LICENSE AGREEMENT

License Agreement

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Coley Pharmaceutical Grou | University of Iowa Research Foundation

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Title: LICENSE AGREEMENT
Governing Law: Iowa Date: 4/20/2005

EXHIBIT 10.16

LICENSE AGREEMENT

This Agreement is made and entered into as of March 31, 1997 (the “Effective Date”) by and between the University of Iowa Research Foundation (hereinafter “UIRF”) having offices at 214 Technology Innovation Center, Iowa City, Iowa 52242-5000 and CpG ImmunoPharmaceuticals, Inc. (hereinafter “Licensee”), a Delaware corporation.

WHEREAS, under the patent policy of The University of Iowa (“UI”), all inventions and technology arising during the normal course of research and teaching at the UI are assigned and entrusted to the UIRF to obtain patent or other appropriate intellectual property protection and license said technology;

WHEREAS, UIRF is, therefore, owner by assignment from Arthur M. Krieg (inventor/s) of his entire right, title and interest in United States Patent Application Serial No. [**********] filed [*************] titled “[*****************************],” (UIRF #[*****] and in the foreign patent applications corresponding thereto, and in the inventions described and claimed herein;

WHEREAS, Licensee wishes to obtain an exclusive world-wide license in order to practice the above-referenced invention covered by patent rights in the United States and in certain foreign countries, and to manufacture, use and sell in the commercial market the products made in accordance therewith; and

WHEREAS, UIRF wishes to grant such a license to Licensee in accordance with the terms of this Agreement.

NOW, THEREFORE, in consideration of the foregoing premises, the parties agree as follows:

ARTICLE 1.

DEFINITIONS

1.1 PARENT RIGHTS shall mean U.S. patent application Serial No. [**********] filed [************], the inventions described and claimed therein, and any divisions, continuations, continuations-in-part to the extent the claims are directed to subject matter specifically described in USSN [**********], patents issuing thereon or reissues thereof; and any and all foreign patents and patent applications corresponding thereto; which will be automatically incorporated in and added to this Agreement and shall periodically be added to Appendix A attached to this Agreement and made part thereof.

1.2 LICENSED PRODUCTS shall mean any product the sale, use or manufacture of which would infringe a pending or issued claim of the PATENT RIGHTS but for the license granted hereunder.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 406 of the Securities Act.

1.3 LICENSED PROCESSES shall mean the processes claimed in PATENT RIGHTS or some portion thereof.

1.4 NET SALES shall mean the amount billed or invoiced on sales of LICENSED PRODUCTS less: (a) Customary trade, quantity or cash discounts and non-affiliated brokers’ or agents’ commissions actually allowed and taken; (b) Amounts repaid or credited by reason of rejection or return; (c) To the extent separately stated on purchase orders, invoices or other documents of sale, taxes levied on and/or other governmental charges made as to production, sale, transportation, delivery or use and paid by or on behalf of Licensee; and/or (d) Shipping and insurance charges.

In the event that a LICENSED PRODUCT under this Agreement is sold in combination with another active ingredient or component having independent therapeutic effect or diagnostic utility _, then “NET SALES,” for purposes of determining royalty payments on the combination, shall be calculated using one of the following methods:

(e)

By multiplying the NET SALES of the combination by the fraction A/A+B, where A is the gross selling price, during the royalty paying period in question, of the LICENSED PRODUCT sold separately, and B is the gross selling price, during the royalty period in question, of the other active ingredients or components sold separately; or

(f)

In the event that no such separate sales are made of the LICENSED PRODUCT or any of the active ingredients or components in such combination package during the royalty paying period in question, NET SALES, for the purposes of determining royalty payments, shall be calculated using the above formula where A is the reasonably estimated commercial value of the LICENSED PRODUCT sold separately and B is the reasonably estimated commercial value of the other active ingredients or components sold separately. Any such estimates shall be determined using criteria to be mutually agreed upon by the parties. Such estimates shall be reported to UIRF with the reports to be provided to UIRF pursuant to Section 4.3 hereof.

1.5 AFFILIATE shall mean any company, corporation, or business in which the entity in question owns or controls at-least fifty percent (50%) of the voting stock.

1.6 AGREEMENT YEAR shall mean the annual period commencing upon an anniversary of the Effective Date.

1.7 QIAGEN shall mean QIAGEN GmbH, a German corporation, having its principal address at Max-Volmer-Str. 4, 40724 Hilden, Germany.

