices provided hereunder must be in writing and shall be deemed effective upon
the earlier of (i) personal delivery (including personal delivery by
telecopy, if a copy is sent by mail or overnight delivery), (ii) the
business day following being sent through an overnight delivery service, or
(iii) the third business day after mailing by first class mail to the
recipient at the address indicated below:

     

    To the
Company:

     

    Aftermarket
Technology Corp.

    1400 Opus
Place, Suite 600

    Downers
Grove, IL 60515

    Attention:  General
Counsel

    Facsimile:  (630)
663-8221

     

    To
Executive:

     

    Donald T.
Johnson Jr.

    3643
White Eagle Drive

    Naperville,
IL 60564

     

    With a
copy to

     

    Jeffrey
B. Rock

    Hasselberg,
Rock, Bell & Kuppler LLP

    4600
Brandywine Drive, Suite 200

    Peoria,
IL 61614-5591

    Facsimile:  (309)
688-9430

     

    or to
such other address or to the attention of such other person as the recipient
party will have specified by prior written notice to the sending
party.

     

    (b)           Severability.  The
provisions of this Agreement are severable and, if any court of competent
jurisdiction determines that any provision contained in this Agreement shall,
for any reason, be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement, and this Agreement shall be reformed and construed so that
such invalid or illegal or unenforceable provision would be valid, legal and
enforceable to the maximum extent possible.

     

    (c)           Entire
Agreement.  This Agreement supersedes all prior and
contemporaneous oral understandings and agreements with respect to the subject
matter hereof.

     

    (d)           Counterparts.  This
Agreement may be executed on separate counterparts, any one of which need not
contain signatures of more than one party, but all of which taken together will
constitute one and the same agreement.

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    (e)           Successors and
Assigns.  This Agreement is intended to bind and inure to the
benefit of and be enforceable by Executive and the Company, and their respective
successors and assigns, except that Executive may not delegate any of his duties
hereunder and he may not assign any of his rights hereunder without the prior
written consent of the Company.

     

    (f)           Attorney's
Fees.  If any legal proceeding is necessary to enforce or
interpret the terms of this Agreement, or to recover damages for breach
therefore, the prevailing party shall be entitled to reasonable attorney's fees,
as well as costs and disbursements, in addition to any other relief to which he
or it may be entitled.

     

    (g)           Amendments; No
Waivers.  Any provision of this Agreement may be amended or
waived if such amendment or waiver is in writing and signed, in the case of an
amendment, by all parties hereto, and in the case of a waiver, by the party
against whom the waiver is to be effective.  No waiver by a party of
any breach of this Agreement shall be deemed to extend to any prior or
subsequent breach or affect in any way any rights arising by virtue of any prior
or subsequent breach.  No failure or delay by a party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege.  The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by
law.

     

    (h)           Governing Law and
Venue.  This Agreement shall be governed by and construed and
enforced in accordance with the internal laws (without reference to choice or
conflict of laws) of the State of Illinois.  The parties to this
Agreement hereby irrevocably consent to the exclusive venue and jurisdiction of
the state and federal courts sitting in the State of Illinois for any matter or
controversy concerning either the existence or enforcement of this Agreement and
hereby waive any contention that Illinois is an improper or inconvenient
forum.

     

    (i)           Construction.  The
captions herein are included for convenience of reference only and shall be
ignored in the construction or interpretation hereof.  Neither party
hereto, nor its respective counsel, shall be deemed the drafter of this
Agreement, and all provisions of this Agreement shall be construed in accordance
with their fair meaning, and not strictly for or against either party
hereto.

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, the parties have executed this Amended and Restated Agreement
effective as of the date first above written.

     

     

    
       

    

     

    
      	
               

            	
                /s/ 
      Donald T. Johnson, Jr.

            
	 	
              Donald
      T. Johnson Jr.

            

    

     

     

    
      
        	 	AFTERMARKET TECHNOLOGY
      CORP.
	 	 	 
	
                 

              	
                 

                By:
      

              	
                 

                /s/ Joseph
      Salamunovich

              
	 	 	
                Joseph
      Salamunovich

              
	 	 	
                Vice
      President

              

      

    

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    GENERAL
RELEASE

     

    THIS
GENERAL RELEASE is entered into by the undersigned (“Employee”) as of the date
appearing next to Employee’s signature hereto.

     

    WHEREAS,
Employee’s employment with Aftermarket Technology Corp. and/or one of its
subsidiaries (Aftermarket and its subsidiaries being referred to collectively as
the “Company”) is being terminated and the Company will provide Employee with
certain benefits upon the termination of employment provided that, among other
things, Employee executes and delivers this General Release;

     

    NOW,
THEREFORE, Employee agrees as follows:

     

    1.           General
Release.  Employee
hereby

     

    (a)           releases
and discharges the Company and its officers, directors, employees, benefit plan
administrators and trustees, and agents (collectively, the “Released Parties”)
from any and all claims, liabilities, demands and causes of action, whether
known or unknown, fixed or contingent, that Employee may have or claim to have
against any of the Released Parties relating to, or arising out of, Employee’s
employment with the Company or the termination thereof, and

     

    (b)           covenants
not to initiate or participate in (except pursuant to a lawful subpoena) any
lawsuit or other legal proceeding asserting any such claims, liabilities,
demands or causes of action.

     

    This
General Release shall be broadly construed to include, but not be limited to,
all claims under any federal, state, or local laws, statutes, regulations, or
ordinances (including those prohibiting employment discrimination, such as the
federal Age Discrimination in Employment Act), and all claims in contract or
tort including, but not limited to, claims for breach of contract, negligence,
defamation, and wrongful or retaliatory discharge.  This General
Release does not include any claim Employee may have (i) based upon facts
occurring after the date that Employee executes this General Release or (ii)
relating to benefits or payments to which Employee is entitled after the
Termination Date (as defined in that certain Executive Employment Agreement
dated as of January ___, 2007 between Employee
and the Company) pursuant to the Executive Employment Agreement.

     

    2.           Knowing
and Voluntary.  Employee
acknowledges and agrees that: (a) Employee has read and understands this
General Release in its entirety; (b) Employee has been advised in writing
to consult with an attorney concerning this General Release before signing it;
(c) Employee has 21 calendar days after receipt of this General
Release to consider its terms before signing it; (d) Employee has the right
to revoke this General Release in full within seven calendar days of signing it
and that none of the terms and provisions of this General Release shall become
effective or be enforceable until such revocation period has expired;
(e) nothing contained in this General Release waives any claim that may
arise after the date of its execution; and (f) Employee is executing this
General Release knowingly and voluntarily, without duress or reservation of any
kind, and after giving the matter full and careful consideration.

     

    IN
WITNESS WHEREOF, the undersigned has executed this General Release as of the
date set forth below.

    

    
      	
              Executed:
      ______________________ , 20___

               

            	
              EMPLOYEE:

               

               

               

            
	 	
               [NAME]Amended and Restated Licence Agreement

 

EXHIBIT 10.40

CONFIDENTIAL TREATMENT REQUESTED BY QLT INC.

Amended and Restated License Agreement

BETWEEN:

the University of British Columbia, a corporation continued
under the University Act of British Columbia and having its
administrative offices at 2075 Wesbrook Mall, in the City of
Vancouver, in the Province of British Columbia, V6T 1W5

(the “University”)

AND:

QLT Inc., a British Columbia company, having a place of
business at 887 Great Northern Way, Vancouver, British Columbia,
Canada, V5T 4T5

(the “Licensee”)

WHEREAS:

A. The University has been engaged in research during the course of which it has invented,
developed and/or acquired certain technology relating to [**] compounds, therapies and/or uses as
set out on Schedules “A” and “B”, which schedules shall be updated annually;

B. The University and the Licensee have agreed that all research conducted by the University or the
Licensee prior to the Commencement Date of this Agreement (as hereinafter defined) which has
resulted in the invention, development and/or acquisition of the technology set out in Schedules
“A” and “B” was conducted under the direction of the principal investigators, [**];

C. The technology described on Schedule “B” was invented, developed and/or acquired under the
direction of [**] as a faculty member of the University together with employees of the
Licensee or other third parties;

D. The University has granted to the Licensee a number of separate licenses set out on Schedule “C”
(collectively, the “Existing License Agreements”) with respect to the technology identified on
Schedules “A” and “B”;

E. It is the intention of the University and the Licensee to enter into this license agreement to
amend and restate any and all of the Existing License Agreements on terms and conditions set out
herein; and

F. The University is desirous of entering into this Agreement with the objective of furthering
society’s use of its advanced technology, and to generate further research in a manner consistent
with its status as a non-profit, tax exempt educational institution.

     NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises and of the
mutual covenants herein set forth, the parties hereto have covenanted and agreed as follows:

 

			
	**	 	Confidential Treatment Requested.

 

2

1. DEFINITIONS:

1.1 In this Agreement, unless a contrary intention appears, the following words and phrases shall
mean:

	 	(a)	 	“Accounting”: means an accounting statement setting out in detail how the
amount of Revenue was determined,
	 
	 	(b)	 	“Affiliated Company” or “Affiliated Companies”: means two or more corporations
where the relationship between them is one in which one of them is a subsidiary of the
other, or both are subsidiaries of the same corporation, or fifty percent (50%) or more
of the voting shares of each of them is owned by the same person, corporation or other
legal entity,
	 
	 	(c)	 	“Confidential Information”: means any part of the Information which is
furnished by either party to the other and designated at that time as confidential,
whether orally or in writing but excluding any part of the Information:

	 	(i)	 	possessed by the Recipient prior to receipt from the Discloser,
as evidenced by the Recipient’s business records;
	 
	 	(ii)	 	published or available to the general public otherwise than
through a breach of this Agreement;
	 
	 	(iii)	 	obtained by the Recipient from a third party with a valid
right to disclose it, provided that said third party is not known by the
Recipient to be under a confidentiality obligation to the Discloser; or
	 
	 	(iv)	 	independently developed by employees, agents or consultants of
the Recipient who had no knowledge of or access to the Confidential Information
as evidenced by the Recipient’s business records,

	 	(d)	 	“Date of Commencement” or “Commencement Date”: means this Agreement will be
deemed to have come into force on the Date of Commencement which shall be the 1st day
of January, [**], and shall be read and construed accordingly,
	 
	 	(e)	 	“Discloser”: means a party to this Agreement providing its Confidential
Information to the other party as Recipient,
	 
	 	(f)	 	“Effective Date of Termination”: means the date on which this Agreement is
terminated pursuant to Article 18,
	 
	 	(g)	 	“Improvements”: means, collectively, the QLT Improvements and the UBC
Improvements,
	 
	 	(h)	 	“Information”: means any and all Technology and any and all Improvements and
any and all oral, written, electronic or other communications and other information
disclosed or provided by one party to the other including any and all analyses or
conclusions drawn or derived therefrom regarding this Agreement and information
developed or disclosed hereunder, or either party’s raw materials, processes,
formulations, analytical procedures, methodologies, products, samples and specimens or
functions,

 

3

	 	(i)	 	“Patents”: means, collectively, the patents and patent applications listed in
Schedules “A” and “B”, including any patents or patent applications that may be added
to Schedules “A” and “B” from time to time, and any counterparts,
Continuations-In-Part, renewals, divisionals, reissues, corresponding international
patent applications, continuations and any patents resulting therefrom, and which have
not yet expired or been abandoned;
	 
	 	(j)	 	“Product(s)”: means goods manufactured using the Technology or Improvements,
including Visudyne;
	 
	 	(k)	 	“QLT Improvements”: means any and all patentable improvements, variations,
updates, modifications, enhancements and alterations related to the Technology which
are conceived, invented, developed and/or acquired by the Licensee (but not jointly by
the Licensee and the University) at any time which claim priority from any of the
patents or patent applications which comprise the Technology and cannot be used or
practised without a licence of Technology;
	 
	 	(l)	 	“QLT New Technology”: means any new discovery or invention, whether patentable
or not, which:

	 	(i)	 	is conceived, invented, developed and/or acquired by the
Licensee (but not jointly by the Licensee and the University), at any time, and
	 
	 	(ii)	 	is not a QLT Improvement, a UBC Improvement or UBC New
Technology;

	 	(m)	 	“Recipient”: means a party to this Agreement receiving Confidential
Information of the other party as Discloser;
	 
	 	(n)	 	“Retirement Date” means March 31, [**];
	 
	 	(o)	 	“Revenue”: means, without duplication, all revenues, receipts, monies, and the
fair market value of all other consideration received, whether by way of cash or credit
or any [**] or any other licensee or party claiming a right by or through such party,
from the marketing, manufacturing, sale, licensing, or distribution of the Technology,
Improvements, Visudyne and/or other Products in any or all parts of the world where the
Licensee is permitted by law and this Agreement to market, sell or distribute
Technology, Improvements, Visudyne and/or other Products, less the following deductions
to the extent included in the amounts invoiced and thereafter actually allowed and
taken:

[**].

Without limiting the generality of the foregoing, Revenue shall also include,
without duplication, all initial license fee payments (or any share thereof) made to
the Licensee, [**] pursuant to each sublicense agreement entered into by the
Licensee relating to the Technology and any Improvements, Visudyne and/or other
Products. For greater clarity, it is confirmed that Revenue shall only include
[**] received by the Licensee in excess of the direct reimbursement for
the actual costs (including overhead for which the Licensee has been reimbursed) of
such [**] incurred by the Licensee pursuant to a written [**]
agreement. Where any Revenue is derived from a country other than Canada it shall
be converted to the equivalent in Canadian dollars at the rate of exchange set by
the Licensee’s

 

			
	**	 	Confidential Treatment Requested.

 

4

principal bank for buying such currency on the Royalty Due Dates. The amount of
Canadian dollars pursuant to such conversion shall be included in the Revenue.

[**]

	 	(p)	 	“Royalty Due Dates”: the last working day of March, June, September and
December of each and every year during which this Agreement remains in full force and
effect.
	 
	 	(q)	 	“Technology”: the Patents together with any and all compounds, knowledge,
know-how and/or technique or techniques invented, developed and/or acquired, prior to
the Commencement Date by: (i) the University; or (ii) jointly by the University and the
Licensee; relating to the Patents, as amended from time to time, including, without
limitation, all research, data, specifications, instructions, manuals, papers or other
materials of any nature whatsoever, whether written or otherwise, relating to same,
	 
	 	(r)	 	“UBC Improvements”: Any and all improvements, variations, updates,
modifications, enhancements and alterations related to the Technology, including all
improvements, variations, updates, modifications, enhancements and alterations relating
to photodynamic compounds or therapies, which are conceived, invented, developed and/or
acquired solely by UBC Personnel, or by UBC Personnel jointly with the Licensee at any
time after the Commencement Date, whether patentable or not,

	 	(i)	 	if patentable, claim priority from any of the patents or patent
applications which comprise the Technology and can not be used or practiced
without a licence of Technology,
	 
	 	(ii)	 	if not patentable, which relate directly to the Technology, or
	 
	 	(iii)	 	inventions or developments by [**] relating to
[**].

	 	(s)	 	“UBC New Technology”: any new discovery or invention, whether patentable or
not, which:

	 	(i)	 	is conceived, invented, developed and/or acquired by UBC
Personnel (but not jointly by the Licensee and the University) which relate to
the Technology, at any time, and
	 
	 	(ii)	 	is not a UBC Improvement, a QLT Improvement, or QLT New
Technology;

	 	(t)	 	“UBC Personnel” shall mean all persons employed by or attending the University
including without limitation, University faculty members, research associates,
post-doctoral fellows, graduate students and undergraduate students and staff, [**]
and, for the period prior to the Retirement Date, [**];
	 
	 	(u)	 	“UBC Trade-marks”: any mark, trade-mark, service mark, logo, insignia, seal,
design, symbol, or device used by the University in any manner whatsoever; and

 

			
	**	 	Confidential Treatment Requested.

 

5

	 	(v)	 	“Valid Patent Claim” means a claim in any unexpired Patent which forms a part
of the Technology, which:

	 	(i)	 	is part of a pending application for a Patent which claim has
not been held invalid; or
	 
	 	(ii)	 	has matured into an issued patent which has not been held
invalid by a non-appealed or unappealable decision by a court or other
appropriate body of competent jurisdiction.

