Exhibit
10.39


LICENSE AGREEMENT


BETWEEN


URIGEN HOLDINGS INC.


AND


THE REGENTS OF THE
UNIVERSITY OF CALIFORNIA


CASE
NOs. SD2003-049 and SD2004-134


“Novel
Intravesical Therapy For Immediate Symptom Relief And Chronic Therapy

In Interstitial Cystitis Patients”















TABLE
OF CONTENTS


	
  Article 1:

  	
   

  	
  Definitions

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 2:

  	
   

  	
  Grant

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 3:

  	
   

  	
  Considerations

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 4:

  	
   

  	
  Reports, Records and Payments

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 5:

  	
   

  	
  Patent Matters

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 6:

  	
   

  	
  Governmental Matters

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 7:

  	
   

  	
  Termination of Agreement

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 8:

  	
   

  	
  Limited Warranty and Indemnification

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 9:

  	
   

  	
  Use of Names and Trademarks

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 10:

  	
   

  	
  Miscellaneous Provisions

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A:

  	
   

  	
  Certificate of Incorporation

  	
   

  	
  24

  



 
















 


LICENSE
AGREEMENT


This agreement (“Agreement”)
is made by and between Urigen Holdings Inc., having an address at 25th Floor, 700 West Georgia Street, Vancouver,
British Columbia V7Y 1B3, Canada, (“LICENSEE”) and The Regents Of The
University Of California, a California corporation having its statewide
administrative offices at 1111 Franklin Street, Oakland, California 94607-5200
USA (“UNIVERSITY”), represented by its San Diego campus having an address at
University of California, San Diego, Technology Transfer & Intellectual
Property Services, Mail-code 0910, 9500 Gilman Drive, La Jolla, California
92093-0910 USA (“UCSD”).


This Agreement is
effective on the date of the last signature (“Effective Date”).


RECITALS


WHEREAS, the inventions
disclosed in UCSD Case Docket Nos. SD2003-049 and SD2004-134 and titled “Novel
Intravesical Therapy For Immediate Symptom Relief And Chronic Therapy In
Interstitial Cystitis Patients” (“Invention”), were made in the course of
research at UCSD by Dr. C. Lowell Parsons (hereinafter, the “Inventor”)
and are covered by Patent Rights as defined below;


WHEREAS,
the Inventors are employees of UCSD, and they are obligated to assign all of
their right, title and interest in the Invention to UNIVERSITY;


WHEREAS,
LICENSEE, through its predecessor
Urigen Inc., entered into a secrecy agreement (UC Control No. 2004-20-0060)
with UNIVERSITY, effective August 7, 2003 (“Secrecy Agreement”), for the
purpose of evaluating the Invention;


WHEREAS,
LICENSEE, through its
predecessor Urigen Inc., entered into a letter of intent (UC Control No.
2004-30-0127) with UNIVERSITY, effective September 9, 2003, for the purpose of
negotiating this Agreement;


WHEREAS,
Urigen Inc. entered into a license agreement (UC Control No. 2004-03-0625) with
UNIVERSITY, effective June 6, 2004, which LICENSEE shall contemporaneously
terminate upon the execution of this present Agreement;


WHEREAS,
UNIVERSITY is desirous
that the Invention be developed and utilized to the fullest possible extent so
that its benefits can be enjoyed by the general public;


WHEREAS,
LICENSEE is desirous of obtaining certain rights from UNIVERSITY for commercial
development, use, and sale of the Invention, and the UNIVERSITY is willing to
grant such rights; and



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WHEREAS, LICENSEE
understands that UNIVERSITY may publish or otherwise disseminate information
concerning the Invention and Technology (as defined below) at any time and that
LICENSEE is paying consideration thereunder for its early access to the
Invention and Technology, not continued secrecy therein.


NOW, THEREFORE,
the parties agree:


ARTICLE
1. DEFINITIONS


The
terms, as defined herein, shall have the same meanings in both their singular
and plural forms.


1.1                    “Affiliate”
means any corporation or other business entity in which LICENSEE owns or controls,
directly or indirectly, at least twenty percent (20%) of the outstanding stock
or other voting rights entitled to elect directors, or in which LICENSEE is
owned or controlled directly or indirectly by at least twenty percent (20%) of
the outstanding stock or other voting rights entitled to elect directors; but
in any country where the local law does not permit foreign equity participation
of at least twenty percent (20%), then an “Affiliate” includes any company in
which LICENSEE owns or controls or is owned or controlled by, directly or
indirectly, the maximum percentage of outstanding stock or voting rights
permitted by local law.


1.2                    “Sublicensee”
means a third party to whom LICENSEE grants a sublicense of certain rights
granted to LICENSEE under this Agreement.


1.3                    “Field”
means disorders of the lower urinary tract, defined as the bladder, prostate
and urethra.


1.4                    “Territory”
means worldwide, where applicable.


1.5                    “Term”
means the period of time beginning on the Effective Date and ending on the later
of (i) the expiration date of the longest-lived of the Patent Rights; or (ii)
the tenth (10th)
anniversary of the first commercial sale of Licensed Product.


1.6                    “Patent
Rights” means any of the following: the US patent application (60/540,186,
titled “Novel Interstitial Therapy For Immediate Symptom Relief And Chronic
Therapy In Interstitial Cystitis”) disclosing and claiming the Inventions,
filed by Inventors and assigned to UNIVERSITY; and continuing applications
thereof including divisions, substitutions, and continuations-in-part (but only
to extent the claims thereof are enabled by disclosure of the parent
application); any patents issuing on said applications including reissues,
reexaminations and extensions; and any corresponding foreign applications or
patents.



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1.7                    “Sponsor
Rights” means all the applicable provisions of any license to the United States
Government executed by UNIVERSITY and the overriding obligations to the Federal
Government under 35 U.S.C. §§ 200-212 and applicable governmental implementing
regulations.


