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                                                                   EXHIBIT 10.41

                              EMPLOYMENT AGREEMENT

This Employment Agreement dated for reference December 9, 2005.

BETWEEN:

            QLT USA, INC., having an address of 2579 Midpoint Drive, Fort
            Collins, Colorado, 80525, USA.

            ("QLT USA")

AND:

            MICHAEL R. DUNCAN, having an address of ####, Colorado, ###, USA.

            ("MR. DUNCAN")

WHEREAS:

A.    Mr. Duncan has been employed by QLT USA and its predecessor, Atrix
      Laboratories, Inc., and currently holds the position of President of QLT
      USA.

B.    QLT USA and Mr. Duncan wish to enter into this Agreement to confirm the
      terms and conditions of Mr. Duncan's employment with QLT USA.

      NOW THEREFORE in consideration of the payment by QLT USA to Mr. Duncan of
$100.00, the promises made by each party to the other as set out in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which the parties acknowledge and agree, QLT USA and Mr. Duncan agree as
follows:

1. POSITION AND DUTIES

1.1   POSITION - Currently, Mr. Duncan holds the position of President of QLT
      USA. Mr. Duncan acknowledges that QLT USA is undergoing a strategic
      evaluation and that, as a result of that evaluation, Mr. Duncan's
      responsibilities and title may be altered to focus on the management of
      the manufacturing facility and generic dermatology business at QLT USA. As
      a result, Mr. Duncan agrees that the Board of Directors of QLT USA (the
      "Board"), may require that Mr. Duncan's title be altered in the future to
      reflect any such different or more focused responsibilities provided that
      such position is at a level of Senior Vice President (including General
      Manager of a division) of QLT USA . Until such time as his title is so
      altered by the Board, Mr. Duncan will hold the position of President of
      QLT USA. Mr. Duncan agrees to be employed by QLT USA in this position (as
      may be altered in accordance with the foregoing), subject to the terms and
      conditions of this Agreement.

1.2   DUTIES, REPORTING AND EFFORTS - In the performance of his duties on behalf
      of QLT USA, Mr. Duncan will:

      (a)   OVERALL RESPONSIBILITIES - Under the direction of the Board of
            Directors of QLT USA (the "Board") and in consultation with the
            Chief Executive Officer of QLT Inc., have overall responsibility for
            such areas as may be directed by the Board from time to time.

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      (b)   REPORT - Report, as and when required, to the Board.

      (c)   BEST EFFORTS - Use his best efforts, industry and knowledge to
            improve and increase QLT USA's business and to ensure that QLT USA
            is at all times in compliance with applicable state, federal and
            other governing statutes, policies and regulations pertaining to QLT
            USA business.

      (d)   WORKING DAY - Devote the whole of his working day attention and
            energies to the business and affairs of QLT USA.

2. COMPENSATION

2.1   ANNUAL COMPENSATION - In return for his services under this Agreement, QLT
      USA agrees to pay or otherwise provide the following total annual
      compensation to Mr. Duncan:

      (a)   BASE SALARY - A base salary in the amount of $282,920 (U.S.) in 24
            equal installments payable semi-monthly in arrears, subject to
            periodic annual reviews at the discretion of the Board of QLT USA
            and the Executive Compensation Committee of the Board of Directors
            of QLT Inc.

      (b)   BENEFIT PLANS - Coverage for Mr. Duncan and his eligible dependents
            under any employee benefit plans provided by/through QLT USA to its
            employees, subject to:

            I.    Each plan's terms for eligibility,

            II.   Mr. Duncan taking the necessary steps to ensure effective
                  enrollment or registration under each plan, and

            III.  Customary deductions of employee contributions for the
                  premiums of each plan.

      (c)   EXPENSE REIMBURSEMENT - Reimbursement, in accordance with QLT USA's
            policies (as amended from time to time and approved by the Board),
            of all reasonable business related promotion, entertainment and/or
            travel expenses incurred by Mr. Duncan, subject to him maintaining
            proper accounts and providing documentation for these expenses upon
            request.

      (d)   VACATION - That number of weeks of paid vacation per year as
            determined in accordance with QLT USA's standard vacation policy for
            executive level employees approved by the Board. As per QLT USA's
            policies (as amended from time to time), unless agreed to in writing
            by the Board:

            I.    All vacation must be taken in the calendar year in which it is
                  earned by Mr. Duncan, and

            II.   Vacation entitlement will not be cumulative from year to year.

      (e)   CASH INCENTIVE COMPENSATION PLAN - Participation in the Cash
            Incentive Compensation Plan offered by QLT USA to its senior
            management in accordance with the terms of such Plan, as amended
            from time to time by the Board. Under the Cash Incentive
            Compensation Plan, Mr. Duncan will be eligible to receive each year
            as a lump sum payment an amount up to that specified in advance by
            the Board of Directors of QLT Inc. and the Board of QLT USA, in
            their sole discretion. The amount of that payment each year will be
            determined at the sole discretion of the Board of Directors of QLT
            Inc. and the Board of QLT USA following the completion of each
            fiscal year of QLT USA and will be based on the performance of Mr.
            Duncan, QLT USA and QLT Inc. relative to pre-set corporate and
            individual objectives and milestones for the immediately preceding
            fiscal year. Mr. Duncan will not be eligible to receive any such
            amount in 2005 for the preceding fiscal year but will be eligible to
            receive that incentive payment in 2006 and subsequent years, based
            on his employment in 2005 and in subsequent years.

      (f)   STOCK OPTION PLAN - Participation in any stock option plan offered
            by QLT USA to its employees, in accordance with the terms of the
            plan in effect at the time of the stock option offer(s).

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3. RESIGNATION

3.1   RESIGNATION - Mr. Duncan may resign from his employment with QLT USA by
      giving QLT USA 60 days prior written notice (the "RESIGNATION NOTICE") of
      the effective date of his resignation. On receiving a Resignation Notice,
      QLT USA may elect to provide the following payments in lieu of notice to
      Mr. Duncan and require him to leave the premises forthwith:

      (a)   BASE SALARY - Base salary owing to Mr. Duncan for the 60-day notice
            period.

      (b)   BENEFITS - Except as set out below in this subparagraph 3.1(b), for
            the 60-day notice period, all employee benefit plan coverage enjoyed
            by Mr. Duncan and his eligible dependents prior to the date of his
            Resignation Notice will continue to the extent permitted by the
            applicable benefit plan provider. Mr. Duncan acknowledges and agrees
            that pension (including 401(k) contributions) and short and long
            term disability plans provided through QLT USA will not be continued
            beyond the last day that Mr. Duncan works at QLT USA's premises (the
            "LAST ACTIVE DAY"). Mr. Duncan's entitlement to any continuation of
            group health insurance benefits after the effective date of his
            resignation will be determined in accordance with, and subject to
            Mr. Duncan's compliance with, the Comprehensive Omnibus
            Reconciliation Act of 1985, as amended ("COBRA") and limited to the
            continuation period prescribed therein.

      (c)   EXPENSE REIMBURSEMENT - Reimbursement (in accordance with QLT USA's
            Policy and Procedures Manual, as amended from time to time) of all
            reasonable business related promotion, entertainment and/or travel
            expenses incurred by Mr. Duncan prior to his Last Active Day,
            subject to the expense reimbursement provisions set out in
            subparagraph 2.1(c).

      (d)   VACATION PAY - Payment in respect of accrued but unpaid vacation pay
            owing to Mr. Duncan as at the expiry of the 60-day notice period.

3.2   OTHERS - In the event of resignation of Mr. Duncan as set out in paragraph
      3.1, the parties agree:

      (a)   NO BONUS - Mr. Duncan will have no entitlement to participate in QLT
            USA's Cash Incentive Compensation Plan for the year in which he
            resigns his employment with QLT USA; and

      (b)   STOCK OPTION PLAN - Mr. Duncan's participation in any stock option
            plan offered by QLT USA to its employees will be in accordance with
            the terms of the plan in effect at the time of the stock option
            offer(s) to Mr. Duncan.

4. RETIREMENT

4.1   RETIREMENT - Effective the date of retirement (as defined in QLT USA's
      policies, as amended from time to time and approved by the Board) of Mr.
      Duncan from active employment with QLT USA, the parties agree that:

      (a)   THIS AGREEMENT - Subject to the provisions of paragraph 10.6, both
            parties' rights and obligations under this Agreement will terminate
            without further notice or action by either party.

      (b)   STOCK OPTIONS - Mr. Duncan's participation in any stock option plan
            offered by QLT USA to its employees will be in accordance with the
            terms of the plan in effect at the time of the stock option offer(s)
            to Mr. Duncan.

      (c)   COBRA BENEFITS - Mr. Duncan's entitlement to any continuation of any
            group health insurance benefits after the effective date of his
            retirement will be determined in accordance with, and subject

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            to Mr. Duncan's compliance with, COBRA and limited to the
            continuation period prescribed therein.