The scope of a Valid Patent Claim shall be limited to its terms as set forth in the
Patent itself or as defined by any court or appropriate body of competent
jurisdiction.

	 	(w)	 	“Visudyne”: [**].

2. PROPERTY RIGHTS IN AND TO THE TECHNOLOGY:

2.1 The parties hereto hereby acknowledge and agree that:

	 	(a)	 	the University owns any and all right, title and interest in and to:

	 	(i)	 	the Technology that was conceived, invented, developed and/or
acquired solely by UBC Personnel;
	 
	 	(ii)	 	any UBC Improvements that are conceived, invented, developed
and/or acquired solely by UBC Personnel; and
	 
	 	(iii)	 	any UBC New Technology;

	 	(b)	 	the Licensee shall own any and all right, title and interest in and to:

	 	(i)	 	the QLT Improvements; and
	 
	 	(ii)	 	the QLT New Technology.

	 	(c)	 	the University and the Licensee shall jointly own any and all right, title and
interest in and to:

	 	(i)	 	the Technology that was conceived, invented, developed and/or
acquired jointly by UBC Personnel and the Licensee; and
	 
	 	(ii)	 	any UBC Improvements that are conceived, invented, developed
and/or acquired jointly by UBC Personnel and the Licensee.

2.2 The parties shall enter into such further agreements and execute any and all documents as may
be required to ensure that ownership of the Technology, any Improvements, UBC New Technology, and
QLT New Technology vest with, or remains with, the parties as set out in Article 2.1.

2.3 Not less than once per year during each and every year of the term of this Agreement, the
parties shall exchange in writing the details of any and all Improvements which the University or
the Licensee have developed and/or acquired during the previous twelve month period.

 

			
	**	 	Confidential Treatment Requested.

 

6

3. GRANT OF LICENSE:

3.1 In consideration of the royalty payments reserved herein, and the covenants on the part of the
Licensee contained herein, the University hereby grants to the Licensee an exclusive, worldwide
license to use and sublicense the Technology, all UBC Improvements and to manufacture, distribute,
and sell Products on the terms and conditions hereinafter set forth during the term of this
Agreement (the “License Grant”).

3.2 For greater clarity it is confirmed that nothing in this Agreement, and in particular Article
3.1, shall be interpreted as granting to the Licensee any license or right to the UBC New
Technology.

3.3 Subject to Article 4.1, the license granted herein is personal to the Licensee and is not
granted to any Affiliated Company or Affiliated Companies.

3.4 [**]

3.5 Notwithstanding Article 3.1 herein, the parties acknowledge and agree that the University may
use the Technology and Improvements without charge in any manner whatsoever for non-commercial
research, scholarly publication, educational or other non-commercial use. The Licensee hereby
grants to the University a worldwide, non-exclusive license to use the QLT Improvements without
charge in any manner whatsoever for non-commercial research, scholarly publication, educational or
other non-commercial use.

3.6 The Licensee shall give written notice to the University if its chief place of business in a
jurisdiction outside British Columbia, prior to beginning business in that other jurisdiction. The
inadvertent failure of the Licensee to comply with this Section 3.6 shall not give rise to a right
of termination by the University under Section 18.3.

3.7 This Agreement amends and restates the Existing License Agreements. As between the University
and the Licensee, the Existing License Agreements described on Schedule “C” hereto shall hereby be
terminated and of no further force or effect. To the extent such Existing License Agreements have
third party signatories, the University and the Licensee agree that they shall make reasonable
efforts to execute, together with such third parties, a termination agreement with respect to all
of the Existing License Agreements. The rights granted by the Licensee to the Technology and UBC
Improvements prior to the date of execution of this Agreement are not subject to Article 4 or the
other obligations to be imposed on sublicensees set out in this Agreement. Royalties and other
payments paid by the Licensee to the University in respect of the Existing License Agreements prior
to the Commencement Date shall be retained by the University without credit therefor hereunder,
and, in respect of periods prior to the Commencement Date for which the Licensee has not yet made a
royalty payment to the University pursuant to the Existing License Agreements, the Licensee shall
make royalty payments in accordance with the terms of this Agreement.

4. SUBLICENSING:

4.1 The Licensee shall have the right to grant sublicenses to Affiliated Companies and other third
parties with respect to the Technology and any UBC Improvements without the prior written consent
of the University. The Licensee will furnish the University with a copy of each sublicense granted
within 30 days after execution.

4.2 Any sublicense granted by the Licensee shall contain covenants by the sublicensee to observe
and perform similar terms and conditions to those in Schedule “D” to

 

			
	**	 	Confidential Treatment Requested.

 

7

this Agreement. The University acknowledges and agrees that this Section 4.2 shall not apply to
the [**] dated [**] between Licensee and [**], as amended.

5. ROYALTIES:

5.1 In consideration of the license granted hereunder, the Licensee shall pay to the University a
royalty as follows:

	 	(a)	 	[**] of all Revenue derived from Visudyne
	 
	 	(b)	 	[**] of all Revenue derived from the Technology listed in Schedule
“A” (as amended from time to time). whether or not such Revenue is also derived from
Technology listed in Schedule “B”;
	 
	 	(c)	 	[**] of all Revenue derived from the Technology listed in Schedule
“B” (as amended from time to time);
	 
	 	(d)	 	[**] of all Revenue derived from any UBC Improvement; and
	 
	 	(e)	 	[**] of all Revenue derived from any QLT Improvement.

For greater clarity it is confirmed that the royalty rates in paragraphs 5.1(a), (b), (c), (d) and
(e) are not intended to be cumulative and that only a single royalty not less than [**],
and not greater than [**], shall be payable with respect to the Revenue received or
derived from any Product. For further clarity, the royalties due pursuant to paragraphs 5.1 (a),
(b), (c), (d) and (e) shall be payable for so long as [**].

5.2 The royalty rates set in Article 5.1(b), (c), (d) and (e) will be reduced by up to
[**] for any Product (other than Visudyne) which satisfies (and continues to satisfy)
each of the following [**] conditions:

	 	(a)	 	[**]

For greater certainty, notwithstanding anything in this Article 5.2, the final royalty payable by
the Licensee to the University shall not be less than [**] of the Royalties determined
in accordance with Article 5.1.

The royalty shall become due and payable within 60 days of each respective Royalty Due Date and
shall be calculated with respect to the Revenue received by the Licensee in the three month period,
immediately preceding the applicable Royalty Due Date.

5.3 All payments of royalties made by the Licensee to the University hereunder shall be made in
Canadian dollars without any reduction or deduction of any nature or kind whatsoever, except as may
be prescribed by law.

5.4 Visudyne and all other Products shall be deemed to have been sold and included in the Revenue
by:

	 	(a)	 	the Licensee when Revenue is actually received, provided that the Licensee
diligently pursues same; and
	 
	 	(b)	 	any sublicensee when Revenue is reported to the Licensee by such sublicensee.

 

			
	**	 	Confidential Treatment Requested.

 

8

5.5 Subject only to Articles 5.6 and 5.7, any transaction, disposition, or other dealing involving
the Technology or Improvements or any part thereof between the Licensee or any sublicensee and
another person that is not made at fair market value shall be deemed to have been made at fair
market value, and the fair market value of that transaction, disposition, or other dealing shall be
added to and deemed part of the Revenue and shall be included in the calculation of royalties under
this Agreement.

5.6 No royalties will be payable on:

	 	(a)	 	Products used in research, pre-clinical trials, clinical trials or for
compassionate use for which the Licensee does not receive consideration;
	 
	 	(b)	 	payments made to the Licensee other than those on account of Revenue, or any
amounts received by the Licensee as reimbursement for direct out of pocket expenses
(including overhead for which the Licensee has been reimbursed) incurred and charged by
the Licensee for further research, development or regulatory approval of the
Technology, Improvements or Products;
	 
	 	(c)	 	sales among the Licensee, its Affiliates, sublicensees and sub-sublicensees or
other licensees, but royalties shall be payable on all sales by the Licensee, its
Affiliates, sublicensees, or sub-sublicensees to a third party (other than an
Affiliate, sublicensee, sub-sublicensee or other licensee).

