Document:

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                                                                  EXHIBIT 10.75

                  DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

         This Development and Commercialization Agreement ("AGREEMENT") is
entered into with effect from the 13th day of August, 2001 (the "EFFECTIVE
DATE") between QLT Inc. ("QLT"), a company incorporated in the Province of
British Columbia, Canada, and Xenova Limited ("XENOVA"), a company incorporated
in England and Wales.

                           R E C I T A L S

         A.       QLT and Xenova have entered into discussions with respect to
the development of a product incorporating Xenova's proprietary compound
currently known as XR9576 and have signed a Confidentiality Agreement dated
April 20, 2001 (the "CONFIDENTIALITY AGREEMENT") in that regard.

         B.       The parties wish to commence the development of the Product
and agree to enter into this binding interim Agreement to set out their
obligations with respect to development, manufacturing and commercialization of
the Product in the Field in the Development Territory and the Territory.

         C.       The parties agree to negotiate and settle a more definitive
comprehensive form of agreement consistent with and not in conflict with the
terms set out in this Agreement, as supplemented by such additional terms,
conditions and other provisions or amendments, to be settled in the manner
provided for in this Agreement.

         NOW THEREFORE, in consideration of the mutual covenants and agreements
provided herein, the parties agree as follows:

         1.       DEFINITIONS. For the purposes of this Agreement and the
Definitive Agreement, the following terms will have the respective meanings set
forth below:

         1.1      "ACT" shall mean the United States Food, Drug and Cosmetic
Act, as amended from time to time, and regulations promulgated thereunder.

         1.2      "AFFILIATE" shall mean any corporation or other entity that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the designated party, but only so
long as such relationship exists. For purposes of this definition, "control"
means ownership of at least 50% of the shares of stock entitled to vote for
directors in the case of a corporation and at least 50% of the interests in
profits in the case of a business entity other than a corporation.

         1.3      "ASSERTING PARTY" shall have the meaning set out in SECTION
14.2.

         1.4      "AVAILABLE XENOVA INDEPENDENT PROGRAM INFORMATION" shall have
the meaning set out in SECTION 7.3.

         1.5      "CONFIDENTIAL INFORMATION" shall mean:
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(a)      In the case of Xenova, all Information disclosed by Xenova to QLT
         concerning the Drug itself, or the use or manufacture
         thereof, owned by or licensed to Xenova prior to the date of this
         Agreement or developed by Xenova after the date of this Agreement
         outside the Program and without reference to or use of any Program
         Information or QLT Confidential Information;

(b)      In the case of QLT, all Information disclosed by QLT to Xenova
         concerning the Product (other than the Drug itself), or the
         use or manufacture thereof, or otherwise useful to the Program, owned
         by or licensed to QLT prior to the date of this Agreement or
         developed by QLT after the date of this Agreement outside the Program
         and without reference to or use of any Program Information or Xenova
         Confidential Information.

Confidential Information will not include any information which is:

         (i)      Now in the public domain or subsequently enters the public
                  domain without fault on the part of the receiving party;

         (ii)     Known by the receiving party from its own sources, as
                  evidenced by the receiving party's written records made
                  prior to the date of the Confidentiality Agreement; or

         (iii)    Received from any third party not under any obligation to keep
                  such information confidential.

         1.6      "CROSS-OVER USE" shall mean the use or sale in the Territory
of a compound, in whatever form, by Xenova (or by an Affiliate, licensee or
sub-licensee of Xenova or by a third party contracting with Xenova or an
Affiliate of Xenova) that can reasonably be seen as competing directly and in a
commercially significant way with the use or sale of the Product within the
Field in the Territory.

         1.7      "CROSS-PRICING RISK" shall mean the use or sale in the
Territory of a compound that incorporates the Drug, in whatever form, that is
owned, controlled or licensed by Xenova or by an Affiliate of Xenova, that has
the same or substantially the same chemical structure, or similar performance
characteristics, to the Product so that the compound could reasonably be
considered to be substituted in medical practice and subject to commercially
significant competitive pricing in relation to the Product.

         1.8      "DEFINITIVE AGREEMENT" shall mean the definitive
comprehensive form of agreement for the continued development and
commercialization of the Product in the Field in the Development Territory and
the Territory consistent with and not in conflict with the terms set out in
this Agreement, to be negotiated by parties and settled as provided in
SECTION 9.

         1.9      "DEVELOPMENT COMMITTEE" shall mean the committee constituted
by the parties in accordance with SECTION 2.2.

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         1.10     "DEVELOPMENT TERRITORY" shall mean the Territory and Europe.

         1.11     "DRUG" will mean Xenova's proprietary compound currently
known as XR9576 in its pure form (free base form and any pharmaceutically
acceptable salt form) and any formulations thereof or improvements thereto. The
parties will include the chemical structure of the Drug as an exhibit to the
Definitive Agreement.

         1.12     "EUROPE" will mean the United Kingdom, Ireland, Germany,
France, Italy, Belgium, The Netherlands, Luxembourg, Liechtenstein, Monaco,
Switzerland, Austria, Spain, Portugal, Greece, Cyprus, Malta, Norway, Sweden,
Denmark, Finland, Greenland, Iceland and any other countries that join the
European Union during the term of this Agreement or the Definitive Agreement,
and any successor states thereto.

         1.13     "FIELD" will mean any human therapeutic, diagnostic or
prophylactic use of the Drug in oncology, including oral uses thereof, but
excluding the ODD Field; provided that if, within [*] of the Effective Date,
Xenova does not complete a bona fide agreement with a third party that grants
rights to that third party to develop and commercialize the Drug in the ODD
Field in the Territory, then the Field shall include the ODD Field.

         1.14     "GMPs" will mean current Good Manufacturing Practices as
defined from time to time by the Act and as related to regulations or any
successor laws or regulations governing the manufacturer, handling, storage and
control of the Drug in the United States.

         1.15     "INFORMATION", for the purposes of this Agreement, shall mean
any know-how, ideas, trade secrets, inventions (including patents covering such
inventions), data, market research, technology and information, including
improvements and modifications to any thereof, processes and analytical
methodology used in development, testing and analysis, and medical, clinical,
toxicological and other scientific data developed or acquired by either party.
"INFORMATION" will be further defined in the Definitive Agreement.

         1.16     "INITIAL DEVELOPMENT" shall have the meaning set out in
SECTION 4.2.

         1.17     "INITIAL DEVELOPMENT PHASE" shall mean the period of time
from the Effective Date to the time of delivery by QLT to Xenova of the
Registration Package as more particularly set out in SECTION 4.2.

         1.18     "MARKETING DEFAULT" shall have the meaning set out in SECTION
5.3(b).

         1.19     "MARKETING DEFAULT NOTICE" shall have the meaning set out in
SECTION 5.3(d).

         1.20     "NET PROCEEDS" shall mean, without duplication, all revenues,
receipts, monies and the fair market value of all other consideration received
or collected, directly or indirectly, by Xenova, or any Affiliate of Xenova,
from end users or any third parties as consideration for the commercialization
and sale of the Product in the Field outside the

*Material has been omitted and filed separately with the commission.

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Territory or, as applicable, the ODD Product in the Territory, provided however
that "NET PROCEEDS" shall not include, without duplication:

(a)      Bona fide milestone payments, license and sublicense fees or equity
         investments received or collected by Xenova, or any Affiliate of
         Xenova, from any sub-licensee or other third party in exchange for
         rights to exploit and commercialize the Product or ODD Product; or

(b)      Any revenues, receipts or monies received by Xenova, or any Affiliate
         of Xenova, on account of (as applicable) research, development or
         manufacturing expenses including a commercially reasonable research,
         development or manufacturing profit mark up, or on account of bona
         fide commercially reasonable marketing and distribution expenses and
         other bona fide third party expenses and financial obligations of
         Xenova, or any Affiliate of Xenova, attributable to the research,
         development, commercialization and/or sale of the Product or the ODD
         Product.

For greater clarity, it is the intention of the parties that:

         (i)      In the event Xenova sublicenses to a third party the
                  marketing and distribution of the Product in any country
                  outside the Territory or the ODD Product in the Territory,
                  then "NET PROCEEDS" would comprise revenues received or
                  collected by Xenova in the nature of "running royalties",
                  after deduction (without duplication) of royalty obligations
                  to third parties with respect to the Product or the ODD
                  Product and any other third party expenditure directly
                  related to unit sales of the Product or the ODD Product;

         (ii)     In the event Xenova enters into a profit share collaboration
                  or similar arrangement with a third party in respect of the
                  marketing and distribution of the Product in any country
                  outside the Territory or the ODD Product in the Territory,
                  then "NET PROCEEDS" would comprise Xenova's share in the
                  profits from that profit share collaboration, after
                  deduction (without duplication, and to the extent not
                  already deducted in calculating Xenova's share in the
                  profits) of royalty obligations to third parties with
                  respect to the Product or ODD Product and any other third
                  party expenditure directly related to unit sales of the
                  Product or ODD Product; and

         (iii)    In the event Xenova directly markets and distributes the
                  Product in any country outside the Territory or the ODD
                  Product in the Territory, then "NET PROCEEDS" would also
                  include "NET SALES", after deduction of bona fide
                  commercially reasonable marketing and distribution expenses
                  and other bona fide commercially reasonable third party
                  expenses and financial obligations of Xenova, or any
                  Affiliate of Xenova, attributable to the commercialization
                  and sale of the Product or ODD Product in that country after
                  deduction (without duplication) of royalty obligations to
                  third parties with respect to the Product or ODD Product and
                  any other third party expenditure directly related to unit
                  sales

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                  of the Product or ODD Product (including any royalties
                  paid to any third party in connection with such
                  commercialization and sale).

In any case, commercially reasonable manufacturing profits attributable to the
manufacturing of the Product or ODD Product are not intended to be included in
"NET PROCEEDS".

         1.21     "NET SALES" shall mean the invoiced sales price of a
(Finished) Product in the Field in the Territory received by QLT, its Affiliates
and/or sub-licensees, from independent third parties in arm's length
transactions exclusively for money or, where the sale is not at arm's length,
the price that would have been so invoiced if it had been at arm's length, less:

(a)      Credits or allowances, if any, given or made for purchase charge
         backs, price reductions, returns, rebates, rejections, recall or
         destruction of spoiled, damaged, out-dated, returned or otherwise
         unacceptable product (voluntarily made or requested or made by an
         appropriate governmental agency, subdivision or department),
         quantity, trade, early-settlement and/or cash discounts, allowances
         and/or incentives on account of or in relation to the invoiced sales
         price of (Finished) Products;

(b)      Any duty, tax, excise or governmental charge upon or measured by the
         production, sale, transportation, delivery or use of (Finished)
         Products related to or based upon sales of (Finished) Products
         (including value added taxes);

(c)      Transportation and handling charges or allowances (freight, postage,
         shipping and insurance), if any, incurred on account of or in relation
         to the invoiced sales price of (Finished) Products and provided the
         amounts are separately charged on the relevant invoice; and

(d)      Allowances for bad debts and unpaid accounts in respect of the sale of
         (Finished) Products.

In no event will the total of these above-detailed deductions be greater than:

         (i)      In the first year of sales, [*], and

         (ii)     Thereafter, [*];

of the total invoice price; such limit to be calculated on a quarterly basis.

         1.22     "ODD" shall mean oral drug delivery.

         1.23     "ODD FIELD" shall mean the use of the Drug solely as an oral
drug delivery system in oncology in the Territory:

[*];

*Material has been omitted and filed separately with the Commission.

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the combined product being referred to in this Agreement and the Definitive
Agreement as the "ODD PRODUCT".

         1.24     "PRODUCT" shall mean any product for use in the Field in the
Territory which incorporates the Drug and any formulations thereof or
improvements thereto, including a product in a different strength (i.e., a
different amount of active ingredient delivered in the same pattern) or having
only cosmetic changes such as size, color, shape, etc., or similar
non-therapeutic changes.

         1.25     "PROGRAM" shall mean all activities undertaken by either or
both parties in accordance with the terms hereof for the development of the
Product in the Development Territory, including regulatory and clinical
activities. A draft summary of the Program activities as identified to date is
set forth on EXHIBIT B hereto.

         1.26     "PROGRAM Information" shall mean any Information developed or
acquired by or on behalf of either party under, or as a result of the Program or
by Xenova as contemplated under this SECTION 1.26. Notwithstanding the
foregoing, Program Information will not include trademarks. For greater clarity,
the parties acknowledge that, subject to the provisions and restrictions set out
in SECTION 6, contemporaneously with the Program, Xenova may be conducting
activities relating to:

(a)      Development and/or commercialization of the Drug outside the Field
         whether inside or outside the Territory;

(b)      Development of the Drug inside the Field and outside the Development
         Territory; or

(c)      Commercialization of the Drug inside the Field and outside the
         Territory.

and in that regard, Program Information shall not include any information
developed or acquired by Xenova under any Xenova Independent Program and
without reference to or use of any Confidential Information or Program
Information owned by QLT, but shall include Available Xenova Independent
Program Information.