5. TERMINATION

5.1   TERMINATION FOR CAUSE - QLT USA reserves the right to terminate Mr.
      Duncan's employment at any time for any reason. Should Mr. Duncan be
      terminated for cause, he will not be entitled to any advance notice of
      termination or pay in lieu thereof. As used in this Agreement, "cause"
      means:

      (a) if Mr. Duncan materially violates any term of his employment, the
      Proprietary Information and Inventions Agreement for Employees entered
      into between QLT USA (formerly Atrix Laboratories, Inc.) on May 30, 2002,
      or any policy of QLT USA or policy of QLT Inc. applicable to QLT USA or
      Mr. Duncan, including, without limitation, the Insider Trading Policy,
      Code of Ethics, Code of Exemplary Conduct and Sexual Harassment Policy of
      QLT USA and/or QLT Inc.;

      (b) willful misfeasance, gross negligence or nonfeasance of duty by Mr.
      Duncan that is reasonably likely to be detrimental or damaging or that has
      the effect of injuring or damaging the reputation, business or business
      relationships of QLT USA or any of its affiliates (including QLT Inc.) or
      any of their respective officers, directors or employees;

      (c) any arrest, indictment (defined as any proceeding in which "probable
      cause" is found), conviction (or the civil equivalent) of Mr. Duncan or a
      plea of guilty or nolo contendere by Mr. Duncan by Mr. Duncan to a charge
      based on a federal or state felony or serious criminal or civil offense
      (even if the crime is classified under the applicable law as a
      "misdemeanor"), including, but not limited to (1) crimes or civil offenses
      involving theft, embezzlement, fraud, dishonesty or moral turpitude; (2)
      crimes or civil offenses based on banking or securities laws (including
      the Sarbanes-Oxley Act of 2002); and (3) civil enforcement actions brought
      by federal or state regulatory agencies (including the Securities and
      Exchange Commission); or

      (d) willful or prolonged and unapproved absence from work by Mr. Duncan or
      failure, neglect or refusal by Mr. Duncan to perform his duties and
      responsibilities as determined by the Board in its sole discretion.

5.2   TERMINATION OTHER THAN FOR CAUSE - QLT USA reserves the right to terminate
      Mr. Duncan's employment at any time other than for cause. However, if QLT
      USA terminates Mr. Duncan's employment for any reason other than for cause
      then, except in the case of Mr. Duncan becoming completely disabled (which
      is provided for in paragraph 5.6) and subject to the provisions set forth
      below, Mr. Duncan will be entitled to receive notice, pay and/or benefits
      (or any combination of notice, pay and/or benefits) as more particularly
      set out in paragraph 5.3. Notwithstanding the foregoing, in the event QLT
      USA in its sole discretion elects to pay the Severance Pay (as defined
      below) in lieu of notice, payment of the Severance Pay will be subject to,
      and will be made 10 days after, receipt by QLT of a release properly
      executed by Mr. Duncan, which release will be in the form set out in
      SCHEDULE A. In the event that Mr. Duncan fails to execute and deliver to
      QLT USA that release within 10 days after the termination of Mr. Duncan's
      employment, QLT USA will not be obligated to pay or provide to Mr. Duncan
      the Severance Pay.

      Notwithstanding the foregoing, Mr. Duncan agrees that:

      (a) any change in his position, responsibilities or reporting relationship
      or any request to transition his employment from QLT USA to QLT Inc. (and,
      if necessary to relocate to Vancouver, British Columbia, with relocation
      costs paid by the Company or QLT Inc., including relocation costs back to
      Colorado or a destination of reasonably comparable distance in the event
      that Mr. Duncan's employment is terminated without cause within 24 months
      after being relocated to Vancouver) will not be considered a termination
      without cause or give rise to any right under this Section 5.2 or Section
      5.3; and

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      (b) in the event that Mr. Duncan's employment with QLT USA is terminated
      in connection with the sale of all or a portion of the business of QLT USA
      to a purchaser:

            (i) in which Mr. Duncan or any member of his immediate family
            directly or indirectly holds an equity interest equal to or greater
            than 5%, or

            (ii) that offers to Mr. Duncan employment with the purchaser which
            provides to Mr. Duncan financial compensation and benefits
            (excluding stock options) which are in the aggregate substantially
            the same as those enjoyed by Mr. Duncan prior to such sale,

      then Mr. Duncan shall not be entitled to any Severance Pay under paragraph
      5.3(a), Benefits Compensation under paragraph 5.3(b) or out-placement
      counseling under paragraph 5.3(c) but Mr. Duncan shall remain entitled to
      the other amounts payable under paragraph 5.3(d) up to and including his
      Last Active Day.

5.3   SEVERANCE NOTICE AND PAY - In the event QLT USA terminates Mr. Duncan's
      employment as set out in paragraph 5.2, Mr. Duncan will, subject to
      paragraph 5.5, be entitled to:

      (a)   NOTICE - Advance written notice of termination ("SEVERANCE NOTICE"),
            or pay in lieu thereof ("SEVERANCE PAY"), or any combination of
            Severance Notice and Severance Pay, as more particularly set out
            below:

            I.    A minimum of six months Severance Notice, or Severance Pay in
                  lieu thereof, and

            II.   One additional month's Severance Notice for each complete year
                  of continuous employment with QLT USA. For greater certainty,
                  for the purposes of determining the number of complete years
                  of continuous employment with QLT USA, all years in which Mr.
                  Duncan was employed by QLT USA and its predecessor, Atrix
                  Laboratories, Inc. will be included in such calculation,

            (the cumulative time referred to in I and II above being referred to
            as the "NOTICE PERIOD")

            up to a maximum total of 24 months' Severance Notice, or Severance
            Pay in lieu of Severance Notice. Mr. Duncan acknowledges and agrees
            that Severance Pay is in respect of base salary only and will be
            made on a bi-weekly or monthly basis, at QLT USA's discretion.

      (b)   HEALTH AND LIFE INSURANCE BENEFITS - If:

            I. Mr. Duncan elects continued coverage under QLT USA's health plan
            pursuant to the COBRA, then QLT USA will continue to pay Mr. Duncan
            QLT USA's portion of the premium for Mr. Duncan's continued coverage
            under the QLT USA health plan until the first to occur of (A) the
            expiry of the Notice Period, and (B) the date on which Mr. Duncan's
            COBRA continuation period terminates in accordance with COBRA; and

            II. Mr. Duncan elects continued coverage under QLT USA's life
            insurance plan, then QLT USA will continue to pay QLT USA's portion
            of the premium for Mr. Duncan's continued coverage under QLT USA's
            life insurance plan, or if continued coverage under QLT USA's life
            insurance plan is not available pursuant to the terms of such plan,
            then QLT USA will pay to Mr. Duncan the amount of the premium that
            would otherwise be payable by QLT USA if Mr. Duncan's employment
            were not terminated until the end of the Notice Period. Mr. Duncan
            acknowledges and agrees that pension and short and long term
            disability plans provided through QLT USA will not be continued
            beyond Mr. Duncan's Last Active Day.

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            (collectively, the "BENEFITS COMPENSATION")

      (c)   OUT PLACEMENT COUNSELING - In the event QLT USA terminates Mr.
            Duncan's employment as set out in paragraph 5.2, in the year
            following termination, QLT USA will pay to an out placement
            counseling service (to be agreed to by Mr. Duncan and QLT USA) a
            maximum of US$5,000 for assistance rendered to Mr. Duncan in seeking
            alternative employment.

      (d)   OTHER COMPENSATION - In the event QLT USA terminates Mr. Duncan's
            employment as set out in paragraph 5.2, the parties further agree as
            follows:

            I.    QLT USA will reimburse (in accordance with QLT USA's policies,
                  as amended from time to time) Mr. Duncan for all reasonable
                  business related promotion, entertainment and/or travel
                  expenses incurred by Mr. Duncan prior to the date of
                  termination, subject to the expense reimbursement provisions
                  set out in subparagraph 2.1(c).

            II.   QLT USA will make a payment to Mr. Duncan in respect of his
                  accrued but unpaid vacation pay to the date of termination.

            III.  QLT USA will make a prorated payment to Mr. Duncan in respect
                  of his entitlement to participate in QLT USA's Cash Incentive
                  Compensation Plan, the pro-ration to be with respect to the
                  portion of the current calendar year worked by Mr. Duncan and
                  the entitlement to be at the level Mr. Duncan would have
                  otherwise been eligible to receive in the current calendar
                  year as if all personal and corporate goals were met but not
                  exceeded.

            IV.   Mr. Duncan's participation in any stock option plan offered by
                  QLT USA to its employees will be in accordance with the terms
                  of the plan in effect at the time of the stock option offer(s)
                  to Mr. Duncan.