5.7 If at any time, and from time to time, a third party in any country shall, under the right of a
[**], by a competent governmental authority, manufacture, use or sell any Product with respect to
which royalties would otherwise be payable pursuant to this Agreement, then the Licensee may
[**] in such country of Product to an amount [**] by said party as
consideration for the [**].

6. ANNUAL LICENSE FEE:

6.1 In further consideration for the license granted hereunder, the Licensee shall pay to the
University, in addition to all other amounts due under this Agreement, an annual maintenance fee of
[**] (Canadian funds) payable on or before the anniversary of the Commencement Date, and
annually thereafter during the term of this Agreement (the “Annual Maintenance Fee”). Neither all
nor any part of the Annual Maintenance Fee paid shall be refundable to the Licensee under any
circumstances.

7. PATENTS:

7.1 The parties acknowledges that the ownership of the Patents and patent applications are as set
forth in Schedules “A” and “B”, notwithstanding the manner in which ownership is registered in any
patent office in any jurisdiction and which Schedules shall be updated by mutual agreement not less
than once a year during the term of this Agreement (the “Patent Portfolio”), which updating shall
include the addition of all Improvements.

7.2 Subject to Article 7.5, the Licensee shall prudently manage the Patent Portfolio and shall take
all reasonable steps as may be required to protect and preserve the Patent Portfolio. The Licensee
agrees to pay all costs in relation to the management of the Patent Portfolio and any further
applications made by the Licensee pursuant to Article 7.4 incurred after the date of execution of
this Agreement. Without limiting the generality of the forgoing the Licensee agrees to pay for all
costs with respect to the Patents, patent applications, divisionals, substitutions, continuations,
continuations in part, all claims of foreign patent applications and

 

			
	**	 	Confidential Treatment Requested.

 

9

any and all patents relating to the Technology and any UBC Improvements licensed hereunder, and
with respect to any and all maintenance fees for any and all patents relating to the Technology and
any UBC Improvements licensed hereunder.

7.3 Within 30 days of presentation of receipts and/or invoices by the University to the Licensee,
the Licensee will reimburse the University for all costs incurred to date with respect to any and
all patents relating to the Technology and any UBC Improvements licensed hereunder.

7.4 The Licensee shall have the right to apply for further patents in other jurisdictions, or
continuations, continuations-in-part, divisions, reissues, re-examinations or extensions of the
Patents, or any further applications made hereunder, in the name of the University with respect to
the Technology or any UBC Improvement that may be patentable, and the Licensee shall pay all costs
of applying for, registering and maintaining the same. [**]. In the event that this Agreement is
terminated for any reason whatsoever, the Licensee shall pay all outstanding costs relating to such
patent applications and shall direct the patent agents responsible for such patent applications to
take all further instructions, if any, relating to such applications from the University.

7.5 Should the Licensee decide to:

	 	(a)	 	discontinue pursuing patent protection in relation to the Patent Portfolio, or
any continuation, continuation-in-part, division, re-issue, re-examination or extension
of the patents in the Patent Portfolio, or
	 
	 	(b)	 	not pursue patent protection in relation to the Patents in the Patent Portfolio
in any jurisdiction, or
	 
	 	(c)	 	discontinue or not pursue patent protection in relation to any further process,
use or products arising out of the Technology or UBC Improvements in any jurisdiction,

then the Licensee shall provide the University with a minimum of 60 days written notice of its
decision to discontinue or not to pursue such patent protection (the “Discontinued Patent”) in
sufficient time for the University to file a patent application, or continue pursuing an existing
patent application. During the 60 day transition period, the Licensee shall be responsible for all
costs of filing, prosecuting and maintaining the Patent Portfolio. After the 60 day transition
period, provided that the University diligently pursues such Discontinued Patent application, or
maintains any existing registration for the Discontinued Patent, the Discontinued Patent shall be
excluded from the License Grant under this Agreement.

7.6 For the purposes of greater clarity, the parties agree that should the Licensee decide not to
pursue patent protection in relation to the Patents in a specific jurisdiction other than the
[**], for reasonable commercial reasons, this shall not invoke the provisions of Article
7.5.

7.7 The Licensee shall provide to the University once each year during the term of this Agreement a
report of all patents filed and/or maintained in the preceding twelve month period relating to the
Technology, UBC Improvements and QLT Improvements.

7.8 In the event of the issuance of any new patent for use of the Technology or any UBC
Improvements, the Licensee shall have the right to become, and shall become the Licensee, of the
same without charge, all pursuant to the terms contained herein.

 

			
	**	 	Confidential Treatment Requested.

 

10

7.9 During the term of this Agreement, without the consent of the University, the Licensee shall
not contest the validity or scope of any University patent including any Patent(s) in the Patent
Portfolio.

7.10 The Licensee will ensure proper patent marking for all Technology and any UBC Improvements
licensed hereunder and, where reasonable to do so, shall clearly mark the appropriate patent
numbers on any Products made using the Technology and any UBC Improvements or any patented
processes used to make such Products.

8. DISCLAIMER OF WARRANTY:

8.1 Except as expressly set out in this Agreement, the University makes no representations,
conditions, or warranties, either express or implied, with respect to the Technology, or any
Improvements, or any Products. Without limiting the generality of the foregoing, the University
specifically disclaims any implied warranty, condition, or representation that the Technology, or
any Improvements, or any Products:

	 	(a)	 	shall correspond with a particular description;
	 
	 	(b)	 	are of merchantable quality;
	 
	 	(c)	 	are fit for a particular purpose; or
	 
	 	(d)	 	are durable for a reasonable period of time.

The University shall not be liable for any loss, whether direct, consequential, incidental, or
special which the Licensee suffers arising from any defect, error, fault, or failure to perform
with respect to the Technology or any Improvements, or any Products, even if the University has
been advised of the possibility of such defect, error, fault, or failure. The Licensee
acknowledges that it has been advised by the University to undertake its own due diligence with
respect to the Technology, and any Improvements.

8.2 The parties acknowledge and agree that the International Sale of Goods Act and the United
Nations Convention on Contracts for the International Sale of Goods have no application to this
Agreement.

8.3 Except as expressly set out in this Agreement, nothing in this Agreement shall be construed as:

	 	(a)	 	a warranty or representation by the University as to title to the Technology
and/or any Improvement, or that anything made, used, sold or otherwise disposed of
under the license granted in this Agreement is or will be free from infringement of
patents, copyrights, trade-marks, industrial design or other intellectual property
rights,
	 
	 	(b)	 	an obligation by the University to bring or prosecute or defend actions or
suits against third parties for infringement of patents, copyrights, trade-marks,
industrial designs or other intellectual property or contractual rights, or
	 
	 	(c)	 	the conferring by the University of the right to use in advertising or
publicity the name of the University or UBC Trade-marks.

8.4 Except as previously disclosed in writing by one Party to the other, the Parties warrant that,
to the best of their knowledge, without making any enquiry, as of the date of execution of this
Agreement, in respect of the Technology which is identified in the unmodified

 

11

Schedules “A” and “B” as of the date of execution of this Agreement, all inventors listed therein
have assigned their rights in the Patents to the respective Party, and no claims have been filed
and served on such party or threatened in writing in respect of the Technology.

8.5 Notwithstanding Article 8.3, in the event of an alleged infringement of the Technology or any
UBC Improvements or any right with respect to the Technology or any UBC Improvements, the Licensee
shall have, the right to prosecute litigation designed to enjoin infringers of the Technology or
any UBC Improvements. The University agrees to provide reasonable cooperation to the Licensee, to
the extent of executing all necessary documents and to vest in the Licensee the right to institute
any such suits, so long as all the direct or indirect costs and expenses of bringing and conducting
any such litigation or settlement shall be borne by the Licensee and in such event all recoveries
shall enure to the Licensee.

