Settlement, Release & Patent License Feb 9, 2007

EXHIBIT 10.35


SETTLEMENT, RELEASE AND PATENT LICENSE


This Settlement, Release and Patent License Agreement (this "AGREEMENT") is made as of February 9, 2007 ("EFFECTIVE DATE"), by and among Takeda Pharmaceutical Company Limited, a Japanese corporation with its principal place of business at 1-1 Doshomachi 4-Chome, Chuo-ku, Osaka, Japan 540-8645 ("TAKEDA"), Wako Pure Chemical Industries, Ltd., a Japanese corporation with its principal place of business at 1-2 Doshomachi 3-Chome, Chuo-ku, Osaka, Japan 540-8605 ("WAKO"), TAP Pharmaceutical Products Inc., a Delaware corporation with its principal place of business at 675 N. Field Drive, Lake Forest, Illinois ("TAP"), and Abbott Laboratories, Limited - Laboratories Abbott, Limitee, a corporation organized and existing under the Canadian Business Corporations Act and having its principal place of business at Montreal, Quebec ("ABBOTT-CANADA"), on the one hand, and QLT USA, Inc., a Delaware corporation with its principal place of business at 2579 Midpoint Drive, Fort Collins, Colorado 80525 ("ATRIX") and Sanofi-Synthelabo, Inc., a Delaware corporation with a principal place of business at 55 Corporate Boulevard, Bridgewater, NJ 08807 ("SANOFI"), on the other hand (collectively, the "PARTIES").


WHEREAS, the Parties deem it to be in their best interests and to their mutual advantage to settle their disputes on the terms and conditions set forth in this Agreement, without admitting liability, in order to achieve certainty in their business dealings and avoid the expense of litigation.


NOW, THEREFORE, in view of the foregoing and for other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:


1. DEFINITIONS.


1.1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms shall have the following meanings:


(a) "AFFILIATE" shall mean any Person that controls, is controlled by, or is under common control with a Party to this Agreement. For purposes of this definition, "control" shall mean (i) in the case of a corporate entity, direct or indirect ownership of more than fifty percent (50%) of the securities having the right to vote for the election of directors, and (ii) in the case of a non-corporate entity, direct or indirect ownership of a majority of the equity interests with the power to direct the management and policies of such non-corporate entity. Notwithstanding the foregoing, in no event shall Abbott Laboratories be considered an Affiliate of any of the Parties.


(b) "CLAIMS" shall mean any and all claims, actions, causes of action, demands, suits, proceedings, administrative proceedings, losses, damages, costs, expenses, liabilities, charges, interest, penalties, fines and charges of whatever nature (including costs of collection, attorneys' fees and other costs of defense, costs of enforcing indemnification provisions, and expenses of investigation), whether known or unknown.


(c) "CONTROL" or "CONTROLLED," as to patent rights, shall mean ownership of such patent right or the ability of a Person to grant a license, or sublicense, or covenant not to sue under any such patent rights.


(d) "GOVERNMENTAL AUTHORITY" shall mean any nation, territory or government (or union thereof), foreign, domestic or multinational, any state, local or other political subdivision thereof, and any bureau, court, tribunal, board, commission, department, agency or other Person exercising executive, legislative, judicial, regulatory or administrative functions of government.


(e) "LICENSOR" or "LICENSORS" shall mean any and each of Takeda, Wako, TAP, and Abbott-Canada, collectively and individually.


(f) "LITIGATION" shall mean, collectively, that certain lawsuit captioned "TAP Pharmaceutical Products Inc., Takeda Chemical Industries, Ltd. and Wako Pure Chemical Industries, Ltd. v. Atrix Laboratories, Inc. and Sanofi-Synthelabo Inc.," No. 03-C-7822, United States District Court for the Northern District of Illinois and the appeal pending therefrom captioned "TAP Pharmaceutical Products Inc., Takeda Chemical Industries, Ltd. and Wako Pure Chemical Industries, Ltd. v. Atrix Laboratories, Inc. and Sanofi-Synthelabo Inc.," No. 2006-1258, United States Court of Appeals for the Federal Circuit.


(g) "LITIGATION PARTY" or "LITIGATION PARTIES" shall mean any and each of Atrix, Sanofi, Takeda, Wako, and TAP, collectively and individually.


(h) "PARTY" shall mean any and each of Atrix, Sanofi, Takeda, Wako, TAP, and Abbott-Canada, collectively and individually.


(i) "PERSON" shall mean an individual, corporation, partnership, limited partnership, limited liability company, unincorporated association, trust, joint venture, union or other organization or entity, including a Governmental Authority.


(j) "RELEASED PARTY" OR "RELEASED PARTIES" shall mean any and each of Atrix and Sanofi, collectively and individually.