1.8                    “Licensed
Method” means any method that uses Technology, or is covered by one or more
Valid claim(s) of the Patent Rights the use of which would constitute, but for
the license granted to LICENSEE under this Agreement, an infringement of any
pending or issued and unexpired Valid claim within Patent Rights.


1.9                    “Licensed
Product” means any service, composition or product that uses Technology, or is
covered by one or more Valid claims of Patent Rights, or that is produced by the
Licensed Method, or the manufacture, use, sale, offer for sale, or importation
of which would constitute, but for the license granted to LICENSEE by
UNIVERSITY herein, an infringement of any pending or issued and unexpired Valid
claim within the Patent Rights.


1.10              “Valid
claim” means (a) a pending claim in any patent application within the Patent
Rights which has been diligently and continuously prosecuted by UNIVERSITY,
which for the purposes of this Agreement shall be treated as if such pending
claim were issued in its then-current form, or (b) a patent claim included in
an issued and unexpired patent that has not been: (i) abandoned or disclaimed;
(ii) declared invalid or unenforceable by a decision of a court or other
governmental agency of competent jurisdiction which decision is unappealable or
unappealed within the time allowed for appeal; or (iii) admitted by UNIVERSITY
to be invalid.


1.11              “Net
Sales” means the total of the gross invoice prices of Licensed Products sold by
LICENSEE, its Sublicensee, an Affiliate, or any combination thereof, less the
sum of the following actual and customary deductions where applicable and
separately listed: cash, trade, or quantity discounts; sales, use, tariff,
import/export duties or other excise taxes imposed on particular sales (except
for value-added and income taxes imposed on the sales of Product in foreign
countries); transportation charges; or credits to customers because of
rejections or returns. For purposes of calculating Net Sales, transfers to a
Sublicensee or an Affiliate of Licensed Product under this Agreement for (i)
end use (but not resale) by the Sublicensee or Affiliate shall be treated as
sales by LICENSEE at list price of LICENSEE, or (ii) resale by a Sublicensee or
an Affiliate shall be treated as sales at the list price of the Sublicensee or
Affiliate.


1.12              “Patent
Costs”  means all out-of-pocket expenses
for the preparation, filing, prosecution, and maintenance of all United States
and foreign patents included in Patent Rights. 
Patent Costs shall also include reasonable out-of-pocket expenses for
patentability opinions, inventorship determination, preparation and prosecution
of patent



 4
 









application, re-examination, re-issue, interference,
and opposition activities related to patents or applications in Patent Rights.


1.13              “Technology”
means the written technical information relating to the Invention which the
Inventors provide to LICENSEE prior to the Effective Date.


1.14              “Combination
Product” means any product which is a Licensed Product and contains one or more
other product(s) or product component(s)having significant therapeutic mode of
action that (i) does not use Invention, Technology or Patent Rights; (ii) the
sale, use or import by itself does not contribute to or induce the infringement
of Patent Rights; (iii) is sold separately by LICENSEE, its Sublicensee, an
Affiliate or one or more independent third parties; and (iv) enhances the
market price of the final product(s) sold, used or imported by LICENSEE, its
Sublicensee, or an Affiliate.


ARTICLE
2. GRANTS


2.1       License. Subject
to the limitations set forth in this Agreement, UNIVERSITY hereby grants to
LICENSEE, and LICENSEE hereby accepts, a license under Patent Rights to make,
have made, use, sell, offer for sale, and import Licensed Products and to
practice Licensed Methods and to use Technology, in the Field within the
Territory and during the Term. After expiration of the Term, but not a
termination by either party, under Articles 7.1 or 7.2 herein, LICENSEE shall
hold a fully paid-up, perpetual, non-exclusive license to the Technology,
including full right of sublicense without any obligation whatsoever to
UNIVERSITY.


The license
granted herein is exclusive for Patent Rights.


2.2                    Sublicense.


(a)       The license granted in Paragraph 2.1
includes the right of LICENSEE to grant sublicense to third parties during the
Term but only for as long the license for Patent Rights is exclusive.


(b)       With respect to sublicense granted
pursuant to Paragraph 2.2(a), LICENSEE shall:


(1)       shall have the right to receive, or agree
to receive, anything of value in lieu of cash as considerations from a third
party under a sublicense granted pursuant to Paragraph 2.2(a) without fee
consent of UNIVERSITY, provided that, LICENSEE supplies UNIVERSITY with
sufficient relevant information such that the UNIVERSITY and LICENSEE can
determine the fair value of such non-cash consideration, and thereby, the
UNIVERSITY’S fair share of consideration receivable. Should UNIVERSITY and
LICENSEE fail to agree upon the fair value of the non-cash consideration, the
LICENSEE shall employ an independent third party, mutually agreeable to both
the UNIVERSITY and LICENSEE, to make such a determination.



 5
 









Both parties agree that
the determination of the independent third party shall be final and binding
upon both parties with respect to appropriate fair value of the non-cash
consideration;


(2)       to
the extent applicable, include all of the rights of and obligations due to
UNIVERSITY (and, if applicable, the Sponsor’s Rights) and contained in this
Agreement;


(3)       subject
to appropriate confidentiality obligations, promptly provide UNIVERSITY with a
copy of each sublicense issued, with sufficient relevant information such that
the UNIVERSITY can determine the fair value of the agreement and UNIVERSITY’s
fair share of consideration receivable; and


(4)       collect
and guarantee payment of all payments due, directly or indirectly, to
UNIVERSITY from Sublicensees and summarize and deliver subject to appropriate
confidentiality obligations, all reports due, directly or indirectly, to
UNIVERSITY from Sublicensees, with sufficient relevant information such that
the UNIVERSITY can determine the fair value and UNIVERSITY’s fair share of
consideration receivable.