ARTICLE 2.

GRANT

2.1 UIRF hereby grants to Licensee and Licensee hereby accepts, subject to the terms and conditions hereof a worldwide exclusive license under the PATENT RIGHTS to make and have made, to use and have used, to import and have imported, to offer for sale and have offered for sale, and to sell and have sold the LICENSED PRODUCTS, and to practice the LICENSED PROCESSES. Such license shall include the right to grant sublicenses, provided, however, that Licensee shall provide UIRF with a copy of any sublicense agreement promptly upon its execution and that such sublicense agreement must contain terms that do not diminish any of the legal or financial rights of UIRF hereunder, including but not limited to the indemnification and insurance provided under this Agreement. In recognition of the exclusive nature of this license, UIRF agrees that it will not grant licenses under PATENT RIGHTS to others except as required by UIRF’s obligations in Paragraph 2.3(a) and that it will not provide any proprietary materials relating to the PATENT RIGHTS to any commercial entity for any purpose or to entities other than commercial entities for any commercial purpose unless otherwise approved by Licensee.

2.2 The term of this Agreement and the exclusive license set forth in Paragraph 2.1 shall be from the Effective Date of this Agreement until the expiration of the last to expire of the PATENT RIGHTS or for a period of fifteen years, whichever is longer.

2.3 The granting and acceptance of this license is subject to the following conditions:

(a)

The UI Patent Policy approved in 1983, Public Law 96-517 and Public Law 98-620. Any right granted in this Agreement greater than that permitted under Public Law 96-517 or Public Law 98-620 shall be subject to modification as may be required to conform to the provision of that statute.

(b)

UIRF shall have the right to make and to use for research purposes only and not for any commercial purpose unless otherwise approved by Licensee, the subject matter described and claimed in PATENT RIGHTS. UIRF shall not disclose any confidential information or proprietary materials relating to the PATENT RIGHTS to any other party without prior written consent of Licensee and without use of a confidentiality agreement in the form of Appendix B or a material transfer agreement in the form of Appendix C, an executed copy of which shall be provided to Licensee.

(c)

Licensee shall pay all future costs connected with the commercial development of the LICENSED PRODUCTS, including but not limited to the costs of complying with applicable government testing, approvals and regulations.

(d)

Licensee shall use reasonable efforts to effect introduction of the LICENSED PRODUCTS into the commercial market as soon as practicable,

consistent with sound and reasonable business practices and judgement; thereafter, until the expiration of this Agreement, Licensee shall endeavor to keep LICENSED PRODUCTS reasonably available to the public.

(e)

UIRF shall have the right to terminate or render this license non-exclusive if Licensee shall not be capitalized with an aggregate investment of at least [***** ******] U.S. dollars (US $[*********]) prior to the first anniversary of the Effective Date.

(f)

UIRF shall have the right to terminate or render this license non-exclusive at any time after three (3) years from the Effective Date if, in UIRF’s reasonable judgment, Licensee:

(i)

has not put the licensed subject matter into commercial use in the country or countries where licensed, directly or through a sublicense, and is not keeping the licensed subject matter reasonably available to the public, or

(ii)

is not demonstrably engaged in a research, development, manufacturing, marketing, or licensing program, as appropriate, directed toward this end.

In making this determination, UIRF shall take into account the normal course of such programs conducted with sound and reasonable business practice and judgment and shall take into account the reports provided hereunder by Licensee.

(g)

All sublicenses granted by Licensee hereunder shall include a requirement that the sublicensee use reasonable efforts to effect introduction of the LICENSED PRODUCTS into the commercial market as soon as practicable, consistent with sound and reasonable business practices and judgement and shall bind the sublicensee to meet Licensee’s obligations to UIRF under this Agreement and a copy of this Agreement shall be attached to such sublicense agreements. Copies of all sublicense agreements shall be provided to UIRF.

2.4 Upon expiration of the period of exclusivity of this license, Licensee shall receive a fully paid up perpetual license to make and have made, to use and have used, to import and have imported, to offer for sale and have offered for sale, and to sell and have sold the LICENSED PRODUCTS, and to practice the LICENSED PROCESSES.

2.5 Licensee agrees during the exclusive period of this license in the United States that any LICENSED PRODUCT produced for sale in the United States will be manufactured substantially in the United States unless any waiver of such requirement is obtained. UIRF shall, at Licensee’s request and expense, assist Licensee in attempting to obtain such a waiver, should Licensee determine to do so.