5.4   ACKNOWLEDGEMENT - Mr. Duncan acknowledges and agrees that in the event QLT
      USA terminates Mr. Duncan's employment as set out in paragraph 5.2, in
      providing:

      (a)   The Severance Notice or Severance Pay, or any combination thereof;
      (b)   The Benefits Compensation;
      (c)   Out placement counseling service as more particularly set out in
            subparagraph 5.3(c); and
      (d)   The other compensation set out in subparagraph 5.3(d);

      QLT USA will have no further obligations, statutory or otherwise, to Mr.
      Duncan in respect of this Agreement and Mr. Duncan's employment under this
      Agreement.

5.5   DUTY TO MITIGATE AND NOTICE OF NEW EMPLOYMENT

      Mr. Duncan acknowledges and agrees that if his employment is terminated as
      set out in paragraph 5.2, his entitlement to Severance Pay, Benefits
      Compensation and other compensation as set out in paragraph 5.3 is subject
      to his duty to mitigate such payments by looking for and accepting
      alternative employment or contract(s) for services. If Mr. Duncan obtains
      new employment or contract(s) for services of four weeks or longer, Mr.
      Duncan agrees that he will notify QLT USA of this fact in writing (the
      "NEW EMPLOYMENT NOTICE") within five working days of such an occurrence
      and in this event the following provisions apply:

            (a) Mr. Duncan acknowledges and agrees that his entitlement to
            Severance Pay and Benefits Compensation will cease as of the date on
            which his new employment or contract for services commences.

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            (b) Within 10 working days of receipt of the New Employment Notice
            from Mr. Duncan, QLT USA agrees that it will pay Mr. Duncan a lump
            sum amount equivalent to 50% of the Severance Pay and Benefits
            Compensation as set out in paragraph 5.3 otherwise owing to Mr.
            Duncan for the balance of the Severance Notice period.

5.6   TERMINATION DUE TO INABILITY TO ACT

      (a)   TERMINATION - QLT USA may immediately terminate this Agreement by
            giving written notice to Mr. Duncan if he becomes completely
            disabled (defined below) to the extent that he cannot perform his
            duties under this Agreement either:

            I.    For a period exceeding six consecutive months, or

            II.   For a period of 180 days (not necessarily consecutive)
                  occurring during any period of 365 consecutive days,

            and no other reasonable accommodation can be reached between QLT USA
            and Mr. Duncan. Notwithstanding the foregoing, QLT USA agrees that
            it will not terminate Mr. Duncan pursuant to this provision unless
            and until Mr. Duncan has been accepted by the insurer for ongoing
            long-term disability payments or, alternatively, has been ruled
            definitively ineligible for such payments.

      (b)   PAYMENTS - In the event of termination of Mr. Duncan's employment
            with QLT USA pursuant to the provisions of this paragraph 5.8, QLT
            USA agrees to pay to Mr. Duncan Severance Pay and Benefits
            Compensation as set out in paragraph 5.3 and in this situation:

            I.    While he is completely disabled Mr. Duncan will have no duty
                  to mitigate the payments owing to him by looking for and
                  accepting suitable alternative employment or contract(s) for
                  service, and

            II.   If Mr. Duncan ceases to be completely disabled, then the
                  provisions of paragraphs 5.5 (duty to mitigate and notice of
                  new employment) and 5.3(c) (out placement counseling) will
                  apply.

      (c)   DEFINITION - The term "completely disabled" as used in this
            paragraph 5.8 will mean the inability of Mr. Duncan to perform the
            essential functions of his position under this Agreement by reason
            of any incapacity, physical or mental, which the Board, based upon
            medical advice or an opinion provided by a licensed physician
            acceptable to the Board, determines to keep Mr. Duncan from
            satisfactorily performing any and all essential functions of his
            position for QLT USA during the foreseeable future.

5.7   DEATH - Except as set out below, effective the date of death (the "DATE OF
      DEATH") of Mr. Duncan, this Agreement and both parties' rights and
      obligations under this Agreement will terminate without further notice or
      action by either party. Within 30 days after the Date of Death (and the
      automatic concurrent termination of this Agreement), QLT USA will pay the
      following amounts to Mr. Duncan's estate:

      (a)   BASE SALARY - Base salary owing to Mr. Duncan up to his Date of
            Death.

      (b)   COBRA BENEFITS - The entitlement of Mr. Duncan's eligible dependents
            to any continuation of any group health insurance benefits after the
            effective date of his death will be determined in accordance with,
            and subject to compliance by Mr. Duncan's eligible dependents with,
            COBRA and limited to the continuation period prescribed therein.

      (c)   EXPENSE REIMBURSEMENT - Reimbursement (in accordance with QLT USA's
            Policy and Procedures

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            Manual, as amended from time to time) of all reasonable business
            related promotion, entertainment and/or travel expenses incurred by
            Mr. Duncan prior to his Date of Death, subject to the expense
            reimbursement provisions set out in subparagraph 2.1(c).

      (d)   VACATION PAY - Payment in respect of accrued but unpaid vacation pay
            owing to Mr. Duncan as at his Date of Death.

      (e)   BONUS - A prorated payment to Mr. Duncan in respect of his
            entitlement to participate in QLT USA's Cash Incentive Compensation
            Plan, the pro-ration to be with respect to the portion of the
            current calendar year worked by Mr. Duncan and the entitlement to be
            at the maximum level Mr. Duncan would have otherwise been eligible
            to receive in the current calendar year if all corporate and
            individual goals were met but not exceeded.

      After his Date of Death, Mr. Duncan's participation and/or entitlement
      under any stock option plan offered by QLT USA to its employees will be in
      accordance with the terms of the plan in effect at the time of the stock
      option offer(s) to Mr. Duncan.

5.8   NO DUPLICATION - In the event that the Severance Pay provisions of this
      Agreement and the payment provisions of any other agreement that has
      previously or may subsequently be entered into between QLT USA (including
      Atrix Laboratories, Inc.) and Mr. Duncan with respect to a change of
      control of QLT USA or QLT Inc. are both applicable, Mr. Duncan agrees that
      he will give written notice to QLT USA with respect to which agreement he
      wishes to be paid out under and that he is not entitled to severance pay
      under both agreements.

5.9   FUNDAMENTAL BREACH - Mr. Duncan acknowledges and agrees that failure by
      him to provide the New Employment Notice to QLT USA within five working
      days as set out in paragraph 5.5(a), or him providing employment or
      contract(s) for services to a company which is in direct competition with
      QLT USA in breach of paragraph 8.1, will be deemed to be a fundamental
      breach of this Agreement and QLT USA's obligations to pay Severance Pay,
      Benefits Compensation and other compensation as set out in paragraph 5.3
      will cease immediately.

5.10  INTERNAL REVENUE CODE SECTION 409A - To the extent applicable, this
      Agreement will be interpreted in accordance with Section 409A of the
      Internal Revenue Code ("CODE") and Department of Treasury regulations and
      other interpretive guidance issued thereunder. Notwithstanding anything to
      the contrary in this Agreement, in the event that QLT USA determines that
      amounts payable under this Agreement may be subject to Code Section 409A,
      QLT USA may adopt such amendments to this Agreement or adopt other
      policies and procedures (including amendments, policies and procedures
      with retroactive effect), or take any other actions that QLT USA
      determines are necessary or appropriate to (a) exempt the Award from Code
      Section 409A and/or preserve the intended tax treatment of the benefits
      provided with respect to the payments under this Agreement, or (b) comply
      with the requirements of Code Section 409A and related Department of
      Treasury guidance. Mr. Duncan acknowledges that compliance with Code
      Section 409A may require that payments under the Agreement be delayed
      until the end of six months following Mr. Duncan's termination of
      employment.

6 CONFLICT OF INTEREST

6.3   AVOID CONFLICT OF INTEREST - Except as set out below, during the term of
      his employment with QLT USA, Mr. Duncan agrees to conduct himself at all
      times so as to avoid any real or apparent conflict of interest with the
      activities, policies, operations and interests of QLT USA, QLT Inc. or any
      of their respective affiliates or subsidiaries. To avoid improper
      appearances, Mr. Duncan agrees that he will not accept any financial
      compensation of any kind, nor any special discount or loan from persons,
      corporations or organizations having dealings or potential dealings with
      QLT USA or QLT Inc., either as a customer or a supplier or a co-venturer.
      QLT USA and Mr. Duncan acknowledge and agree that from

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      time to time the Board may consent in writing to activities by Mr. Duncan
      which might otherwise appear to be a real or apparent conflict of
      interest.

6.4   NO FINANCIAL ADVANTAGE - During the term of his employment with QLT USA,
      Mr. Duncan agrees that neither he nor any members of his immediate family
      will take financial advantage of or benefit financially from information
      that is obtained in the course of his employment related duties and
      responsibilities unless the information is generally available to the
      public.

6.5   COMPLY WITH POLICIES - During the term of his employment with QLT USA, Mr.
      Duncan agrees to comply with all written policies issued by QLT USA
      dealing with conflicts of interest.

