Exhibit 10.40


LICENSE
AGREEMENT


This License Agreement
(the “Agreement”) is made and entered into as of May 12, 2006 (the “Effective
Date”), by and between Kalium, Inc., a corporation organized under the laws of
the State of California (“KALIUM”), having a registered address at 5197 Alta
Vista Street, San Diego, California, USA, 92019, and Urigen Holdings Inc., a
corporation organized under the laws of British Columbia, Canada (“URIGEN”),
having an office of registered and records office at 25th Floor, 700 West Georgia Street, Vancouver,
British Columbia V7Y 1B3, Canada. KALIUM and URIGEN may sometimes hereinafter
be referred to individually as “a Party” or jointly as the “Parties”.


WHEREAS,
KALIUM is the owner of certain patent rights and technology relating,
among other things, to suppositories for use in the genitourinary or
gastrointestinal system, and desires that the same be developed and utilized to
the fullest extent possible to commercialize products;


WHEREAS, URIGEN represents that it can
bring to bear the scientific expertise, business talent, know-how, and
resources to develop and market products based upon certain of KALIUM’S patent
rights and technology; and


WHEREAS, KALIUM has determined that the
best method for commercializing certain of its patent rights and technology is
through the grant of an exclusive license to URIGEN; and


WHEREAS, URIGEN wishes to obtain, and
KALIUM is willing to grant, an exclusive license to practice inventions covered
by the patent rights and technology subject to the terms set forth below.


NOW, THEREFORE,  in consideration of the above premises and the mutual
covenants contained herein, the Parties hereby agree as follows:



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1                            DEFINITIONS.


When used in this
Agreement, the following terms shall have the meanings set out in this Article
1. Except as otherwise explicitly provided, all references to Articles and
Sections shall refer to the Articles and Sections of this Agreement, and all
references to Schedules shall refer to the Schedules appended to this
Agreement, all of which are incorporated herein by reference.


1.1      The term “Affiliate”
shall mean any entity which controls, is controlled by, or is under
common control with a Party, where “control” means beneficial ownership of more
than fifty percent (50%) of the outstanding shares or securities or the ability
otherwise to elect a majority of the board of directors or other managing
authority.


1.2      The term “Combination
Product” shall mean any pharmaceutical or biologic product in any
dosage form that contains, in addition to an active agent included within a
Valid Claim within the Licensed Patent Rights, one or more other active
ingredients having significant and anticipated prophylactic or therapeutic
activity.


1.3      The term “FDA”
shall mean the United States Food and Drug Administration.


1.4      The term “EMEA” shall mean the European Medicines
Evaluation Agency or any successor thereto which coordinates the scientific
review of human pharmaceutical or biologic products under the centralized
procedure of the European Community.


1.5      The term “Field”
shall mean the use of suppositories in the genitourinary or
gastrointestinal system.



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1.6      The term “Licensed Patent Rights” shall mean United
States Patent Nos. 6,464,670, and United States Utility Patent Application
Serial Number 09/943,380, entitled “Reinforced Urethral Suppository” and filed
on August 30, 2001, and United States Utility Patent Application Serial No.
11/340,071, entitled “Transluminal Drug Delivery Methods and Devices” and filed
on January 26, 2006; and any continuation, continuation-in-part, continuing
prosecution, division, extension, renewal, reissue, revival, addition,
re-examination, and foreign counterpart of any of the foregoing,.


1.7      The term “Licensed
Product” shall mean any product the development, manufacture, use,
importation, tender, or Sale of which is covered by a Valid Claim of a Licensed
Patent Right.


1.8      The term “Licensed
Technology” shall mean all knowledge, know-how, show-how,
procedures, methods, techniques, discoveries, improvements, information, trade
secrets, other intellectual property rights of any kind, clinical data,
technical data, and the like which are owned or controlled by KALIUM and which
relate to the development, manufacture, and/or commercialization of Licensed
Products in the Field, which are not the subject of a Valid Claim within the
Licensed Patent Rights.


1.9      The term “Net
Sales” shall mean the total gross invoice price of any Licensed
Product Sold by URIGEN, its Affiliates or sublicensees, or any combination
thereof, less the sum of the following actual and customary deductions, where
applicable and separately listed on the applicable invoice: cash, trade, or
quantity discounts; sales, use, tariff, import/export duties, or other excise
taxes imposed on particular Sales (but excluding value-added and/or income
taxes imposed in respect of the Sales of Licensed Products); transportation
charges; or credits to customers because of rejections, recalls, or returns.
For purposes of calculating Net Sales, transfers to a sublicensee or an
Affiliate for (i) end use (but not resale) by the sublicensee or Affiliate
shall be treated as Sales by URIGEN at the list price of URIGEN, or (ii) resale
by a sublicensee or an Affiliate shall be treated as Sales at the list price of
the sublicense or Affiliate.



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1.10    The terms “Sale, Sell, Sold” shall mean any
transaction that transfers to a purchaser, for value, physical possession and
title to a Licensed Product, after which transfer the seller has no right or
power to determine the purchaser’s resale price, if any.


1.11    The term “Term” shall have the meaning set forth in
Section 8.1.


1.12    The term “Territory” shall mean worldwide.


1.13    The term “Valid Claim” shall mean a claim in any
issued, unexpired patent which has not been held unpatentable or invalid or
unenforceable by a decision of a court or other competent authority, which is
not appealable or not appealed within the time allowed for appeal, and which
has not been admitted to be invalid or unenforceable through reissue,
disclaimer, or otherwise. For clarity, any claim of an issued patent within the
Licensed Patent Rights those lapses due to a failure to pay a requisite
maintenance fee or annuity shall cease to be a Valid Claim as of the date the
patent lapses.