(c)       Subject
to Article 7.1 herein, upon termination of this Agreement for any reason,
UNIVERSITY, at its sole discretion, shall determine whether LICENSEE shall
cancel or assign to UNIVERSITY any and all sublicenses.


2.3       Reservation
of Rights. UNIVERSITY reserves the right to:


(a)       use
the Invention, Technology and Patent Rights for educational and research
purposes;


(b)       publish
or otherwise disseminate any information about the Invention and Technology at
any time; and


(c)       allow
other nonprofit institutions to use Invention, Technology and Patent Rights for
educational and research purposes in their facilities.



 6















ARTICLE 3. CONSIDERATIONS


3.1       Fees
and Royalties. The parties hereto understand that the fees and
royalties payable by LICENSEE to UNIVERSITY under this Agreement are partial
considerations for the license granted herein to LICENSEE under Technology, and
Patent Rights. LICENSEE shall pay UNIVERSITY:


(a)                    in
recognition of LICENSEE being a startup business and partially in lieu of cash,
a license issue fee in the form of 7.5% of the LICENSEE’s common stock
authorized in the Certificate of Incorporation of the LICENSEE dated July 18,
2005, (“Shares”), and a copy of which is attached to this Agreement as Exhibit
A. The stock shall be delivered to UNIVERSITY within ninety (90) days of
Agreement Effective Date and in the following manner:


The Shares shall be issued in the name of “Shellwater
& Co.”, a nominee of UNIVERSITY;


(b)                   The
acceptance of LICENSEE’s common stock in paragraph 3.1 (a) above is subject to:


(1)                    LICENSEE
and UNIVERSITY shall enter into a stockholder agreement outlining the rights of
UNIVERSITY as a stockholder that is no less favorable to the founders of
LICENSEE and is acceptable to the UNIVERSITY, and such rights shall include a “piggyback
registration” right and other customary rights of a stockholder. If Company
registers Shares of Company under the Securities Act of 1933, the Company shall
include the Shares in that registration at the expense of Company. If the
underwriter of the offering decides that the size of the offering should be
decreased, then the number of Shares included in the offering shall be reduced
proportionally to the reduction of other stockholder;


(2)                    in
the event LICENSEE amends or restates its Certificate of Incorporation prior to
a major liquidity event, such as an “initial public offering,” a merger, or an
acquisition by another company of substantially all of LICENSEE’s assets, in a
manner that UNIVERSITY’s equity holding in this paragraph is disproportionately
affected in relation to the holdings of the LICENSEE’s other founders, LICENSEE
shall do all things necessary and legal to adjust UNIVERSITY’s holding to
restore the relative proportion;


(3)                    final
acceptance by UNIVERSITY of said equity of LICENSEE is conditioned upon receipt
and acceptance of any LICENSEE stockholders’ agreement and other relevant
information UNIVERSITY reasonably deems necessary in order



 7
 









to make a properly informed decision in accordance
with UNIVERSITY’s policy guidelines on accepting equity in UNIVERSITY
technology licensing transactions. If the UNIVERSITY and LICENSEE cannot
finalize and agree to the terms of the issuance of such equity in LICENSEE,
then this Agreement shall remain in effect and LICENSEE shall pay UNIVERSITY
One Hundred Thousand Dollars ($100,000) in lieu of such equity and LICENSEE and
UNIVERSITY shall renegotiate in good faith the arrangement of such payment;


(c)       license maintenance fees of Fifteen
Thousand Dollars (US$15,000.00) per year and payable on June 6, 2006 and
annually thereafter on each anniversary; provided however, that LICENSEE’s
obligation to pay this fee shall end on the date when LICENSEE is commercially
selling a Licensed Product;


(d)       milestone payments in the amounts payable
according to the following schedule or events for each clinical indication and
jurisdiction within the Territory:


	
  Amount

  	
   

  	
  Date or Event

  
	
  (1)  $  25,000

  	
   

  	
  IND filed

  
	
  (2)  $200,000

  	
   

  	
  NDA accepted for
  filing by the appropriate regulatory agency

  
	
  (3)  $400,000

  	
   

  	
  Regulatory
  approval

  



 


(e)       an earned
royalty of one and one half percent (1.5%) on Net Sales of Licensed
Products by LICENSEE and/or its Affiliate(s) in countries where UNIVERSITY does
not hold Patent Rights; two percent (2%) on Net Sales of Licensed Products by
LICENSEE and/or its Affiliate(s) in countries for which UNIVERSITY holds Patent
Rights, but no Valid claims have issued covering said Licensed Products within
four (4) years of the original priority date; and three percent (3%) on Net
Sales of Licensed Products by LICENSEE and/or its Affiliate(s) in countries
where UNIVERSITY holds Patent Rights with Valid, issued claims covering said
Licensed Products; For a territory where a patent has been finally rejected or
has failed to issue Valid claims within seven (7) years of the priority date,
the royalty is 1.5%; provided, however, that the earned royalty due on Net
Sales of Combination Product by LICENSEE and/or its Affiliate(s) shall be
calculated as below:


Earned Royalties due UNIVERSITY = [A/(A+B+C ...)] x
Royalty Rate on Net Sales of the Licensed Products applicable in (i) or (ii) x
Net Sales of Combination Product, where:



 8
 









A is the separately
listed sale price of the Licensed Product or Licensed Product components; and


B and C ... are the
separately listed sale prices of the individual products or product components,
respectively, that satisfied the requirements outlined in Paragraph 1.13. If
LICENSEE does not separately sell any of the B, C ... products or product
components used in Combination Product, the purchase price paid by LICENSEE in
the procurement of said products or product components shall be used.