(k) "RELEASING PARTY" or "RELEASING PARTIES" shall mean any and each of Takeda, Wako, TAP, and Abbott-Canada, collectively and individually.


(l) "SUBJECT PRODUCT" or "SUBJECT PRODUCTS" shall mean (i) the following products marketed or sold on or prior to the Effective Date by Atrix or licensed by Atrix and sold by its Affiliates or licensees in the Territory on or prior to the Effective Date: the Eligard(R) products (which contain leuprolide acetate in 7.5 mg, 22.5 mg, 30 mg, and 45 mg dosages) and dental products called Atridox(TM), Atrisorb Free Flow(TM), Atrisorb-D(TM) and Doxyrobe(TM); and (ii) products that are the same as or have only non-colorable (i.e. insubstantial or immaterial) differences from any of the foregoing products.


(m) "SUBJECT PRODUCT PATENT RIGHTS" shall mean any and all rights in the following that are owned, licensed or Controlled by any of the Releasing Parties, and that claim or cover the Subject Products (or the manufacture, use or sale thereof), whether the following are existing as of the Effective Date or thereafter: (i) patents in the Territory; (ii) patent applications in the Territory, including provisional applications, and (iii) any patents issuing therefrom and any divisionals, continuations, continuations-in-part, reissues, re-examinations, extensions, and term extensions (under applicable patent law or regulation or other law or regulation) in the Territory of any of the above-described patents or patent applications.


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(n) "SUBLICENSEE" shall mean any Person, and their respective sublicensees, to whom a sublicense is granted pursuant to Section 5.2.


(o) "TERRITORY" shall mean the United States of America, its territories and possessions including the Commonwealth of Puerto Rico, and Canada.


1.2. ADDITIONAL DEFINITIONS. Certain additional capitalized terms are defined below in the body of this Agreement.


2. RELATIONSHIP OF AGREEMENT WITH MOTION TO DISMISS; STIPULATED ORDER OF DISMISSAL.


Forthwith after execution of this Agreement, the Litigation Parties will jointly file a motion to dismiss (the "MOTION TO DISMISS") the appeal in the case entitled "TAP Pharmaceutical Products Inc., Takeda Chemical Industries, Ltd. and Wako Pure Chemical Industries, Ltd. v. Atrix Laboratories, Inc. and Sanofi-Synthelabo Inc.," No. 2006-1258 in the U.S. Court of Appeals for the Federal Circuit (the "Appeals Court") in the form of Exhibit A attached to this Agreement. If the Appeals Court grants the Motion to Dismiss prior to issuing any opinions on the merits of the appeal (including a ruling pursuant to Federal Rule of Appellate Procedure 36), then the Litigation Parties shall, within three business days after the Appeals Court grants the Motion to Dismiss, file a Stipulated Order of Dismissal in the case captioned "TAP Pharmaceutical Products Inc., Takeda Chemical Industries, Ltd. and Wako Pure Chemical Industries, Ltd. v. Atrix Laboratories, Inc. and Sanofi-Synthelabo Inc.," No. 03-C-7822 in the United States District Court for the Northern District of Illinois (the "District Court"), in the form of Exhibit B attached to this Agreement, and make other appropriate filings requesting the District Court -- and take all other actions reasonably required -- to dismiss with prejudice all claims for relief asserted by any Party against any other Party in the Litigation. If the District Court dismisses case no. 03-C-7822 in accordance with the Stipulated Order of Dismissal, (a) Atrix shall and the Releasing Parties shall instruct Patterson, Belknap, Webb & Tyler to instruct the Escrow Agent (as that term is defined in the Escrow Agreement dated June 8, 2006 between Atrix and JPMorgan Chase Bank, N.V. (the "JP Morgan Escrow Agreement")) to deliver the Escrow Funds (as that term is defined in the JP Morgan Escrow Agreement) to Atrix in accordance the terms of the JP Morgan Escrow Agreement; and (b) Atrix and Sanofi shall pay their respective shares of the Settlement Amount in accordance with Section 3.1. If the Appellate Court denies the Motion to Dismiss or issues an opinion on the merits of the appeal prior to granting the Motion to Dismiss, then this Agreement shall automatically and immediately terminate, cease to have any force and effect, and shall be deemed null and void and of no effect on a retroactive basis.