2                            GRANT
OF RIGHTS.


2.1      Licensed Patent Rights and Technology. Subject
to the terms and conditions hereof, KALIUM hereby grants to URIGEN and its
Affiliates during the Term, as defined below, an exclusive license under the
Licensed Patent Rights and Licensed Technology within Territory, including the
right to grant sublicenses, to develop, have developed, make, have made, use,
have used, import, have imported, export, have exported, distribute, have
distributed, market, have marketed, Sell, offer for Sale, and have Sold
Licensed Products the Field, including the right to grant sublicenses
consistent with the terms of this Agreement. URIGEN shall provide KALIUM in
confidence, in accordance with Article 9 herein, with a complete copy of any
sublicense involving the Licensed Patent Rights or Licensed Technology within
sixty (60) days of the execution of the sublicense.



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2.2      Right of
First Refusal. For a
period of five (5) years from the Effective Date, KALIUM hereby grants to
URIGEN a right of first refusal to obtain an exclusive or non-exclusive license
for any discoveries, improvements, information, trade secrets, techniques,
patents, and any other intellectual property rights whatsoever that are outside
of the scope of the Licensed Patent Rights or Licensed Technology, but are
related to the development, manufacture, and commercialization of products in
the Field (hereinafter the “Additional
Rights”). Should KALIUM negotiate a bona
fide license agreement for the Additional Rights acceptable to a
third party, then KALIUM shall promptly notify URIGEN of the same and URIGEN
shall have thirty (30) days from said notice to accept the terms of the license
with the third party, and to enter into a licensing agreement with KALIUM upon
those terms. Should URIGEN fail to exercise such right within the thirty (30)
day period or otherwise clearly communicate its intent to KALIUM not to
exercise such right prior to the end of the thirty (30) day period, then KALIUM
shall be free to enter into the license agreement with the third party without
any further obligation whatsoever to URIGEN.


2.3      Provision
of Information, Technology and Materials. KALIUM shall provide to URIGEN, within thirty
(30) days from the Effective
Date, a copy of all information and tangible forms of technology and materials
then in its possession that is reasonably necessary to the research,
development, manufacture, and commercialization of Licensed Products,
including, but not limited to, a copy of all pre-clinical documentation,
clinical documentation, know how, written reports, notebooks, copies of patents
and patent applications, prior art searches, and the like.


3                            PAYMENTS.


3.1      Stock
Issuance as License Fees. As partial consideration for the rights granted to URIGEN under this
Agreement and as a nonrefundable license fee, URIGEN shall issue to KALIUM or
its nominees under the terms of a Warrant Agreement (the “Warrant Agreement”)
or Stock Subscription Agreement (the “Stock Agreement”), as the case may be,
equity in the amount of 360,000 shares of URIGEN



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common
stock or warrants to purchase the same. Within ninety (90) days of the
Effective Date, KALIUM shall elect in writing to receive the equity hereunder
in either URIGEN common stock or warrants to purchase URIGEN common stock.
Within thirty (30) days of the receipt by URIGEN of the election of KALIUM,
URIGEN shall, depending upon the election of KALIUM, either issue the common
stock to KALIUM pursuant to the Stock Agreement or provide to KALIUM a Warrant
Agreement. Should KALIUM choose the Warrant Agreement, then the Warrant
Agreement shall provide that KALIUM must elect to convert all warrants under
the Warrant Agreement to shares of URIGEN common stock prior to the closing of
the next financing round by URIGEN, and if not so converted, said Warrant
Agreement, warrants and rights to URIGEN common stock shall lapse and be null
and void.


3.2      Royalties.  URIGEN shall pay KALIUM earned royalties (in accordance with Article 7
herein) throughout the Term on Net Sales of Licensed Products Sold by URIGEN,
its Affiliates or sublicensees on a country-by-country basis in the Territory
based upon patent coverage in the country of Sale, as follows:


3.2.1   four and one half percent (4.5%) where a Licensed Product is covered by
a Valid Claim of an issued patent within the Licensed Patent Rights, which said
issued patent is based on or claims priority to U.S. Utility Patent Application
Serial No. 11/340,071 entitled “Transluminal Drug Delivery Methods and Devices”,
filed on January 26, 2006 (in any case, the “TDDM Application”);


3.2.2   three percent (3.0%) where a Licensed Product is covered solely by a
Valid Claim of an issued patent within the Licensed Patent Rights, which said
issued patent is based on patents or patent applications other than the TDDM
Application (“Other Patent Rights”);


3.2.3   three percent (3%) if, and only if, the Licensed  Product is covered by one or more pending
claims in the TDDM Application and no patent has issued from the TDDM
Application; and



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3.2.4   two percent (2%) if, and only if, the
Licensed Product is covered by one or more pending claims in the Other Patent
Rights and no patent has issued from the Other Patent Rights.


With respect to
paragraphs 3.2.3 and 3.2.4, the obligation to make royalty payments shall cease
upon the earlier of (i) two (2) years from the first Sale of a Licensed Product
in the country within the Territory or (ii) with respect to paragraph 3.2.3,
the issuance of a patent based upon the TDDM Application with one or more Valid
Claims reading upon the Licensed Product, or (iii) with respect to paragraph
3.2.4, the issuance of a patent based upon the Other Patent Rights with one or
more Valid Claims reading upon the Licensed Product. For purposes of clarity,
should no patent issue from the TDDM Application or the Other Patent Rights
within two (2) years from the first Sale of a Licensed Product in the country
within the Territory with one or more Valid Claims reading upon the Licensed
Product, then no royalty payments shall be due hereunder until said patent(s)
issue with one or more Valid Claims meeting the requirements of paragraphs
3.2.1 or 3.2.2 hereunder.


With respect to Net Sales
of Licensed Products upon which URIGEN is reasonably required to pay royalties
to a third party based on patent rights dominating or necessary to the
manufacture, use, or Sale of Licensed Products, the royalties payable by URIGEN
to KALIUM on Net Sales of such Licensed Products shall be reduced by the amount
of the royalties actually paid to such third party; provided, however, that in
no event shall the royalties payable by URIGEN to KALIUM with respect to such
Licensed Products be less than fifty
percent (50%) of  the amounts set
forth above.