7. CONFIDENTIALITY AND INTELLECTUAL PROPERTY

7.1   CONFIDENTIALITY AND INTELLECTUAL PROPERTY OWNERSHIP - The parties
      incorporate by reference the terms of that separate Proprietary
      Information and Inventions Agreement For Employees entered into between
      QLT USA (formerly Atrix Laboratories, Inc.) and Mr. Duncan dated May 30,
      2002, which agreement forms a material part of this Agreement.

7.2   NO USE OF FORMER EMPLOYER'S MATERIALS - Mr. Duncan certifies that he has
      not brought to QLT USA and will not use while performing his employment
      duties for QLT USA any materials or documents of any former employer which
      are not generally available to the public, except if the right to use the
      materials or documents has been duly licensed to QLT USA by the former
      employer.

8. POST-EMPLOYMENT RESTRICTIONS

8.1   NON-COMPETE - Mr. Duncan acknowledges that by virtue of his senior
      position with QLT USA, he has intimate knowledge of the business, products
      and customers of QLT USA and, by virtue of his participation on the
      executive committee for the global QLT group, has intimate knowledge of
      the business, products and customers of QLT Inc. and its other affiliates
      and subsidiaries. As a result, Mr. Duncan agrees that, without the prior
      written consent of the Board, for a period of one year following
      termination of his employment with QLT USA for any reason (by resignation
      or otherwise), as measured from his Last Active Day, Mr. Duncan will not:

      (a)   PARTICIPATE IN A COMPETITIVE BUSINESS - Directly or indirectly, own,
            manage, operate, join, control or participate in the ownership,
            management, operation or control of, or be a director or an employee
            of, or a consultant to, any business, firm or corporation that, as a
            part of conducting its business, is in any way competitive with QLT
            USA with respect to:

            I.    The development and/or commercialization and/or marketing of
                  light-activated pharmaceutical products for photodynamic
                  therapy in the treatment of cancer, ophthalmic, dermatology,
                  urology and auto-immune disease,

            II.   The development and/or commercialization and/or marketing of
                  pharmaceutical products that are directly competitive with QLT
                  Inc. or QLT USA's then current commercial products, Visudyne
                  or Eligard or any other products then being commercialized by
                  or on behalf of QLT USA, QLT Inc. or its affiliates or
                  subsidiaries which have worldwide annual net sales of
                  U.S.$50,000,000 or more in the calendar year preceding Mr.
                  Duncan's Last Active Day, or

            III.  the development and/or commercialization and/or marketing of
                  pharmaceutical products that are based on a polymer based drug
                  delivery technology platform and are used in the treatment of
                  substantially the same medical indications as products which
                  have become a significant component of QLT Inc. or QLT USA's
                  core business or the core business of any affiliate or

                                    Page 9
<PAGE>

                  subsidiary of QLT,

            anywhere in Canada, the United States or Europe.

      (b)   SOLICIT ON BEHALF OF A COMPETITIVE BUSINESS - Directly or indirectly
            call upon or solicit any QLT USA employee or QLT USA customer or
            known prospective customer of QLT USA on behalf of any business,
            firm or corporation that, as part of conducting its business, is in
            any way competitive with QLT USA with respect to:

            I.    The development and/or commercialization and/or marketing of
                  light-activated pharmaceutical products for photodynamic
                  therapy in the treatment of cancer, ophthalmic, dermatology,
                  urology and auto-immune disease,

            II.   The development and/or commercialization and/or marketing of
                  pharmaceutical products that are directly competitive with QLT
                  Inc. or QLT USA's then current commercial products, Visudyne
                  or Eligard or any other products then being commercialized by
                  or on behalf of QLT USA, QLT Inc. or its affiliates or
                  subsidiaries which have worldwide annual net sales of
                  U.S.$50,000,000 or more in the calendar year preceding Mr.
                  Duncan's Last Active Day, or

            III.  the development and/or commercialization and/or marketing of
                  pharmaceutical products that are based on a polymer based drug
                  delivery technology platform and are used in the treatment of
                  substantially the same medical indications as products which
                  have become a significant component of QLT Inc. or QLT USA's
                  core business or the core business of any affiliate or
                  subsidiary of QLT,

            anywhere in Canada, the United States or Europe.

      (c)   SOLICIT EMPLOYEES - Directly or indirectly solicit any individual to
            leave the employment of QLT USA, QLT Inc. or any of their affiliates
            or subsidiaries for any reason or interfere in any other manner with
            the employment relationship existing between QLT USA, QLT Inc. or
            any of their affiliates or subsidiaries and their current or
            prospective employees.

      (d)   SOLICIT CUSTOMERS - Directly or indirectly induce or attempt to
            induce any customer, supplier, distributor, licensee or other
            business relation of QLT USA, QLT Inc. or any of their affiliates or
            subsidiaries to cease doing business with QLT USA, QLT Inc. or any
            of their affiliates or subsidiaries or in any way interfere with the
            existing business relationship between any such customer, supplier,
            distributor, licensee or other business relation and QLT USA, QLT
            Inc. or any of their affiliates or subsidiaries.

8.2   MINORITY SHARE INTERESTS ALLOWED - The parties agree that nothing
      contained in paragraph 8.1 is intended to prohibit Mr. Duncan from owning
      any minority interest in any company where stock or shares are traded
      publicly.

9. REMEDIES

9.1   IRREPARABLE DAMAGE - Mr. Duncan acknowledges and agrees that:

      (a)   BREACH - Any breach of any provision of this Agreement could cause
            irreparable damage to QLT USA; and

      (b)   CONSEQUENCES OF BREACH - In the event of a breach of any provision
            of this Agreement by him, QLT USA will have, in addition to any and
            all other remedies at law or in equity, the right to an injunction,
            specific performance or other equitable relief to prevent any
            violation by him of any of

                                    Page 10
<PAGE>

            the provisions of this Agreement including, without limitation, the
            provisions of paragraphs 7 and 8.

9.2   INJUNCTION - In the event of any dispute under paragraphs 7 and/or 8, Mr.
      Duncan agrees that QLT USA will be entitled, without showing actual
      damages, to a temporary or permanent injunction restraining his conduct,
      pending a determination of such dispute and that no bond or other security
      will be required from QLT USA in connection therewith.

9.3   ADDITIONAL REMEDIES - Mr. Duncan acknowledges and agrees that the remedies
      of QLT USA specified in this Agreement are in addition to, and not in
      substitution for, any other rights and remedies of QLT USA at law or in
      equity and that all such rights and remedies are cumulative and not
      alternative or exclusive of any other rights or remedies and that QLT USA
      may have recourse to any one or more of its available rights and remedies
      as it will see fit.

10. GENERAL MATTERS

10.1  TAX WITHHELD - The parties acknowledge and agree that all payments to be
      made by QLT USA to Mr. Duncan under this Agreement will be subject to QLT
      USA's withholding of applicable withholding taxes.

10.2  INDEPENDENT LEGAL ADVICE - Mr. Duncan acknowledges that he has obtained or
      had the opportunity to obtain independent legal advice with respect to
      this Agreement and all of its terms and conditions.

10.3  BINDING AGREEMENT - The parties agree that this Agreement will enure to
      the benefit of and be binding upon each of them and their respective
      heirs, executors, successors and assigns.

10.4   GOVERNING LAW - The parties agree that this Agreement will be governed by
       and interpreted in accordance with the laws of the state of Colorado. All
       disputes arising under this Agreement will be referred to the Courts of
       the state of Colorado, which will have exclusive jurisdiction, unless
       there is mutual agreement to the contrary.

10.5  NOTICE - The parties agree that any notice or other communication required
      to be given under this Agreement will be in writing and will be delivered
      personally or by facsimile transmission as follows:

     (a)   IF TO QLT USA -      Attention:  Board of Directors of QLT USA, Inc.
                                2579 Midpoint Drive
                                Fort Collins, Colorado
                                80525, USA
                                Fax No. (970) 482-9735

           WITH A COPY TO:
                                QLT Inc.
                                887 Great Northern Way
                                Vancouver, British Columbia
                                V5T 4T5, Canada
                                Attention: Chief Executive Officer
                                Fax No. (604) 707-7001

     (b)   IF TO MR. DUNCAN -   To the address on page 1;

      or to such other addresses and persons as may from time to time be
      notified in writing by the parties. Any notice delivered personally will
      be deemed to have been given and received at the time of delivery. Any
      notice delivered by facsimile transmission will be deemed to have been
      given and received on the

                                    Page 11
<PAGE>

      next business day following the date of transmission.

10.6  SURVIVAL OF TERMS

      (a)   MR. DUNCAN'S OBLIGATIONS - Mr. Duncan acknowledges and agrees that
            his representations, warranties, covenants, agreements, obligations
            and liabilities under any and all of paragraphs 7, 8 and 10 of this
            Agreement will survive any termination of this Agreement.