8.6 In the event that any complaint alleging infringement or violation of any patent or other
proprietary rights is made against the Licensee or a sublicensee of the Licensee with respect to
the use of the Technology or any UBC Improvements, or the manufacture, use or sale of any Products,
the following procedure shall be adopted:

	 	(a)	 	the Licensee shall promptly notify the University upon receipt of any such
complaint and shall keep the University fully informed of the actions and positions
taken by the complainant and taken or proposed to be taken by the Licensee on behalf of
itself or a sublicensee,
	 
	 	(b)	 	except as provided in Article 8.5(d), all costs and expenses incurred by the
Licensee or any sublicensee of the Licensee in investigating, resisting, litigating and
settling such a complaint, including the payment of any award of damages and/or costs
to any third party, shall be paid by the Licensee or any sublicensee of the Licensee,
as the case may be,
	 
	 	(c)	 	solely to the extent that any final disposition of the litigation that will
restrict the claims in or admit any invalidity of any Patent(s) or significantly
adversely affect the University’s rights, no such disposition of the litigation shall
be taken without full consultation with and approval by the University, not to be
unreasonably withheld or delayed,
	 
	 	(d)	 	the University may elect to participate formally in any litigation involving
the complaint to the extent that the court may permit, but any additional expenses
generated by such formal participation shall be paid by the University (subject to the
possibility of recovery of some or all of such additional expenses from the
complainant).

9. INDEMNITY AND LIMITATION OF LIABILITY:

9.1 The Licensee hereby indemnifies, holds harmless and defends the University, its Board of
Governors, officers, employees, faculty, students, invitees, and agents against any and all claims
(including all legal fees and disbursements incurred in association therewith) arising out of the
exercise of any rights under this Agreement including, without limiting the generality of the
foregoing, against any damages or losses, consequential or otherwise, arising from or out of the
use of the Technology or any Improvements or any Products licensed under this Agreement by the
Licensee or its sublicensees, or their customers or end-users howsoever the same may arise.

9.2 Subject to Article 9.3, the University’s total liability, whether under the express or implied
terms of this Agreement, in tort (including negligence), or at common law, for any loss or damage
suffered by the Licensee, whether direct, indirect, special, or any other similar or like

 

12

damage that may arise or does arise from any breaches of this Agreement by the University, its
Board of Governors, officers, employees, faculty, students, or agents shall be limited to the [**].

9.3 In no event shall the University be liable for [**] arising from any breach or
breaches of this Agreement.

9.4 [**]

10. PUBLICATION AND CONFIDENTIALITY:

10.1 The Discloser’s Confidential Information shall be developed, received, and used by the
Recipient solely in furtherance of the purposes set forth in this Agreement subject to the terms
and conditions set forth in this Article 10.

10.2 The Recipient shall keep and use all of the Confidential Information in confidence and will
not, without the Discloser’s prior written consent, disclose any Confidential Information to any
person or entity, except those of the Recipient’s officers, faculty, students, staff, employees,
consultants, agents and assigns who require said Confidential Information in performing their
obligations under this Agreement. The Recipient covenants and agrees that it will initiate and
maintain an appropriate internal program limiting the internal distribution of the Confidential
Information.

10.3 The Recipient shall not use, either directly or indirectly, any Confidential Information for
any purpose other than as contemplated herein without the Discloser’s prior written consent.

10.4 In the event that the Recipient is required by judicial or administrative process to disclose
any or all of the Confidential Information, the Recipient shall promptly notify the Discloser, and
when available, shall allow the Discloser reasonable time to oppose such process before disclosing
any Confidential Information.

10.5 Notwithstanding any termination or expiration of this Agreement, the obligations created in
this Article 10 shall survive and be binding upon the Recipient, its successors and assigns.

10.6 Notwithstanding, Articles 10.1, 10.2, 10.3 and 10.8, the University shall not be restricted
from presenting at symposia, national or regional professional meetings, or from publishing in
journals or other publications accounts of its research relating to the Information, provided that
with respect to Confidential Information only, the Licensee shall have been furnished copies of the
disclosure proposed therefor at least 30 days in advance of the date for submission of same for
presentation or publication and does not within 30 days after receipt of the proposed disclosure
object to such presentation or publication. Any objection to a proposed presentation or
publication shall specify the portions of the presentation or publication considered objectionable
(the “Objectionable Material”). Upon receipt of notification from the Licensee that any proposed
publication or disclosure contains Objectionable Material, the University and the Licensee shall
work together to revise the proposed publication or presentation to remove or alter the
Objectionable Material in a manner acceptable to the Licensee, in which case the Licensee shall
withdraw its objection. In the event that an objection is made, disclosure of the Objectionable
Material shall not be made for a period of 6 months after the date the Licensee has received the
proposed publication or presentation relating to the Objectionable Material. The University shall
co-operate in all reasonable respects in making revisions to any proposed disclosures if considered
by the Licensee to contain Objectionable Material. The University shall not be restricted from
publishing or presenting the proposed

 

			
	**	 	Confidential Treatment Requested.

 

13

disclosure as long as the Objectionable Material has been removed. After the 6 month period has
elapsed, the University shall be free to present and/or publish the proposed publication or
presentation, whether or not it contains Objectionable Material. In respect of any disclosures made
pursuant to this Section, at the Licensee’s request, the Licensee’s Confidential Information shall
be deleted therefrom prior to such disclosure.

10.7 The Licensee requires of the University, and the University agrees insofar as it may be
permitted to do so at law, that this Agreement, and each part of it, is confidential and shall not
be disclosed to third parties, as the Licensee claims that such disclosure would or could reveal
commercial, scientific or technical information and would significantly harm the Licensee’s
competitive position and/or interfere with the Licensee’s negotiations with prospective
sublicensees. Notwithstanding anything contained in this Article, the parties hereto acknowledge
and agree that the University may identify the title of this Agreement, the parties to this
Agreement, and the names of the inventors of the Technology and any UBC Improvements.

10.8 The parties acknowledge that: (a) this Agreement is in part, a license of know-how, and (b)
the definition of Confidential Information contained herein applies only to Information disclosed
by one party to the other; and (c) Information regarding the Technology may have arisen at the
University, and (d) the University would have no obligation of confidence in respect of such
Information without this Section 10.8. Notwithstanding the definition of Confidential Information
contained in this Agreement, the University shall use reasonable efforts to maintain the
confidentiality of the Information arising at the University respecting the Technology and the
Improvements, unless same is Information falling within the terms of Section 1.1(c)(ii) or
(iii).Notwithstanding the rest of this Article 10, the Licensee’s obligations of confidence and use
respecting the University’s Confidential Information are subject to the Licensee’s rights to
disclose and use the Technology and UBC Improvements in the exercise of the Licensee’s rights under
the License Grant in Article 3.

11. PRODUCTION AND MARKETING:

11.1 The Licensee shall not use any of the UBC Trade-marks or make reference to the University or
its name in any advertising or publicity whatsoever, without the prior written consent of the
University, except as required by law. Without limiting the generality of the foregoing, neither
party shall issue a press release with respect to this Agreement or any activity contemplated
herein without the prior review and approval of same by the other party, except as required by law.
If either party is required by law to act in contravention of this Article, such party shall
provide the other party with sufficient advance notice in writing to permit the other party to
bring an application or other proceeding to contest the requirement.

11.2 The Licensee represents and warrants to the University that:

	 	(a)	 	it has the infrastructure, expertise and resources to develop and commercialize
the Technology and any UBC Improvements;
	 
	 	(b)	 	it has the infrastructure, expertise and resources to track and monitor on an
ongoing basis performance under the terms of each sublicense agreement entered into by
the Licensee; and
	 
	 	(c)	 	it has the infrastructure, expertise and resources to initiate and maintain an
appropriate program limiting the distribution of the University’s Confidential
Information, Technology and any UBC Improvements, and any related biological materials
as set out in this Agreement.

11.3 Subject to the following, the Licensee shall use reasonable efforts to develop and, subject
to obtaining regulatory approval, promote, market and sell Products and utilize the

 

14

Technology and any UBC Improvements and to meet or cause to be met the market demand for Products
and the utilization of the Technology and any UBC Improvements on a product-by-product basis. The
University acknowledges that, with respect to Visudyne and the Technology and any UBC Improvements
respecting Visudyne, the Licensee shall be deemed to be making such reasonable efforts so long as
Visudyne is being marketed. Without limiting the generality of the foregoing, the Licensee
covenants and agrees that it shall notify the University in writing if it no longer intends to
proceed with the development and commercialization of any of Product embodying any material part of
the Technology or UBC Improvements (the “Non-Commercialized Technology”). Upon the University’s
receipt of such written notice, the Non-Commercialized Technology shall be excluded from the
License Grant under this Agreement and if jointly owned by the Licensee and the University shall be
[**].