         1.27     "QLT PATENTS", for the purposes of this Agreement, shall have
the meaning set out in SECTION 8.4(G). QLT Patents will be further defined in
the Definitive Agreement.

         1.28     "REGISTRATION PACKAGE" shall mean:

(a)      The standard dossier for a NDA for oncology products, the Table of
         Contents summary of which is attached as EXHIBIT D for illustrative
         purposes; and

(b)      As supplemented by data generated from the studies specified by the
         FDA during Xenova's meeting with the FDA on 25 April, 2001 (and
         summarized at the end of EXHIBIT D), unless the FDA later determines
         that any of the studies specified by the FDA during this meeting are
         not required.

         1.29     "SPECIFIC ACTION" shall have the meaning set out in SECTION
5.2.

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         1.30     "SPENDING CAP" shall have the meaning set out in SECTION 4.3.

         1.31     "TERRITORY" shall mean the United States of America, Canada
and Mexico.

         1.32     "XENOVA INDEPENDENT PROGRAM" shall have the meaning set out
in SECTION 7.3.

         1.33     "XENOVA PATENTS", for the purposes of this Agreement, shall
have the meaning set out in SECTION 8.4(A). Xenova Patents will be further
defined in the Definitive Agreement.

         1.34     Words defined elsewhere in this Agreement shall have the
meaning assigned thereto.

         1.35     The Definitive Agreement will contain additional definitions
as are appropriate for a Definitive Agreement of this nature, including
definitions of Combination Products, EMEA, FDA, Finished Products, First Line
Approval, ICH, Marketing Plan, NDA, Second Line Approval, Valid Claim, etc.

         2.       PRODUCT DEVELOPMENT.

         2.1      PROGRAM COMMENCEMENT - Promptly after:

(a)      Execution of this Agreement by both parties;

(b)      Payment by QLT of the upfront payment set out in SECTION 9.2; and

(c)      Delivery by Xenova to QLT of the Drug and Product as more specifically
         set out in SECTION 3.2;

the parties will commence the Program all as more specifically set out in this
Agreement and the Definitive Agreement, including a transition phase.

         2.2      DEVELOPMENT COMMITTEE - At the time of commencement of the
Program, the parties will establish the Development Committee consisting of an
equal number of members from each party. Each member shall have one vote. If
the Development Committee has a tie vote with respect to any manner properly
before it, either party may refer the matter to the Chief Executive Officers of
each party for resolution. Except as provided in SECTION 4.2 of this Agreement,
QLT shall have the tie-breaking vote with respect to all development activities
(in the Development Territory) and commercialization activities (in the
Territory, except in relation to Xenova's rights (if any) under SECTION 5.3(d))
for the Product in the Field. When QLT has the tie-breaking vote, it shall be
exercised by the Chief Executive Officer of QLT (or another Executive Officer
of QLT as his or her designee). The meetings and other procedures of the
Development Committee shall be set forth in more detail in the Definitive
Agreement, but shall consist of at least the following:

(a)      MANDATE -

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         (i)      Pooling of expertise and information exchange by the
                  parties with respect to the Product.

         (ii)     Strategic overview of clinical, regulatory and
                  manufacturing issues in the Development Territory
                  (including overview of the selection of initial and
                  alternative third party contract manufacturers in
                  the Development Territory).

         (iii)    Receive reports of marketing matters from QLT on the
                  Territory and from Xenova on Europe (to the extent
                  that Xenova is not restricted by any obligation
                  under an agreement with a third party).

         (iv)     Consider matters and make decisions on material
                  matters set out in this Agreement and in the
                  Definitive Agreement for consideration and
                  decisions by the Development Committee.

(b)      NUMBER OF MEMBERS - Each party shall have an equal number of members
         on the Development Committee, each of these members to have the
         appropriate background and expertise to contribute to the Development
         Committee.  Each party may change its members on the Development
         Committee from time to time.

(c)      MEETINGS - The Development Committee shall meet at a minimum four
         times per year, at least once in person and otherwise by
         videoconference.

(d)      SUB-COMMITTEES - From time to time the Development Committee will form
         sub-committees (standing or ad hoc) to consider and/or to provide
         guidance and oversight on specific matters (for example, the
         Development Committee will set up a European development sub-committee
         to consider the European aspects of the Program).

         3.       CMC, MANUFACTURING AND SUPPLY.

         3.1      OVERVIEW - In connection with the rights and licenses granted
by Xenova to QLT under this Agreement and the Definitive Agreement, Xenova will
transfer or otherwise make available to QLT the Drug, the Product,
manufacturing processes, analytical methods, reference standards and other
documents and information as are and to the extent necessary for QLT to carry
out its activities as contemplated by this SECTION 3.

         3.2      DEVELOPMENT SUPPLY - Xenova grants to QLT and QLT shall have
the exclusive rights and be responsible for manufacture and supply of Drug and
Product for Initial Development of the Product in the Field in the Development
Territory. In connection therewith, the parties agree as follows:

(a)      DRUG - Xenova shall transfer to QLT approximately [*]of Drug in its
         possession or control (including Drug not yet released by [*]). Xenova
         will supply this Drug to QLT at no charge to QLT.

(b)      PRODUCT - Xenova shall transfer to QLT at least [*] of Product in its
         possession or control (including any Product not yet released by [*])
         and any other ampoules not

*Material has been omitted and filed separately with the Commission.

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         required inside or outside the Program.  Xenova will supply this
         Product to QLT at no charge to QLT.

(c)      QUALITY - Xenova has provided QLT with a Material Safety Data Sheet
         for the Drug. Xenova has also provided QLT with all relevant
         information available and known to Xenova concerning the safety,
         handling, use, disposal and environmental effects of the Drug or as
         may be necessary to conduct the Program.

The parties agree that there will be a transition period during which they will
work together on the CMC (Chemistry, Manufacturing and Control) aspects of
development of the Drug and the Product in order to ensure a smooth and
efficient transfer from Xenova to QLT of manufacturing and supply
responsibility during and for the purposes of Initial Development and for
further development and commercialization in the Territory.

         3.3      COMMERCIAL SUPPLY IN THE TERRITORY - Except as otherwise set
out in this Agreement (including where Xenova exercises its rights under
SECTION 5.3(d)) and the Definitive Agreement, Xenova grants to QLT and QLT
shall have the exclusive rights and be responsible for the manufacture and
supply of Drug and Product (with the right to sub-contract the manufacture and
supply to QLT of Drug and Product) for commercialization of the Product in the
Field in the Territory. Xenova will not grant any other rights to manufacture
and supply the Product in the Field in the Territory, except that Xenova or its
licensee(s) may manufacture Product or have it manufactured in the Territory
for use:

(a)      Inside the Field but outside the Territory; or

(b)      Outside the Field in the Territory.

         3.4      XENOVA RETAINS ALL OTHER MANUFACTURING RIGHTS - Except as set
forth above in this SECTION 3, Xenova will retain all manufacturing and supply
rights for the Drug and the Product.

         3.5      MANUFACTURING FACILITIES -

(a)      ENSURING MANUFACTURING QUALITY -

         (i)      The parties acknowledge and agree that, notwithstanding that
                  each has manufacturing and supply rights and
                  responsibilities under this Agreement and the Definitive
                  Agreement, it is their intention to minimize unnecessary
                  costs and time delays in the worldwide development and
                  commercialization of the Drug and the Product, and in
                  particular in the manufacturing and supply aspects of the
                  worldwide development and commercialization of the Drug and
                  the Product.

         (ii)     In connection with this intention, the parties agree that in
                  the Development Territory they will work together [*]:

                  (A)      Is appropriately qualified (from a regulatory,
                           quality and standards perspective) in the
                           appointing party's territory;

*Material has been omitted and filed separately with the Commission

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                  (B)      Is competent to (and has been approved by the
                           relevant regulatory bod(ies) in the appointing
                           party's territory) to provide Drug or Product (as
                           the case may be) to an appropriate quality;

                  (C)      Has the ongoing manufacturing capacity to provide
                           Drug or Product (as the case may be) in the
                           appointing party's territory; and

                  (D)      Can manufacture the Drug or Product (as the case may
                           be) at a similar or better quality or upon similar
                           or better commercial terms than an alternate site
                           identified by the appointing party.

[*].

         (iii)    Following any acquisition of all or substantially all of [*]
                  assets or business relating to the subject matter of this
                  Agreement or the Definitive Agreement [*], if QLT's (or QLT
                  in its acquired form) initial manufacturer is in material
                  breach of its MANUFACTURING AND SUPPLY REQUIREMENTS (as
                  defined below), Xenova may so notify QLT.  Such manufacturer
                  shall then be given a period of up to six months to cure such
                  breach [adopt a Section 13.3 procedure; start cure within one
                  month (within six month period)], failing which Xenova shall
                  (at Xenova's discretion):

                  [*].

                  If the parties disagree over whether Xenova is entitled to
                  exercise either of the rights stated in paragraphs (A) and
                  (B) above, either party may refer its claim to expedited
                  arbitration under SECTION 14.2.

(b)      DRUG

         (i)      Xenova shall provide an introduction for QLT to [*] so that
                  QLT may set up its own relationship and agreement with [*]
                  for the manufacture and supply of Drug for QLT for
                  development of the Product in the Field in the Development
                  Territory and for QLT for commercialization of the Product in
                  the Field in the Territory.

         (ii)     The parties will consider including in the Definitive
                  Agreement a provision whereby if QLT is the first to validate
                  [*] for commercial production of Drug, and Xenova also wishes
                  to make use of [*] as a Drug manufacturing site, Xenova would
                  [*].

(c)      PRODUCT - QLT and Xenova will each be responsible for the
         qualification of their own Product manufacturer and the associated
         costs of this activity. Both parties agree that they will use
         reasonable commercial efforts to ensure that the manufacturing
         processes, in-process analytical methods, release analytical methods
         and specifications for the Product are as similar as possible.

*Material has been omitted and filed separately with the Commission.

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         3.6      EQUIVALENCY - QLT and Xenova will work together to ensure
equivalency between Product manufactured and used for Initial Development in
Europe and the Territory (by QLT and/or its third party contractors) and Product
manufactured and used for commercial supply in Europe (by Xenova and/or its
third party contractors) and Product manufactured and used for commercial supply
in the Territory (by QLT and/or its third party contractors) and to ensure that
the Product meets mutually agreed upon regulatory specifications.

         3.7      RECIPROCAL RIGHT OF INSPECTION - Each of Xenova and QLT shall
have the right, on reasonable written notice to the other, to periodically
inspect:

(a)      FACILITIES - The facilities used by the other to manufacture the Drug
         and/or the Product, and to the extent possible with the other's
         assistance, the facilities of any third party manufacturer of the Drug
         and/or the Product; and

(b)      RECORDS - The other's records relating to manufacture with respect to
         the Drug and/or the Product so that the inspecting party may audit the
         other's compliance with GMP and its contractual obligations with
         respect to the Drug and the Product.

         3.8      DEFINITIVE AGREEMENT - The parties agree that the CMC,
manufacturing and supply provisions set out in this SECTION 3 shall be expanded
upon in the Definitive Agreement, including provisions for:

(a)      Manufacture and supply agreement requirements including diligence and
         quality requirements and requirements to meet market demand
         (collectively "MANUFACTURING AND SUPPLY REQUIREMENTS");

(b)      Recalls; and

(c)      Reciprocal product liability indemnities according to the respective
         manufacturing and marketing responsibilities;

but agree that the provisions of this SECTION 3 set out the parties general
agreement with respect to these matters as they apply to the Drug and the
Product in the Field and in the Development Territory and the Territory.

         4.       CLINICAL AND REGULATORY DEVELOPMENT.

         4.1      GRANT OF RIGHTS - Xenova grants to QLT and QLT shall have the
exclusive rights (without the right to sub-license but with the right to
sub-contract) and be responsible for clinical and other development of the
Product in the Field in the Development Territory as more specifically set out
in this SECTION 4.

         4.2      INITIAL DEVELOPMENT IN THE DEVELOPMENT TERRITORY - QLT will
be responsible for conducting clinical and other studies for the development of
the Product and

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for the costs thereof (subject to SECTION 4.8) in the Field in the Development
Territory. The parties agree that QLT's responsibilities under this provision
will require QLT to work diligently and utilize sound and reasonable
scientific, business and medical practice and judgment to:

(a)      Carry out the Program in the Development Territory in accordance with
         the Development Plan (summary attached as EXHIBIT B; full Plan
         including timelines to be delivered to Xenova at the time of signing
         the Definitive Agreement);

(b)      File with the FDA an NDA for the Product in the Field in the United
         States in a timely manner; and

(c)      Deliver to Xenova the Registration Package for use by Xenova for
         registration purposes in Europe;

         (collectively, "INITIAL DEVELOPMENT").