(f)        that percentage of all sublicense fees received by LICENSEE from
its Sublicensees that are not earned royalties (in accordance with 3.1 (e) and
(h)) in consideration for sublicensing the Patent Rights, as follows:


Fifty percent (50%) for
sublicenses issued before an IND is filed by LICENSEE;


Forty percent (40%) for sublicenses issued after an
IND is filed but before initiation of Phase 3 clinical trial by LICENSEE;


Twenty-five percent (25%) for sublicenses issued after
initiation of Phase 3 clinical trial by LICENSEE.


(g)       on each and every sublicense royalty payment received by
LICENSEE from its Sublicensees on sales of Licensed Product by Sublicensee,
royalties based on the royalty rate in Paragraph 3.1(e) as applied to Net Sales
of Sublicensee; but in any foreign country where the local law limits the
amount of sublicense royalties to less than what is owed, LICENSEE shall not be
obligated for sublicense royalties in excess of that received from
sublicensees;


(h)       beginning the calendar year of commercial
sales of the first License Product by LICENSEE, its Sublicensee, or an
Affiliate and if the total earned royalties paid by LICENSEE under Paragraphs
3.1(e) and (g) to UNIVERSITY in any such year cumulatively amounts to less than
Thirty-Five Thousand Dollars ($35,000.00) (“minimum
annual royalty”), LICENSEE shall pay to UNIVERSITY a minimum annual
royalty on or before February 28 following the last quarter of such year the
difference between amount noted above and the total earned royalty paid by
LICENSEE for such year under Paragraphs 3.1(e) and (g); provided, however, that
for the year of commercial sales of the first Licensed Product, the amount of
minimum annual royalty payable shall be pro-rated for the number of months
remaining in that calendar year.


All fees and royalty payments specified in Paragraphs
3.1(a) through 3.1(h) above shall be paid by LICENSEE pursuant to Paragraph 4.3
and shall be delivered by LICENSEE to UNIVERSITY as noted in Paragraph 10.1.



 9
 









Royalties under this paragraph shall be payable only
once with respect to a given Licensed Product, regardless of the number of
claims of the Patent Rights pertaining to such Licensed Product, or the number
of countries in which the manufacture, use or sale of a given Licensed Product
occurs.


3.2       Patent Costs. LICENSEE shall reimburse
UNIVERSITY all past (prior to the Effective Date) and future (on or after the
Effective Date) Patent Costs plus a fifteen percent (15%) patent service fee
within thirty (30) days following receipt by LICENSEE of an itemized invoice
from UNIVERSITY. [Current patent costs are less than US$1500.00.]


3.3       Due Diligence.


(a)       LICENSEE, either alone,
or through its Affiliates or sublicensees, shall:


(1)       diligently proceed with the development,
manufacture and sale of Licensed Products;


(2)       annually spend not less than One Hundred
Thousand US Dollars (US$100,000) for the development of Licensed
Products during each of the first three years of this Agreement LICENSEE may,
at its sole option, fund the research of any one of the Inventors and credit
the amount of such funding actually paid to UCSD against its obligation under
this paragraph;


(3)       accomplish the following tasks on or
before the specified dates, and provide appropriate written evidence to
UNIVERSITY:


(i)        submit
an IND covering Licensed Products to the United States FDA within three (3)
years from the Effective Date of this Agreement;


(ii)       initiate
first clinical trial of Licensed Products within four (4) years from the
Effective Date of this Agreement;


(iii)      submit
an NDA covering Licensed Products to the United States FDA within nine (9)
years from the Effective Date of this Agreement;


(iv)      obtain
approval of Licensed Products from the United States FDA within eleven (11) years
from the Effective Date of this Agreement;


(4)       market Licensed Products in the United
States within six (6) months of receiving regulatory approval to market such
Licensed Products;


(5)       reasonably fill the market demand for
Licensed Products following commencement of marketing at any time during the
term of this Agreement; and


(6)       obtain
all necessary governmental approvals for the manufacture, use and sale of
Licensed Products.



 10
 









(b)       If
LICENSEE fails to perform any of its obligations specified in Paragraphs
3.3(a)(l)-(6), then UNIVERSITY shall have the right, subject to Article 7.1
herein, and option to either terminate this Agreement or change LICENSEE’s
exclusive license to a nonexclusive license. This right, if exercised by
UNIVERSITY, supersedes the rights granted in Article 2.


3.4       Royalty Stacking. If LICENSEE is required
to license the patent right of a third party to make, use, sell, offer for sale
or import Licensed Products, the earned royalty due hereunder shall be reduced
by the lesser amount of (i) the actual royalties paid by LICENSEE to the third
party; or (ii) an amount in the proportion of one half of a dollar ($0.50) for
every one dollar ($1.00) of royalty paid to such third party, provided that in
any given reporting period under no circumstances shall the royalty due to
UNIVERSITY in that reporting period be less than fifty percent (50%) of the
amount otherwise due under this paragraph. The undeducted portion of the
royalty paid by LICENSEE to the third party in any year should not be carried
forward into future years and is not deductible from royalty due to UNIVERSITY
at any time.


ARTICLE
4. REPORTS, RECORDS AND PAYMENTS


4.1       Reports.


(a)       Progress Reports.


(1)       Beginning upon execution of this
Agreement and ending on the date of first commercial sale of a Licensed Product
in the United States, LICENSEE shall submit to UNIVERSITY, subject to
appropriate confidentially obligations, semi-annual progress reports covering
LICENSEE’s (and Affiliate’s and Sublicensee’s) activities to develop and test
all Licensed Products and obtain governmental approvals necessary for marketing
the same. Such reports shall include a summary of work completed; summary of
work in progress; current schedule of anticipated events or milestones; market
plans for introduction of Licensed Products; and summary of resources (dollar
value) spent in the reporting period.


(2)       LICENSEE shall also report to UNIVERSITY,
in its immediately subsequent progress report, the date of first commercial
sale of a Licensed Product in each country.