2.6 UIRF hereby grants to Licensee the right to extend the licenses granted in Paragraph 2.1 to an AFFILIATE subject to the terms and conditions hereof.

ARTICLE 3.

ROYALTIES, PAYMNTS

3.1 Licensee shall pay to UIRF a non-refundable license fee in the sum of $[*******] as follows:

$[******] payable within thirty days of the Effective Date

$[******] payable six months after the Effective Date

$[******] payable twelve months after the Effective Date

$[******] payable eighteen months after the Effective Date

$[******] payable twenty-four months after the Effective Date

3.2

(a) Licensee shall pay UIRF within forty-five (45) days after the end of each calendar quarter, during the term of the license of Paragraph 2.1, royalties on NET SALES of all LICENSED PRODUCTS sold by Licensee and its AFFILIATES or sublicensees as follows:

In the human field:

[*]%, if total royalty being paid on the LICENSED PRODUCT to all parties, other than by Licensee to [******] and its AFFILIATES for anything other than licenses under issued patents, is less than [*]%

[****]%, if total royalty being paid on the LICENSED PRODUCT to all parties, other than by Licensee to [******] and its AFFILIATES for anything other than licenses under issued patents, is greater than or equal to [*]%, but less than [*]%

In the animal field:

[***]% on NET SALES of LICENSED PRODUCTS

(b) On sales between Licensee and its AFFILATES or sublicensees for resale, the royalty shall be paid on the resale.

3.3

Commencing in the fifth AGREEMENT YEAR, an annual license maintenance fee

payment of $[*******] shall be payable to the UIRF, payable within forty-five (45) days of the end of each AGREEMENT YEAR. This payment shall be reduced by the amount of any milestones, royalties or non-royalty sub-license income accrued to the UIRF solely during that AGREEMENT YEAR but shall not be reduced by (a) any royalties accruing in any other AGREEMENT YEAR or (b) contract research funding payable to the University of Iowa pursuant to the terms of any Sponsored Research Agreement.

3.4 Licensee shall pay to UIRF the following sums within thirty (30) days of the achievement of the indicated milestones;

$[******] payable upon the [******************************************************************] LICENSED PRODUCTS in the animal field in the United States

$[******] payable upon [****************************************************************************] LICENSED PRODUCTS in the human field

$[******] payable upon [*****************************************************************] LICENSED PRODUCTS in the human field in [**********************************]

3.5 In the case of sublicenses, Licensee shall also pay to UIRF [***********] percent [**]% of all license issue fees and license maintenance fees, excluding equity investments in Licensee and any funds received by Licensee for the conduct of research.

ARTICLE 4.

REPORTING, CONFIDENTIALITY

4.1 Prior to signing this Agreement, Licensee has provided to UIRF a written business plan pertaining to the subject matter of the licenses granted hereunder. UIRF hereby acknowledges receipt of such business plan.

4.2 Licensee shall provide brief written annual reports within sixty (60) days after each anniversary of the Effective Date which shall include but not be limited to: summaries of progress on research and development, regulatory approvals, manufacturing, sublicensing, marketing and sales during the preceding twelve (12) months as well as plans for the coming year. If progress differs from that anticipated in the plan provided under 4.1, or in the previous annual report, Licensee shall explain the reasons for the differences and propose a modified plan for UIRF’s review and approval. Licensee shall also provide any reasonable additional data UIRF requires to evaluate Licensee’s performance.

4.3

(a) Commencing upon the first sale of LICENSED PRODUCTS, Licensee agrees to submit to UIRF within forty-five (45) days after the calendar quarters ending

March 31, June 30, September 30, and December 31, reports setting forth for the preceding three (3) month period at least the following information:

the number of LICENSED PRODUCTS sold by Licensee, its AFFILIATES and sublicensees;

ii)

total billings for each LICENSED PRODUCT;

iii)

an accounting for all LICENSED PROCESSES used or sold;

iv)

deductions applicable to determine the NET SALES thereof

the amount of royalty due thereon;

and with each such royalty report to pay the amount of royalty due. Such report shall be certified as correct by an officer of Licensee and shall include a detailed listing of all deductions from royalties as specified herein. If no royalties are due to UIRF for any reporting period, the written report shall so state.

All payments due hereunder shall be payable in United States dollars.

