LICENSE AGREEMENT

Exhibit 10.16

LICENSE AGREEMENT

THIS LICENSE AGREEMENT (this “Agreement”), effective as of February 28, 2003 (the “Effective Date”), is between THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL having an address at CB #4105, 308 Bynum Hall, Chapel Hill, NC (hereinafter referred to as “University”) and PANACOS PHARMACEUTICALS, INC., a corporation organized and existing under the laws of Delaware and having an address at 209 Perry Parkway, Gaithersburg, MD 20877 (hereinafter referred to as “Licensee”).

WITNESSETH

WHEREAS, University owns and controls its share of the ownership interest in the inventions covered by the Patents listed in Appendix A (hereinafter “Inventions”) hereto, developed jointly by the parties pursuant to the Sponsored Research Agreement; and

WHEREAS, Licensee is desirous of producing, using and selling products which include the use of Inventions and is willing to expend its commercially reasonable efforts and resources to do so if it can obtain an exclusive license to use the Inventions under the terms and conditions set forth herein; and

WHEREAS, University desires to facilitate a timely transfer of its information and technology concerning the Inventions for the ultimate benefit of the public and this transfer is best accomplished by the grant of this license; and

WHEREAS, in the opinion of the University, this transfer can best be accomplished consistent with its mission by affiliation with Licensee;

WHEREAS, University and Licensee entered into that certain License Agreement dated as of April 28, 1999 pursuant to which Licensee obtained an exclusive license to certain Inventions (the “ Original Agreement ”);

WHEREAS, University and Licensee now wish to amend and restate the Original Agreement in its entirety and University desires to provide Licensee with, and License desires to obtain, an exclusive license to certain additional Inventions;

NOW, THEREFORE, for and in consideration of the covenants, conditions, and undertakings hereinafter set forth, it is agreed by and between the parties as follows:

1.1. “U NIVERSITY T ECHNOLOGY ” means any unpublished (a) research and development information, (b) unpatented inventions, and (c) technical data, owned by or in the control of University prior to the Effective Date or during the Term of this

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Agreement, which relates to and is necessary for: (i) the practice of the Inventions, or (ii) the manufacture, use, sale, offer for sale or importation of any compounds disclosed in the Patents or any analogs, derivatives, modifications or improvements thereof, and which University has the right to provide Licensee under this Agreement, and which Licensee does not otherwise own or control.

1.2. “I NVENTIONS ” has the meaning set forth in the first Whereas clause above.

1.3. “L ICENSED P RODUCTS ” means (i) any method, procedure, or component part thereof whose manufacture, use, sale, offer for sale or importation is covered by any University Technology or by one or more Valid Claims of the Patents, or (ii) any product containing at least one Licensed Compound.

1.4. “L ICENSED C OMPOUNDS ” means any individual compounds whose manufacture, use, sale, offer for sale or importation is covered by any University Technology or by one or more Valid Claims of the Patents.

1.5. “P ATENTS ” means any US patents and/or patent applications owned or controlled in whole or in part by University prior to or during the Term of this Agreement and which University has the right to provide its share to Licensee and which are included in and limited to those listed in Appendix A attached hereto, as well as any continuations, continuations in part, divisionals, provisionals, continued prosecution applications, extensions, or reissues thereof, and any foreign counterpart of any of the foregoing.

1.6. “N ET S ALES ” means, subject to Article 3.4, the invoiced sales price of Licensed Products sold by Licensee, less (a) any charges for sales taxes or other taxes separately stated on the invoice, (b) shipping and insurance charges, (c) actual credits and allowances for returned, rejected, recalled, or defective goods, (d) trade discounts, but before cash discounts and (e) government mandated rebates. Licensed Products will be considered sold when billed out, or when delivered or paid for before delivery, whichever first occurs. As used herein, “cash discounts” means discounts given on account of payments made in cash or payments made early.

1.7. “L ICENSED T ERRITORY ” means the world, subject to any restrictions in Article XI herein.

1.8. “L ICENSED F IELD ” means any and all human therapeutic and prophylactic uses.

1.9. “S UBLICENSEE ” means any person or organization to which Licensee has granted a sublicense to the University Technology or Patents for the purpose of development and/or commercialization of Licensed Products in the Licensed Field.

1.10. “C ONFIDENTIAL I NFORMATION ” means information considered proprietary to the party disclosing the information, and may include information relating to: research, development, patent prosecution and maintenance, manufacturing, purchasing, accounting, engineering, marketing, merchandising or selling.

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1.11. “S UBLICENSE I NCOME ” means all royalties, all other payments, and any equity Licensee receives from Sublicensees, of which University is owed a percentage; provided, however, that Sublicense Income shall specifically exclude (i) [***](but shall specifically [***] to the extent such [***], (ii) [***], and (iii) [***] of the same. In the event of a sublicense as contemplated herein, such sublicense shall state explicitly the consideration provided in exchange for University Technology or Patents.

1.12. “IND” means an Investigational New Drug Application filed with the Food and Drug Administration for authorization to initiate human clinical trials in the United States, or any foreign equivalent document for authorization to initiate human clinical trials outside the United States.

1.13. “A FFILIATE ” means any corporation or other business entity which, directly or indirectly, controls, is controlled by, or is under common control with, a party. For purposes of this definition, “control” means ownership or beneficial interest in [***]% or more of the voting stock or other voting interest of the corporation or other business entity.

1.14. “ ANDA ” means an Abbreviated New Drug Application, made in the form of a Food and Drug Administration submission or package to the Food and Drug Administration, for approval to market a Licensed Product in the United States, or any foreign equivalent document for approval to market a Licensed Product outside the United States.