Royalties under this
Section 3.2 shall be payable only once with respect to a given Licensed
Product, regardless of the number of claims of the Licensed Patent Rights
pertaining to such Licensed Product; provided, however, that should a Licensed
Product be covered by Valid Claims under both Sections 3.2.1 and 3.2.2 or 3.2.3
and 3.2.4, then URIGEN shall use the highest applicable royalty rate in
calculating the monies due KALIUM.



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In calculating royalties
with respect to a Combination Product, the Parties shall enter into good-faith
negotiations regarding the percentage of the Net Sales of such Combination
Product to be used in calculating royalty’s payable with respect to such
Combination Product, on a country-by-country basis. If the Parties are unable
to agree upon such percentage within ninety (90) days after the commencement of
such negotiations, then royalties with respect to a Combination Product in a
country shall be equal to the royalty rate on Net Sales of such Combination
Product that would otherwise apply to the Net Sales of such Combination Product
for such calendar quarter, multiplied by a fraction whose numerator is URIGEN’S,
its Affiliate’s or sublicensees published Sales price in such country for the
Licensed Product contained in a given Combination Product, and whose
denominator is URIGEN’S, its Affiliate’s or sublicensees published Sales price
in such country for the Combination Product. If the numerator and denominator
cannot be determined in the manner set forth above, then the numerator shall be
the manufacture or acquisition cost of Licensed Product contained therein, and
the denominator shall be the sum of the numerator and the cost (calculated on
the same basis if manufactured; otherwise, on the basis of purchase price) of
all other active ingredients contained in the Combination Product. In each
case, the cost is to be determined in accordance with URIGEN’S, its Affiliate’s
or sublicensee’s standard accounting procedures.


3.3
Milestone Payments. URIGEN shall provide KALIUM written
notice within fifteen (15) days of its becoming aware of the achievement of
each of the milestone events set forth below in respect to the first Licensed
Product developed by URIGEN, its Affiliates or sublicensees hereunder, and the
given milestone payment shall be payable following occurrence of the
corresponding milestone event (each an “Event”)
as follows:


	
  Event

  	
   

  	
  Amount

  
	
  (1) the earlier
  of (a) the filing of an IND, or (b) 120 days from the Effective
  Date of this Agreement

  	
   

  	
  US$20,000

  



 



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  (2) Issuance of a U.S. patent based on the TDDM
  Application with one or more Valid Claims covering Licensed Products in the
  Field

  	
   

  	
  US$  37,500

  
	
  (3) NDA Accepted
  for Filing by FDA or EMEA

  	
   

  	
  US$100,000

  
	
  (4) Regulatory
  Approval by FDA or EMEA

  	
   

  	
  US$300,000

  



Milestone Payment (1)
above shall be payable in cash. Milestone Payments (2), (3), and (4), above,
shall be payable, at URIGEN’S sole discretion, in cash or an equivalent value
in shares of URIGEN common stock. The Milestone Payments provided herein shall
be payable only once regardless of the number of Licensed Products ultimately
developed by URIGEN hereunder. Milestone Payments shall be made by URIGEN
within thirty (30) days after the occurrence of the applicable Event. If URIGEN
elects to make Milestone Payments (2), (3), and/or (4) in shares of URIGEN
common stock, the price per share shall be determined as follows: (a) if URIGEN
is a private company, the price per share established by the most recent round
of financing having raised CDN$500,000 or greater; and (b) if URIGEN is a
publicly listed company, the average closing price per share of URIGEN common
stock on the ten (10) business days immediately preceding the date of the
Event.


3.4      Sublicense Payments. With
respect to sublicenses granted by URIGEN or an Affiliate hereunder, URIGEN
shall pay to KALIUM twenty-two and one-half percent (22.5%) of all fees, and
lump sum payments directly attributable to sublicenses of Licensed Patent
Rights, including, but not limited to, technology access fees, license issue
fees, and milestone payments, but excluding royalty payments from the
sublicensee to URIGEN, its Affiliates or their designee, research support
received by URIGEN, its Affiliates or sublicensees and payments for equity of
URIGEN, its Affiliates or sublicensees (“Sublicense Revenues”). In the event
that the sum of: (i) payments by URIGEN to KALIUM of a percentage of Sublicense
Revenues as set forth above, and (ii) payments by URIGEN to one or more third
party licensors for other patent rights dominating or reasonably necessary to
the development, manufacture or



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commercialization of Licensed Products hereunder,
exceeds thirty-five percent (35%) of any such Sublicense Revenues received by
URIGEN, then payments to KALIUM will be reduced on a pro-rata basis with
payments owed to such third parties on such Sublicense Revenues, provided that
in no event shall KALIUM receive less than fifteen percent (15%) of the
Sublicense Revenues of URIGEN or its Affiliates.


4         WARRANTIES,
REPRESENTATIONS AND DISCLAIMERS.


4.1      URIGEN Representations. URIGEN
hereby represents, warrants, and agrees that it:


(a)       is
a corporation duly organized and validly existing and in good standing under
the laws of British Columbia, Canada, and is duly qualified to conduct its
business as presently conducted;


(b)       has full power and authority to execute
and deliver this Agreement and to perform its obligations hereunder;


(c)       has taken all necessary legal action to
authorize the execution and delivery of this Agreement, and this Agreement
constitutes the legal, valid and binding obligation of URIGEN enforceable
against URIGEN in accordance with its terms; and


(d)       is not subject to any pending or
threatened (i) voluntary or involuntary bankruptcy, liquidation, or similar
proceeding or order, (ii) litigation, regulatory, judicial, or arbitral
proceeding or order, or (iii) non­ competition, license, exclusivity, or
confidential agreement, any of which would likely affect its ability to enter
into and/or perform its obligations under this Agreement.