On the earlier to occur of:

         (i)      QLT spending the amount of the Spending Cap in the Program
                  and declining to spend further amounts in the Program; and

         (ii)     The later of:

                  (A)      Delivery by QLT to Xenova of the Registration
                           Package as set out above; or

                  (B)      Receipt by QLT of first NDA approval for the Product
                           in the Field;

QLT's rights with respect to Initial Development in Europe shall cease and QLT's
tie-breaking vote on matters to be decided at the Development Committee shall
cease. Other than the spending and diligence provisions set out below, QLT will
have no further obligations to Xenova for development of the Product in the
Field in the Development Territory.

         4.3      QLT's CONTRIBUTIONS - Xenova acknowledges and agrees that
QLT, in performing its obligations under this Agreement and the Definitive
Agreement, will not be obligated to expend in excess of [*] (the "SPENDING
CAP") on Initial Development. If QLT exceeds the Spending Cap on Initial
Development, the parties will reasonably discuss in good faith, having regard
to the contributions of each party, some form of cut-back in the Program,
resource re-allocation, alterations in the development exclusivity provisions
for Europe, cost sharing or other arrangement for the continuation of the
Program. This provision will not be subject to (expedited or traditional)
arbitration in the event that the parties do not in good faith come to any
solution hereunder.

         4.4      PRIOR PROGRAM COMMITMENTS - Xenova shall be responsible for
and shall satisfy all obligations, liabilities and commitments pertaining to
the development of the Drug

*Material has been omitted and filed separately with the commission.

                                      -12-
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and Product existing or arising before the Effective Date. In addition, Xenova
shall be responsible, at its own cost, to complete the following
contractually-committed activities which are ongoing as of the Effective Date:

(a)      Finish all ongoing clinical and non-clinical studies (including
         completion of the study reports) except the Phase IIb study being
         conducted at MD Anderson Medical Centre; and

[*].

The parties acknowledge that after the Effective Date they will also consider
the following:

         (i)      Within 30 days of the Effective Date the parties will discuss
                  ongoing responsibility for ongoing stability and analytical
                  studies for the Drug/Product being conducted at [*],
                  including whether QLT needs or wants to take over the cost
                  and responsibility for these studies. If appropriate, more
                  definitive provisions dealing with these studies will be
                  included in the Definitive Agreement. In any event Xenova
                  shall not be required to bear any costs incurred in the [*]
                  studies after the period of 45 days from the Effective Date;
                  and

         (ii)     Between the Effective Date and the time of signing the
                  Definitive Agreement, the parties will review and determine
                  ongoing academic relationships/collaborations for the
                  Drug/Product and whether one or both will continue these
                  academic relationships/collaborations.

4.5      REGULATORY RESPONSIBILITY IN THE TERRITORY

(a)      RESPONSIBILITY - During the term of this Agreement and the Definitive
         Agreement, QLT will be fully responsible for and shall have the
         exclusive right to conduct (whether itself or through one or more
         sub-contractors) all regulatory activities and costs with respect to
         the development and commercialization of the Product in the Field in
         the Territory, including all communication with and responding to the
         FDA and other regulatory authorities regarding filings for the
         Product in the Field in the Territory.

(b)      TRANSFER - In connection with this QLT regulatory responsibility,
         Xenova agrees that promptly after the commencement of the Program it
         will commence working with QLT to:

         (i)      Assign and transfer to QLT all regulatory applications,
                  filings and correspondence in the Field in the Territory for
                  the Drug and the Product (including the IND in the United
                  States); and

         (ii)     Give QLT access to all regulatory applications, filings and
                  correspondence outside the Field in the Territory for the
                  Drug and the Product (including the IND in the United
                  States). QLT will retain ownership of all regulatory
                  applications and

*Material has been omitted and filed separately with the commission.

                                      -13-
<PAGE>
                  filings for the Drug and the Product in the Field in the
                  Territory after completion of development of the Product in
                  the Field in the Territory.

The parties will work together and assist each to effect this assignment and
transfer as quickly as possible. Each party will bear its own cost of this
assignment and transfer.

(c)      XENOVA REVIEW - Xenova will have the right to review and comment upon
         (but not delay):

         (i)      The CMC section (or equivalent) of the regulatory filings to
                  be made by QLT throughout the Territory; and

         (ii)     Material regulatory filings to be made by QLT throughout the
                  Territory.

         QLT shall consider such comments by Xenova but shall have no
                  obligation to revise the filings.

(d)      XENOVA OBSERVER ROLE - Xenova shall have the right to participate at
         Xenova's cost in an observer role in any material meetings to be held
         with the FDA and other regulatory authorities in the Territory with
         respect to the Product in the Field during the term of this Agreement
         and the term of the Definitive Agreement, to the extent that QLT is
         not restricted from providing such access by regulatory authorities in
         the Territory or by the terms of any licence granted by QLT in respect
         of the Territory.

(e)      CORRESPONDENCE - Each party will promptly provide the other party with
         copies of all material correspondence from or to the FDA and other
         regulatory authorities in the Territory concerning the Product.

4.6      REGULATORY RESPONSIBILITY IN EUROPE

(a)      RESPONSIBILITY - During the term of this Agreement and the Definitive
         Agreement, Xenova will be fully responsible for and shall have the
         exclusive right (whether itself or through one or more contractors and
         licensees) to conduct all regulatory activities and costs with respect
         to applications for marketing approval for the Product in the Field in
         Europe, including all communication with and responding to the EMEA
         and other regulatory authorities regarding such applications for the
         Product in the Field in Europe and establishing sources of commercial
         manufacture, marketing and supply of the Product in the Field for the
         European market.

(b)      QLT ASSISTANCE - Notwithstanding the Xenova responsibility noted
         above, QLT agrees that it will:

         (i)      Cooperate with and assist Xenova (or its licensee) at QLT's
                  cost (provided that these costs are not unreasonable) in
                  preparation of the regulatory filings in Europe and will (if
                  desired by Xenova) participate with Xenova in any meetings
                  with the EMEA or other European regulatory agencies, such
                  regulatory filings,

                                      -14-
<PAGE>
                  meetings and other procedures to be at Xenova's cost (unless
                  requested by QLT); and

         (ii)     Provide to Xenova the required letter(s) of authorization
                  with respect to Xenova (or its licensee) having the right to
                  use and/or access clinical and other data generated by or on
                  behalf of QLT for the purposes of registration and
                  commercialization of the Product in the Field in Europe.

(c)      ACCESS TO EUROPEAN FILINGS - In order for QLT to carry out its
         development responsibilities in Europe as more specifically set out
         in SECTION 4.2, Xenova will grant to QLT such access to Xenova's
         regulatory applications and filings in Europe for the Drug and the
         Product (including the equivalent of the US IND with the EMEA) as is
         reasonable and necessary for QLT to carry out the clinical
         development contemplated by SECTION 4.2.

(d)      QLT OBSERVER ROLE - In the event that Xenova does not invite QLT's
         assistance and participation with the regulatory process for the
         Product in the Field in Europe, QLT shall have the right to
         participate in an observer role at QLT's cost in any material
         meetings to be held with the EMEA and other regulatory authorities in
         Europe with respect to the Product in the Field during the term of
         this Agreement and the term of the Definitive Agreement, to the
         extent that Xenova is not restricted from providing such access by
         regulatory authorities in Europe or by the terms of any licence
         granted by Xenova in respect of the European Territory.

(e)      CORRESPONDENCE - Each party will promptly provide the other party with
         copies of all material correspondence from or to the EMEA and other
         regulatory authorities in Europe concerning the Product.

         4.7      NOTICE OF AE REPORTS, ETC. - Xenova and QLT each agree that
it (or its sub-licensee) will promptly notify the other of any information that
it obtains or develops regarding the efficacy or safety of the Drug or the
Product.  QLT and Xenova agree to exchange adverse drug reaction reports in a
manner and time frame that will allow compliance with regulatory reporting
requirements, including any requirements of the Act and regulations promulgated
thereunder (and, if applicable, the ICH guidelines) and ongoing safety review
of the Drug and Product. The parties will agree in writing upon standard
operating procedures for reporting these events to regulatory authorities and
to each other.

         4.8      PERSONNEL - In connection with the Program, the parties will
make available appropriate scientific, clinical, regulatory, manufacturing,
engineering, executive and other personnel to perform activities under the
Program.

         4.9      XENOVA CONTRIBUTION - Xenova will contribute [*].

         4.10     DEVELOPMENT COMMITTEE - The Development Committee shall
review and oversee all material activities to be undertaken by the parties
pursuant to the Program.

*Material has been omitted and filed separately with the Commission.

                                      -15-
<PAGE>
         5.       COMMERCIALIZATION AND MARKETING.

         5.1      GRANT OF RIGHTS - Xenova grants to QLT and QLT shall have the
exclusive rights and be responsible for commercialization, marketing and sale of
the Product in the Field in the Territory as more specifically set out in this
SECTION 5.

         5.2      COMMERCIALIZATION DILIGENCE -

(a)      GENERAL STATEMENT - QLT shall work diligently and utilize sound and
         reasonable scientific, business and medical practice and judgment in
         the commercialization, marketing and sale of the Product in the Field
         as appropriate throughout the Territory.

(b)      EXCEPTION - In accordance with SECTION 5.2(a) and the other provisions
         of this Agreement and the Definitive Agreement, QLT will endeavour to
         maximize the overall potential of the Product in the Territory as a
         whole.  According, and notwithstanding the diligence provision in
         SECTION 5.2(a), Xenova acknowledges and agrees that QLT will not be
         obligated to file for regulatory approval or launch the Product in
         [*] if to do so would adversely affect QLT's efforts in maximizing
         Net Sales in the Territory as a whole.  If the parties disagree over
         whether QLT should file for regulatory approval or launch the Product
         in [*], either party may refer the disagreement to expedited
         arbitration in accordance with SECTION 14.2.  If the arbitrator
         determines that launch of the Product in [*] would not adversely
         affect QLT's efforts in maximizing Net Sales as a whole, QLT shall
         promptly file for approval (if not pending) and launch the Product in
         such country within [*] of obtaining regulatory approval, failing
         which Xenova may notify QLT at any time within [*] following the [*]
         period, that such country is deleted from the list of countries set
         out in the definition of "Territory" set out in SECTION 1.31 and this
         Agreement and the Definitive Agreement shall be deemed to be amended
         accordingly.

(c)      COMMERCIALIZATION DILIGENCE ARBITRABLE - If at any time during the
         term of the Definitive Agreement Xenova considers that QLT has
         without legitimate reason failed to work diligently and utilize sound
         and reasonable scientific, business and medical practice and judgment
         in the commercialization, marketing and sale of the Product in the
         Field as appropriate throughout the Territory, Xenova shall be
         entitled to refer the following to expedited arbitration as set out
         in SECTION 14.2:

        (i)       Whether QLT has complied with its obligations under SECTION
                  5.2(a); and if not

        (ii)      What specific action QLT should have taken ("SPECIFIC
                  ACTION") in order to have so complied.

(d)      CONSEQUENCES OF COMMERCIALIZATION DEFAULT - If the expedited
         arbitration decision determines that QLT has failed to comply with
         its obligations under this SECTION 5.2, and if QLT fails to take the
         Specific Action within [*] of the arbitration decision,

*Material has been omitted and filed separately with the Commission.

                                      -16-
<PAGE>
         Xenova will be entitled, by giving written notice to QLT at any time
         within the [*] period after the end of the [*] period, to terminate
         the Definitive Agreement.  Termination by Xenova under this provision
         will be termination by Xenova for material breach by QLT under
         SECTION 13.3, provided that QLT shall not have any further
         opportunity to cure or commence the cure of such breach as described
         in that Section.

         5.3      MARKETING DILIGENCE -

(a)      SUMMARY MARKETING PLAN - Without limiting the diligence provisions in
         SECTION 5.2, QLT shall provide to Xenova at least annually during the
         term of the Definitive Agreement (in approximately [*] of each year,
         commencing in [*]) an updated, written Marketing Plan, describing
         past, current and projected activities taken or to be taken by QLT to
         bring Product to market in the Field in the Territory and to maximize
         the sale of the Product in the Field in the Territory.  The parties
         acknowledge and agree that QLT has the right and responsibility for
         commercialization, marketing and sale of the Product in the Field in
         the Territory and therefore QLT shall be entitled from time to time
         and at any time to update and amend the Marketing Plan using sound
         and reasonable scientific, business, medical and marketing practice
         and judgment and also taking into account the prospects for the
         Product. Xenova's receipt of or comments (or failure to comment) on
         the Marketing Plan shall not be taken as a satisfaction with or a
         waiver of QLT's diligence obligations under SECTION 5.2.