      (b)   QLT USA'S OBLIGATIONS - QLT USA acknowledges and agrees that its
            representations, warranties, covenants, agreements, obligations and
            liabilities under any and all of paragraphs 3, 4, 5 and 10 of this
            Agreement will survive any termination of this Agreement.

      (c)   WITHOUT PREJUDICE - Any termination of this Agreement will be
            without prejudice to any rights and obligations of the parties
            arising or existing up to the effective date of such expiration or
            termination, or any remedies of the parties with respect thereto.

10.7  WAIVER - The parties agree that any waiver of any breach or default under
      this Agreement will only be effective if in writing signed by the party
      against whom the waiver is sought to be enforced, and no waiver will be
      implied by indulgence, delay or other act, omission or conduct. Any waiver
      will only apply to the specific matter waived and only in the specific
      instance in which it is waived.

10.8  ENTIRE AGREEMENT - The parties agree that the provisions contained in this
      Agreement, the Proprietary Information and Inventions Agreement for
      Employees dated May 30, 2002 entered into between Mr. Duncan and QLT USA
      (formerly Atrix Laboratories, Inc.), any Stock Option Agreements and
      agreements relating to a change of control of QLT Inc. entered into
      between QLT USA and Mr. Duncan constitute the entire agreement between QLT
      USA and Mr. Duncan with respect to the subject matters hereof and thereof,
      and supersede all previous communications, understandings and agreements
      (whether verbal or written) between QLT USA and Mr. Duncan regarding the
      subject matters hereof and thereof. To the extent that there is any
      conflict between the provisions of this Agreement and any Stock Option
      Agreements between QLT USA and Mr. Duncan, the following provisions will
      apply:

      (a)   CHANGE OF CONTROL - If the conflict is with respect to an event,
            entitlement or obligation in the case of a Change of Control of QLT
            Inc. (as defined in any agreement relating to a change of control of
            QLT Inc. entered into between QLT USA and Mr. Duncan), the
            provisions of that change of control agreement will govern (unless
            Mr. Duncan otherwise elects as contemplated in paragraph 5.8 of this
            Agreement).

      (b)   STOCK OPTIONS - If the conflict is with respect to an entitlement or
            obligation with respect to stock options of QLT USA, the provisions
            of the Stock Option Agreements will govern (unless the parties
            otherwise mutually agree).

      (c)   OTHER - In the event of any other conflict, the provisions of this
            Agreement will govern (unless the parties otherwise mutually agree).

10.9  SEVERABILITY OF PROVISIONS - If any provision of this Agreement as applied
      to either party or to any circumstance is adjudged by a court of competent
      jurisdiction to be void or unenforceable for any reason, the invalidity of
      that provision will in no way affect (to the maximum extent permissible by
      law):

      (a)   The application of that provision under circumstances different from
            those adjudicated by the court;

      (b)   The application of any other provision of this Agreement; or

      (c)   The enforceability or invalidity of this Agreement as a whole.

                                    Page 12
<PAGE>

      If any provision of this Agreement becomes or is deemed invalid, illegal
      or unenforceable in any jurisdiction by reason of the scope, extent or
      duration of its coverage, then the provision will be deemed amended to the
      extent necessary to conform to applicable law so as to be valid and
      enforceable or, if the provision cannot be so amended without materially
      altering the intention of the parties, then such provision will be
      stricken and the remainder of this Agreement will continue in full force
      and effect.

10.10 CAPTIONS - The parties agree that the captions appearing in this Agreement
      have been inserted for reference and as a matter of convenience and in no
      way define, limit or enlarge the scope or meaning of this Agreement or any
      provision.

10.11 AMENDMENTS - Any amendment to this Agreement will only be effective if the
      amendment is in writing and is signed by QLT USA and Mr. Duncan.

      IN WITNESS WHEREOF the parties have executed this Agreement as of the day
and year first written above.

QLT USA, INC.

BY: ___________________________

_______________________________
MICHAEL R. DUNCAN

                                    Page 13
<PAGE>

                                   SCHEDULE A

                                     RELEASE

                      EMPLOYEE ACKNOWLEDGEMENT AND RELEASE

RELEASE

In exchange for my receipt of severance pay and other benefits to which I am not
otherwise entitled, I hereby release acquit and forever discharge QLT USA, Inc.,
including its officers, directors, agents, attorneys, servants, employees,
stockholders, successors, assigns, subsidiaries and affiliates (collectively
"QLT USA"), of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys fees, damages, indemnities and obligation of
every kind and nature, in law, equity or otherwise, known and unknown, suspected
and unsuspected, disclosed and undisclosed, arising at any time before and
including my employment termination date, including, but not limited to:

      (a)   any and all such claims and demands directly or indirectly arising
            out of or in any way relation to my employment and the termination
            of my employment, claims or demands related to salary, bonuses,
            commissions, stock, stock options, or any other ownership interests
            in QLT USA (including QLT Inc.), vacation pay, fringe benefits,
            expense, reimbursements, sabbatical benefits, severance benefits, or
            any other form of compensation;

      (b)   claims pursuant to any federal, state or local law or cause of
            action, as amended, including but not limited to the: Federal Age
            Discrimination in Employment Act ("ADEA"), Title VII of the Civil
            Rights Act of 1964, Civil Rights Act of 1866, Fair Labor Standards
            Act, Older Workers Benefit Protection Act, Employee Retirement
            Income Security Act, Family and Medical Leave Act, Americans with
            Disabilities Act, Colorado Wage Act and Colorado Anti-Discrimination
            Act; and

      (c)   any and all claims related to wrongful discharge, harassment, breach
            of the covenant of good faith and fair dealing, contract law, tort
            law, discrimination, fraud, negligence, personal injury, loos of
            income, defamation or emotional distress.

I acknowledge that, among other things, I am waiving and releasing any rights I
may have under the ADEA, that this waiver and release is knowing, voluntary and
willing, and that the consideration given for this waiver and release is in
addition to anything of value to which I was already entitled as an employee of
QLT USA. I further acknowledge that I have been advised that:

      (a)   the waiver and release granted herein does not relate to claims
            which may arise after this release is executed;

      (b)   I should consult with an attorney prior to executing this release
            (although I may voluntarily choose not to do so);

      (c)   I have (45 days if my age is 40 or over and 21 days if I am under
            the age of 40) beginning the day after I receive this release in
            which to consider it, after which QLT USA's offer to enter into the
            Letter Agreement, to which this release is

                                    Page 14
<PAGE>

            attached, will be terminated and withdrawn if I have not executed
            the Letter Agreement and this release (although I may voluntarily
            choose to execute the documents earlier);

      (d)   I have seven (7) days beginning the day after I execute this release
            to revoke my consent to the release. I agree that the revocation
            must be in writing and hand-delivered or mailed to QLT USA, Inc. If
            mailed, the revocation must be postmarked within the seven (7) day
            period, properly addressed to QLT USA, Inc. at 2579 Midpoint Drive,
            Fort Collins, Colorado, U.S.A., 80525, Attention: President, and
            sent by certified mail, return receipt requested. I understand that
            I will not receive any payment under this Letter Agreement if I
            revoke the Letter Agreement and in any event, I understand that I
            will not receive any settlement payment until after the seven (7)
            day revocation period has expired;

      (e)   the Letter Agreement shall not be effective and enforceable and no
            severance paid until the seven (7) day revocation period has
            expired;

      (f)   by executing the Letter Agreement and this release I am representing
            that I am entering into these agreements and releases based upon my
            own knowledge and judgement and that I have not relied on any
            representations or promises of QLT USA other than those contained in
            the Letter Agreement and this release;

      (g)   if any facts or matters upon which I have relied in entering into
            the Letter Agreement and this release shall later prove to be
            otherwise, the Letter Agreement and this release shall nevertheless
            remain in full force and effect; and

      (h)   by executing the Letter Agreement and this release I am representing
            that I am entering into these agreements and releases voluntarily,
            without coercion, and with full knowledge that they are intended, to
            the maximum extent permitted by law, as a complete and final
            releases and waiver of any and all of my claims.

I also acknowledge that a general release does not extend to claims that the
creditor does no know or suspect to exist in the creditor's favor at the time of
executing the release, which if known by the creditor would and must have
materially affected the creditor's settlement with the debtor. I hereby
expressly waive and relinquish all rights and benefits under any such principal
of law in any jurisdiction with respect to any unknown or unsuspected claims I
may have against QLT USA.

I HAVE READ AND UNDERSTOOD, AND I AGREE COMPLETELY TO THE TERMS STATED ABOVE.