4.2      KALIUM Representations. KALIUM
hereby represents, warrants, and agrees that:



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(a)       it
has good and valid title to the Licensed Patent Rights and Licensed Technology,
which, to the best of its knowledge, are free and clear of any encumbrances,
debt, pending liabilities, or contingent liabilities, that to the best of its
knowledge, the Licensed Patent Rights and Licensed Technology do not violate
the intellectual or other property rights of third parties, and that the Licensed Patent Rights
and Licensed Technology are not the subject of any pending or threatened legal
action, including, but not limited to, any assertion by any third parties that
any of the same are invalid, unenforceable, or violate the rights of any third
party;


(b)       it
has sufficient rights to grant the rights (including the exclusive rights)
granted herein to URIGEN, and that such grant of rights hereunder are free and
clear of any known claims, encumbrances, liens, security interests and rights
of third parties;


(c)       it
is a corporation duly organized and validly existing and in good standing under
the laws of the state of California, and is duly qualified to conduct its
business as presently conducted;


(d)       it
has full power and authority to execute and deliver this Agreement and to
perform its obligations hereunder, and is not subject to any outstanding tax
liabilities;


(e)       Schedule
A is full, accurate and complete list of all third parties that have held
previous discussions with KALIUM regarding acquiring potential rights to the
Licensed Patent Rights and/or Licensed Technology;


(f)        it
has taken all necessary legal action to authorize the execution and delivery of
this Agreement, and this Agreement constitutes the legal, valid, and binding
obligation of KALIUM enforceable against KALIUM in accordance with its terms;
and



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(g)       it
is not subject to any pending or threatened (i) voluntary or involuntary
bankruptcy, liquidation, or similar proceeding or order, (ii) litigation,
regulatory, judicial, or arbitral proceeding or order, or (iii)
non-competition, license, exclusivity or confidential agreement, any of which
would likely affect its ability to enter into and/or perform its obligations
under this Agreement.


4.3      Warranty
Disclaimer. Other
than as provided in Sections 4.1 and 4.2, nothing in this Agreement is or shall
be construed as:


(a)       a
warranty or representation by KALIUM as to the validity or scope of any
Licensed Patent Rights;


(b)       a
warranty or representation that anything made, used, practiced, Sold or
otherwise disposed of under any license granted in this Agreement (including
Licensed Products) is or will be free from infringement of patents, copyrights
and other rights of third parties;


(c)       an
obligation to bring or prosecute actions or suits against third parties for
infringement, except to the extent and in the circumstances described in
Section 6; or


(d)       a
grant by implication, estoppel, or otherwise of any licenses under patent
applications or patents of KALIUM or other persons other than as provided
herein.


4.4      No
Warranty. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES
ANY REPRESENTATION OR EXTENDS ANY WARRANTY OF ANY KIND, EITHER EXPRESS OR
IMPLIED, INCLUDING WARRANTIES AS TO TITLE, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, OR NON-INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY
RIGHTS.



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4.5      Disclaimer of Liability. In
no event will either Party be liable for any incidental, special, or
consequential damages resulting from this Agreement including, without
limitation, the exercise of URIGEN’S rights under the license granted pursuant
to this Agreement or the use of the Licensed Patent Rights or Licensed
Technology.


5         INDEMNIFICATION
AND INSURANCE.


5.1      Indemnification. URIGEN
agrees to indemnify, hold harmless, and defend KALIUM, its directors, officers,
employees, agents, and the inventors of the patents and patent applications included
in the Licensed Patent Rights against any and all liability and/or damages with
respect to any claims, suits, demands, judgments, or causes of action arising
out of (a) the development, manufacture, storage, Sale, or other distribution,
or any other use of Licensed Products or Licensed Technology, or exercise of
rights granted hereunder, by URIGEN, its Affiliates, sublicensees,
distributors, agents or representatives; (b) the use by end-users and other
third parties of Licensed Products; and/or (c) any representation, warranty, or
statement by URIGEN, its Affiliates, sublicensees, distributors, agents or
representatives, which is made concerning KALIUM, the Licensed Products,
Licensed Technology, or the Licensed Patent Rights. In the event any such claims,
demands, or actions are made, subject to Section 5.2, URIGEN shall defend
KALIUM at URIGEN’S sole expense by counsel selected by URIGEN, subject to
approval by KALIUM, which such approval is not to be unreasonably withheld. The
foregoing indemnification shall not apply to any claims caused by the
negligence, recklessness, or willful misconduct of KALIUM or any KALIUM
personnel. Further, KALIUM agrees to indemnify, hold harmless and defend
URIGEN, its directors, officers, employees and agents against any and all
liability and/or damages with respect to any claims, suits, demands, judgments
or causes of action arising out of any and all uses of Licensed Products,
Licensed Patent Rights or Licensed Technology prior to the Effective Date,
including any experimental uses on human subjects. In the event any such
claims, demands or actions are made, subject to Section 5.2, KALIUM shall
defend URIGEN at KALIUM’S sole expense by counsel



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selected by KALIUM,
subject to approval by URIGEN, which such approval is not to be unreasonably
withheld.


5.2      Notice. In the event
that a Party seeks indemnification under Section 5.1, above, that Party agrees
to (i) promptly inform the other Party of any claim, (ii) permit the other
Party to assume direction and control of the defense or claims resulting
therefrom (including the right to settle it at the sole discretion of
indemnifying Party), and (iii) cooperate as reasonably requested (at the
expense of the indemnifying Party) in the defense of the claim, provided,
however, that the indemnifying Party may not agree to any settlement which
would invalidate or render unpatentable any Valid Claim of any Licensed Patent
Right, constitute an admission by indemnified Party or which would impose any
ongoing obligation on the indemnified Party without the indemnified Party’s
written consent, which shall not be unreasonably withheld. Notwithstanding the
foregoing, the indemnified Party shall have the right to participate in the
defense or prosecution of any claim, including hiring its own counsel at its
own expense, and the indemnifying Party shall cooperate with indemnified Party
if the indemnified Party does so participate.


5.3      Insurance. In addition
to the foregoing, from and after the time URIGEN or any Affiliate or
sublicensees begin clinical trials on any Licensed Product, URIGEN, its
Affiliate or sublicensee, as the case may be, shall obtain and maintain, during
the Term (as defined below), comprehensive general liability insurance,
including products liability insurance, with reputable and financially secure
insurance carriers to cover the activities of URIGEN, its Affiliates and
sublicensees, if any, contemplated by this Agreement. Such insurance shall be
in an amount which is customarily carried by companies at a comparable stage of
development or introduction of new pharmaceutical products.



