Document:

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

 2
 

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.

 3
 

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)       $         *

  	
   

  	
  *

  
	
  (2)       $         *

  	
   

  	
  *

  
	
  (3)       $         *

  	
   

  	
  *

  

 

(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:

* Filed under an application for confidential
treatment.

 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 * (US$*)
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 * from the
Effective Date of this Agreement;

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

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

(iv)      obtain
approval of Licensed Products from the United States FDA within * 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.

*Filed under an application for confidential
treatment.

 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 * ($*) 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 *
percent (*%) 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;

*Filed under an application for confidential
treatment.

 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.

 

 24Exhibit 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:

 1
 

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.

 2
 

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.

 3
 

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 *

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.

*Filed
under an application for confidential treatment.

 4

 

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

 5
 

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

 6
 

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                 * 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.

* Filed
under an application for confidential treatment.

 7
 

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)          *, or
  (b)        *

        * from the Effective Date of this
  Agreement

  	
   

  	
  US$ *

  

*Filed
under an application for confidential treatment.

 8
 

 

	
  (2) *

  	
   

  	
  US$*

  
	
  (3) *

  	
   

  	
  US$*

  
	
  (4) *

  	
   

  	
  US$*

  

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     * percent (   *%) 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

*Filed
under an application for confidential treatment.

 9
 

commercialization of Licensed Products hereunder,
exceeds     * 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     * 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:

*Filed under
an application for confidential treatment.

 10

(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

 11
 

(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.

 12
 

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

 13
 

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.

 14

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,

 15
 

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

 16
 

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 * with the United States FDA, EMEA, or make a * with an appropriate agency in another jurisdiction outside
of the United States or Europe within * from the Effective Date of this
Agreement, provided, however, that the * date shall be extended by the period
of time

*Filed under an application for confidential
treatment.

 23
 

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

(b)       Within * following the Effective Date,
URIGEN shall complete a financing of not less than *, the proceeds of which
will be used in part for the development and commercialization of Licensed
Products. And

(c)       Within * 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

*Filed under an application for confidential
treatment.

 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

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