(b)       Royalty Reports. After the first commercial
sale of a Licensed Product anywhere in the world, LICENSEE shall submit to
UNIVERSITY quarterly royalty reports on or before each February 28, May 31,
August 31 and November 30 of each year. Each royalty report shall cover
LICENSEE’s (and each Affiliate’s and Sublicensee’s) most recently completed
calendar quarter and shall show:


(1)       the
gross sales, deductions as provided in Paragraph 1.10, and Net Sales during the
most recently completed calendar quarter and the royalties, in US dollars,
payable with respect thereto;



 11















(2)       the number of each type of Licensed
Product sold;


(3)       sublicense fees and royalties received
during the most recently completed calendar quarter in US dollars, payable with
respect thereto;


(4)       the method used to calculate the
royalties; and


(5)       the exchange rates used.


If no sales of Licensed Products has been made and no
sublicense revenues has been received by LICENSEE during any reporting period,
LICENSEE shall so report.


4.2       Records & Audits.


(a)       LICENSEE
shall keep, and shall require its Affiliates and Sublicensees to keep, accurate
and correct records of all Licensed Products manufactured, used, and sold, and
sublicense fees received under this Agreement. Such records shall be retained
by LICENSEE for at least five (5) years following a given reporting period.


(b)       All
records shall be available during normal business hours for inspection at the
expense of UNIVERSITY by UNIVERSITY’s Internal Audit Department or by a
Certified Public Accountant selected by UNIVERSITY and in compliance with the
other terms of this Agreement for the sole purpose of verifying reports and
payments or other compliance issues. Such inspector shall not disclose to
UNIVERSITY any information other than information relating to the accuracy of
reports and payments made under this Agreement or other compliance issues. In
the event that any such inspection shows an under reporting and underpayment in
excess of five percent (5%) for any twelve (12) month period, then LICENSEE
shall pay the cost of the audit as well as any additional sum that would have
been payable to UNIVERSITY had the LICENSEE reported correctly, plus an
interest charge at a rate of ten percent (10%) per year. Such interest shall be
calculated from the date the correct payment was due to UNIVERSITY up to the
date when such payment is actually made by LICENSEE. For underpayment not in
excess of five percent (5%) for any twelve (12) month period, LICENSEE shall
pay the difference within thirty (30) days without interest charge or
inspection cost.


4.3       Payments.


(a)       All
fees and royalties due UNIVERSITY shall be paid in United States dollars and
all checks shall be made payable to “The Regents of the University of
California”, referencing UNIVERSITY’s taxpayer identification number,
95-6006144. When Licensed Products are sold in currencies other than United
States dollars, LICENSEE shall first determine the earned royalty in the
currency of the country in which Licensed Products were sold and then convert



 12
 









the amount into equivalent United States funds, using
the exchange rate quoted in the Wall Street Journal on the last business day of
the applicable reporting period.


(b)       Royalty
Payments.


(1)       Royalties shall accrue when Licensed
Products are invoiced, or if not invoiced, when delivered to a third party or
Affiliate.


(2)       LICENSEE shall pay earned royalties
quarterly on or before February 28, May 31, August 31 and November 30 of each
calendar year. Each such payment shall be for earned royalties accrued within
LICENSEE’s most recently completed calendar quarter.


(3)       Royalties earned on sales occurring or
under sublicense granted pursuant to this Agreement in any country outside the
United States shall not be reduced by LICENSEE for any taxes, fees, or other
charges imposed by the government of such country on the payment of royalty
income, except that all payments made by LICENSEE in fulfillment of UNIVERSITY’s
tax liability in any particular country may be credited against earned
royalties or fees due UNIVERSITY for that country. LICENSEE shall pay all bank
charges resulting from the transfer of such royalty payments.


(4)       If at any time legal restrictions prevent
the prompt remittance of part or all royalties by LICENSEE with respect to any
country where a Licensed Product is sold or a sublicense is granted pursuant to
this Agreement, LICENSEE shall convert the amount owed to UNIVERSITY into US
currency and shall pay UNIVERSITY directly from its US sources of fund for as
long as the legal restrictions apply.


(5)       In the event that any patent or patent
claim within Patent Rights is held invalid in a final decision by a patent
office from which no appeal or additional patent prosecution has been or can be
taken, or by a court of competent jurisdiction and last resort and from which
no appeal has or can be taken, all obligation to pay royalties based solely on
that patent or claim or any claim patentably indistinct therefrom shall cease
as of the date of such final decision. LICENSEE shall not, however, be relieved
from paying any royalties that accrued before the date of such final decision,
that are based on another patent or claim not involved in such final decision,
or that are based on the use of Technology.


(c)       Late
Payments. In the event royalty, reimbursement and/or fee payments are not
received by UNIVERSITY when due, LICENSEE shall pay to UNIVERSITY interest
charges at a rate of ten percent (10%) per year. Such interest shall be
calculated from the date payment was due until actually received by UNIVERSITY.



 13
 









ARTICLE
5. PATENT MATTERS


5.1       Patent Prosecution and Maintenance.


(a)       Provided
that LICENSEE has reimbursed UNIVERSITY for Patent Costs pursuant to Paragraph
3.2, UNIVERSITY shall diligently prosecute and maintain the United States and,
if available, foreign patents, and applications in Patent Rights using counsel
of its choice. UNIVERSITY shall provide LICENSEE with copies of all relevant
documentation relating to such prosecution and LICENSEE shall keep this
documentation confidential. The counsel shall take instructions only from
UNIVERSITY, and all patents and patent applications in Patent Rights shall be
assigned solely to UNIVERSITY, provided, however, LICENSEE or its
representatives may request to meet and confer with such counsel at mutually
agreeable times and places and in the presence of UNIVERSITY representatives.