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6         PROSECUTION
AND MAINTENANCE OF PATENT RIGHTS.


6.1      Patent Prosecution and Maintenance.


(a)       URIGEN
shall assume responsibility, through counsel of its choice, at its sole
expense, for the preparation and prosecution of all patent applications and the
maintenance of all patents related to the Licensed Technology and included in
the Licensed Patent Rights (and any patents or patent applications covering
Additional Rights licensed by URIGEN). URIGEN counsel shall take directions
solely from URIGEN, provided, however, KALIUM or its representatives may
request to meet and confer with such URIGEN counsel at mutually agreeable times
and places and in the presence of URIGEN representatives by providing URIGEN
and its counsel with at least two (2) weeks advance written notice of such a
requested meeting. URIGEN agrees to take all actions reasonably necessary to
diligently prosecute and maintain any patents or patent applications in the
countries where the same are filed, prosecuted, and maintained.


(b)       Both Parties agree to cooperate with the
other Party to execute all lawful papers and instruments, to make all rightful
oaths and declarations, and to provide consultation and assistance as may be
necessary in the preparation, prosecution, maintenance, and reinforcement of
all such patent applications and patents.


(c)       In the event URIGEN elects, by notice to
KALIUM, that is wishes to discontinue support for the filing, prosecution,
and/or maintenance of any patent application and/or patent contained in the
Licensed Patent Rights in any country by written notice to KALIUM, and does not
file or re-file a new application to replace the filing, any such patent
application or patent shall be excluded from the definition of the Licensed
Patent Rights and from the scope of the licenses and rights granted under this
Agreement, and all rights relating thereto shall revert to KALIUM and may be
freely licensed by KALIUM without any obligation whatsoever to URIGEN.


6.2      Defense Against Infringement. In
the event URIGEN or KALIUM becomes aware of any actual or threatened
infringement of any Licensed Patent Rights,



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that Party shall promptly
notify the other and the Parties shall discuss the most appropriate action to
take. Both Parties shall use their best efforts in cooperating with each other
to terminate such infringement without litigation. If, within one hundred
twenty (120) days after the date of notification of infringement, attempts to
abate such infringement are unsuccessful, then URIGEN may bring such action at
its own expense, in which event KALIUM shall cooperate with URIGEN as
reasonably requested, at URIGEN’S expense. KALIUM may, on its own initiative,
join in such suit. All recoveries, damages and awards in such suit, after
reimbursement of any litigation expenses of KALIUM not previously reimbursed,
shall belong to URIGEN. To the extent URIGEN’S recoveries exceed URIGEN’S
expenses with respect to such infringement action; such excess recoveries shall
be considered Net Sales under this Agreement, giving rise to the royalty obligations
under Section 3.2. In the event that URIGEN elects not to institute or
prosecute any suit to enjoin or recover damages from any infringer, then KALIUM
alone may, in its sole discretion and at its expense, initiate and conduct an
infringement action and keep any settlement or award which may be obtained.
URIGEN and KALIUM agree that neither will settle any action commenced by it in
a manner that is prejudicial to any Licensed Patent Rights without the other
Party’s prior written approval.


6.3      Third Party Infringement Claims. In
the event any Licensed Product becomes the subject of a claim for patent or
other proprietary right infringement anywhere in the world by virtue of the
incorporation of the Licensed Patents Rights or Licensed Technology therein,
the Parties shall promptly give notice to the other and meet to consider the
claim and the appropriate course of action. URIGEN shall have the right to
conduct the defense of any such suit brought against URIGEN and/or KALIUM, and
shall have the sole right and authority to settle any such suit; provided that
KALIUM shall cooperate with URIGEN, as reasonably requested by URIGEN, in
connection with the defense of such claim, at URIGEN’S expense.


6.4      Marking. URIGEN agrees
to mark, and to cause any Affiliate or sublicensee to appropriately mark, any
Licensed Products (or their containers or labels) made, Sold, or otherwise
disposed of by it or them with any notice of patent rights



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necessary or desirable
under applicable law to enable the Licensed Patent Rights to be enforced to
their full extent in any country where Licensed Products are made, used or
Sold.


7                            REPORTING,
VERIFICATION AND PAYMENT.


7.1      Books and Records. URIGEN
agrees to keep, and to cause any Affiliate or sublicense to keep, proper
records and books of account in accordance with generally accepted accounting
practices, showing the Sales upon which the royalty and Sublicense Revenue
payments of URIGEN are based, and all other information necessary for the
accurate determination of payment to be made hereunder. URIGEN agrees to
deliver to KALIUM, within thirty (30) days after each calendar quarter,
beginning with the first quarter in which actual Sales are made, a report
showing the information on which the payments herein provided are calculated,
including a breakdown of income from Sales of each Licensed Product and to
accompany each such report with the payment shown to be due thereby.


7.2      Audit. On
reasonable written notice, KALIUM, at its own expense, shall have the right to
have an independent certified public accountant, reasonably satisfactory to
URIGEN, inspect and audit the books and records of URIGEN, its Affiliates, and
its sublicensees during usual business hours for the sole purpose of, and only
to the extent necessary for, determining the correctness of payments due under
this Agreement. Such examination with respect to any fiscal year shall not take
place later than three (3) years following the expiration of such period. The
expense of any such audit shall be borne by KALIUM; provided, however, that if
any such audit reveals a discrepancy of greater than five percent (5%) between
what the audit determines was, in fact, due and what was paid by URIGEN with
respect to any period being audited, then URIGEN shall reimburse KALIUM for the
reasonable cost of such audit. URIGEN shall include substantially the same
audit rights in any sublicense it grants in order to ensure correctness of
payments due hereunder.