(b)      DEFINITION OF MARKETING DEFAULT - For the purposes of this SECTION
         5.3, "MARKETING DEFAULT" by QLT in the marketing of the Product in
         the Field in the Territory during the term of the Definitive
         Agreement means:

         (i)      [*] - Provided that since the Effective Date there has not
                  been a significant change in oncology marketing practices:

                  (A)      If QLT does not promptly commence and actively
                           pursue the [*] of a [*] for the Product promptly
                           after the time of receipt of [*] data that is
                           supportive of the [*]; or

                  (B)      If after first [*] QLT does not promptly commence
                           and actively pursue the [*] of [*] for the Product;
                           or

                  (C)      If following a positive [*] QLT does not promptly
                           commence and actively pursue the [*] of a [*] for
                           the Product in accordance with the [*].

         (ii)     [*] - Provided that since the Effective Date there has not
                  been a significant change in oncology marketing practices:

                  (A)      If QLT does not have at least [*] who are [*] at the
                           time of [*] of the Product following [*]; or

*Material has been omitted and filed separately with the Commission.

                                      -17-
<PAGE>
                  (B)      If QLT does not [*] or

                  (C)      QLT has failed to conduct any [*] provided for in
                           the [*] within the [*] provided for in [*]; or

                  (D)      Xenova otherwise considers that QLT has not worked
                           diligently and utilized sound and reasonable
                           scientific, business and medical practice and
                           judgment in its marketing of the Product in the
                           Field as appropriate throughout the Territory.

(c)      MARKETING DILIGENCE ARBITRABLE - If Xenova, acting reasonably,
         considers that QLT has committed a Marketing Default, Xenova may
         assume the co-promote and manufacture rights more specifically set
         out in SECTION 5.3(d) below. If there is any disagreement between the
         parties as to whether Xenova is entitled to assume such rights,
         either party refer its claim with respect to the Marketing Default to
         expedited arbitration under SECTION 14.2.

(d)      CONSEQUENCES OF MARKETING DEFAULT - If the arbitration decision
         determines that QLT has committed a Marketing Default, Xenova shall
         have the right to give written notice (the "MARKETING DEFAULT
         NOTICE") to QLT that it wishes to exercise the following rights:

         (i)      Xenova will have the right (by itself or through any
                  licensee(s) or sub-contractor(s)) to co-promote and sell the
                  Product in the Field in the Territory; and

         (ii)     Xenova will have the right to manufacture and supply Product
                  for sale by its (or its licensees') representatives in the
                  Field in the Territory.

         The parties agree that if Xenova exercises this co-promote and
         manufacture right, they will reasonably negotiate revised financial
         terms under the Definitive Agreement and for the Xenova
         co-promotion and manufacturing activities (including the
         amount of royalties due by QLT, a cost and profit share,
         etc.). If the parties are not able to reach agreement on the
         revised financial terms under the Definitive Agreement and
         for the Xenova co-promotion and manufacturing activities
         within 45 days of delivery of the Marketing Default Notice by
         Xenova to QLT, the matter shall immediately be submitted to
         expedited arbitration as set out in SECTION 14.2.

(e)      CO-PROMOTION AND MARKETING RIGHTS - In the event the arbitrator
         decides that QLT has committed a Marketing Default, Xenova's
         sole remedy shall be limited to its right to exercise the
         co-promote and manufacturing right under this SECTION 5.

         5.4      ARBITRATION RIGHTS ALTERNATIVE - The parties acknowledge and
agree that the rights to refer a claim to arbitration under SECTIONS 5.2 and
5.3 shall be alternative and not cumulative with respect to the same or
substantially the same set of facts or circumstances (but not any subsequent
occurrence of such facts and circumstances).

*Material has been omitted and filed separately with the commission.

                                      -18-
<PAGE>
         5.5      COMMERCIALIZATION BY XENOVA

(a)      GENERAL - Xenova shall work diligently and utilize sound and reasonable
         scientific, business and medical practice and judgment in the
         commercialization of the Product in the Field as appropriate outside
         the Territory and the ODD Product in the ODD Field as appropriate in
         the Territory.

(b)      SUB-LICENSE REVENUES - Xenova agrees that in entering into any
         relationships for the marketing and distribution of the Product in the
         Field in any country outside the Territory and the ODD Product in the
         ODD Field in the Territory, it will not use unusual efforts to
         structure the marketing and distribution relationship to reduce or
         avoid post commercialization payments.

         6.       ACTIVITIES, NON-COMPETITION, GLOBAL FRANCHISE AND FURTHER
OPPORTUNITIES.

         6.1      XENOVA ACTIVITIES - Xenova will not develop or commercialize
the Drug in the ODD Field in the Territory except in conformity with the
provisions set out in SECTION 1.25.

         6.2      OTHER XENOVA ACTIVITIES - For the purpose of protecting the
development of the Product in the Field in the Development Territory, Xenova
agrees as follows:

(a)      INSIDE FIELD/ROW - For a period of [*] from the Effective Date, Xenova
         will not, without the consent of QLT (such consent not to be
         unreasonably withheld or delayed), conduct (itself or with or through a
         third party or parties) any [*] development activities [*] with respect
         to the Drug or the Product for use inside the Field outside the
         Development Territory.

(b)      OUTSIDE FIELD/INSIDE DEVELOPMENT TERRITORY - For a period of [*] from
         the Effective Date, Xenova will not, without the consent of QLT (such
         consent not to be unreasonably withheld or delayed), conduct (itself
         or with or through a third party or parties) any [*] development
         activities [*] with respect to the Drug or the Product for use outside
         the Field in the Territory or in the Development Territory. However,
         the restrictions set out in this SECTION 6.2(b) shall not apply to the
         ODD Field (including outside the Territory) or any ODD activities
         outside the Field.

(c)      OUTSIDE FIELD/ ROW - For a period of [*] from the Effective Date,
         Xenova will not, without the consent of QLT (such consent not to be
         unreasonably withheld or delayed), conduct (itself or with or through a
         third party or parties) any [*]) development activities [*] with
         respect to the Drug or the Product outside the Field outside the
         Development Territory. However, the restrictions set out in this
         SECTION 6.2(c) shall not apply to the ODD Field (including outside the
         Territory) or any ODD activities outside the Field.

*Material has been omitted and filed separately with the Commission.

                                      -19-
<PAGE>
         6.3      RECIPROCAL NON-COMPETE - During the term of this Agreement
and the Definitive Agreement, neither QLT nor Xenova will conduct (itself or
with or through a third party or parties) any material development or
commercialization activities in the Territory with respect to any [*] for use
in cancer other than the Drug or the Product.

         6.4      GLOBAL FRANCHISE - The parties acknowledge that in the
development and commercialization of the Product in accordance with this
Agreement and the Definitive Agreement, the parties will endeavor to maximize
the overall global potential of the Product and will endeavor to ensure that
any sub-licenses or third party contracts entered into by the parties will
also have this same goal of maximization of the overall global franchise
for the Product.

         6.5      NOTICE AND DISCUSSION OF OTHER OPPORTUNITIES - If Xenova
intends at any time after the Effective Date to develop the Drug or Product
outside the Field (on its own or with or through a third party or parties), it
will give written notice of this intention to QLT and discuss with QLT the
possibility of a relationship with QLT for this additional development and use
of the Drug or Product.

         6.6      CROSS-OVER USE AND CROSS PRICING PROTECTION - Except as set
out in SECTION 6.2 and below in this SECTION 6.6, subject to giving notice as
described in SECTION 6.5 above, Xenova shall be free to pursue development and
commercialization opportunities for the Drug or the Product outside the Field
(on its own or with or through its licensees, sub-licensees, or any third party
or parties appointed by Xenova) it being intended that any such development and
commercialization shall not result in or otherwise cause Cross-Over Use or
Cross-Pricing Risk. Where either party in good faith believes that any such
development and commercialization (whether commenced or proposed) have resulted
or caused or would result in or cause Cross-Over Use or Cross-Pricing Risk, the
parties agree to discuss and seek to resolve any such issues in a
mutually-acceptable manner. If the parties disagree as to whether there exists
or may be potential Cross-Over Use or Cross Pricing Risk or they can not
otherwise resolve these issues so as to avoid the Cross-Over Use or Cross
Pricing Risk in a mutually acceptable manner, then either:

         [*]

         6.7      CONSEQUENCES OF ARBITRATION - If the arbitration decision
under SECTION 6.6(a) determines that the additional development and
commercialization does or would result (as the case may be) in Cross-Over Use
or Cross-Pricing Risk then Xenova shall cease pursuing or not pursue, as the
case may be, the additional development and commercialization opportunity.

         7.       CONFIDENTIALITY AND USE OF INFORMATION.

         7.1      CONFIDENTIALITY - Each party will, for the term of this
Agreement (and for the term of the Definitive Agreement) and for ten years after
its expiration or termination for any

*Material has been omitted and filed separately with the Commission.

                                      -20-
<PAGE>
reason (or the expiration or termination of the Definitive Agreement for any
reason), keep confidential and not disclose to others, and use only as
permitted hereunder in connection with the Program or as otherwise permitted
under this Agreement or the Definitive Agreement, all of the other party's
Confidential Information and all Program Information that is owned by the other
party. Notwithstanding the foregoing, such information may be:

(a)      REQUIRED FOR REGULATORY FILINGS - Disclosed to government agencies and
         others where such information may be required to be included in
         regulatory filings permitted under the terms of this Agreement or the
         Definitive Agreement;

(b)      UNDER CONFIDENTIALITY - Provided to third parties under agreements
         including appropriate confidentiality provisions for consulting, market
         research, manufacturing, development, and clinical testing with respect
         to the Product and similar activities under the Program;

(c)      PUBLISHED IF APPROVED - Published if and to the extent such
         publication has been approved in writing by QLT and Xenova; or

(d)      REQUIRED BY LAW - Disclosed to the extent required by applicable laws
         or regulations or as ordered by a court or other regulatory body having
         competent jurisdiction.

In each of the foregoing cases, the other party will use diligent efforts to
limit the disclosure and maintain confidentiality to the extent possible and to
inform the other party in good time of any intended or actual disclosure.

         7.2      XENOVA USE OF INFORMATION - Subject to SECTION 6.6, QLT shall
provide to Xenova and Xenova shall have the right to use and cross-reference
QLT's regulatory filings and clinical data (including Phase IV data) for the
Drug and the Product as well as all Program Information and any other data
which would enable Xenova to increase the Net Proceeds obtained from
commercialization of the Drug or the Product outside the Territory for the sole
purpose of developing and/or commercializing the Drug and/or the Product:

(a)      Inside the Field but outside the Territory (subject to QLT's exclusive
         rights under SECTION 4, for as long as those rights continue); and/or

(b)      Outside the Field, including inside or outside of the Territory;

whether by itself or through any licensee(s). Xenova shall provide compensation
to QLT for the use of QLT's Program Information as described in SECTION 9.7.

         7.3      QLT USE OF XENOVA INFORMATION - If Xenova conducts any
studies (to the extent not restricted pursuant to SECTION 6):

(a)      Inside the Field but outside the Territory; or

(b)      Outside the Field, whether inside or outside of the Territory;

                                      -21-
<PAGE>
in relation to the Drug or the Product or the use or manufacture thereof
including in the field of oral drug delivery ("XENOVA INDEPENDENT PROGRAM"), to
the extent that Xenova is not restricted by any third party agreements, QLT
shall have the right to use and to cross-reference, whether by itself or
through any licensee(s) or subcontractor(s), and Xenova shall provide to QLT,
Xenova's clinical data (including Phase IV data) and regulatory filings for the
Drug and the Product, as well as Program Information developed or acquired by
Xenova under any Xenova Independent Program and any other data which would
enable QLT to increase the Net Sales obtained from commercialization of the
Product inside the Field inside the Territory (collectively, "AVAILABLE XENOVA
INDEPENDENT PROGRAM INFORMATION") for the purpose of commercialization of the
Drug or the Product in the Field in the Territory.

         7.4      THIRD PARTY ACCESS - Each of QLT and Xenova will use
reasonable endeavors to ensure that any licensee or third party or parties that
it contracts with (where the licensee or third party may control the clinical
data, filings, Program Information and Information from any Xenova Independent
Program) will allow QLT or Xenova, as the case may be, to share these data,
filings, Program Information and Information with the other party as
contemplated by SECTIONS 7.3 and 7.4.