(b)       UNIVERSITY
shall consider amending any patent application in Patent Rights to include
claims reasonably requested by LICENSEE to protect the products contemplated to
be sold by LICENSEE under this Agreement


(c)       LICENSEE
shall apply for an extension of the term of any patent in Patent Rights if
appropriate under the Drug Price Competition and Patent Term Restoration Act of
1984 and/or European, Japanese and other foreign counterparts of this law.
LICENSEE shall prepare all documents for such application, and UNIVERSITY shall
execute such documents and to take any other additional action as LICENSEE
reasonably requests in connection therewith.


(d)       LICENSEE
may elect to terminate its reimbursement obligations with respect to any patent
application or patent in Patent Rights upon three (3) months’ written notice to
UNIVERSITY. UNIVERSITY shall use reasonable efforts to curtail further Patent
Costs for such application or patent when such notice of termination is
received from LICENSEE. UNIVERSITY, in its sole discretion and at its sole
expense, may continue prosecution and maintenance of said application or
patent, and LICENSEE shall then have no further license with respect thereto.
Nonpayment of any portion of Patent Costs with respect to any application or
patent may be deemed by UNIVERSITY as an election by LICENSEE to terminate its
reimbursement obligations with respect to such application or patent provided,
however, that such an election shall be subject to the notice and cure
provisions of Article 7.1 (a) herein. The University is not obligated to file,
prosecute, or maintain Patent Rights outside of the territory at any time or to
file, prosecute, or maintain Patent Rights to which Licensee has terminated its
License hereunder.


5.2       Patent Infringement.


(a)       If
either party (in the case of the UNIVERSITY to the extent of the knowledge of
the Licensing Officer responsible for administration of this Agreement) learns
of any substantial infringement of Patent Rights, that party shall so inform
the other party and provide that party with reasonable evidence of the
infringement. Neither party shall notify a third party, other than their legal
counsel, Affiliates or sublicensees, of the infringement of Patent Rights
without the



 14
 









consent of the other party. Both parties shall use
reasonable efforts and cooperation to terminate infringement without
litigation.


(b)       LICENSEE
may request UNIVERSITY to take legal action against such third party for the
infringement of Patent Rights. Such request shall be made in writing and shall
include reasonable evidence of such infringement and damages to LICENSEE. If
the infringing activity has not abated ninety (90) days following LICENSEE’s
request, UNIVERSITY shall elect to or not to commence suit on its own account.
UNIVERSITY shall give notice of its election in writing to LICENSEE by the end
of the one-hundredth (100th) day after receiving notice of such request from
LICENSEE. LICENSEE may thereafter bring suit for patent infringement at its own
expense, if and only if UNIVERSITY elects not to commence suit and the
infringement occurred in a jurisdiction where LICENSEE has an exclusive license
under this Agreement. If LICENSEE elects to bring suit, UNIVERSITY may join
that suit at its own expense.


(c)       Any
recovery or settlement received in connection with any suit will first be
shared by UNIVERSITY and the LICENSEE equally to cover the litigation costs
each incurred, and next shall be paid to UNIVERSITY or the LICENSEE to cover
any litigation costs it incurred in excess of the litigation costs of the
other. In any suit initiated by the LICENSEE, any recovery in excess of
litigation costs will be shared equally between the LICENSEE and UNIVERSITY.


(d)       Each
party shall cooperate with the other in litigation proceedings at the expense
of the party bringing suit. Litigation shall be controlled by the party
bringing the suit, except that UNIVERSITY may be represented by counsel of its
choice in any suit brought by LICENSEE.


5.3       Defense Against 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 Invention, Patents Rights or Technology therein, the
parties shall promptly give notice to the other and meet to consider the claim
and the appropriate course of action. LICENSEE shall have the right to conduct
the defense at its own expense of any such suit brought against LICENSEE and/or
UNIVERSITY. LICENSEE may contest or settle such claim on such terms, at such
time and in such manner as LICENSEE, in its sole discretion, shall elect,
provided, however, that LICENSEE may not agree to any settlement which would
invalidate any Valid claim of the Patent Rights or which would impose any ongoing
obligation on UNIVERSITY or which admit liability or wrongdoing on the part of
the UNIVERSITY without the prior written consent of UNIVERSITY, which such
consent shall not be unreasonably withheld.


5.4       Patent Marking. LICENSEE shall mark all
Licensed Products made, used or sold under the terms of this Agreement, or
their containers, in accordance with the applicable patent marking laws.



 15
 









ARTICLE 6. GOVERNMENTAL
MATTERS


6.1       Governmental Approval or Registration. If
this Agreement or any associated transaction is required by the law of any
nation to be either approved or registered with any governmental agency,
LICENSEE shall assume all legal obligations to do so. LICENSEE shall notify
UNIVERSITY if it becomes aware that this Agreement is subject to a United
States or foreign government reporting or approval requirement. LICENSEE shall
make all necessary filings and pay all costs including fees, penalties, and all
other out-of-pocket costs associated with such reporting or approval process.


6.2       Export Control Laws. LICENSEE shall observe
all applicable United States and foreign laws with respect to the transfer of
Licensed Products and related technical data to foreign countries, including,
without limitation, the International Traffic in Arms Regulations and the
Export Administration Regulations.


6.         Preference for United States Industry. If
LICENSEE sells a Licensed Product in the US, LICENSEE shall manufacture said
product substantially in the US.


ARTICLE 7. TERMINATION OF
THE AGREEMENT


7.1       Termination for Cause. Either Party may, at
its option, terminate this Agreement for cause in the event that the other
Party commits a material breach of this Agreement and fails to cure such breach
during: (a) in the case of any payment default, a cure period of thirty (30)
days following receipt of a written notice of such breach from the
non-breaching Party; or (b) in all other cases, (i) an initial cure period of
ninety (90) days following receipt of a written notice of such breach from the
non-breaching Party. After the end of the applicable cure period, if the breach
remains uncured, then the Party having the right of termination may exercise
its termination option by giving the breaching Party written notice of its
election to terminate. Any termination of this Agreement shall not release the
breaching Party from any obligations incurred hereunder, and the non-breaching
Party shall be entitled to pursue an action for damages or other relief arising
as a result of such material breach.