11.4 In the event that the University is of the view that the Licensee is in breach of Article
11.3, the University shall notify the Licensee in writing, specifying the portion of the Technology
or UBC Improvements for which it alleges that the Licensee has not used reasonable efforts as
specified in Article 11.3 (the “Disputed Technology”). The parties shall use good faith efforts to
resolve the matter for a period of sixty (60) days following receipt of written notice by the
Licensee. If the parties fail to resolve the matter within that time period, they shall appoint a
mutually acceptable person as an independent evaluator (the “Evaluator”) to conduct the evaluation
set forth in Article 11.5. In the event that the parties cannot agree on such an Evaluator, the
appointing authority shall be the British Columbia International Commercial Arbitration Centre.

11.5 Unless the parties mutually agree otherwise, the following rules and procedures shall govern
the conduct of the parties and the Evaluator before and during the investigation by the Evaluator:

	 	(a)	 	within 30 days of the appointment of the Evaluator each party shall provide to
the Evaluator and the other party copies of all documents, statements and records on
which the party intends to rely in presenting its position to the Evaluator;
	 
	 	(b)	 	within 45 days of the appointment of the Evaluator the Licensee shall provide
to the Evaluator and the University a written summary of its position respecting the
Disputed Technology. On receipt of the Licensee’s summary the University shall have 15
days to prepare and submit to the Licensee and the Evaluator its own summary in reply
to the summary submitted by the Licensee;
	 
	 	(c)	 	on receipt of the documents, statements, records and summaries submitted by the
parties the Evaluator shall have 30 days within which to conduct such further inquiries
as he or she may deem necessary for the purpose of reviewing the efforts made by the
Licensee with respect to the Disputed Technology in compliance with the requirements of
Article 11.3. For the purpose of conducting such an inquiry, the Evaluator shall have
the right to:

	 	(i)	 	require either party to disclose any further documents or
records which the Evaluator considers to be relevant;
	 
	 	(ii)	 	interview or question either orally (or by way of written
questions) one or more representatives of either party on issues deemed to be
relevant by the Evaluator;
	 
	 	(iii)	 	make an “on site” inspection of the Licensee’s facilities;

 

			
	**	 	Confidential Treatment Requested.

 

15

	 	(iv)	 	obtain if necessary, the assistance of an independent expert to
provide technical information with respect to any area in which the Evaluator
does not have a specific expertise;

	 	(d)	 	on completion of the Inquiry described in Article 11.5(c), the Evaluator shall
within 15 days prepare a report setting out his or her findings and conclusions as to
whether or not the Licensee has used reasonable efforts as specified in Article 11.3
respecting the Disputed Technology. If the Evaluator has determined that the Licensee
has failed to use reasonable efforts as specified in Article 11.3 respecting the
Disputed Technology, then the Evaluator shall also specify in the report his or her
conclusions as to what would constitute such reasonable efforts, and the Licensee shall
thereafter make the efforts so specified. If the Licensee fails to make such efforts,
after notice of default provided in accordance with the terms of Article 18, then the
University’s sole remedy for failure to make the efforts specified in Articles 11.3 and
11.5(d) respecting the Disputed Technology shall be, at the Licensee’s option, either:

	 	(i)	 	that the Disputed Technology shall be excluded from the License
Grant under this Agreement and, if owned by the Licensee, shall be assigned by
the Licensee to the University without payment of any consideration by the
University; or
	 
	 	(ii)	 	the remedies set out in Article 18.9 respecting the Disputed
Technology.

11.6 The University may not call for more than one evaluation pursuant to Article 11.4 in any three
year period. The cost of an evaluation hereunder shall be borne by the unsuccessful party.

12. ACCOUNTING RECORDS:

12.1 The Licensee shall maintain at its principal place of business, or such other place as may be
most convenient, separate accounts and records of all Revenues, and all business done pursuant to
this Agreement, such accounts and records to be in sufficient detail to enable proper returns to be
made under this Agreement, and the Licensee shall cause its sublicensees to keep similar accounts
and records.

12.2 The Licensee shall deliver to the University on the date 60 days after each and every Royalty
Due Date, together with the royalty payable thereunder, the Accounting and a report on all
sublicensing activity, including an accounting statement setting out in detail how the amount of
Revenue was determined and identifying each sublicensee and the location of the business of each
sublicensee.

12.3 The calculation of royalties shall be carried out in accordance with generally accepted
Canadian accounting principles (“GAAP”), or the standards and principles adopted by the U.S.
Financial Accounting Standards Board (“FASB”) applied on a consistent basis.

12.4 The Licensee shall retain the accounts and records referred to in Article 12.1 above for at
least [**] years after the date upon which they were made and shall permit on reasonable notice,
and no more than once every year, any duly authorized representative of the University to inspect
such accounts and records during normal business hours of the Licensee at the University’s expense.
The Licensee shall furnish such reasonable evidence as such representative will deem necessary to
verify the Accounting and will permit such representative to make copies of or extracts from such
accounts, records and agreements at the University’s

 

			
	**	 	Confidential Treatment Requested.

 

16

expense. If an inspection of the Licensee’s records by the University shows an under-reporting or
underpayment by the Licensee of any amount to the University, in excess of [**], then the Licensee
shall reimburse the University for the cost of the inspection as well as pay to the University any
amount found due [**] within 30 days of notice by the University to the Licensee.

12.5 During the term of this Agreement and thereafter, the University shall use reasonable efforts
to ensure that all information provided to the University or its representatives pursuant to this
Article remains confidential and is treated as such by the University.

13. INSURANCE:

13.1 Unless satisfactory arrangements are made between the Licensee and the University with respect
to a self-insurance program or the requirement for insurance hereunder is waived by the University
sixty (60) days prior to the commencement of any human clinical trials or other Product testing
involving human subjects by the Licensee or any sublicensee, the Licensee shall procure and
maintain, during the term of this Agreement, the insurance outlined in Articles 13.2 and 13.3 and
otherwise comply with the insurance provisions contained in Articles 13.2 and 13.3.

13.2 The Licensee shall give written notice to the University:

	 	(a)	 	30 days prior to the commencement of the first of any human clinical trials
involving any Product testing involving human subjects by the Licensee or any
sublicensee, (“Human Clinical Trials”), and
	 
	 	(b)	 	30 days prior to the first sale of any Product by the Licensee or any
sublicensee

of the terms of the appropriate product liability and clinical trials insurance which it has
placed. Such insurance shall in no case be less than the insurance which a reasonable and prudent
businessperson carrying on a similar line of business would acquire. To the extent available to a
reasonable and prudent businessperson carrying on a similar line of business: (a) this insurance
shall be placed with a reputable and financially secure insurance carrier; (b) shall include the
University, its Board of Governors, faculty, officers, employees, students, and agents as
additional insureds; and (c) shall provide primary coverage with respect to the activities
contemplated by this Agreement. Failing the parties agreeing on the appropriate terms or the
amount of coverage, then the matter shall be determined by arbitration as provided for herein.

13.3 The Licensee shall provide the University with certificates of insurance evidencing such
coverage 30 days before commencement of Human Clinical Trials and 30 days prior to the sales of any
Product and the Licensee covenants not to start Human Clinical Trials, unless the insurance
outlined in Article 13.1 or 13.2 is in effect.

13.4 The Licensee shall require that each sublicensee under this Agreement shall either:

	 	(a)	 	[**]

14. ASSIGNMENT:

14.1 Except as expressly permitted hereby, the Licensee will not assign, transfer, mortgage, charge
or otherwise dispose of any or all of the rights, duties or obligations granted to it under this
Agreement without the prior written consent of the University, which consent will not be
unreasonably withheld. Notwithstanding the foregoing, the Licensee shall have the right to

 

			
	**	 	Confidential Treatment Requested.

 

17

assign to an Affiliated Company, any entity with which it may merge or amalgamate, or an entity
that acquires all or most of the assets related to the Technology, the rights granted hereunder
with respect to the UBC Improvements, and/or any Products.

14.2 The University shall have the right to assign its rights, duties and obligations under this
Agreement to a company or society of which it is the sole shareholder in the case of a company or
of which it controls the membership, in the case of a society, in either case, if such company or
society acquires all or most of the University’s assets related to the Technology and the UBC
Improvements. In the event of such an assignment, the Licensee will release, remise and forever
discharge the University from any and all obligations or covenants, provided however that such
company or society, as the case may be, executes a written agreement which provides that such
company or society shall assume all such obligations or covenants from the University and that the
Licensee shall retain all rights granted to the Licensee pursuant to this Agreement.