Conversion of foreign currency to US, dollars shall be made at the conversion rate existing in the United States (as reported in the Wall Street Journal) on the last working day of each royalty period. Such payments shall be without deduction of exchange, collection or other charges.

(c)

All such reports shall be maintained in confidence by UIRF, except as required by law, including Public Law 96-517 and 98-620.

(d)

Late payments shall be subject to an interest charge of [****************] percent ([*****]%) per month.

4.4 UIRF shall not disclose the contents of the business plan or any report provided by Licensee hereunder to any third party without the prior written consent of Licensee, which consent shall not be unreasonably withheld, except to the extent that disclosure of any such information shall be required by government agencies.

ARTICLE 5.

RECORD KEEPING

Licensee shall keep, and shall require its AFFILIATES and sublicensees to keep, accurate and correct records of LICENSED PRODUCTS made, used, imported or sold under this Agreement, appropriate to determine the amount of royalties due hereunder to UIRF. Such records shall be retained for at least three (3) years following a given reporting period. They shall be available during normal business hours for inspection at the expense of UIRF by UIRF’s

Internal Audit Department or by a Certified Public Accountant selected by UIRF and approved by Licensee for the sole purpose of verifying reports and payments hereunder. Such accountant shall not disclose to UIRF any information other than information relating to accuracy of reports and payments made under this Agreement. In the event that any such inspection shows an underreporting and underpayment in excess of [****] percent ([*]%) for any twelve (12) month period, then Licensee shall pay the cost of such examination as well as any additional sum that would have been payable to UIRF had the Licensee reported correctly, plus interest.

ARTICLE 6.

FILING, PROSECUTION AND MAINTENANCE OF PATENTS

6.1 Licensee shall reimburse UIRF for all reasonable expenses heretobefore incurred by UIRF for the preparation, filing, prosecution and maintenance of PATENT RIGHTS and not previously reimbursed by or on behalf of Licensee promptly upon execution of this Agreement and shall reimburse UIRF for all such ongoing expenses within thirty (30) days of receipt of invoices from UIRF. Late payment of these invoices shall be subject to interest charges of [*****************] percent ([***]%) per month. UIRF shall take responsibility for the preparation, filing, prosecution and maintenance of any and all patent applications and patents included in PATENT RIGHTS using patent counsel approved by Licensee, such approval to not be unreasonably withheld. UIRF shall promptly inform Licensee regarding all matters directly pertaining to prosecution of LICENSED PATENTS, and shall seek Licensee’s counsel concerning all proposed courses of action affecting the LICENSED PATENTS, including but not limited to in which countries patent prosecution should be obtained and all proposed courses of action in any interference proceedings. UIRF shall cause its patent counsel to provide Licensee with copies of all correspondence regarding PATENT RIGHTS and UIRF shall provide Licensee sufficient opportunity to comment on any document that UIRF intends to file or to cause to be filed with the relevant intellectual property or patent office.

6.2 UIRF and Licensee shall cooperate fully in the preparation, filing, prosecution and maintenance of PATENT RIGHTS and of all patents and patent applications licensed to Licensee hereunder, executing all papers and instruments or requiring members of UIRF to execute such papers and instruments as to enable UIRF to apply for, to prosecute and to maintain patent applications and patents in UIRF’s name in any country. Each party shall provide to the other prompt notice as to all matters which come to its attention and which may affect the preparation, filing, prosecution or maintenance of any such patent applications or patents.

6.3 If Licensee elects to no longer pay the expenses of prosecution or maintenance of a patent application or patent included with PATENT RIGHTS, Licensee shall notify UIRF not less than sixty (60) days prior to such action and shall thereby surrender its rights hereunder to such patent or patent application.

ARTICLE 7.

MARKING

7.1 If a PATENT RIGHT has been or is subsequently issued to UIRF covering any feature or features of the LICENSED PRODUCTS, Licensee agrees to mark each and every package or container in which the LICENSED PRODUCTS are used or sold by or for Licensee with marking complying with the provisions of Title 35, U.S. Code, Section 287, if required, or any future equivalent provisions of the United States relating to the marking of patented devices, or with marking complying with the law of the country where the LICENSED PRODUCTS are shipped, used or sold.

ARTICLE 8.