7.2       Termination by Licensee.


(a)       LICENSEE
shall have the right at any time and for any reason to terminate this Agreement
upon a ninety (90) day written notice to UNIVERSITY. Said notice shall state
LICENSEE’s reason for terminating this Agreement.


(b)       Any
termination under Paragraph 7.2(a) shall not relieve LICENSEE of any obligation
or liability accrued under this Agreement prior to termination or rescind any
payment made to UNIVERSITY or action by LICENSEE prior to the time termination
becomes effective. Termination shall not affect in any manner any rights of
UNIVERSITY arising under this Agreement prior to termination.



 16
 









7.3       Survival on Termination. The
following Paragraphs and Articles shall survive the termination of this
Agreement:


(a)                    Article
4 (REPORTS, RECORDS AND PAYMENTS);


(b)                   Paragraph
7.4 (Disposition of Licensed Products on Hand);


(c)                    Paragraph
8.2 (Indemnification);


(d)                   Article
9 (USE OF NAMES AND TRADEMARKS);


(e)                    Paragraph
10.2 hereof (Secrecy); and


(f)                      Paragraph
10.5 (Failure to Perform).


7.4       Disposition of Licensed Products on Hand. Upon
termination of this Agreement, LICENSEE may dispose of all previously made or
partially made Licensed Product within a period of one hundred and twenty (120)
days of the effective date of such termination provided that the sale of such
Licensed Product by LICENSEE, its Sublicensees, or Affiliates shall be subject
to the terms of this Agreement, including but not limited to the rendering of
reports and payment of royalties required under this Agreement.



 17















ARTICLE
8. LIMITED WARRANTY AND INDEMNIFICATION


8.1  Limited Warranty.


(a)       UNIVERSITY warrants that it has the
lawful right to grant this license.


(b)       The license granted herein is provided “AS
IS” and without WARRANTY OF MERCHANTABILITY or WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE or any other warranty, express or implied. UNIVERSITY makes
no representation or warranty that the Licensed Product, Licensed Method or the
use of Patent Rights or Technology will not infringe any other patent or other
proprietary rights.


(c)       In no event shall UNIVERSITY be liable
for any incidental, special or consequential damages resulting from exercise of
the license granted herein or the use of the Invention, Licensed Product,
Licensed Method or Technology.


(d)       Nothing in this Agreement shall be
construed as:


(1)
a warranty or representation by UNIVERSITY as to the validity or scope of any
Patent Rights;


(2)
a warranty or representation that anything made, used, sold or otherwise
disposed of under any license granted in this Agreement is or shall be free
from infringement of patents of third parties;


(3)
an obligation to bring or prosecute actions or suits against third parties for
patent infringement except as provided in Paragraph 5.2 hereof;


(4)
conferring by implication, estoppel or otherwise any license or rights under
any patents of UNIVERSITY other than Patent Rights as defined in this
Agreement, regardless of whether those patents are dominant or subordinate to
Patent Rights;


(5)
an obligation to furnish any know-how not provided in Patent Rights and
Technology; or


(6)
an obligation to update Technology.


8.2  Indemnification.


(a)       LICENSEE shall indemnify, hold harmless
and defend UNIVERSITY, its officers, employees, and agents; the sponsors of the
research that led to the Invention; and the Inventors of the patents and patent
applications in Patent Rights and their employers against any and all 



 18
 









claims, suits, losses,
damage, costs, fees, and expenses resulting from or arising out of exercise of
this license or any sublicense. This indemnification shall include, but not be
limited to, any product liability.


(b)       LICENSEE, upon the first to occur of (i)
sale of a Licensed Product, (ii) application for regulatory approval to sell a
Licensed Product, or (iii) initiation of human clinical trials, at its sole
cost and expense, shall insure its activities in connection with the work under
this Agreement and obtain, keep in force and maintain insurance or an
equivalent program of self insurance as follows:


(1)
comprehensive or commercial general liability insurance (contractual liability
included) with limits of at least: (i) each occurrence, $1,000,000; (ii)
products/completed operations aggregate, $5,000,000; (iii) personal and
advertising injury, $1,000,000; and (iv) general aggregate (commercial form
only), $5,000,000; and


(2)
the coverage and limits referred to above shall not in any way limit the
liability of LICENSEE.


(c)       LICENSEE shall furnish UNIVERSITY with
certificates of insurance showing compliance with all requirements. Such
certificates shall: (i) provide for thirty (30) day advance written notice to
UNIVERSITY of any modification; (ii) indicate that UNIVERSITY has been endorsed
as an additional insured under the coverage referred to above; and (iii)
include a provision that the coverage shall be primary and shall not
participate with nor shall be excess over any valid and collectable insurance
or program of self-insurance carried or maintained by UNIVERSITY.


(d)       UNIVERSITY shall notify LICENSEE in
writing of any claim or suit brought against UNIVERSITY in respect of which
UNIVERSITY intends to invoke the provisions of this Article. LICENSEE shall
keep UNIVERSITY informed on a current basis of its defense of any claims under
this Article.


ARTICLE
9. USE OF NAMES AND TRADEMARKS


9.1       Nothing contained in this Agreement
confers any right to use in advertising, publicity, or other promotional
activities any name, trade name, trademark, or other designation of either
party hereto (including contraction, abbreviation or simulation of any of the
foregoing). Unless required by law, the use by LICENSEE of the name, “The
Regents Of The University Of California” or the name of any campus of the
University Of California is prohibited, without the express written consent of
UNIVERSITY.


9.2       UNIVERSITY may disclose to the Inventors
the terms and conditions of this Agreement upon their request. If such
disclosure is made, UNIVERSITY shall request the Inventors not disclose such
terms and conditions to others.