15. GOVERNING LAW AND ARBITRATION:

15.1 This Agreement shall be governed by and construed in accordance with the laws of the Province
of British Columbia and the laws of Canada in force therein without regard to its conflict of law
rules. All parties agree that by executing this Agreement they have attorned to the jurisdiction
of the Supreme Court of British Columbia. Subject to Article 15.2 and 15.3, the British Columbia
Supreme Court shall have exclusive jurisdiction over this Agreement.

15.2 In the event of any dispute arising between the parties concerning this Agreement, its
enforceability or the interpretation thereof, the same shall be settled by a single arbitrator
appointed pursuant to the provisions of the Commercial Arbitration Act of British Columbia, or any
successor legislation then in force. The place of arbitration shall be Vancouver, British
Columbia. The language to be used in the arbitration proceedings shall be English.

15.3 Nothing in Article 15.2 shall prevent a party hereto from applying to a court of competent
jurisdiction for interim protection such as, by way of example, an interim injunction.

15.4 Notwithstanding the rest of this Article 15, if a ruling by a court or arbitral authority on
any dispute between the Licensee and a sublicensee, regarding the interpretation of the
sublicensee’s sublicense agreement, could reasonably effect the interpretation of this Agreement,
then on receipt of notice of such a dispute from the Licensee, the University may elect to apply to
join in such proceeding. If:

	 	(a)	 	the University is permitted to join in such proceeding it shall be bound by the
decision of such court or arbitral authority, in so far as such decision reasonably
effects the interpretation of this Agreement;
	 
	 	(b)	 	if the University elects not to join in such proceeding (for reasons other not
being permitted to join) then the University hereby agrees to be bound by the decision
of such court or arbitral authority, in so far as such decision reasonably effects the
interpretation of this Agreement.
	 
	 	(c)	 	if the University is not permitted to join in such proceeding, then the
University shall not be bound by the decision of such court or arbitral authority.

If the Licensee and the University retain common counsel to represent them for the purposes of any
such proceeding, then the Licensee shall bear all costs of such counsel. If the University retains
independent counsel, then the Licensee will bear one-half of the cost of such counsel.

 

18

16. NOTICES:

16.1 All payments, reports and notices or other documents that any of the parties hereto are
required or may desire to deliver to any other party hereto may be delivered only by personal
delivery or by registered or certified mail, or fax, all postage and other charges prepaid, at the
address for such party set forth below or at such other address as any party may hereinafter
designate in writing to the others. Any notice personally delivered or sent by fax shall be deemed
to have been given or received at the time of delivery, or faxing. Any notice mailed as aforesaid
shall be deemed to have been received on the expiration of five days after it is posted, provided
that if there shall be at the time of mailing or between the time of mailing and the actual receipt
of the notice a mail strike, slow down or labour dispute which might affect the delivery of the
notice by the mails, then the notice shall only be effected if actually received.

	 	 	 
	If to the University:

	 	The Director
	 

	 	University — Industry Liaison Office
	 

	 	University of British Columbia
	 

	 	#103 — 6190 Agronomy Road
	 

	 	Vancouver, British Columbia
	 

	 	V6T 1Z3
	 

	 	Telephone: (604)-822-8580
	 

	 	Fax: (604)-822-8589
	 
	 	 
	If to the Licensee:

	 	Attention: President and Chief Executive Officer
	 

	 	QLT Inc.
	 

	 	887 Great Northern Way
	 

	 	Vancouver, B.C.
	 

	 	V5T 4T5
	 

	 	Telephone: (604)-707-7000
	 

	 	Fax: (604)-707-7001
	 
	 	 
	Attention: Legal Department
	 

	 	QLT Inc.
	 

	 	887 Great Northern Way
	 

	 	Vancouver, B.C.
	 

	 	V5T 4T5
	 

	 	Telephone: (604)-707-7000
	 

	 	Fax: (604)-707-7001

17. TERM:

17.1 This Agreement and the license granted hereunder shall terminate on the expiration of a term
of [**], whichever event shall last occur unless earlier terminated pursuant to Article 18 herein.
Upon the later of the expiry of the term of [**], the Licensee shall thereafter have in
perpetuity, a fully paid up world-wide, exclusive license to use and sublicense the Technology and
UBC Improvements and to manufacture, distribute, and sell any Products, without further accounting
to the University.

18. DEFAULT AND TERMINATION:

18.1 This Agreement shall automatically and immediately terminate without notice to the Licensee if
any proceeding under the Bankruptcy and Insolvency Act of Canada, or any other statute of similar
purport, is commenced by or against the Licensee, provided that if such proceedings are initiated
against the Licensee by a third party and are not initiated by the

 

			
	**	 	Confidential Treatment Requested.

 

19

Licensee, the Licensee shall have a 60 day period following the commencement of any such
proceedings to discharge such proceedings, and, if such proceedings are discharged within such
period, the termination shall be of no effect.

18.2 The University may, at its option, terminate this Agreement immediately on the happening of
any one or more of the following events by delivering notice in writing to that effect to the
Licensee:

	 	(a)	 	if any resolution is passed by the Licensee or voluntary order made or other
steps taken by the Licensee for the winding up, liquidation or other termination of the
existence of the Licensee other than as a result of a disposition of its substantially
all of its assets to another party,
	 
	 	(b)	 	if the Licensee ceases to carry on its business other than as a result of a
disposition of its substantially all of its assets to another party,
	 
	 	(c)	 	if the Licensee commits a material breach of the requirement to obtain and
maintain insurance pursuant to Article 13.4,
	 
	 	(d)	 	if, as a result of the operation of Articles 11.3 or 11.5(d), no Technology or
UBC Improvements remain subject to the License Grant under this Agreement

18.3 Other than as set out in Articles 18.1 and 18.2, if either party shall be in material default
under or shall fail to comply with the material terms of this Agreement then the non-defaulting
party shall have the right to terminate this Agreement by written notice to that effect if:

	 	(a)	 	such default is reasonably curable within 30 days after receipt of notice of
such default and such default or failure to comply is not cured within 30 days after
receipt of written notice thereof, or
	 
	 	(b)	 	such default is not reasonably curable within 30 days after receipt of written
notice thereof, and such default or failure to comply is not cured within such further
reasonable period of time as may be necessary for the curing of such default or failure
to comply.

18.4 If this Agreement is terminated pursuant to Article 18.1 or 18.2, or 18.3 the Licensee shall
make royalty payments to the University in the manner specified in Article 5, and 6 and the
University may proceed to enforce payment of all outstanding royalties or other monies owed to the
University and to exercise any or all of the rights and remedies contained herein or otherwise
available to the University by law or in equity, successively or concurrently at the option of the
University.

18.5 Upon any termination of this Agreement, the Licensee shall:

	 	(a)	 	except as required by law, deliver up to the University within a reasonable
time, not to exceed six months from the Effective Date of Termination, all Technology
and any UBC Improvements in its possession or control (except for a copies retained for
record keeping purposes) and shall thereafter have no further right of any nature
whatsoever in the Technology or any UBC Improvements.
	 
	 	(b)	 	have a reasonable time to liquidate its inventory of Products, provided that
such period shall not exceed six months from the Effective Date of Termination. The
Licensee shall then deliver or cause to be delivered to the University an accounting
within 210 days from the Effective Date of Termination. The accounting will specify,
in or on such terms as the University may in its

 

20

	 	 	 	reasonable discretion require, the inventory or stock of Products manufactured and
remaining unsold on the Effective Date of Termination. The Licensee will continue to
make royalty payments to the University in the same manner specified in Article 5
and 6 on all unsold Products that are sold in accordance with this Article 18.5(b),
notwithstanding anything contained in or any exercise of rights by the University
under Article 18.5 herein.

18.6 Except as required by law, upon any termination of this Agreement, each party shall cease to
use the Confidential Information of the other party, and upon written request and at the option of
the other party, shall deliver or destroy (and certify the destruction) of all copies of same.