Date:_____________________                By:_______________________

                                             _______________________
                                             Printed Name

                                    Page 15<PAGE>

                                                                   EXHIBIT 10.42

                                                                December 9, 2005

STRICTLY PERSONAL AND CONFIDENTIAL

Mr. Michael Duncan,

c/o 2579 Midpoint Drive,
Fort Collins, Colorado
U.S.A. 80525

Dear Mike:

                                  INTRODUCTION

            A dedicated executive management team is essential to protecting and
enhancing the best interests of QLT Inc. ("QLT"), QLT USA, Inc. ("QLT USA") and
the shareholders of QLT. QLT USA wishes to provide you with compensation and
benefits arrangements which would come into effect in circumstances related to a
change in control of QLT, as the parent of QLT USA, which are competitive with
those of other corporations, in order to ensure that QLT USA receives the
benefit of the full attention and dedication of the executives at all times, and
notwithstanding any threatened or pending change in control. Given the
importance of your role with QLT USA, we wish to ensure that you are provided
with such an arrangement in the event of a change of control of QLT.

            The purpose of this Letter Agreement is to document the terms of the
severance package to which you as a Company executive shall be entitled if
material changes in the terms of your employment with QLT USA occur without your
consent, or if your employment with QLT USA is terminated, in connection with a
change in control of QLT. This Letter Agreement terminates and replaces the
Change of Control Agreement entered into between Atrix Laboratories, Inc. and
you dated April 5, 2004.

                  NOW THEREFORE in consideration of $10.00, the promises made by
each party to the other as set out in this Letter Agreement and other good and
valuable consideration, the receipt and sufficiency of which each of the parties
acknowledges, QLT USA and you agree as follows:

                                     PART I
                                   DEFINITIONS

1.1   DEFINITIONS. In this Letter Agreement:

      (a)   "AFFILIATE" has the meaning given to it in the Business Corporations
            Act (British Columbia);

      (b)   "BENEFIT PLANS" means the coverage under QLT USA's group benefit
            plan for employees which QLT USA provides to you and your eligible
            dependants, including all medical, dental, life and other benefit
            plans but excluding short and long term disability coverage;

<PAGE>

      (c)   "BOARD" means the Board of Directors of QLT;

      (d)   "CHANGE OF CONTROL" means any of the following events:

            (i)   MERGER. A merger, consolidation, reorganization or arrangement
                  involving QLT other than a merger, consolidation,
                  reorganization or arrangement in which stockholders of QLT
                  immediately prior to such merger, consolidation,
                  reorganization or arrangement own, directly or indirectly,
                  securities possessing at least 65% of the total combined
                  voting power of the outstanding voting securities of the
                  corporation resulting from such merger, consolidation,
                  reorganization or arrangement in substantially the same
                  proportion as their ownership of such voting securities
                  immediately prior to such merger, consolidation,
                  reorganization or arrangement;

            (ii)  TENDER OFFER. The acquisition, directly or indirectly, by any
                  person or related group of persons acting jointly or in
                  concert (other than QLT or a person that directly or
                  indirectly controls, is controlled by, or is under common
                  control with, QLT of beneficial ownership of securities
                  possessing more than 35% of the total combined voting power of
                  QLT's outstanding securities pursuant to a tender offer made
                  directly to QLT's stockholders;

            (iii) SALE. The sale, transfer or other disposition of all or
                  substantially all of the assets of QLT other than a sale,
                  transfer or other disposition to an Affiliate of QLT or to an
                  entity in which stockholders of QLT immediately prior to such
                  sale, transfer or other disposition own, directly or
                  indirectly, securities possessing at least 65% of the total
                  combined voting power of the outstanding voting securities of
                  the purchasing entity in substantially the same proportion as
                  their ownership of such voting securities immediately prior to
                  sale, transfer or other disposition; or

            (iv)  BOARD CHANGE. A change in the composition of the Board over a
                  period of 24 consecutive months or less such that a majority
                  of the Board members ceases to be comprised of individuals who
                  either have been:

                  (A)   Board members continuously since the beginning of such
                        period, or

                  (B)   appointed or nominated for election as Board members
                        during such period by at least a majority of the Board
                        members described in subsection (A) above who were still
                        in office at the time the Board approved such
                        appointment or nomination.

      (e)   "INVOLUNTARY TERMINATION" means any one of the following:

            (i)   the termination of your employment by QLT USA or the giving of
                  written notice to you by QLT USA of the intended termination
                  of your employment, in either case for reasons other than
                  cause, permanent disability or death, within the 24 month
                  period following the occurrence of a Change of Control, or

            (ii)  your giving written notice to QLT USA, within 24 months after
                  a Triggering Event, in which you advise that a Triggering
                  Event has occurred and tender your resignation from employment
                  with QLT USA;

                                                                               2
<PAGE>

      (f)   "SUCCESSOR" shall mean any corporation which is the legal successor
            to QLT, or which acquires substantially all of the assets of QLT,
            pursuant to a Change of Control;

      (g)   "TRIGGERING EVENT" shall mean, without your express written consent,
            the occurrence of any one or more of the following circumstances
            after a Change of Control:

            (i)   the assignment to you of any duties which are materially
                  inconsistent, in an adverse respect, with your position,
                  authority, duties or responsibilities prior to the Change of
                  Control, or any other action by QLT USA or the Successor which
                  results in a material diminution in such position, authority
                  or responsibilities, except an isolated and inadvertent action
                  not taken in bad faith and which is remedied by QLT USA or the
                  Successor promptly after receipt of notice thereof from you;

            (ii)  any reduction by QLT USA or the Successor in your base salary;

            (iii) a reduction by QLT USA or the Successor of 25% or more of your
                  annual cash incentive compensation opportunity;

            (iv)  QLT USA or the Successor's requiring you to, or notifying you
                  that you will be required to, relocate to or be based at, or
                  situate one day or more per week in, a location which is 100
                  kilometers or more from the location where you were based
                  immediately prior to the Change of Control;

            (v)   the failure by QLT USA or the Successor to continue,
                  substantially as in effect immediately prior to the Change of
                  Control, all of QLT USA's Benefit Plans, in which you
                  participate (or substantially equivalent successor plans,
                  programs, policies, practices or arrangements) or the failure
                  by QLT USA or the Successor to continue your participation
                  therein on substantially the same basis as existed immediately
                  prior to the Change of Control;

            (vi)  the failure of QLT or QLT USA to obtain an agreement from any
                  Successor to assume and agree to perform this Letter
                  Agreement, as contemplated in Section 3.5 of this Letter
                  Agreement, and your Employment Agreement with QLT USA (the
                  "Employment Agreement"); or

            (vii) any purported termination by QLT USA or the Successor of your
                  employment other than for cause, permanent disability or
                  death.

                                     PART II
                           CHANGE OF CONTROL BENEFITS

2.1   SEVERANCE PAYMENT. Upon the occurrence of an Involuntary Termination, you
      shall receive a severance payment from QLT USA equal to the base salary
      and maximum bonus entitlement to which you would have been entitled in an
      18 MONTH PERIOD (the "Severance Period"), calculated as set out below.
      Notwithstanding the foregoing, in the event QLT USA in its sole discretion
      elects to pay the amounts set out in this Section 2.1 (the "Severance
      Pay") in lieu of notice, payment of the Severance Pay will be subject to,
      and will be made 10 days after, receipt by QLT of a release properly
      executed by you, which release will be in the form set out in SCHEDULE A
      (with such modifications as may be

                                                                               3
<PAGE>

      required by QLT USA to ensure that such release is enforceable under the
      laws and circumstances in effect at such time). In the event that you fail
      to execute and deliver to QLT USA that release within 10 days after the
      termination of your employment, QLT USA will not be obligated to pay or
      provide to you the Severance Pay.

            (a)   the rate of base salary will be that in effect at the time of
                  the Involuntary Termination or as was in effect immediately
                  prior to the occurrence of a Triggering Event, whichever rate
                  is greater; and

            (b)   the maximum bonus entitlement will be calculated as the
                  maximum amount available to you under QLT USA's cash incentive
                  compensation plan at the time of the Involuntary Termination
                  as if 100% of your individual goals and the corporate goals
                  were met but not exceeded or the entitlement which was
                  available to you immediately prior to the occurrence of a
                  Triggering Event, whichever amount is greater, pro-rated for
                  any portion of the Severance Period of less than a year.