         7.5      USE OF QLT INFORMATION IN ODD - Notwithstanding any provision
of this Agreement and the Definitive Agreement, and in recognition of the ODD
Field:

(a)      QLT shall have no obligation to provide to Xenova, for the purpose of
         development and commercialization of the ODD Product, QLT's regulatory
         filings and clinical data (including Phase IV data) for the Drug and
         the Product as well as any or all QLT Program Information; and

(b)      Xenova shall not have any right of access or right to use or
         cross-reference, for the purpose of development and commercialization
         of the ODD Product, QLT's regulatory filings and clinical data
         (including Phase IV data) for the Drug and the Product as well as any
         or all QLT Program Information.

However the provisions of this SECTION 7.5 shall not entitle QLT to withhold
from Xenova any regulatory filings and clinical data (including Phase IV data)
for the Drug and the Product as well as any or all QLT Program Information
which in the absence of this SECTION 7.5 QLT would be obliged to provide to
Xenova and which Xenova requires for the purpose of development and
commercialization of Drug and Product in the fields and territories described
in SECTION 7.2(a) and (b).

8.       OWNERSHIP; ADDITIONAL TECHNOLOGY; LICENSES.

         8.1      OWNERSHIP -

(a)      DRUG and MANUFACTURING INFORMATION - Except as set out below at this
         SECTION 8.1(a), Program Information will be the property of Xenova if
         and to the extent related

                                      -22-
<PAGE>
         solely to the Drug itself, or the manufacture or use thereof.  As
         between Xenova and QLT, Available Xenova Independent Program
         Information shall be the property of Xenova. Notwithstanding the
         foregoing, if manufacturing processes having application to the Drug
         and/or the Product are discovered or invented by QLT under this
         Agreement and the Definitive Agreement, QLT shall own the Program
         Information, but (subject to SECTION 6) will grant to Xenova a
         non-exclusive license (if the manufacturing processes also have
         application beyond the Drug and/or the Product or an exclusive license
         (otherwise) to use the discovery or invention with the Drug and
         Product:

         (i)      Inside the Field, but outside the Territory; and

         (ii)     Outside the Field including inside or outside the Territory.

(b)      OWNERSHIP OF OTHER PROGRAM INFORMATION - All other Program Information
         will be the property of the party that generated it but will be made
         available to the other Party in accordance with the provisions of this
         Agreement or the Definitive Agreement.

         8.2      ADDITIONAL USEFUL TECHNOLOGY - The Definitive Agreement shall
include provisions to be agreed relating to the situation where either party
wishes to in-license additional technology.

         8.3      COMPULSORY LICENSES - If appropriate, the parties agree that
the Definitive Agreement will contain provisions dealing with compulsory license
situations that would require an equitable adjustment in royalties.

         8.4      GRANT OF LICENSES -

(a)      LICENSE FOR THE TERRITORY - Xenova hereby grants to QLT an exclusive
         license (including as against Xenova) for the Territory, to develop,
         make, have made, use, sell, have sold, offer for sale, export (from one
         part of the Territory to another) or import the Product (including the
         Drug) in the Field, including an exclusive license in the Field and in
         the Territory in respect of the Drug and Product under the patents
         listed in Exhibit A (the "XENOVA PATENTS") and Program Information
         owned or controlled by Xenova (as at the Effective Date and developed
         inside or outside the Territory during the term of this Agreement and
         the Definitive Agreement) to the extent necessary or useful for such
         purpose, all on the terms set forth in this Agreement and in the
         Definitive Agreement.  Certain exceptions to this exclusive license
         (for example, on a Marketing Default by QLT), will be set out in the
         Definitive Agreement. For greater clarity, nothing in this Agreement
         shall prevent Xenova from applying for or prosecuting patents, or
         entering into agreements with third parties, in relation to the Drug or
         Product (a) outside the Territory, or (b) outside the Field, provided
         that any activities conducted under such agreements shall not be in
         breach of any license granted by Xenova under this Agreement or the
         Definitive Agreement.

                                      -23-
<PAGE>
(b)      RIGHT TO SUB-LICENSE IN THE TERRITORY - QLT shall have the right to
         sublicense the rights granted hereby (without the right to sub-license
         for development but with the right to sub-contract development) on the
         terms and conditions upon notice to Xenova and subject to the
         provisions set out below in SECTIONS 8.4(c) and (d).

(c)      RIGHT TO SUB-LICENSE MARKETING

         (i)   If QLT intends to sub-license its marketing rights under this
               Agreement and the Definitive Agreement, QLT shall give written
               notice of this intention to Xenova and [*]; and

         (ii)  Otherwise, provided QLT has given written notice to and discussed
               with Xenova as set out in clause (i) above, QLT may sublicense
               its rights hereunder to a non-Affiliate third party with the
               consent of Xenova, which consent shall not be unreasonably
               withheld or delayed. The criteria to be considered by Xenova
               when determining whether to give such consent shall include
               whether the third party is appropriately qualified,
               experienced and competent in oncology marketing in the Territory
               and has the necessary resources to do so

         (iii) If there is any disagreement between the parties in relation to
               the withholding of such consent, the disagreement may be referred
               to expedited arbitration in accordance with SECTION 14.2.

(d)      RIGHT TO SUB-LICENSE MANUFACTURING - At any time during the term of
         this Agreement and the term of the Definitive Agreement that QLT has
         manufacturing and supply rights, QLT may sub-license those rights to a
         third party selected by QLT, subject to consent by Xenova, which
         consent shall not be unreasonably withheld or delayed. The criteria to
         be considered by Xenova when determining whether to give such consent
         shall include whether the third party:

         (i)  Is appropriately qualified in the Territory;

         (ii) Is competent to (and has been approved by the relevant regulatory
              body in the appointing party's territory) to provide Drug and
              Product (as the case may be) to an appropriate quality; and

         (iii) Has the manufacturing capacity to provide Drug or Product (as the
               case may be).

If there is any disagreement between the parties in relation to the withholding
of such consent, the disagreement may be referred to expedited arbitration in
accordance with SECTION 14.2.

(e)      SUB-LICENSING - The Definitive Agreement will include further terms for
         sub-licensing.

(f)      EUROPE - Xenova hereby grants to QLT an exclusive license (except as
         otherwise set out in this Agreement, and including as against Xenova)
         during the Initial

*Material has been omitted and filed separately with the commission.

                                      -24-
<PAGE>
         Development Phase for Europe, to develop, make, have
         made and use the Product (including the Drug) in the Field to the
         extent necessary for Initial Development, including an exclusive
         license in the Field and in Europe under the Xenova Patents, all on the
         terms set forth in this Agreement and in the Definitive Agreement.

(g)      QLT LICENSE - QLT hereby grants to Xenova an exclusive license (except
         as otherwise set out in this Agreement, and including as against QLT)
         for (i) outside the Territory whether inside or outside the Field, and
         (ii) inside the Territory, for use outside the Field (and inside the
         Field if Xenova exercises its rights (if any) under SECTION 5.3(d)),
         to develop, make, have made, use, sell, have sold, offer for sale,
         import or export the Product (including the Drug), including an
         exclusive license under any and all patents (the "QLT PATENTS"),
         know-how and Program Information owned or controlled by QLT (as at the
         Effective Date and during the term of this Agreement and the Definitive
         Agreement) which are necessary or useful for such purpose, all on the
         terms set forth in this Agreement and in the Definitive Agreement.

         9.       DEFINITIVE AGREEMENT.

         9.1      DEFINITIVE AGREEMENT -

(a)      NEGOTIATIONS - Following the Effective Date, the parties agree to
         enter promptly into good faith negotiations to settle the Definitive
         Agreement, consistent with the terms and conditions of this
         Agreement, as supplemented by such additional terms, conditions and
         other provisions or amendments to this Agreement as may be mutually
         agreed upon by the parties.  All of the terms, conditions and other
         provisions of the Definitive Agreement, whether settled by the
         parties or by expedited arbitration, shall be consistent with and not
         in conflict with any of the terms and conditions of this Agreement.
         QLT will not be required to pay any additional consideration for any
         rights granted under this Agreement or the Definitive Agreement,
         other than as set forth in this Agreement.

(b)      XENOVA TEAM - Xenova agrees that [*] from Xenova, as well as [*]
         (Xenova's solicitor) will comprise the Xenova negotiating team to
         negotiate and settle the Definitive Agreement.

(c)      QLT TEAM - QLT agrees that [*] from QLT, as well as [*] (QLT's
         solicitor) will comprise the QLT negotiating team to negotiate and
         settle the Definitive Agreement.

(d)      ARBITRATION - The parties will endeavor to negotiate, settle and
         sign the Definitive Agreement within [*] after the Effective Date.
         However, if the parties have not settled and signed the Definitive
         Agreement within [*] after Effective Date, either party may assert to
         the other that it desires that one or more of the terms being
         negotiated in accordance with this SECTION 9.1 be resolved by
         expedited arbitration pursuant to SECTION 14.2. Such party shall do
         so by giving the other party written notice to that effect and
         specifying those issues. As set out in SECTION 14.2(b), the process
         for resolution will commence with the Chief Executive Officers (or
         another member of

*Material has been omitted and filed separately with the Commission.

                                      -25-
<PAGE>
         senior management) of each party and if not resolved at that level,
         shall be resolved by binding expedited arbitration as set out in
         SECTION 14.2. The decision of the arbitrator shall bind both parties
         as fully as though such terms and conditions were included in this
         Agreement, provided that the arbitrator specifies that he/she has
         concluded such terms, conditions, provisions or amendments are
         consistent with and do not conflict with any of the terms and
         conditions of this Agreement.

         9.2      UPFRONT PAYMENT - In partial consideration for Xenova's
commitments under this Agreement and the Definitive Agreement, QLT will pay
Xenova an upfront nonrefundable, non-creditable fee of US$10 MILLION (by wire
transfer into an account designated by Xenova within ten business days after
the Effective Date

         9.3      MILESTONE EVENTS AND PAYMENTS - The Definitive Agreement will
contain the following provisions with respect to milestone events and payments,
with total milestone payments capped at US$50 MILLION:

(a)      First US NDA filing - [*].

(b)      US FDA Approval -

         (i)   First indication - [*]; and

         (ii)  Subsequent indications - [*] per approval (if first line
               approval) and [*] per approval ([*]).

         9.4      CURRENCY OF PAYMENT -

(a)      AGREEMENT - The upfront and milestone payments set out in this
         Agreement and the Definitive Agreement are and shall be respectively
         denominated in US dollars.

(b)      CURRENCY CHOICE - At least 10 days prior to the due date of the upfront
         or any milestone payments to be made by QLT to Xenova under this
         Agreement and the Definitive Agreement, Xenova may give written notice
         to QLT as to whether Xenova may wish to receive the payment in US
         dollars or British pounds sterling (or a combination thereof). If
         Xenova does not give this currency choice notice to QLT, QLT will make
         the payment in US dollars.

(c)      FOREIGN EXCHANGE - If Xenova elects to receive the upfront or any
         milestone payment or part thereof in British pounds sterling, Xenova
         shall notify QLT in writing on the day it wishes to receive the payment
         (no earlier than the due date) and QLT shall make that payment to
         Xenova in British pounds sterling, where the exchange rate for US
         dollars to British pounds sterling will be the buying rate for
         British pounds sterling quoted by QLT's primary banker.

*Material has been omitted and filed separately with the Commission.

                                      -26-
<PAGE>
         9.5      ROYALTIES - The Definitive Agreement will contain the
following provisions for the payment of royalties on cumulative annual sales of
(Finished) Products in the Field in the Territory:

(a)      Annual Net Sales under [*] - 15% of Net Sales.

(b)      Annual Net Sales between [*] - [*] of incremental Net Sales.

(c)      Annual Net Sales over [*] - 22% of incremental Net Sales.

(d)      All royalties under this SECTION 9.4 will be paid in US dollars.

         9.6      TERM FOR THE PAYMENT OF ROYALTIES - During the term of this
Agreement and the Definitive Agreement, the term for payment of royalties shall
be:

(a)      If there is a valid claim in the country of sale at the date of first
         commercial sale, royalties are due for the life of the valid claim.

(b)      If there is no valid claim in the country of sale at the date of first
         commercial sale, royalties are due for 10 years from the date of first
         commercial sale.

(c)      [*].

         9.7      COMPENSATION FOR USE OF PROGRAM INFORMATION - Xenova will
provide compensation to QLT for use of "Program Information" as follows:

(a)      EUROPE - Xenova will pay to QLT [*] that Xenova receives from the sale
         of Products in the Field in Europe after regulatory approval has been
         obtained;

(b)      ROW - Xenova will pay to QLT [*] that Xenova receives from the sale of
         Products in the Field outside the Development Territory after
         regulatory approval has been obtained; and

(c)      ODD - Xenova will pay to QLT [*] that Xenova receives from the sale of
         the Drug in the ODD Field in the Territory after regulatory approval
         has been obtained.