INFRINGEMENT

8.1 With respect to any PATENT RIGHTS under which Licensee is exclusively licensed pursuant to this Agreement, Licensee or its sublicensee shall have the right to prosecute in its own name and at its own expense any infringement of such patent, so long as such license is exclusive at the time of the commencement of such action. UIRF agrees to notify Licensee promptly of each infringement of such patents of which UIRF is or becomes aware, Before Licensee or its sublicensees commences an action with respect to any infringement of such patents, Licensee shall give careful consideration to the views of UIRF and to potential effects on the public interest in making its decision whether or not to sue and in the case of a Licensee sublicense, shall report such views to the sublicensee.

8.2 If Licensee elects to sue for patent infringement, UIRF agrees to be named as nominal third party plaintiff if necessary to the commencement of any such action, and further agrees to provide any information available to UIRF and needed by Licensee in prosecuting such action. Licensee shall reimburse UIRF for any costs it incurs as part of an action brought by Licensee or its sublicensee, irrespective of whether UIRF shall become a co-plaintiff.

8.3 If Licensee or its sublicensee elects to commence an action as described above, Licensee may reduce, by up to [*****] percent ([**]%), the royalty due to UIRF earned under the patent subject to suit by [*****] percent ([**]%) of the amount of the expenses and costs of such action, including attorney fees. In the event that such [*****] percent ([**]%) of such expenses and costs exceed the amount of royalties withheld by Licensee for any calendar year, Licensee may to that extent reduce the royalties due to UIRF from Licensee in succeeding calendar years, but never by more than [*****] percent ([**]%) of the royalty otherwise due in any one year.

8.4 No settlement, consent judgment or other voluntary final disposition of the suit may be entered into without the consent of UIRF, which consent shall not be unreasonably withheld.

8.5 Recoveries or reimbursements from such action shall first be applied to reimburse Licensee and UIRF for litigation costs not paid from royalties and then to reimburse UIRF for royalties withheld. Any remaining recoveries or reimbursements shall be divided [**]% to Licensee and [**]% to UIRF.

8.6 In the event that Licensee and its sublicensee, if any, elect not to exercise their right

to prosecute an infringement of the PATENT RIGHTS pursuant to the above paragraphs, UIRF may do so at its own expense, controlling such action and retaining all recoveries therefrom.

8.7 If a declaratory judgment action alleging invalidity of any of the PATENT RIGHTS shall be brought against Licensee or UIRF, then UIRF, at its sole option, shall have the right to intervene and take over the sole defense of the action at its own expense.

8.8 UIRF shall have no obligation to defend any action for infringement brought against Licensee by a third party. In the event Licensee is sued by a third party, and as a result of the settlement of such suit is required to pay a royalty to a third party on a LICENSED PRODUCT, the amount of royalty paid will be deducted from the royalty payment due to the UIRF for that LICENSED PRODUCT. In the event the settlement prevents the Licensee from continuing sales of a LICENSED PRODUCT, no additional royalties and/or minimum royalties will apply for that LICENSED PRODUCT.

ARTICLE 9.

TERMINATION OF AGREEMENT

9.1 Upon any termination of this Agreement, and except as provided herein to the contrary, all rights and obligations of the Parties hereunder shall cease, except as follows:

(a)

UIRF’s right to receive or recover and Licensee’s obligation to pay royalties accrued or accruable for payment at the time of any termination;

(b)

Licensee’s obligation to maintain records and UIRF’s right to conduct a final audit as provided in Article 5 of this Agreement; and

(c)

Any cause of action or claim of either party, accrued or to accrued because of any breach or default by the other party.

9.2 In the event Licensee fails to make payments due hereunder, UIRF shall have the right to terminate this Agreement upon forty-five (45) days’ written notice, unless Licensee makes such payments plus interest within the forty-five (45) day notice period or unless any such payment is contested in good faith, in which event UIRF shall not have the right to terminate this Agreement until the matter is resolved and Licensee still fails to make any such payment. If payments are not so made, UIRF may immediately terminate this Agreement.

9.3 In the event that Licensee shall be in default in the performance of any obligations under this Agreement (other than as provided in 9.2 above which shall take precedence over any other default), and if the default has not been remedied within ninety (90) days after the date of notice in writing of such default, UIRF may terminate this Agreement immediately by written notice, unless any such obligation is contested in good faith, in which event UIRF shall not have the right to terminate this Agreement until the matter is resolved and Licensee still fails to perform any such obligation.

9.4 In the event that Licensee shall becom

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