2.2 OTHER COMPENSATION. In addition to the amounts paid under Section 2.1, upon
the occurrence of an Involuntary Termination, QLT USA shall:

            (a)   EXPENSES - reimburse you for all reasonable business related
                  promotion, entertainment and/or travel expenses incurred by
                  you during the course of your employment with QLT USA, subject
                  to the expense reimbursement provisions set out in your
                  Employment Agreement with QLT USA and QLT USA's Policy and
                  Procedures Manual, as amended from time to time;

            (b)   VACATION - make a payment to you in respect of your accrued
                  but unpaid vacation pay up to and including your last day of
                  employment with QLT USA;

            (c)   CASH INCENTIVE COMPENSATION EARNED PRIOR TO INVOLUNTARY
                  TERMINATION - in addition to the payments under Section 2.1(b)
                  above, QLT USA shall make a payment to you in respect of your
                  entitlement to participate in QLT USA's cash incentive
                  compensation plan in respect of the current calendar year, and
                  the prior year if such payment has not yet been made, to be
                  pro-rated with respect to the portion of the current calendar
                  year worked by you up to and including your last day of
                  employment with QLT USA and, in respect of the current
                  calendar year, shall be calculated at the maximum annual bonus
                  entitlement available to you under QLT USA's cash incentive
                  compensation plan at the time of the Involuntary Termination
                  as if 100% of your individual goals and the corporate goals
                  were met but not exceeded or the entitlement which was
                  available to you immediately prior to the occurrence of any
                  prior Triggering Event, whichever amount is greater;

            (d)   BENEFITS - If:

                  I.    You elect continued coverage under QLT USA's health plan
                        pursuant to the Comprehensive Omnibus Reconciliation Act
                        of 1985, as amended ("COBRA"), then QLT USA will
                        continue to pay you QLT USA's portion of the premium for
                        your continued coverage under the QLT USA health plan
                        until the first to occur of (A) the expiry of the Notice
                        Period, and (B) the date on which your COBRA
                        continuation period terminates in accordance with COBRA;
                        and

                                                                               4
<PAGE>

                  II.   you elects continued coverage under QLT USA's life
                        insurance plan, then QLT USA will continue to pay QLT
                        USA's portion of the premium for your continued coverage
                        under QLT USA's life insurance plan, or if continued
                        coverage under QLT USA's life insurance plan is not
                        available pursuant to the terms of such plan, then QLT
                        USA will pay to you the amount of the premium that would
                        otherwise be payable by QLT USA if your employment were
                        not terminated until the end of the Notice Period. you
                        acknowledge and agree that pension and short and long
                        term disability plans provided through QLT USA will not
                        be continued beyond your Last Active Day.

                        (collectively, the "BENEFITS COMPENSATION");

            (e)   RELOCATION EXPENSES - pay any relocation expenses
                  reimbursement to which you may be entitled under the terms of
                  your Employment Agreement with QLT USA, such expenses to be
                  calculated and paid in accordance with terms of your
                  Employment Agreement, provided that there is no duplication of
                  payments pursuant to the Employment Agreement and this clause;

            (f)   OUT-PLACEMENT COUNSELLING - reimburse you for out-placement
                  counselling services from a qualified counsellor to be agreed
                  to by you and QLT USA to a maximum of U.S.$5,000 for services
                  rendered to you in seeking alternative employment.

            409A TAXES. To the extent applicable, this Letter Agreement will be
            interpreted in accordance with Section 409A of the Internal Revenue
            Code ("CODE") and Department of Treasury regulations and other
            interpretive guidance issued thereunder. Notwithstanding anything to
            the contrary in this Letter Agreement, in the event that QLT USA
            determines that amounts payable under this Letter Agreement may be
            subject to Code Section 409A, QLT USA may adopt such amendments to
            this Letter Agreement or adopt other policies and procedures
            (including amendments, policies and procedures with retroactive
            effect), or take any other actions that QLT USA determines are
            necessary or appropriate to (a) exempt the Award from Code Section
            409A and/or preserve the intended tax treatment of the benefits
            provided with respect to the payments under this Agreement, or (b)
            comply with the requirements of Code Section 409A and related
            Department of Treasury guidance. You acknowledge that compliance
            with Code Section 409A may require that payments under the Letter
            Agreement be delayed until the end of six months following you's
            termination of employment.

2.3 TIMING OF PAYMENT. The amounts set out in Sections 2.1 and 2.2 shall be paid
to you in a lump sum payment and will, in the case of the Severance Pay be made
10 days after receipt by QLT of a release properly executed by you, which
release will be in the form set out in SCHEDULE A, or in the case of the other
payments owing under Sections 2.2 will be made within 30 days of your
Involuntary Termination, in the same manner as if you were employed throughout
the Severance Period.

2.4 NO DUPLICATION. QLT USA agrees that an Involuntary Termination by you, as
defined in subsection 1.1(e)(ii), shall constitute a termination of your
employment by QLT USA without cause pursuant to your Employment Agreement and
any other agreement in effect between you and QLT USA. In the event that the
severance payment and other compensation provisions set out in Sections 2.1 and
2.2

                                                                               5
<PAGE>

of this Letter Agreement and the severance payment provisions in your Employment
Agreement with QLT USA are both applicable, you agree that, upon QLT USA's
request, you shall given written notice to QLT USA with respect to which
agreement which you wish to be paid out under and that you shall not be entitled
to severance pay under both agreements.

2.5 OPTIONS. Upon the occurrence of an Involuntary Termination, the provisions
of your Stock Option Agreement(s) with QLT USA shall govern all stock option
issues, including, without limitation, acceleration of vesting and the time
period remaining to exercise any vested options.

2.6 ACKNOWLEDGEMENT. In the event of an Involuntary Termination, payment by QLT
USA of the amounts set out in Sections 2.1 and 2.2 or, if you elect to receive
severance under your Employment Agreement payment of the amounts set out
therein, in lieu of receiving a duplicative payment hereunder, shall be in full
and final satisfaction of all amounts that might otherwise be payable by QLT USA
to you by way of compensation for length of service, damages in lieu of notice
of termination or any other obligations arising under your employment with QLT
USA and QLT USA shall have no further obligations, statutory or otherwise,
arising out of or in respect of your employment.

2.7 TERMINATION FOR CAUSE, PERMANENT DISABILITY OR DEATH. For greater certainty,
if your employment is terminated for cause, permanent disability or death or you
terminate your employment other than as an Involuntary Termination, you shall
not be entitled to payment of the amounts under this Letter Agreement and the
terms of your Employment Agreement with QLT USA shall govern.

2.8 WAIVER OF NON-COMPETITION COVENANT. Effective upon your Involuntary
Termination, QLT USA hereby waives any and all rights it has to insist upon
compliance with or to enforce any covenant, undertaking or agreement by you
under your Employment Agreement or otherwise, pursuant to which you have agreed
not to compete with QLT USA in your future employment or otherwise limit your
future employment opportunities. Your obligations of confidentiality to QLT USA
contained in your Employment Agreement and the Proprietary Information and
Inventions Agreement for Employees dated May 30, 2002 entered into between you
and QLT USA (formerly Atrix Laboratories, Inc.) shall remain in full force and
effect and are not altered by this Letter Agreement.

2.9 RIGHT TO WAIVE ANY AND ALL CONSIDERATION. In your discretion, upon your
written request to QLT USA made within 15 days of your Involuntary Termination,
you may elect to irrevocably waive your right to any of the consideration
payable by QLT USA pursuant to this Letter Agreement.

                                    PART III
                            MISCELLANEOUS PROVISIONS

3.1 TERM OF AGREEMENT. This Letter Agreement shall remain in effect for the term
of your employment with QLT USA and for a further six month period thereafter,
unless the parties mutually agree to an earlier termination, provided that the
expiry or termination of this Letter Agreement shall not affect the rights and
obligations of the parties arising under this Letter Agreement prior to its
termination or expiry.

3.2 LEGAL FEES. QLT USA shall pay, to the full extent permitted by law, all
legal fees and expenses which you may reasonably incur as a result of any
contest (regardless of the outcome thereof) by QLT USA or its successors or
Affiliates, you or others of the validity or enforceability of, or liability
under,

                                                                               6
<PAGE>

any provision of this Letter Agreement or any guarantee of performance thereof
(including as a result of any contest by you about the amount of any payment
pursuant to this Letter Agreement).

3.3 WITHHOLDING TAXES. QLT USA may withhold from any amounts payable under this
Letter Agreement such federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.

3.4 GENERAL CREDITOR STATUS. The benefits to which you may become entitled under
this Letter Agreement shall be paid, when due, from the general assets of QLT
USA. Your right (or the right of the executors or administrators of your estate)
to receive any such payments shall at all times be that of a general creditor of
QLT USA and shall have no priority over the claims of other general creditors of
QLT USA.

3.5 SUCCESSORS; BINDING AGREEMENT. QLT USA shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of its business and/or assets to assume and agree to perform
this Letter Agreement by express written agreement in the same manner and to the
same extent that it would be required to perform it if no such succession had
taken place. Failure of QLT USA to obtain such assumption and agreement within
30 days of any such succession shall be a breach of this Letter Agreement and
shall entitle you to compensation from QLT USA in the same amount and on the
same terms as you would be entitled under this Letter Agreement, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the date of the Involuntary Termination.

3.6 DEATH. Notwithstanding anything else in this Letter Agreement, should you
die after becoming entitled to benefits under this Letter Agreement but before
receipt of all benefits to which you became entitled under this Letter
Agreement, then the payment of such benefits shall be made, on the due date or
dates hereunder had you survived, to the executors or administrators of your
estate.

3.7 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of Colorado and the laws of the United
States in force therein without regard to its conflict of law rules. The parties
agree that by executing this Agreement they have attorned to the jurisdiction of
the courts of Colorado and the appellate courts therefrom.