         9.8      REPORTS AND AUDITS - The Definitive Agreement will contain
reporting and audit provisions typical of license agreements of the nature of
the Definitive Agreement, including:

(a)      QLT DEVELOPMENT PROGRESS REPORTS - During the term of the Definitive
         Agreement, QLT will deliver annual progress reports to Xenova on
         development of the Drug and Product in the Development Territory (in
         addition to the discussions and review at the Development Committee),
         such annual reports to summarize QLT's progress with development of the
         Drug and the Product in the past year and its plans and budgets for the
         Product in the Field in the Territory in the coming year as they become
         available.

*Material has been omitted and filed separately with the Commission.

                                      -27-
<PAGE>
(b)      QLT MILESTONE AND ROYALTY REPORTS - After first NDA approval of the
         Product in the Field in the Territory and for the remainder of the term
         of the Definitive Agreement, QLT shall submit quarterly payment reports
         to Xenova, such reports to include:

         (i)   A report of milestone payments owing to Xenova; and

         (ii)  An accounting of Net Sales (where reasonably available on a
               country-by-country basis) and a calculation of the royalties
               owing to Xenova.

(c)      XENOVA NET PROCEEDS REPORTS - After first regulatory approval of the
         Product in the Field outside the Territory and, after first regulatory
         approval of the ODD Product in the ODD Field in the Territory, as the
         case may be, and for the remainder of the term of the Definitive
         Agreement, Xenova shall submit quarterly payment reports to QLT, such
         reports to include an accounting of Net Proceeds (where reasonably
         available on a country-by-country basis) and a calculation of monies
         owing to QLT under SECTION 9.7.

(d)      RECIPROCAL AUDIT RIGHTS - Not more than once per year during the term
         of the Definitive Agreement, each of QLT and Xenova shall have the
         right to audit (through independent auditors) the other's books and
         records to determine the completeness and accuracy of the reports and
         payments required to be made under the Definitive Agreement.

         10.      REPRESENTATIONS, WARRANTIES AND COVENANTS.

         10.1     XENOVA - Xenova represents, warrants and covenants to QLT
that:

(a)      AUTHORITY - Xenova has full right, power and authority to enter into
         this Agreement and the Definitive Agreement and to grant the licenses
         set forth herein;

(b)      NO CONFLICTING AGREEMENTS - Xenova has not entered and during the term
         of this Agreement (and the term of Definitive Agreement) will not enter
         into any agreement, arrangement or commitment regarding the Drug or the
         Product that is inconsistent with this Agreement;

(c)      OWNERSHIP AND RIGHTS - Except as set forth on EXHIBIT C hereto, Xenova
         holds all right, title and interest in and to the patents listed in
         EXHIBIT A, free of any rights or encumbrances of third parties which
         would impact QLT's rights hereunder; and

(d)      SUFFICIENCY OF GRANTS - As far as Xenova is aware (but without
         necessarily having conducted any searches or investigations), and
         except as set forth on EXHIBIT C hereto, no further rights of Xenova
         other than those granted to QLT hereunder are required for and no
         third party patent or other proprietary right would be infringed by
         the development and commercialization of the Drug or the Product in
         the Territory as contemplated by this Agreement.

         10.2     QLT - QLT represents, warrants and covenants to Xenova that:

                                      -28-
<PAGE>
(a)      AUTHORITY - QLT has full right, power and authority to enter into this
         Agreement and the Definitive Agreement and to grant the licenses set
         forth herein; and

(b)      NO CONFLICTING AGREEMENTS - QLT has not entered and during the term of
         this Agreement (and the term of Definitive Agreement) will not enter
         into any agreement, arrangement or commitment regarding the Product
         that is inconsistent with this Agreement and the Definitive Agreement.

         10.3     OTHER REPRESENTATIONS, WARRANTIES AND COVENANTS - The parties
will negotiate to include in the Definitive Agreement such other
representations, warranties and covenants from each of the parties as are
reasonable and standard for a license of the nature of the Definitive Agreement.

         11.      PATENT PROSECUTION, MAINTENANCE AND ENFORCEMENT.

         11.1     XENOVA PATENTS - PROSECUTION AND MAINTENANCE -

(a)      XENOVA'S RESPONSIBILITY - During the term of this Agreement and the
         Definitive Agreement, except as set out below, Xenova shall be
         responsible for, in its sole discretion and at its sole expense,
         prosecution and maintenance of the Xenova Patents.

(b)      REVIEW - QLT shall have the right to:

         (i)   Review all pending applications, patents, other proceedings,
               communications, reports and observations relating to the Xenova
               Patents; and

         (ii)  Make recommendations to Xenova concerning the Xenova Patents.
               Xenova shall reasonably consider such comments but shall have no
               obligation to revise the filings or other communications.

(c)      DISCLOSURE - Xenova shall promptly disclose to QLT and keep QLT fully
         informed and/or supply QLT in a timely fashion with:

         (i)   The complete texts of all Xenova Patents and all relevant patent
               applications filed and/or controlled by Xenova; and

         (ii)  All information received concerning:

               (A)   The institution or possible institution of any
                     interference, opposition, re-examination, reissue,
                     revocation, nullification or any official proceeding
                     involving any Xenova Patents; and

               (B)   The course of patent prosecution or other proceedings
                     related to any Xenova Patents;

                                      -29-
<PAGE>
including by providing QLT with copies of substantive communications, search
reports and third-party observations submitted to or received from patent
offices.

(d)      NOTICE TO QLT -

         (i)   Xenova shall notify QLT in writing of its intentions with regard
               to ceasing prosecution or maintenance of patent protection for
               any Xenova Patent in any country in the Territory in reasonable
               time for QLT to continue prosecuting or maintaining the patent
               protection at its own discretion and expense, with a rebuttable
               presumption that less than 45 days notice is not sufficient
               notice; and

         (ii)  Xenova will execute such documents and otherwise cooperate with
               QLT as may be necessary (but without significant expense to
               Xenova) to perfect and maintain the patent protection that Xenova
               is ceasing and QLT elects to continue pursuant to clause (i)
               above.

(e)      NO ROYALTY - In the event that QLT elects to continue prosecution or
         maintenance of a patent or patent application forming part of the
         Xenova Patents in any country of the Territory, no royalty obligations
         shall accrue with respect to sales of Products in that country unless
         Xenova agrees to pay the costs of such prosecution or maintenance.

         11.2     QLT PATENTS - PROSECUTION AND MAINTENANCE -

(a)      QLT'S RESPONSIBILITY - During the term of this Agreement and the
         Definitive Agreement, except as set out below, QLT shall be responsible
         for, in its sole discretion and at its sole expense, prosecution and
         maintenance of the QLT Patents.

(b)      REVIEW - Xenova shall have the right to:

         Review all pending applications, patents, other proceedings,
communications, reports and observations relating to the QLT Patents; and

         Make recommendations to QLT concerning the QLT Patents. QLT shall
reasonably consider such comments but shall have no obligation to revise the
filings or other communications.

(c)      DISCLOSURE - QLT shall promptly disclose to Xenova and keep Xenova
         fully informed, and/or supply Xenova in a timely fashion with:

         (i)   The complete texts of all QLT Patents, and

         (ii)  All information received concerning:

               (A)   The institution or possible institution of any
                     interference, opposition, re-examination, reissue,
                     revocation, nullification or any official proceeding
                     involving any QLT Patents; and

                                      -30-
<PAGE>
              (B) The course of patent prosecution or other proceedings related
                  to any QLT Patents;

including by providing Xenova with copies of substantive communications, search
reports and third party observations submitted to or received from Patent
offices.

(d)      NOTICE TO XENOVA -

         (i)  QLT shall notify Xenova in writing of its intentions with regard
              to ceasing prosecution or maintenance of patent protection for any
              QLT Patent in any country in the Territory in reasonable time for
              Xenova to continue prosecuting or maintaining the patent
              protection at its own discretion and expense, with a rebuttable
              presumption that less than 45 days notice is not sufficient
              notice; and

         (ii) QLT will execute such documents and otherwise cooperate with
              Xenova as may be necessary (but without significant expense to
              QLT) to perfect and maintain the patent protection that QLT is
              ceasing and Xenova elects to continue pursuant to clause (i)
              above.

         11.3     XENOVA PATENTS - INFRINGEMENT -

(a)      NOTICE - Each of QLT and Xenova agrees that during the term of this
         Agreement and the Definitive Agreement it will promptly notify the
         other in the event that it becomes aware of any potential infringement
         of the Xenova Patents.

(b)      QLT TO PROSECUTE - QLT agrees that during the term of this Agreement
         and the Definitive Agreement it will prosecute infringers of the Xenova
         Patents or otherwise act to eliminate infringement of the Xenova
         Patents by third parties in the Territory when, in the sole judgment
         and discretion of QLT, such action is necessary, proper and justified
         in relation to the Product in the Field in the Territory. In the event
         litigation is initiated, the costs of litigation shall be funded as
         follows:

         (i)  Subject to clause (ii) below [*] of the costs of litigation shall
              be borne by QLT; and

         (ii) [*] of the costs of litigation shall be borne by Xenova, subject
              to the following:

              (A)   Xenova's funding obligations will be satisfied by QLT
                    withholding royalties otherwise due to be paid to Xenova
                    under the Definitive Agreement (and Xenova will not be
                    obligated to make out-of-pocket expenditures to satisfy this
                    funding obligation); and

              (B)   In no event will Xenova's funding obligations under this
                    SECTION 11.3(B) exceed [*] in any year.

(c)      The costs of the litigation shall be deemed to be QLT's actual third
         party expenses directly related to or incurred in connection with the
         alleged infringement. At such

*Material has been omitted and filed separately with the Commission.

                                      -31-
<PAGE>
         time as the infringement ceases (whether voluntarily, by settlement or
         by court order), QLT's full royalty obligations shall resume. Any
         recovery, lump-sum settlement or royalty payment made to QLT by the
         alleged infringer shall be treated as follows:

        (i)   XENOVA REIMBURSED - First, Xenova shall be reimbursed in the
              amount of any withheld royalties;

        (ii)  QLT REIMBURSED - Second, QLT shall be reimbursed for all actual
              third party expenses directly related to or incurred in connection
              with the alleged infringement for which royalty payments were not
              withheld; and

        (iii) REMAINDER - Third, any remaining amount shall be treated as if it
              were sales of Product, with Xenova receiving a royalty on the
              remaining amount as set out in this Agreement and QLT retaining
              the balance.

(d)      QLT DOES NOT PROSECUTE - If QLT elects not to bring or prosecute
         infringement litigation pursuant to this SECTION 11.3 it will promptly
         notify Xenova and Xenova may elect to bring suit against the alleged
         infringer at its sole expense, and in its sole discretion. In this
         case, any recovery, lump-sum settlement or royalty payment made by
         the alleged infringer shall be retained by Xenova.

         11.4     QLT PATENTS - INFRINGEMENT -

(a)      QLT'S RESPONSIBILITY - QLT agrees that during the term of this
         Agreement and the Definitive Agreement, it will, at QLT's sole cost
         and expense, protect its interests in the QLT Patents from
         infringement by third parties and that it will prosecute infringers
         or otherwise act to eliminate infringement when, in the sole judgment
         and discretion of QLT, such action is necessary, proper and justified.

(b)      XENOVA'S ASSISTANCE - Xenova agrees that during the term of this
         Agreement and the Definitive Agreement it will notify QLT if it becomes
         aware of any infringement of the QLT Patents and agrees that it will,
         at QLT's request and expense, reasonably assist QLT to prevent or
         discontinue the infringement.

         11.5     THIRD PARTY PATENTS - Notwithstanding any other royalty
payment provision of this Agreement or the Definitive Agreement, in
the event that any activities licensed under this Agreement or the
Definitive Agreement are found to infringe the intellectual property
rights of a third party, and result in the payment of royalties or
other compensation by QLT (or a QLT sub-licensee) to the third party,
QLT may reduce its royalty payments to Xenova, the reduction to be in
the amount of the royalties or other compensation paid to the third
party, up to a maximum of [*] of the royalties payable to Xenova
under the Definitive Agreement with respect to the country(ies) in
the Territory for which payments are being made to the third party.
Provided that such reductions shall only be made where the third
party liability arises from the use of the inventions claimed in the
Xenova Patents and shall not be made in respect of any other
inventions, improvements or other features that QLT

*Material has been omitted and filed separately with the Commission.

                                      -32-
<PAGE>
chooses to incorporate into the Product.