18.7 Notwithstanding the termination of this Agreement, Article 12 shall remain in full force and
effect until [**] years after

	 	(a)	 	all payments of royalty required to be made by the Licensee to the University
under this Agreement have been made by the Licensee to the University, and
	 
	 	(b)	 	any other claim or claims of any nature or kind whatsoever of the University
against the Licensee has been settled.

18.8 In the event that this Agreement is terminated, any sublicense granted by the Licensee under
this Agreement shall be assigned by QLT to the University and shall remain in full force and effect
between the sublicensee and the University, except that the University’s obligations thereunder
shall be no greater than the University’s obligations under this Agreement. At the request of the
Licensee, the University shall acknowledge to a sublicensee the University’s obligations to the
sublicensee under this Section.

18.9 Except as otherwise expressly set out in this Agreement, including Articles 18.1, 18.2 and
18.3, the University and the Licensee agree that, in the event of breach of this Agreement by the
Licensee, the University’s sole remedies shall be:

	 	(a)	 	a judgement for payment of any and all monetary amounts that are due and owing
by the Licensee to the University pursuant to this Agreement and enforcement of any
such judgement;
	 
	 	(b)	 	injunctive relief to enjoin further breach of this Agreement;
	 
	 	(c)	 	specific performance by the Licensee of the Licensee’ obligations hereunder;
	 
	 	(d)	 	damages; and
	 
	 	(e)	 	recovery of costs associated with seeking and obtaining such judgement,
injunctive relief, specific performance or damages.

The University may exercise the foregoing remedies concurrently.

19. MISCELLANEOUS COVENANTS OF LICENSEE:

19.1 Licensee will provide to the University such reasonable assistance, necessary background and
additional information as may be required by the University in determining an equitable sharing of
revenues with the inventors of the Technology.

 

			
	**	 	Confidential Treatment Requested.

 

21

19.2 The Licensee hereby represents and warrants to the University that QLT Inc. is a corporations
duly organized, existing, and in good standing under the laws British Columbia and has the power,
authority, and capacity to enter into this Agreement and to carry out the transactions contemplated
by this Agreement, all of which have been duly and validly authorized by all requisite corporate
proceedings.

19.3 The Licensee represents and warrants that it has the expertise necessary to handle the
Technology and any UBC Improvements with care and without danger to the Licensee, its employees,
agents, or the public. The Licensee shall not accept delivery of the Technology or any UBC
Improvements until it has requested and received from the University all necessary information and
advice to ensure that it is capable of handling such Technology and any UBC Improvements in a safe
and prudent manner.

19.4 The Licensee shall comply in all material respects with all laws, regulations and ordinances,
whether Federal, State, Provincial, County, Municipal or otherwise with respect to the Technology
and any UBC Improvements and/or this Agreement.

19.5 [**]

19.6 The Licensee shall pay all taxes and any related interest or penalty howsoever designated and
imposed as a result of the existence or operation of this Agreement, including, but not limited to,
tax which the Licensee is required to withhold or deduct from payments to the University. The
Licensee will furnish to the University such evidence as may be required by Canadian authorities to
establish that any such tax has been paid. [**]

19.7 [**] to the appropriate governmental authority, and [**] with proof of
payment of such income tax together with official or other appropriate evidence issued by the
appropriate governmental authority sufficient to enable [**].

19.8 The obligations of the Licensee to make all payments hereunder will be absolute and
unconditional and will not except as expressly set out in this Agreement, be affected by any
circumstances, including without limitation any set-off, compensation, counterclaim, recoupment,
defence or other right which the Licensee may have against the university, or anyone else for any
reason whatsoever.

19.9 All amounts due and owing to the University hereunder but not paid by the Licensee on the due
date thereof shall bear interest in Canadian dollars at the rate of [**] per annum
calculated annually not in advance. Such interest shall accrue on the balance of unpaid amounts
from time to time outstanding from the date on which portions of such amounts become due and owing
until payment thereof in full.

20. GENERAL:

20.1 On reasonable notice, the Licensee shall permit any duly authorized representative of the
University during normal business hours and at the University’s sole risk and expense to enter upon
and into any premises of the Licensee for the purpose of inspecting any Products and the manner of
their manufacture and generally of ascertaining whether or not the provisions of this Agreement
have been, are being, or will be complied with by the Licensee.

20.2 Nothing contained herein shall be deemed or construed to create between the parties hereto a
partnership or joint venture. No party shall have the authority to act on behalf of any other
party, or to commit any other party in any manner or cause whatsoever or to use any other party’s
name in any way not specifically authorized by this Agreement. No party shall be

 

			
	**	 	Confidential Treatment Requested.

 

22

liable for any act, omission, representation, obligation or debt of any other party, even if
informed of such act, omission, representation, obligation or debt.

20.3 Subject to the limitations hereinbefore expressed, this Agreement shall enure to the benefit
of and be binding upon the parties, and their respective successors and permitted assigns.

20.4 No condoning, excusing or overlooking by any party of any default, breach or non-observance by
any other party at any time or times in respect of any covenants, provisos, or conditions of this
Agreement shall operate as a waiver of such party’s rights under this Agreement in respect of any
continuing or subsequent default, breach or non-observance, so as to defeat in any way the rights
of such party in respect of any such continuing or subsequent default or breach and no waiver shall
be inferred from or implied by anything done or omitted by such party, save only an express waiver
in writing.

20.5 No exercise of a specific right or remedy by any party precludes it from or prejudices it in
exercising another right or pursuing another remedy or maintaining an action to which it may
otherwise be entitled either at law or in equity.

20.6 Marginal headings as used in this Agreement are for the convenience of reference only and do
not form a part of this Agreement and are not be used in the interpretation hereof.

20.7 The terms and provisions, covenants and conditions contained in this Agreement which by the
terms hereof require their performance by the parties hereto after the expiration or termination of
this Agreement shall be and remain in force notwithstanding such expiration or other termination of
this Agreement for any reason whatsoever.

20.8 In the event that any Article, part, section, clause, paragraph or subparagraph of this
Agreement shall be held to be indefinite, invalid, illegal or otherwise voidable or unenforceable,
the entire agreement shall not fail on account thereof, and the balance of the Agreement shall
continue in full force and effect.

20.9 The parties hereto acknowledge that the law firm of Richards Buell Sutton has acted solely for
the University in connection with this Agreement and that all other parties hereto have been
advised to seek independent legal advice.

20.10 Subject to Article 3.7, this Agreement sets forth the entire understanding between the
parties and replaces any and all previous License Agreements regarding the Technology and
Improvements between the parties to this Agreement. No modifications hereof shall be binding
unless executed in writing by the parties hereto.

 

23

20.11 Whenever the singular or masculine or neuter is used throughout this Agreement the same shall
be construed as meaning the plural or feminine or body corporate when the context or the parties
hereto may require.

IN WITNESS WHEREOF the parties hereto have hereunto executed this Agreement on the
14th day of December, 2007 but effective as of the Date of Commencement.

	 	 	 
	SIGNED FOR AND ON BEHALF of
	 	 
	THE UNIVERSITY OF BRITISH COLUMBIA
	 	 
	by its duly authorized officers:
	 	 
	 
	 	 
	/s/ Angus Livingston
 

Authorized Signatory

	 	 
	 
	 	 
	 

Authorized Signatory

	 	 
	 
	 	 
	QLT Inc.
	 	 
	Per:
	 	 
	/s/ Bob Butchofsky
 

Authorized Signatory

	 	 
	 
	 	 
	/s/ Cameron Nelson
 

Authorized Signatory

	 	 

 

24

SCHEDULE “A”

DESCRIPTION OF TECHNOLOGY AND IMPROVEMENTS — [**] ROYALTIES

[**]

 

			
	**	 	Confidential Treatment Requested.

 

25

SCHEDULE “B”

DESCRIPTION OF TECHNOLOGY AND IMPROVEMENTS — [**] ROYALTY

[**]

 

			
	**	 	Confidential Treatment Requested.

 

26

SCHEDULE “C”

EXISTING LICENSE AGREEMENTS

[**]

 

			
	**	 	Confidential Treatment Requested.

 

27

SCHEDULE “D”

SUBLICENSE TERMS

[**]

 

			
	**	 	Confidential Treatment Requested.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00137-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00137-of-00352.parquet"}]]