3.8 NOTICE. The parties agree that any notice or other communication required to
be given under this Letter Agreement will be in writing and will be delivered
personally to the addresses set forth on page 1 of this Letter Agreement (or, in
your case, to the most recent address for you which QLT USA has on record), or
to such other addresses and persons as may from time to time be notified in
writing by the parties.

3.9 ENTIRE AGREEMENT. This Letter Agreement, the Employment Agreement, the
Proprietary Information and Inventions Agreement for Employees referred to in
paragraph 2.8 above and any Stock Option Agreements you have with QLT USA
constitute the entire agreement between QLT USA and you with respect to the
subject matter hereof, and supersede all previous communications, understandings
and agreements (whether verbal or written) between QLT USA and you regarding the
subject matter hereof. To the extent that there is any conflict between the
provisions of this Letter Agreement, the Employment Agreement, the Proprietary
Information and Inventions Agreement for Employees and any Stock Option
Agreements between you and QLT USA, the following provisions shall apply:

                                                                               7
<PAGE>

            (i)   If the conflict is with respect to an event, entitlement or
                  obligation in the event of a Change of Control, the provisions
                  of this Letter Agreement shall govern (unless you and QLT USA
                  otherwise mutually agree).

            (ii)  If the conflict is with respect to an entitlement or
                  obligation with respect to stock options of QLT USA, the
                  provisions of the Stock Option Agreements shall govern (unless
                  you and QLT USA otherwise mutually agree).

            (iii) In the event of any other conflict, the provisions of the
                  Employment Agreement (which incorporate the terms of the
                  Proprietary Information and Inventions Agreement for
                  Employees) shall govern (unless you and QLT USA otherwise
                  mutually agree).

3.10 SEVERABILITY OF PROVISIONS. If any provision of this Letter Agreement as
applied to either party or to any circumstance should be adjudged by a court of
competent jurisdiction to be void or unenforceable for any reason, the
invalidity of that provision shall in no way affect (to the maximum extent
permissible by law):

            (i)   The application of that provision under circumstances
                  different from those adjudicated by the court;

            (ii)  The application of any other provision of this Letter
                  Agreement; or

            (iii) The enforceability or invalidity of this Letter Agreement as a
                  whole.

If any provision of this Letter Agreement becomes or is deemed invalid, illegal
or unenforceable in any jurisdiction by reason of the scope, extent or duration
of its coverage, then the provision shall be deemed amended to the extent
necessary to conform to applicable law so as to be valid and enforceable or, if
the provision cannot be so amended without materially altering the intention of
the parties, then such provision shall be stricken and the remainder of this
Letter Agreement shall continue in full force and effect.

3.11 CAPTIONS. The captions appearing in this Letter Agreement have been
inserted for reference and as a matter of convenience and in no way define,
limit or enlarge the scope or meaning of this Letter Agreement or any provision.

3.12 AMENDMENTS. Any amendment to this Letter Agreement shall only be effective
if the amendment is in writing and is signed by QLT USA and by you.

3.13 REMEDIES. All rights and remedies provided pursuant to this Letter
Agreement or by law shall be cumulative, and no such right or remedy shall be
exclusive of any other. A party may pursue any one or more rights or remedies
hereunder or may seek damages or specific performance in the event of another
party's breach hereunder or may pursue any other remedy by law or equity,
whether or not stated in this Letter Agreement.

3.14 NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Letter Agreement shall
confer upon you any right to continue in the employment of QLT USA for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of QLT USA or you, which rights are hereby expressly reserved by
each, to terminate your employment at any time in accordance with the terms of
your Employment Agreement.

                                                                               8
<PAGE>

            Please indicate your acceptance of the foregoing provisions of this
Letter Agreement by signing the enclosed copy of this Letter Agreement and
returning it to QLT USA.

QLT USA, INC.

By:        /s/ Robert L. Butchofsky
       ------------------------------
       Robert L. Butchofsky,
       Director

ACCEPTED AND AGREED TO this ___ day of ________, 2005 by:

Signature:     /s/ Michael R. Duncan
            --------------------------
            MICHAEL R. DUNCAN

                                                                               9
<PAGE>

                                   SCHEDULE A

                                 FORM OF RELEASE

                      EMPLOYEE ACKNOWLEDGEMENT AND RELEASE

RELEASE

In exchange for my receipt of severance pay and other benefits to which I am not
otherwise entitled, I hereby release acquit and forever discharge QLT USA, Inc.,
including its officers, directors, agents, attorneys, servants, employees,
stockholders, successors, assigns, subsidiaries and affiliates (collectively
"QLT USA"), of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys fees, damages, indemnities and obligation of
every kind and nature, in law, equity or otherwise, known and unknown, suspected
and unsuspected, disclosed and undisclosed, arising at any time before and
including my employment termination date, including, but not limited to:

            (a)   any and all such claims and demands directly or indirectly
                  arising out of or in any way relation to my employment and the
                  termination of my employment, claims or demands related to
                  salary, bonuses, commissions, stock, stock options, or any
                  other ownership interests in QLT USA (including QLT Inc.),
                  vacation pay, fringe benefits, expense, reimbursements,
                  sabbatical benefits, severance benefits, or any other form of
                  compensation;

            (b)   claims pursuant to any federal, state or local law or cause of
                  action, as amended, including but not limited to the: Federal
                  Age Discrimination in Employment Act ("ADEA"), Title VII of
                  the Civil Rights Act of 1964, Civil Rights Act of 1866, Fair
                  Labor Standards Act, Older Workers Benefit Protection Act,
                  Employee Retirement Income Security Act, Family and Medical
                  Leave Act, Americans with Disabilities Act, Colorado Wage Act
                  and Colorado Anti-Discrimination Act; and

            (c)   any and all claims related to wrongful discharge, harassment,
                  breach of the covenant of good faith and fair dealing,
                  contract law, tort law, discrimination, fraud, negligence,
                  personal injury, loos of income, defamation or emotional
                  distress.

I acknowledge that, among other things, I am waiving and releasing any rights I
may have under the ADEA, that this waiver and release is knowing, voluntary and
willing, and that the consideration given for this waiver and release is in
addition to anything of value to which I was already entitled as an employee of
QLT USA. I further acknowledge that I have been advised that:

                  (a)   the waiver and release granted herein does not relate to
                        claims which may arise after this release is executed;

                  (b)   I should consult with an attorney prior to executing
                        this release (although I may voluntarily choose not to
                        do so);

                  (c)   I have (45 days if my age is 40 or over and 21 days if I
                        am under the age of 40) beginning the day after I
                        receive this release in which to consider it, after
                        which QLT USA's offer to enter into the Letter
                        Agreement, to which this release is attached, will be

                                                                              10
<PAGE>

                        terminated and withdrawn if I have not executed the
                        Letter Agreement and this release (although I may
                        voluntarily choose to execute the documents earlier);

                  (d)   I have seven (7) days beginning the day after I execute
                        this release to revoke my consent to the release. I
                        agree that the revocation must be in writing and
                        hand-delivered or mailed to QLT USA, Inc. If mailed, the
                        revocation must be postmarked within the seven (7) day
                        period, properly addressed to QLT USA, Inc. at 2579
                        Midpoint Drive, Fort Collins, Colorado, U.S.A., 80525,
                        Attention: President, and sent by certified mail, return
                        receipt requested. I understand that I will not receive
                        any payment under this Letter Agreement if I revoke the
                        Letter Agreement and in any event, I understand that I
                        will not receive any settlement payment until after the
                        seven (7) day revocation period has expired;

                  (e)   the Letter Agreement shall not be effective and
                        enforceable and no severance paid until the seven (7)
                        day revocation period has expired;

                  (f)   by executing the Letter Agreement and this release I am
                        representing that I am entering into these agreements
                        and releases based upon my own knowledge and judgement
                        and that I have not relied on any representations or
                        promises of QLT USA other than those contained in the
                        Letter Agreement and this release;

                  (g)   if any facts or matters upon which I have relied in
                        entering into the Letter Agreement and this release
                        shall later prove to be otherwise, the Letter Agreement
                        and this release shall nevertheless remain in full force
                        and effect; and

                  (h)   by executing the Letter Agreement and this release I am
                        representing that I am entering into these agreements
                        and releases voluntarily, without coercion, and with
                        full knowledge that they are intended, to the maximum
                        extent permitted by law, as a complete and final
                        releases and waiver of any and all of my claims.

I also acknowledge that a general release does not extend to claims that the
creditor does no know or suspect to exist in the creditor's favor at the time of
executing the release, which if known by the creditor would and must have
materially affected the creditor's settlement with the debtor. I hereby
expressly waive and relinquish all rights and benefits under any such principal
of law in any jurisdiction with respect to any unknown or unsuspected claims I
may have against QLT USA.

I HAVE READ AND UNDERSTOOD, AND I AGREE COMPLETELY TO THE TERMS STATED ABOVE.

Date:_____________________     By:_______________________________
                                  _______________________________
                                  Printed Name

                                                                              11

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