 17
 









7.3      Payments. All payments
made hereunder shall be paid in U.S. Dollars, payments to be made calendar
quarterly within thirty (30) days after end of the particular quarter, and
shall be payable in immediately payable funds, unless otherwise agreed in
writing. Any payment, or portion thereof, not made when due shall bear interest
at the rate of ten percent (10%) per year, compounding daily, or the maximum
legal rate, whichever is less.


7.4      Foreign Payments. Royalties
based on Net Sales in any foreign country shall be payable to KALIUM in the
United States in United States Dollars. Dollar amounts shall be calculated
using the foreign exchange rate, as published by The Wall Street Journal, West
Coast Edition, in effect for such foreign currency on the last business day of
each quarter for which a report is required. Where royalties are due for Net
Sales in a country where, for reasons of currency, tax or other regulations,
transfer of foreign currency out of such country is prohibited, URIGEN has the
right to place KALIUM’S royalties in a bank account in such country in the name
of and under the sole control of KALIUM; provided, however, that the bank
selected be reasonably acceptable to KALIUM and that URIGEN inform KALIUM of
the location, account number, amount and currency of money deposited therein.
After KALIUM has been so notified, those monies shall be considered as
royalties duly paid to KALIUM and will be completely controlled by KALIUM, and
URIGEN will have no further responsibility with respect thereto.


8                            TERM AND TERMINATION.


8.1      Term. Unless earlier
terminated under this Section 8, this Agreement shall become effective as of
the Effective Date and shall end on the later of (i) the expiration date of the
last to expire of any patent included in the Licensed Patent Rights containing
a Valid Claim covering the development, manufacture or commercialization of
Licensed Products; or (ii) the tenth (10th) anniversary of the first commercial Sale of a Licensed
Product pursuant to this Agreement (the “Term”).



 18















8.2      Termination
by Either Party. This Agreement may be terminated by either
Party, if the other Party substantially fails to perform or otherwise
materially breaches any of the material terms, covenants, or provisions of this
Agreement, such termination to be effected by giving written notice of intent
to terminate to the breaching Party stating the grounds therefore. The Party
receiving the notice shall have sixty (60) days thereafter (the “Cure Period”)
to correct such breach; provided, however, that if such breach relates to the
payment of money, the Cure Period shall be thirty (30) days. If such breach is
not corrected within the applicable Cure Period, then the non-breaching Party
shall have the right to immediately terminate this Agreement by so notifying
the other Party.


8.3      Consequences
of Termination.


(a)       In
the event of expiration of this Agreement or termination of the Agreement for
any reason whatsoever:


(i)        URIGEN shall not thereby be discharged
from any liability or obligation to KALIUM which became due or payable prior to
the effective date of such expiration or termination; and


(ii)       the rights and obligations of the Parties
under paragraphs 4.4, 4.5, 7.2, 8.3 and 8.4 and Articles 5, 9 and 10 shall
survive any termination of this Agreement.


(b)       In the event of termination of the
Agreement pursuant to Section 8.2 due to an uncured material breach of URIGEN
or it’s Affiliates:


(i)        If URIGEN or its Affiliates then possess
Licensed Product, have started the manufacture thereof or have accepted orders
therefore, URIGEN and its Affiliates shall have the right to Sell their
inventories thereof, complete the manufacture thereof and market such fully
manufactured Licensed Product, in order to fulfill such



 19
 









accepted orders, subject to the obligation of URIGEN
to pay KALIUM the royalty payments therefore as provided in Section 3 of this
Agreement;


(ii)       Subject to Section 8.3(b)(i), URIGEN
shall discontinue, and shall cause its Affiliates to discontinue, the
manufacture, use, marketing, and Sale of Licensed Products, and shall assign
any sublicenses granted hereunder to KALIUM; and


(iii)     All rights sold, assigned, or transferred
by KALIUM to URIGEN hereunder shall revert to KALIUM, and URIGEN agrees to
execute all instruments reasonably necessary to re-vest said rights in KALIUM.


8.4      Termination
in the Event of Bankruptcy. URIGEN acknowledges that KALIUM
is subject to Title 11, U.S. Code (the “Bankruptcy Code”), and for the purposes
of Section 365(n) of the Bankruptcy Code, all rights granted pursuant to this
License Agreement are and shall be deemed to be, licenses and rights to “intellectual
property” as defined under Section 101 of the Bankruptcy Code. KALIUM
acknowledges that URIGEN, as licensee, shall retain and may fully exercise all
of its rights and elections under the Bankruptcy Code. KALIUM acknowledges that
URIGEN is subject to the Bankruptcy and
Insolvency Act (Canada), R.S., 1985, c. B-3 and that in the event
that URIGEN voluntarily ceases operations or ceases operation due to a
liquidation bankruptcy thereunder, then KALIUM may immediately terminate this
Agreement by written notice to URIGEN, upon which the Licensed Patent Rights
and Licensed Technology shall revert back to KALIUM, provided, however, that
KALIUM may not terminate this Agreement under this paragraph 8.4 should URIGEN
reorganize under the Bankruptcy and Insolvency Act (Canada) or Title 11 of the
U.S. Code (the “Bankruptcy Code”).



 20
 









9                            CONFIDENTIAL
INFORMATION.


9.1      Confidentiality.
All confidential business, scientific, and technical information related to the
Licensed Patent Rights, Licensed Technology, and all other information
communicated by each Party to the other, including, without limitation,
information contained in patent applications, shall be received in strict
confidence by the other Party, its Affiliates, and sublicensees, used only for
the purposes of this Agreement, and not disclosed by the recipient Party, its
Affiliates, and sublicensees or their respective agents or employees without
the prior written consent of the disclosing Party, unless such information (i)
was in the public domain at the time of disclosure, (ii) later became part of
the public domain through no act or omission of the recipient Party, its
employees agents, successors, or assigns, (iii) was lawfully disclosed to the
recipient Party by a third party having the right to disclose it, (iv) was
already known by the recipient Party at the time of disclosure, to the extent
the recipient can so demonstrate by competent written proof, (v) was
independently developed by the recipient Party without reference to the
information provided hereunder as demonstrated by competent written proof of
the recipient Party, or (vi) is required to be disclosed to a governmental
agency pursuant to such agency’s rule and regulations in order to secure
regulatory approval, provided that the recipient Party shall first give notice
to the disclosing Party of such disclosure and shall have made a reasonable
effort to maintain the confidentiality of such information. Nothing contained
herein shall prevent URIGEN or its Affiliates from disclosing information to
sublicensees so long as such sublicensees agree to be bound by these
confidentiality provisions.