 19
 









9.3       UNIVERSITY may acknowledge the existence
of this Agreement and the extent of the grant in Article 2 to third parties,
but UNIVERSITY shall not disclose the financial terms of this Agreement to
third parties, except where UNIVERSITY is required by law to do so, such as
under the California Public Records Act.


ARTICLE
10. MISCELLANEOUS PROVISIONS


10.1     Correspondence.
Any notice or payment required to be given to either party under this Agreement
shall be deemed to have been properly given and effective:


(a)
on the date of delivery if delivered in person, or


(b)
five (5) days after mailing if mailed by first-class or certified mail, postage
paid, to the respective addresses given below, or to such other address as is
designated by written notice given to the other party.


If sent to LICENSEE:

Urigen Holdings Inc. 

25th Floor

700 West Georgia Street 

Vancouver, BC V7Y 1B3, 

Canada 

Attention: Bill Garner, M.D.


If sent to UNIVERSITY:

University of California, San Diego

Technology Transfer & Intellectual Property Services

9500 Gilman Drive, MC-0910

La Jolla, CA 92093-0910 USA

Attention: Director


10.2 Secrecy.


(a)       “Confidential Information” shall mean
information, including Technology, relating to the Invention and disclosed by a
party during the term of this Agreement, which if disclosed in writing shall be
marked “Confidential”, or if first disclosed otherwise, shall within thirty
(30) days of such disclosure be reduced to writing by the disclosing party and
sent to the receiving party.


(b)       A receiving Party shall:


(1)
use the Confidential Information for the sole purpose of performing under the
terms of this Agreement;



 20
 









(2)       safeguard Confidential Information
against disclosure to others with the same degree of care as it exercises with
its own data of a similar nature;


(3)       not disclose Confidential Information to
others (except to its employees, agents or consultants who are bound to the
receiving party by a like obligation of confidentiality) without the express
written permission of the disclosing party, except that the receiving party shall
not be prevented from using or disclosing any of the Confidential Information
that:


(i)
it can demonstrate by written records was previously known to it;


(ii)
is now, or becomes in the future, public knowledge other than through acts or
omissions of the receiving party or


(iii)
is lawfully obtained by the receiving party from sources independent of the
disclosing party; and


(c)       The secrecy obligations with respect to
Confidential Information shall continue for a period ending five (5) years from
the termination date of this Agreement.


10.3     Assignability.
This Agreement may be assigned by UNIVERSITY, but is personal to LICENSEE and
assignable by LICENSEE only with the written consent of UNIVERSITY, which
consent shall not be unreasonably withheld. Examples of reasonable grounds to
withhold consent include without limitation the concerns of UNIVERSITY as a
constitutionally established entity in the State of California for public
health and safety as a university, as well as in the maintenance of its
reputation in science research and administration of its assets. A condition of
UNIVERSITY’s consent to such assignment will be a transfer fee payment by
assignee of One hundred thousand dollars (US$100,000) payable to UNIVERSITY no
less than 30 days after the assignment.


10.4     No
Waiver. No waiver by either party
of any breach or default of any covenant or agreement set forth in this
Agreement shall be deemed a waiver as to any subsequent and/or similar breach
or default.


10.5     Failure
to Perform. In the event of a failure of performance due under this
Agreement and if it becomes necessary for either party to undertake legal
action against the other on account thereof, then the prevailing party shall be
entitled to reasonable attorney’s fees in addition to costs and necessary
disbursements.


10.6     Governing
Laws. THIS AGREEMENT SHALL BE INTERPRETED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, but the scope and validity
of any patent or patent application shall be governed by the applicable laws of
the country of the patent or patent application.



 21
 









10.7     Force
Majeure. A party to this Agreement may be excused from any
performance required herein if such performance is rendered impossible or
unfeasible due to any catastrophe or other major event beyond its reasonable
control, including, without limitation, war, riot, and insurrection; laws,
proclamations, edicts, ordinances, or regulations; strikes, lockouts, or other
serious labor disputes; and floods, fires, explosions, or other natural
disasters. When such events have abated, the non-performing party’s obligations
herein shall resume.


10.8     Headings.
The headings of the several sections are inserted for convenience of
reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.


10.9     Entire
Agreement. This Agreement embodies the entire understanding of the
parties and supersedes all previous communications, representations or
understandings, either oral or written, between the parties relating to the subject
matter hereof.


10.10   Amendments.
No amendment or modification of this Agreement shall be valid or
binding on the parties unless made in writing and signed on behalf of each
party.


10.11   Severability.
In the event that any of the provisions contained in this Agreement
is held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provisions of this Agreement, and this Agreement shall be construed as if the
invalid, illegal, or unenforceable provisions had never been contained in it.



 22















IN WITNESS WHEREOF, both
UNIVERSITY and LICENSEE have executed this Agreement, in duplicate originals,
by their respective and duly authorized officers on the day and year written.


	
  URIGEN HOLDINGS INC. [LICENSEE]:

  	
   

  	
  THE REGENTS OF THE UNIVERSITY OF CALIFORNIA:

  
	
   

  	
   

  	
   

  
	
   By

  	
  /s/ William J. Garner

  	
   

  	
  By

  	
   

  	
  /s/ Alan S. Paau

  
	
   

  	
  (Signature)

  	
   

  	
   

  	
   

  	
  (Signature)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  William J. Garner, M.D.

  	
   

  	
  Alan S. Paau, Ph.D., MBA

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  CEO

  	
   

  	
  Assistant Vice-Chancellor,

  Technology Transfer &

  Intellectual Property Services

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date

  	
  December 30, 2005

  	
   

  	
  Date

  	
   

  	
  1/18/06

  



 



 23















 


Exhibit A


Certificate of
Incorporation, Urigen Holdings Inc.


 



 24