         12.      TRADEMARK.

         12.1     During the term of this Agreement and the Definitive
Agreement, QLT shall be responsible for, in its sole discretion and at its sole
expense, origination, selection, application, prosecution, registration and
maintenance of one or more trademarks and trade-names under which the Product
will be sold and distributed in the Field in the Territory. QLT will at
Xenova's request add, or cause to be added, a marking in a form proposed by
Xenova and reasonably acceptable to QLT on the packaging of all Products sold
by QLT, its Affiliates or sub-licensees hereunder, to indicate the connection of
Xenova as licensor of the Product, provided that such marking shall not cause
any contravention of labeling or packaging laws or regulations.

         13.      TERM AND TERMINATION.

         13.1     TERM - This Agreement will come into effect on the Effective
Date and will remain in effect until superseded by the executed Definitive
Agreement. The term of the Definitive Agreement shall be, in respect of each
country in the Territory, the life of the patents in such country or 10 years
from first commercial sale of the Product in such country, whichever is longer.

         13.2     EARLY TERMINATION BY QLT -

(a)      BEFORE FIRST COMMERCIAL SALE - At any time before the first commercial
         sale of Product in the Territory, QLT may terminate this Agreement and
         the Definitive Agreement upon not less than 90 days' written notice to
         Xenova; provided, however, that before delivering any such termination
         notice within the [*] after the Effective Date, QLT shall first offer
         to discuss with Xenova QLT's intention to terminate and the reasons
         therefore.

(b)      AFTER FIRST COMMERCIAL SALE - At any time after the first commercial
         sale of Product in the Territory, QLT may terminate this Agreement and
         the Definitive Agreement upon not less than 180 days' written notice to
         Xenova.

(c)      ADVERSE CHANGE - Notwithstanding the foregoing, if there is a
         significant adverse change or event in the safety or efficacy profile
         of the Drug or Product, QLT may terminate this Agreement and the
         Definitive Agreement at any time upon 60 days' written notice to
         Xenova.

(d)      MATERIAL BREACH - At any time during the term of this Agreement and the
         Definitive Agreement, QLT may terminate this Agreement and the
         Definitive Agreement due to Xenova's material breach of any of its
         material obligations upon not less than 45 days' written notice to
         Xenova. Xenova shall have the opportunity to:

*Material has been omitted and filed separately with the Commission.

                                      -33-
<PAGE>
         (i)  Cure the breach within the 45-day period; or

         (ii) If the breach is not capable of cure within the 45-day cure
              period, to commence to diligently pursue a cure within this 45-day
              cure period;

to avoid termination of this Agreement and the Definitive Agreement (unless the
material breach, by its nature, is incurable, in which case this Agreement and
the Definitive Agreement may be terminated immediately).

         13.3     EARLY TERMINATION BY XENOVA -

(a)      MATERIAL BREACH - At any time during the term of this Agreement and the
         Definitive Agreement, Xenova may terminate this Agreement and the
         Definitive Agreement due to QLT's material breach of any of its
         material obligations upon not less than 45 days' written notice to
         QLT. QLT shall have the opportunity to:

         (i)  Cure the breach within the 45-day period; or

         (ii) If the breach is not capable of cure within the 45-day cure
              period, to commence to diligently pursue a cure within this 45-day
              cure period;

to avoid termination of this Agreement and the Definitive Agreement (unless the
material breach, by its nature, is incurable, in which case this Agreement and
the Definitive Agreement may be terminated immediately).

(b)      MARKETING DEFAULT - The parties acknowledge and agree that a Marketing
         Default does not, of itself, constitute a material breach by QLT of a
         material obligation under the Definitive Agreement and that the
         consequences of a Marketing Default are as set out in SECTION 5.3(d).

         13.4     BANKRUPTCY - If during the term of this Agreement and the
Definitive Agreement either party becomes bankrupt or insolvent, petitions any
judicial body under any bankruptcy or insolvency laws, or has any proceeding
commenced against it for insolvency, bankruptcy or liquidation (or any analogous
action occurs in any jurisdiction) the other party may terminate this Agreement
and the Definitive Agreement by providing 10 days written notice to the other.

         13.5     XENOVA LICENSES IN THE CASE OF CERTAIN EARLY TERMINATIONS -
If:

(a)      CONVENIENCE - QLT terminates this Agreement and the Definitive
         Agreement under any of SECTIONS 13.2 (a) TO (c); or

(b)      MATERIAL BREACH - Xenova terminates this Agreement and the Definitive
         Agreement under SECTION 13.3(a) due to a material breach by QLT (which
         is not cured or commenced to be cured by QLT or is not capable of cure,
         as applicable) or default by QLT under SECTION 13.4;

                                      -34-
<PAGE>
then the following shall occur:

         (i)  If the termination is pre-first NDA approval of the Product in the
              Field in the Territory, QLT will grant to Xenova an
              irrevocable, royalty-free, worldwide, exclusive license (or
              non-exclusive license in the case of any QLT manufacturing
              processes if Xenova's license to such processes prior to
              termination was non-exclusive under SECTION 8.1(a)), with the
              right to sublicense, to any Program Information owned by QLT,
              the QLT Patents, solely to develop and commercialize the Drug
              and/or Product in the Field and will assign and transfer to
              Xenova the trademarks and trade-names (including all goodwill
              associated therewith) and regulatory filings in connection with
              Drug and/or Product in the Field; and

         (ii) If the termination is post-first NDA approval of the Product in
              the Field in the Territory, QLT will grant to Xenova an
              irrevocable, royalty bearing, worldwide, exclusive license, with
              the right to sublicense, to any Program Information owned by QLT,
              the QLT Patents, solely to develop and commercialize the Drug
              and/or Product in the Field and will assign and transfer to Xenova
              the trademarks and trade-names (including all goodwill associated
              therewith) and regulatory filings in connection with Drug and/or
              Product in the Field. In this case the royalty to be paid by
              Xenova to QLT in consideration for the work done by QLT prior to
              the effective date of termination will be agreed to by the parties
              negotiating in good faith, provided that if the parties do not
              agree to a new lower royalty rate within 45 days after the
              effective date of termination, the matter will be referred to
              expedited arbitration under this Agreement and the Definitive
              Agreement and provided further that if the termination arises from
              QLT's failure to perform its diligence obligations underthis
              Agreement and the Definitive Agreement, the above royalty back to
              QLT will be capped at an amount equal to QLT's development and
              commercialization costs with respect to the Product in the Field.

         13.6 QLT LICENSE IN THE CASE OF CERTAIN EARLY TERMINATIONS - If QLT
terminates this Agreement or the Definitive Agreement due to material breach by
Xenova of a material provision of this Agreement or the Definitive Agreement,
all rights and licenses granted by Xenova to QLT under this Agreement and the
Definitive Agreement shall continue as exclusive (or non-exclusive, as the case
may be) royalty bearing licenses from Xenova to QLT on the terms and conditions
set out in this Agreement and the Definitive Agreement, except that the royalty
rates set out therein shall be reduced, as agreed to by the parties negotiating
in good faith, with the royalty rates set out in this Agreement and the
Definitive Agreement being the maximum royalty rates available, provided that if
the parties do not agree to a new lower royalty rate within 45 days after the
effective date of termination, the matter will be referred to expedited
arbitration under this Agreement and the Definitive Agreement.

         13.7 DEFINITIVE AGREEMENT - The Definitive Agreement will include
further conventional provisions, not inconsistent or in conflict with any of the
terms and conditions

                                      -35-
<PAGE>
of this Agreement, to be agreed, as to the consequences of termination or
expiry in relation to the sale and commercialization of Product.  Except as
expressly provided in this Agreement or the Definitive Agreement, the existence
or exercise of a right of termination under this Agreement and the Definitive
Agreement shall be without prejudice to any other rights or remedies that the
terminating party may have.

14.      MISCELLANEOUS.

         14.1     GOVERNING LAW - This Agreement will be governed by and
construed in accordance with the laws of England, excluding any choice of law
rules that may direct the application of the laws of another jurisdiction.

         14.2     EXPEDITED ARBITRATION -

(a)      NOTICE - In the event that the matter in dispute relates to:

         (i)   The matters described in SECTION 3.5(a)(iii) (manufacturing
               default);

         (ii)  Disagreement as to whether to file and launch in [*] as set out
               in SECTION 5.2(b);

         (iii) Commercial diligence default as set out in SECTION 5.2;

         (iv)  Xenova's belief, acting reasonably, that QLT has committed a
               Marketing Default and Xenova wishes to exercise its co-promote
               and manufacture rights under SECTION 5.3 or the parties'
               inability to agree revised financial terms under SECTION 5.3(d);

         (v)   The determination of a claim pertaining to Cross-Over Use or
               Cross-Pricing Risk under SECTION 6.6 (where the arbitrator shall
               be instructed to attempt to find a mutually-acceptable solution
               to avoid the Cross-Over Use or Cross-Pricing Risk whilst giving
               reasonable protection to each party's commercial interests);

        (vi)   The determination of a claim pertaining to sub-licensing under
               SECTION 8.4(c) OR (d);

        (vii)  The settling of the form of the Definitive Agreement as provided
               for under SECTION 9; or

        (viii) Settlement of revised financial terms under SECTIONS
               13.5 OR 13.6;

the party asserting the claim (the "ASSERTING PARTY") shall first inform the
other party, in writing, of the specific nature of the controversy, dispute or
matter, the pertinent provisions of this Agreement or the Definitive Agreement,
and its proposed resolution.

(b)      SUBMISSION TO ARBITRATION - If the executive resolution efforts set
         out above are not successful, the claim shall be submitted to
         arbitration in accordance with the

*Material has been omitted and filed separately with the Commission.

                                      -36-
<PAGE>
Commercial Arbitration Rules of the American Arbitration Association (the
"AAA") by a panel of one arbitrator (unless the parties agree otherwise)
knowledgeable as to the subject matter of the claim, and judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. If necessary, the Definitive Agreement will provide for
the express adoption of the International Arbitration Treaty in respect of
enforcement of Awards.

(c)      AAA EXPEDITED AND OPTIONAL EMERGENCY RULES TO APPLY - The parties agree
         that the AAA Expedited Procedures and Optional Rules for Emergency
         Measures of Protection shall apply to the proceedings under this
         SECTION 14.2, notwithstanding the amount or complexity of any claims
         made. The parties will consider including further or alternative
         provisions in the Definitive Agreement to ensure that expedited
         arbitration is a quick and effective means of dispute resolution.

(d)      PROCEDURES - The arbitrator shall have the right to order discovery as
         he/she deems appropriate, and to order injunctive relief and the
         payment of attorney's fees, costs and other damages, excluding
         punitive damages.

(e)      PLACE OF ARBITRATION - Any arbitration conducted under this provision
         shall take place in New York City, New York, USA.

(f)      APPOINTING AUTHORITY - The AAA shall be the appointing authority.

(g)      TIMING FOR SETTLEMENT OF THE DEFINITIVE AGREEMENT - The parties agree
         that the award for the settling of the Definitive Agreement shall be
         rendered no later than December 31, 2001.

         14.3     TRADITIONAL ARBITRATION - Except for:

(a)      Applications for injunctions for the protection of the Xenova Patents,
         the QLT Patents, Program Information or Confidential Information (all
         of which are not subject to arbitration but which may be submitted to
         the courts for resolution); and

(b)      Matters subject to expedited arbitration as set out in SECTION 14.2;

disputes which may arise under, out of or in connection with the Definitive
Agreement or relating to or concerning the subject matter of the Definitive
Agreement, shall be settled by arbitration as set out in SECTION 14.2 except
that there shall be a panel of three arbitrators rather than one and SECTION
14.2(c) shall not apply

         14.4     AMENDMENT - Neither this Agreement nor the Definitive
Agreement will be amended or modified except in writing signed by each of the
parties hereto.

         14.5     INTERPRETATION - The parties agree that whenever the phrase
"including" is used in this Agreement that it means including, without
limitation.

                                      -37-
<PAGE>
         14.6     NOTICE - All notices, requests and other communications
required or permitted to be given hereunder or with respect hereto will be in
writing, and may be given by:

(a)      Personal delivery;

(b)      Registered first-class Canada or United Kingdom mail, postage prepaid
         by the sender, return receipt requested;

(c)      Overnight delivery service, charges prepaid by the sender; or

(d)      Via facsimile (confirmed by delivery by one of the three methods
         stated above);

and, in each case, addressed to the other party at the address for such party as
set forth below, and will be effective one business day after receipt in the
case of (a) (c) or (d) above, and five days after mailing in the case of (b)
above.