10                     CHOICE OF
LAW; DISPUTE RESOLUTION.


10.1    Governing
Law. This Agreement is made in accordance with and shall be
governed and construed in accordance with the laws of the Province of British
Columbia, Canada, as applied to contracts executed and performed entirely
within the Province of British Columbia, without regard to conflicts of laws rules.



 21















10.2    Arbitration.
If a dispute arises between the Parties relating to the
interpretation or performance of this Agreement or the grounds for the
termination thereof, the Parties agree to hold a meeting, attended by their
representatives with decision-making authority regarding the dispute, to
attempt in good faith to negotiate a resolution of the dispute prior to
pursuing other available remedies. If, within thirty (30) days after such
meeting, the Parties have not succeeded in negotiating a resolution of the
dispute, such dispute shall be submitted to final and binding arbitration under
the then current International Commercial Arbitration Rules of Procedure of the
British Columbia International Commercial Arbitration Centre (“BCICAC”), before
a panel of three (3) arbitrators in Vancouver, British Columbia, Canada. Such
arbitrators shall be selected by the mutual agreement of the Parties or,
failing such agreement, shall be selected according to the aforesaid BCICAC
rules. The arbitrators shall have the right to order discovery as they deem
appropriate. The Parties shall bear the costs of arbitration equally unless the
arbitrators, pursuant to their right, but not their obligation, require the
non-prevailing Party to bear all or any unequal portion of the prevailing Party’s
costs. The decision of the arbitrator shall be final and may be sued on or
enforced by the Party in whose favor it runs in any court of competent
jurisdiction at the option of the successful Party. The arbitrators will be
instructed to prepare and deliver a written, reasoned opinion conferring their
decision. The rights and obligations of the Parties to arbitrate any dispute
relating to the interpretation or performance of this Agreement or the grounds
for the termination thereof shall survive the expiration or termination of this
Agreement for any reason.


11       COMMERCIALIZATION.


11.1    Commercial
Development Obligation. In order to maintain in force the
license granted hereunder, URIGEN shall use commercially reasonable efforts and
diligence to develop Licensed Products, as promptly as is reasonably and
commercially feasible, and thereafter to produce and Sell such quantities of
Licensed Products in markets throughout the Territory. The Parties hereto
acknowledge and agree that achievement of the milestones described in Section
11.2 on or before the dates set forth therein shall be conclusive evidence of
compliance by URIGEN with its



 22
 









commercial development obligations hereunder for the time periods
specified in Section 11.2, below. URIGEN shall implement and maintain
commercially reasonable marketing efforts, on a country-by-country basis,
commensurate with the commercial opportunity for such Licensed Product in such
country. Marketing efforts undertaken by any Affiliates and sublicensees shall be
attributed to URIGEN for the purposes of this Section 11.1.


KALIUM shall have the right to terminate relevant rights under this
license or to convert the relevant license to non-exclusive (with royalties
being reduced to 50% of above amounts) if URIGEN fails to meet milestones set
forth in Section 11.2 for a category of Licensed Product and cannot otherwise
show evidence of commercially reasonable efforts to expeditiously develop and
commercialize Licensed Products. The Parties agree to negotiate in good faith
an amendment of the provisions of Section 11.2 to the extent such amendments
are supported by reasonable evidence of (i) diligent efforts on the part of
URIGEN and (ii) the need for any requested extension. In the event KALIUM has a
reasonable basis to believe that URIGEN is not using commercially reasonable
efforts and diligence as required hereunder, upon notice by KALIUM to URIGEN
which specifies the basis for such belief, KALIUM and URIGEN shall attempt in
good faith to resolve the issue. In the event KALIUM and URIGEN cannot agree
upon any matter related to URIGEN’S commercial development obligations
hereunder, the Parties agree to utilize arbitration pursuant to Section 10.2
hereof in order to resolve the matter. If the arbitrators determine that URIGEN
has not complied with its obligations hereunder, and such default is not fully
cured within sixty (60) days after the arbitrators’ decision, KALIUM may
terminate URIGEN’S rights under this Agreement.


11.2    Diligence
Milestones


(a)       URIGEN,
its Affiliates or sublicensee shall file an Investigational New Drug (IND)
application with the United States FDA, EMEA, or make a similar filing  with
an appropriate agency in another jurisdiction outside of the United States or
Europe within eighteen (18) months from the Effective Date of this Agreement,
provided, however, that the eighteen (18) month date shall be extended by the
period of time



 23
 









required to address any formulation or manufacturing issues of a
Licensed Product selected for development and commercialization. And


(b)       Within two hundred seventy (270) days
following the Effective Date, URIGEN shall complete a financing of not less
than One Million Canadian Dollars (CDN$1,000,000), the proceeds of which will
be used in part for the development and commercialization of Licensed Products.
And


(c)       Within three (3) years from the Effective
Date, URIGEN, its Affiliates or sublicensees shall complete a clinical trial or
a Licensed Product anywhere within the Territory.


11.3    Technology
Transfer. Within thirty (30) days after the Effective Date,
KALIUM agrees to provide URIGEN with a copy of any Licensed Technology then in
its possession, and shall such other actions as may be reasonably requested by
URIGEN to affect the transfer of the Licensed Technology to URIGEN. For
clarity, in the event URIGEN wishes that KALIUM assist it in the post-Effective
Date development of Licensed Products or Licensed Technology, it is understood
and agreed that any such activities will be the subject of a further written
agreement between the Parties; provided, however, that KALIUM shall have no
obligation to enter into any such further agreement.