3. MONETARY CONSIDERATION.


3.1. PAYMENT BY ATRIX AND SANOFI. Subject to the conditions set forth in Section 2, which are for the benefit of and may be waived by Atrix and Sanofi jointly, (a) Atrix shall pay to TAP the amount of $112.5 million, and (b) Sanofi shall pay to TAP the amount of $45 million (the amounts in (a) and (b), in the aggregate being the "SETTLEMENT AMOUNT"), in each case, within three business days after both of the following events occur: the Appeals Court grants the Motion to Dismiss and the District Court dismisses case no. 03-C-7822 in accordance with the Stipulated Order of Dismissal. All payments shall be made in United States Dollars. Atrix and Sanofi shall deposit their respective share of the Settlement Amount with their respective legal counsel on the Effective Date to be held in escrow on behalf of such Parties for payment to TAP in accordance


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with this Agreement. The Settlement Amount shall be paid to TAP by wire transfer of immediately available funds to an account previously designated by TAP to Atrix and Sanofi in writing and TAP shall apportion the Settlement Amount among the other Releasing Parties, if any apportionment is to be made. Payment of the Settlement Amount to TAP shall constitute full payment of any portion of the Settlement Amount to the other Releasing Parties entitled thereto. TAP represents that it will comply with any applicable United States federal, state or local withholding tax obligations with respect to such payments, if any, that TAP makes to the other Releasing Parties. TAP acknowledges that, as between TAP on the one hand and Atrix and Sanofi on the other hand, TAP assumes full responsibility to fulfill any withholding tax obligations with respect to the Settlement Amount. The Settlement Amount, once paid, is not refundable.


3.2. NO OTHER FUNDS TRANSFER. The Settlement Amount represents full and complete payment for all of the rights and releases granted to Atrix, Sanofi and any Atrix and Sanofi Releasees (as defined in Section 4.1) under this Agreement, and neither Atrix, Sanofi nor any Atrix and Sanofi Releasee shall be under any obligation to pay any additional or further amounts to any Releasing Party under this Agreement.


3.3. TAXES. If the United States Internal Revenue Service or any state or local taxing authority within the United States imposes on Atrix or Sanofi any withholding tax on any portion of the Settlement Amount under the Internal Revenue Code of 1986, as amended or the Treasury regulations thereunder, TAP shall indemnify and hold harmless Atrix and Sanofi for the amount of such withholding tax, plus any interest, penalties or additions to tax related thereto.


4. RELEASES, COVENANTS NOT TO SUE, AND DISMISSALS.


4.1. RELEASES BY EACH RELEASING PARTY. Upon full payment of the Settlement Amount, each Releasing Party, each acting on behalf of itself and its respective predecessors, successors, and assigns, does hereby now and shall forever release and discharge Atrix and Sanofi, and their predecessors, successors, assigns and Affiliates, and each of their respective current and former officers, directors, employees, agents, attorneys, representatives, distributors, resellers, licensees, direct or indirect customers and contract manufacturers (collectively and individually, "ATRIX RELEASEES" and "SANOFI RELEASEES"), from and against (a) any and all Claims arising under, related to, or connected with any Subject Product Patent Rights in the Territory with respect to the period before the Effective Date, (b) any and all Claims raised in the Litigation, including but not limited to any requests in the Litigation to recover damages, fees or expenses due for alleged infringement of the Subject Product Patent Rights, or any requests to recover attorneys' fees or costs in connection with the Litigation, (c) any and all Claims arising out of or related to actions taken or statements made concerning or in connection with the Litigation in the Territory, (d) any and all matters which could have been raised (whether or not due to compulsory counterclaim requirements) in, or as a result of, the Litigation in the Territory; and (e) any and all Claims, arising during the period before the Effective Date, related to allegations that the Subject Products (or any aspect thereof for use in the Subject Products) infringe any Subject Product Patent Rights Controlled by a Releasing Party in the Territory. Releasing Parties, acting jointly and severally, represent and warrant, as of the Effective Date, to Atrix and Sanofi that they possess and Control (and have always possessed and Controlled) the exclusive right to sue for infringement or misappropriation of the Subject Product Patent Rights in the Territory and that no other Person has ever had the right to recover damages for infringement or misappropriation of any Subject Product Patent Rights in the Territory.


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4.2. RELEASES BY ATRIX AND SANOFI. Upon full payment of the Settlement Amount, Atrix and Sanofi, each acting on behalf of itself and its respective predecessors, successors and assigns, does hereby now and shall forever release and discharge the Releasing Parties, and each of their respective predecessors, successors, assigns and Affiliates, and each of their respective current and former officers, directors, employees, agents, attorneys, representatives, distributors, resellers, licensees, and direct or indirect customers (collectively and individually, "COLLECTIVE TAP RELEASEES"), from and against (a) any and all Claims raised in the Litigation, including but not limited to any Claim that U.S. Patent No. 4,728,721 is invalid or unenforceable in the Territory or should be reexamined or revoked, any Claim that any Releasing Party wrongfully enforced or co ...