Settlement Agreement dated effective December 31, 2012 among Simon Fraser University, Canadian Integrated Optics (BC) Ltd, the Corporation and 0935493 B.C. Ltd

SFU and CIO operating under the name Canadian Integrated Optics IOM Ltd. (“IOM”) entered into an April 1, 2010 Research Agreement (the “Research Agreement”) under which IOM sponsored certain research to be conducted at the 4D Labs materials science facility at SFU under the direction of Dr. Gary Leach of SFU;

IOM and SFU entered into a May 21, 2010, Amendment #1 to the Research Agreement;

IOM, SFU and CIO determined that the Research Agreement and any amendments thereto should be between SFU and CIO and, with the consent of IOM, SFU and CIO entered into a July 31, 2010, Amendment #2 to the Research Agreement amending the research sponsor under the Research Agreement from IOM to CIO and making certain other changes to the Research Agreement;

SFU and CIO entered into a January 1, 2011, Amendment #3 to the Research Agreement, a July 2, 2011, Amendment #4 to the Research Agreement, and a January 2, 2012, Amendment #5 to the Research Agreement;

In or around January and February 2012, CIO defaulted under the Research Agreement, as amended. In response, on or about March 20, 2012, SFU delivered CIO a 30-day notice of termination of the Research Agreement (the “Termination Notice”);

SFU and CIO entered into an April 15, 2012, Amendment #6 to the Research Agreement (the “Amendment”) suspending the Termination Notice without prejudice and providing for additional sponsored research to be conducted at 4D Labs under the direction of Dr. Gary Leach;

CIO executed a promissory note (the “Promissory Note”) in favour of SFU promising to pay to SFU the principal sum of $452,749 and interest on certain terms and conditions;

Quantum executed a guarantee (the “Quantum Guarantee”) in favour of SFU for the obligations of CIO under the Promissory Note (the “Guaranteed Obligations”);

093Co executed a guarantee (the “093Co Guarantee”) in favour of SFU for the Guaranteed Obligations;

SFU and 093Co entered into a Security Agreement (the “Security Agreement”) granting SFU a security interest in 093Co’s right title and interest in three Kurt J. Lesker PVD 75 Deposition Tools having serial numbers PRD060525, PRD064578 and PRD072561 (collectively, the “Collateral”) and any proceeds therefrom in consideration for the payment and performance of all indebtedness of 093Co to SFU, including, without limitation, indebtedness of 093Co to SFU under the 093Co Guarantee;

SFU and Quantum entered into a Trustee Beneficial Owner Agreement (the “Beneficial Owner Agreement”) whereby Quantum ratified the execution and delivery by 093Co to SFU of the Security Agreement and charged in favour of SFU all of its beneficial interest in the Collateral as security for payment for all indebtedness of Quantum to SFU;

On May 24, 2012, SFU registered a financing statement against 093Co and Quantum in the Collateral and any proceeds therefrom;

As at August 8, 2012, CIO owed SFU $364,066 plus interest under the Promissory Note (and interest has continued to accrue since then);

Through September 15, 2012, CIO owed SFU a further $109,835 in 4D Labs’ user fees pursuant to the Research Agreement and the terms of use of 4D Labs in connection with the research under the Research Agreement;

Under the terms of the Research Agreement, the Amendment, the Promissory Note, the Quantum Guarantee and the 093Co Guarantee, CIO, Quantum and 093Co (collectively, the “Debtors”) are jointly and severally liable to pay to SFU $346,066 plus interest and costs but the Debtors are unable to do so;

Under the terms of the Research Agreement and the Amendment, CIO is liable to pay to SFU $109,835 plus interest and costs but CIO is unable to do so;

On or about October 1, 2012, CIO alleged that there were certain deficiencies in SFU’s 4D Lab facilities which resulted in wasted research expenditures under the Research Agreement and contributed to a lack of scientific progress on the research (the “Gas Allegations”); and

The parties wish to settle the aforementioned debts and allegations in support of their ongoing, mutually beneficial relationship.

it is liable to SFU for $364,066 plus interest which continues to accrue at the rates set out in the Promissory Note, and any other costs recoverable by or due to the SFU pursuant to the Research Agreement, the Amendment and the Promissory Note;

it is liable to SFU for a further $109,835 plus interest and any other costs recoverable by or due to SFU pursuant to the Research Agreement and the terms of use of 4D Labs in connection with the research under the Research Agreement;

it is in default of the terms of the Research Agreement, the Amendment, and the Promissory Note;

it does not have any defences to the right of SFU to enforce the terms of the Research Agreement, the Amendment, and the Promissory Note; and

SFU has entered into this Settlement Agreement based upon the release of SFU and the representations made herein.

it is liable to SFU for $364,066 plus interest which continues to accrue at the rates set out in the Promissory Note, and any other costs recoverable by or due to the SFU pursuant to the Research Agreement, the Amendment and the Promissory Note, the Quantum Guarantee and the Beneficial Owner Agreement;

it is in default of the terms of the Quantum Guarantee;

it does not have any defences to the right of SFU to enforce the terms of the Research Agreement, the Amendment, the Promissory Note, the Quantum Guarantee and the Beneficial Owner Agreement; and

SFU has entered into this Settlement Agreement based upon the release of SFU and the representations made herein.

it is liable to SFU for $364,066 plus interest which continues to accrue at the rates set out in the Promissory Note, and any other costs recoverable by or due to the SFU pursuant to the Research Agreement, the Amendment and the Promissory Note, the 093Co Guarantee and the Security Agreement;

it is in default of the terms of the 093Co Guarantee;

it does not have any defences to the right of SFU to enforce the terms of the Research Agreement, the Amendment, the Promissory Note, the 093Co Guarantee and the Security Agreement; and

SFU has entered into this Settlement Agreement based upon the release of SFU and the representations made herein.

all right, title, and interest in and to each of the Collateral and the additional supporting equipment more particularly described in Schedule “A” (collectively, the “Supporting Equipment”) are held by them;

are not subject to any claim, encumbrance, charge, security interest, hypothecation, lease or other interest except as provided or in the Security Agreement and in this Settlement Agreement;

in the case of CIO and 093Co, do not comprise all or substantially all of their assets or undertaking, and;

in the case of Quantum, do not comprise all of its property and assets including goodwill and corporate franchises.

the Collateral; and

the additional supporting equipment more particularly described in Schedule “A” (collectively, the “Supporting Equipment”)

possession of the Collateral and the Supporting Equipment;

a legally enforceable transfer deed in favour of SFU for each deposition tool included in the Collateral; and

a legally enforceable transfer deed in favour of SFU for the Supporting Equipment.

the intellectual property developed pursuant to or arising out of the Research Agreement (other than claims against the intellectual property creators under SFU Intellectual Property Policy R30.03);

the $364,066 plus interest at the rates set out in the Promissory Note, and any other costs recoverable by or due to SFU due to SFU from CIO, Quantum and 093Co pursuant to the Research Agreement, the Amendment and the Promissory Note, the Quantum Guarantee, the 093Co Guarantee and the Security Agreement; and

the further $109,835 plus interest and any other costs recoverable by or due to SFU from CIO pursuant to the Research Agreement and the terms of use of 4D Labs in connection with the research under the Research Agreement