11.4    Progress
Reports. URIGEN shall provide regular updates, at least as
frequently as each meeting of its Board of Directors, regarding the status of
the commercial development of Licensed Products utilizing Licensed Patent
Rights or Licensed Technology. This information shall be provided to one
individual to be designated in advance by KALIUM and shall be treated as
confidential information of URIGEN hereunder. 
Dr. Lowell Parson, on behalf of KALIUM, shall have the right to
attend URIGEN Board of Directors meetings as an observer/visitor until URIGEN
becomes a publicly-traded corporation (hereinafter “Pre-public Board Meetings”).
URIGEN shall provide Dr. Parsons with notice of all Pre-public Board
Meetings contemporaneous with notice provided to URIGEN Directors along with a
copy of the



 24
 









Agenda for each Meeting. Dr. Parsons shall notify URIGEN within
ten (10) days of a scheduled Pre-public Board Meeting whether or not he will
attend such Meeting.


11.5    Foreign Registration. URIGEN agrees to register this Agreement with
any foreign governmental agency which requires such registration, and URIGEN
shall pay all costs and legal fees in connection therewith. In addition, URIGEN
shall assure that all foreign laws affecting this Agreement or the Sale of
Licensed Products are fully satisfied.


12       ADDRESSES.


The payments to be made
hereunder to KALIUM shall be made by wiring the required amount to KALIUM’S
bank in accordance with KALIUM’S instructions, or, if otherwise requested by
KALIUM, by mailing or sending by commercial courier checks for the required
amount to KALIUM’S address. Notices provided for herein shall effectively be
given by mailing the same by certified or registered mail or by delivery by
commercial courier, in each case properly addressed with charges prepaid. For
the purposes of making payments and giving notices, the addresses of the
Parties hereto are as follows:


Kalium, Inc. 

5197 Alta Vista Street

San Diego, CA 92019 

Attn: President


Urigen Holdings Inc.

Suite 7333, 515 West Hastings
Street
 Vancouver, BC V6B 5K3
 Canada
 Attention: President & CEO



 25
 









With a copy to:


Farris Vaughn Willis &
Murphy LLP

25th Floor, 700 West Georgia Street
 Vancouver, British Columbia V7Y 1B3
 CANADA
 Attn: R. Hector MacKay-Dunn, Q. C.


AND


Catalyst Law Group, APC

9710 Scranton Road, Suite 170

San Diego, CA 92121

Attn: Thomas E. Jurgensen, J.D.


or to such subsequent addresses as either
Party may furnish the other by giving notice thereof as provided in this
Section 12.



 26















13       MISCELLANEOUS.


13.1    Assignment. This Agreement shall be assignable by a Party
to its Affiliates upon thirty days prior written notice to the other Party;
such written notice shall also contain an explanation by the assigning Party of
why such assignment shall occur. If a Party assigns this Agreement to an
Affiliate, the Party shall still be responsible for all of its obligations as
specified in this Agreement. This Agreement shall be assignable by a Party to a
non-Affiliated third party only with the prior written consent of the other
Party, which consent may be withheld at the sole discretion of such other
Party. Any assignment (other than to an Affiliate) without the prior written
consent of the other Party shall be void. Notwithstanding the preceding sentence,
in the event of: (i) a sale or transfer of all or substantially all of a Party’s
assets; or (ii) the merger or consolidation of a Party with another company,
this Agreement shall be assignable to the transferee or



 26
 









successor company. This Agreement shall be
binding upon and inure to the benefit of KALIUM, URIGEN, and their respective
permitted assigns and successors in interest.


13.2    Headings. The headings used in this Agreement are for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.


13.3    Amendment. No amendment or modification hereof shall be
valid or binding upon the Parties unless made in writing and signed by both
Parties.


13.4    Force Majeure. Any delays in performance by any Party under
this Agreement (other than the payment of monies due) shall not be considered a
breach of this Agreement if and to the extent caused by occurrences beyond the
reasonable control of the Party affected, including but not limited to, acts of
God, embargoes, governmental restrictions, strikes or other concerted acts of
workers, fire, flood, explosion, riots, wars, civil disorder, rebellion,
terrorism, or sabotage. The Party suffering such occurrence shall immediately
notify the other Party and any time for performance hereunder shall be extended
by the actual time of delay caused by the occurrence.


13.5    Independent Contractors. In making and performing this Agreement,
KALIUM and URIGEN act and shall act at all times as independent contractors and
nothing contained in this Agreement shall be construed or implied to create an
agency, partnership or employer and employee relationship between KALIUM and
URIGEN. At no time shall one Party make commitments or incur any charges or
expenses for or in the name of the other Party except as specifically provided
herein.


13.6    Severability. If any term, condition or provision of this
Agreement is held to be unenforceable for any reason, it shall, if possible, be
interpreted or revised rather than voided, in order to achieve the intent of
the Parties to this Agreement to the extent possible. In any event, all other
terms, conditions and provisions of this Agreement shall be deemed valid and
enforceable to the full extent.



 27
 









13.7    Waiver.
None of the terms, covenants, and conditions of this
Agreement can be waived except by the written consent of the Party waiving
compliance.


13.8    Entire
Agreement. This Agreement contains the entire agreement and
understanding between the Parties with respect to the subject matter hereof,
and merges all prior discussions, representations, and negotiations with
respect to the subject matter of this Agreement.


13.9    Counterparts.
This Agreement may be executed in multiple counterparts, each
of which shall be an original and all of which combined shall constitute
together one and the same instrument.


IN WITNESS WHEREOF, the Parties hereto have
executed this Agreement by their duly authorized officers or representatives.


	
  URIGEN HOLDINGS INC.

  	
  KALIUM, INC.

  
	
  (URIGEN)

  	
  (KALIUM)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  



 



 28















SCHEDULE A


The following is a full,
accurate and complete list of all third parties that have held

previous discussions with KALIUM regarding acquiring potential rights to the
Licensed

Patent Rights and/or Licensed Technology:



 29