         If TO QLT:                         QLT INC.
                                            887 Great Northern Way
                                            Vancouver, BC
                                            Canada V5T 4T5
                                            Fax #: +1 604 707-7001
                                            Attention:   Chief Executive Officer

         With a copy to:                    FARRIS, VAUGHAN, WILLS & MURPHY
                                            P.O. Box 10026, Pacific Centre South
                                            Toronto Dominion Bank Tower
                                            700 West Georgia Street, 26th Floor
                                            Vancouver, British Columbia
                                            V7Y 1B3 CANADA
                                            Attention:   R. Hector MacKay-Dunn
                                            Fax #:       +1 604 661-9349

         If to Xenova:                      XENOVA LIMITED
                                            957 Buckingham Avenue
                                            Slough
                                            Berkshire, SL1 4NL
                                            England
                                            Fax #:  +44 1753 706615
                                            Attention:  Chief Executive Officer

Any party may change its address at which notice is to be received by written
notice provided pursuant to this SECTION 14.6.

         14.7     COMPLIANCE WITH LAWS - Each party will be responsible for
assuring that all applicable rules, laws and regulations are met in the
performance of its duties hereunder.

                                      -38-
<PAGE>
         14.8     ENTIRE AGREEMENT - This Agreement, together with the exhibits
hereto, sets forth the entire agreement and understanding between the parties
with respect to the subject matter hereof, and supersedes all prior agreements
and understandings between the parties with respect to the subject matter
hereof, whether oral or in writing

         14.8     PRESS RELEASES -

(a)     INITIAL PRESS RELEASES - QLT and Xenova will work together to prepare a
        individual but mutually acceptable press releases disclosing the
        transaction contemplated by this Agreement for public release after
        execution of this Agreement by both parties, and such release shall be
        approved by both parties in writing prior to its release.

(b)     SUBSEQUENT PUBLICITY - After the initial press releases, each party
        agrees that it will not, without the prior consent of the other
        party, originate any publicity, news release or public announcement,
        written or oral, whether to the public, the press, stockholders or
        otherwise, referring to the existence or terms of this Agreement,
        including its existence, the subject matter to which it relates, the
        performance under it or any of its specific terms and conditions,
        except for disclosures that are substantially the same as the
        disclosure in the initial press releases or such announcements, as in
        the opinion of the counsel for the party making such announcement,
        are required by law, including Canadian, United Kingdom and United
        States securities laws, rules or regulations, and the regulations of
        the London Stock Exchange or the Toronto Stock Exchange, or NASDAQ,
        without the prior written consent of the other party.  If a party
        decides to make an announcement it believes to be required by law
        with respect to this Agreement or the Definitive Agreement, it will
        give the other party such notice as is reasonably practicable and an
        opportunity to comment upon the announcement.  In addition, neither
        party will disclose the existence of this Agreement, any of the
        subject matter hereof, or any of the terms hereof to any third party
        without the prior written consent of the other party, except as
        otherwise provided in this Agreement.

         14.9 SURVIVAL - The Definitive Agreement will include provisions
stating which provisions survive termination. Termination shall not affect any
accrued rights or liabilities of either party arising prior to termination.

                                      -39-
<PAGE>
         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.

      QLT INC.                              XENOVA LIMITED

      By:    /s/ Julia Levy                 By: /s/ David A. Oxlade
             --------------------------         ------------------------------
      Title: President and                  Title: Chief Executive Officer
             Chief Executive Officer

                                      -40-
<PAGE>
                                   EXHIBIT A

                             LIST OF XENOVA PATENTS
US Patent Number [*].

[*].

*Material has been omitted and filed separately with the Commission.

                                      -41-
<PAGE>
                                   EXHIBIT B

                      DRAFT SUMMARY OF PROGRAM ACTIVITIES

The following summarizes the proposed Development Plan for the Product. This
Development Plan as it relates to the primary indication is subject to change
at the discretion of the Development Committee or as a result of any
requirements of the FDA.

Primary (Initial) Indication to be Pursued

         - First line therapy of advanced NSCLC (Stage IIIb/IV NSCLC) in
           combination with chemotherapy.

Clinical Development

QLT will conduct two international [*] randomized placebo-controlled trials of
chemotherapy plus placebo versus chemotherapy plus the Product, as follows:

         -  Each study to investigate a different chemotherapy regimen [*]

         -  European involvement will include a [*] European sites for the two
            combined trials in [*] countries.

         -  Approximately [*] patients per trial (a total of [*]) for the two
            combined trials.

         -  [*].

CMC
         -  Establish product monographs for the Drug and the Product.

         -  Produce final validated form of the Product in [*].

         -  Establish scaled up manufacturing process capable of supplying
            commercial requirements.

Preclinical Toxicology

         -  Perform additional tox studies required to file NDA ([*] briefing
            document).

Regulatory

         -  [*].

         -  Manage all ongoing interactions with FDA during the Program.

*Material has been omitted and filed separately with the Commission.

                                      -42-
<PAGE>
         -  Assemble NDA filing to take through FDA review to approval.

         -  Provide NDA dossier to support Xenova's registration in Europe.

Other Studies in the Primary Indication and Other Indications

         -  [*].

         -  Any additional studies required by the FDA for registration in the
            primary indication will be conducted after a [*] decision.

         -  Other additional studies in the primary or subsequent indications
            will be reviewed and approved, if appropriate, by the Development
            Committee before commencement.

*Material has been omitted and filed separately with the Commission.

                                      -43-
<PAGE>
                                   EXHIBIT C

                               (see Section 10.1)

(1)      All matters that would be shown by searches of publicly available
         patent prosecution files in respect of Xenova's patents covering the
         Drug, held at Patent Offices in the Territory, are disclosed or
         deemed to be disclosed to QLT.

(2)      Xenova has not conducted searches or inquiries in relation to the
         existence of third party patents or other proprietary rights, and makes
         no representation and gives no warranty in relation to any third party
         patents and other proprietary rights not known to it.

(3)      [*]

*Material has been omitted and filed separately with the Commission.

                                      -44-
<PAGE>
                                   EXHIBIT D

                       DEFINITION OF REGISTRATION PACKAGE

(a)      Table of Contents for a standard dossier for a NDA for oncology
         products:

<TABLE>
<CAPTION>
________________________________________________________________________________________________________
(PRODUCT NAME) NDA XX-XXX (Indication) TABLE OF CONTENTS
________________________________________________________________________________________________________
                                                                                NDA LOCATION
________________________________________________________________________________________________________
                                                                                VOLUME       PAGE
________________________________________________________________________________________________________
<S>                                                                             <C>          <C>
Covering Letter
________________________________________________________________________________________________________
[*]
________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________

________________________________________________________________________________________________________
</TABLE>

*Material has been omitted and filed separately with the Commission.

                                      -45-
<PAGE>
(b)      List of additional studies required by the FDA prior to NDA submission
         for the Product:

         (1)   NON-CLINICAL: The following table lists the planned non-clinical
               studies that have been identified by Xenova as necessary prior to
               a NDA submission. These studies were presented to the FDA in the
               briefing document that was sent prior to the end of Phase II
               meeting. It is anticipated that these studies would not need to
               be initiated until the results from the [*] are known.

         ______________________________________________________________________
         [*]
         ______________________________________________________________________

         ______________________________________________________________________

         ______________________________________________________________________

         ______________________________________________________________________

         ______________________________________________________________________

         ______________________________________________________________________

         ______________________________________________________________________

         ______________________________________________________________________

         ______________________________________________________________________

         ______________________________________________________________________

         ______________________________________________________________________

2.       CLINICAL STUDIES: In the clinical section of the minutes to the end of
         Phase II meeting with the FDA, the FDA requested:

         -  [*].

*Material has been omitted and filed separately with the Commission.

                                      -46-<PAGE>

EXHIBIT 10.1.1

                                LEASE AGREEMENT

THIS  AGREEMENT  OF  LEASE  ENTERED  AT  LAHORE  THIS  IS  1ST  DAY OF JULY 2002

Mrs  Samina  Hijab  W/O  Masood Hahi through General Power of Attorney Mr. Ibrar
Ahmad  S/O Nisar Ahamad Malik resident of 4-Tariq Block, New Garden Town, Lahore
hereinafter  called  the  LESSOR; which expression shall unless repugnant to the
context  means  and  in  clued  here  legal  hires,  executor; administrator and
assignees;  party  of  the  ONE  PART

AND

ESSENTAIL  -TEC  (PVT)  LTD  458-K  MODEL  TOWN;  LAHORE: hereinafter called the
LESSEE;  which  shell  unless  repugnant  to  the  context means and include its
administrator; successor-in-interest, executor and assignees; party of the OTHER
PART.

WHEREAS  the  party  over the ONE PART is the absolute owner of the property no.
458-K  Model  Town.Ext; Lahore and she has full authority to let the house. This
house is taken for office but there will be no public dealing in that office and
no  signboard  will  be  placed  outside  the  building.

AND  WHEREAS  the  party  of the ONE PART has decided to lease the above mention
property  in  favor of the LESSEE for a period of twelve (12) months with effect
from  1st  july  2002  and the LESSEE is desirons of taking on lease of the said
premises  to  have  residence  on such and conditions as indicated herein below.

THIS  AGREEMENT  WITNESSETH  BELOW:

     1.   That the property has been leased to the LESSEE for the period of
          twelve months commencing from 1st July 2002 and expiring 30th June
          2003 at a monthly rent of 289737.

           /s/     Ibrar Ahmad                     /s/ Shuaid Rana
          --------------------------------       -----------------------------
                     LESSOR                                LESSEE

<PAGE>
                                    Page 2

     2.   I  and  advance rent for the entire period of six months amounting RS:
          173838  has  been  paid  by  the  LESSEE  to  party  of  ONE  PART.
     3.   That  the  lessee  has  paid a sum of RS: 50,000/- as security Deposit
          which  will  be  refunded  by  the LESSOR to the LESSEE at the time of
          vacation  of  the  premises (including in the payment at page 2 above)
     4:   That  the  period of lease will commence from the 1st of July 2002 and
          shall  be  terminated  on  30th June 2003 . The parties can effect the
          renewal  of  the  lease  by  their  mutual  consent  only  through the
          agreement  .  in  case  the  lessee  intends by maturity to vacant the
          premises  before  the  maturity  of the agreement he will give clear 2
          months  notice  to  the  lesser  in  advance.
     5.   That  the  vacant  physical possession of the property shall be handed
          over to the LESSOR on termination of lease expiring on 30th June 2003,
          the  lessee  will handover the possession to the party of the one part
          unless the lease is renewed for further period. if a two months notice
          from  either  party  id  not given at the expiry of this agreement the
          contract will assumed renewed at 8% applicable on the original Rent RS
          31907-  and  increase  added  every  year  i.e  1st  July  each  year.
     6.   That  the  lease  is  not entitles to make any alteration of additions
          etc;  in  the  premises  without  prior written consent of the LESSOR.
     7.   That  the  LESSEE  is  responsible for the sale custody of all fixture
          fittings, installation and in case of any damage caused to the fixture
          etc.  it  will  be  repaired  or  replace  at  the cost of the LESSEE.
          (inventor  of fixture etc to be prepared signed by both parties before
          occupation.  which  shall  become  part  of  this  agreement  .) Shall
          maintain  Garden;  Plants,  and  Plague  etc.  Rocky

           /s/     Ibrar Ahmad                     /s/ Shuaid Rana
          --------------------------------       -----------------------------
                    LESSOR                                LESSEE

<PAGE>
                                    Page 3

     8.   That  the  LESSEE shall handover the vacant possession of the premises
          in  the  time  of  vacation to the LESSOR or her authorized agent on a
          valid  receipt. The LESSEE shall not be entitled to sublet in premises
          to  anyone  else.
     9.   That  the  LESSEE  will  also  pay  essential service bills the water,
          Electricity,  Sui  Gas  and  Telephone  charges  to  the  respective
          department directly in addition to the above mentioned montly rent and
          provide  a  copy  of  receipt  to  LESSOR.
     10.  That  the  entire  party  can terminate the lease by giving two months
          notice  without  assigning any reason. in such events the LESSOR shall
          return  to the lessee the balance for UNUTILIZED period of the advance
          rent;  promptly  on  such  termination.
     11.  The lessee will Handover the House of the LESSOR in the same condition
          he  had  take  over  at  the  time  of  occupancy.

IN  WITHNESS  WHEREOF, the parties have set and subscribed their hands hereunder
at  lahore  on  the  day  and  year  montioned  above.

           /s/     Ibrar Ahmad       /s/ Shuaid Rana

--------------------------------     -----------------------------
      LESSOR                         LESSEE
      On behalf of:  Samina Hijab    General Manager, On behalf of Esstec, Inc.

Witness

/s/ Muhammad Asim
-------------------------------                   -----------------------------

<PAGE>

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