1.15. “ CLASS OF LICENSED COMPOUNDS ” means each subset of Licensed Compounds as described in the Patents and identified in Appendix A as (i) Class 1, (ii) Class 2, or (iii) Class 3.

1.16. “ FIRST COMMERCIAL SALE ” means the first sale of Licensed Product for use in the Field by Licensee or its Sublicensee to any third party in a country.

1.17. “ NDA ” means an original New Drug Application, made in the form of a Food and Drug Administration submission or package to the Food and Drug Administration, for approval to market a Licensed Product in the United States, or any foreign equivalent document.

1.18. “P ERFORMANCE M ILESTONE ” means any milestone listed on Appendix B attached hereto.

1.19. “P HASE II C LINICAL T RIAL ” means a dosing range trial to evaluate efficacy and safety in the targeted patient population and/or to define optimal dosing regimen of Licensed Product, or any other trial required to be designated as a Phase II clinical trial by the Food and Drug Administration.

1.20. “R OYALTY Q UARTER ” has the meaning set forth in Article 3.5.

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1.21. “S PONSORED R ESEARCH A GREEMENT ” means that certain sponsored research agreement by and between the parties effective April 28, 1999, including any amendments thereto.

1.22. “T ERM ” shall commence on the Effective Date and shall expire upon the expiration of the last Valid Claim of the Patents, unless earlier terminated pursuant to Article VII.

1.23. “V ALID C LAIM ” means either (a) a claim of an issued and unexpired patent included within the Patents which has not been held permanently revoked, unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which has not been admitted to be invalid or unenforceable through reissue or disclaimer or otherwise or (b) a claim of a pending patent application included within the Patents, which claim was filed in good faith and has not been abandoned or finally disallowed without the possibility of appeal or refiling of said application. Notwithstanding the foregoing (and subject to Article 3.3(iii)), if a claim of a pending patent application has not issued as a claim of an issued patent within ten (10) years after the filing date from which such claim takes priority, such pending claim shall cease to be a Valid Claim for purposes of this Agreement unless and until such claim becomes an issued claim of an issued patent.

1.24. “P ATENT C OUNSEL ” has the meaning set forth in Article 11.1.

2.1. University and Licensee hereby acknowledge and agree that the Original Agreement is terminated and superseded by this Agreement as of the Effective Date of this Agreement. Notwithstanding any provision to the contrary in the Original Agreement, no provision contained therein shall survive termination of the Original Agreement. Notwithstanding the foregoing, each party hereby agrees that all actions, suits, damages, claims and demands, in law or in equity, which either of them has against the other under the terms of the Original Agreement, upon, or by reason of any breach of the Original Agreement, shall be enforceable under this Agreement.

2.2. (i) University grants to Licensee, to the extent of the Licensed Territory, a non-exclusive right and license (with the right to grant sublicenses pursuant to Article 2.3) to use University Technology in the Licensed Field, subject to all the terms and conditions of this Agreement.

(ii) University grants to Licensee, to the extent of the Licensed Territory, an exclusive right and license (with the right to grant sublicenses pursuant to Article 2.3) under the Patents to make, have made, use, sell, offer for sale, and import Licensed Products and Licensed Compounds embodying the Invention(s) in the Licensed Field, upon the terms and conditions set forth herein.

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2.3. University grants to Licensee, to the extent of the Licensed Territory, the right to sublicense. Sublicensees shall be subject to provisions substantially similar to the following provisions of this Agreement: Articles 2.5, 2.6, 2.7, 2.8, VI, IX, 11.6, XII, XIV, XV, XVI, XIX, XXI, and XXII and this Article 2.3 Sublicensees may not further sublicense any rights they obtain herein without the written consent of University. In the event of early termination of this Agreement, any sublicense agreement with any Sublicensee shall provide for the termination of the sublicense, or the conversion to a license directly between such Sublicensee and University on substantially the same terms as the sublicense agreement, at the option of the Sublicensee, provided, however, that in no event shall University have greater obligations to such Sublicensee as it has to Licensee hereunder.

2.4. Any license granted herein (excluding the grant in Article 2.2(i) above) is exclusive for the Term of this Agreement.

2.5. Licensee shall not disclose any University Technology pursuant to Article 2.2(i) above to third parties during the Term or any time thereafter, provided, however, that disclosure of University Technology may be made at any time (1) with the prior written consent of University, or (2) pursuant to the provisions of this Agreement, including Article 6 herein.

2.6. Licensee is further granted the right to disclose and use any University Technology, or other Confidential Information of University pertaining to the Patents, Licensed Products, or Licensed Compounds in any submission to local, state, federal or foreign governmental agency, including, but not limited to, the US Food and Drug Administration and the US Patent and Trademark Office, notwithstanding any provisions to the contrary in Article VI.

2.7. Notwithstanding the foregoing, any and all licenses granted hereunder are subject to the rights of the United States Government which may arise out of its sponsorship of the research which led to the Inventions.

2.8. Subject to the licenses granted to Licensee pursuant to the foregoing provisions of this Article II, each party retains all right, title, and interest in such party’s inventions and intellectual property, including, without limitation, its share of any joint inventions and jointly owned Patents.

3.1. In consideration for the licenses granted hereunder, Licensee shall issue a total of [***] ([***]) shares of Common Stock of Licensee $.01 par value per share, in the name of University within [***] ([***]) days of the Effective Date of this Agreement, provided that University enters into a restricted stock agreement in the form attached hereto as Appendix C.

3.2. The parties acknowledge that Licensee has paid University for all past costs (including reasonable attorney’s fees) arising out of the filing, prosecution, or

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maintenance of the Patents. Licensee will pay a further license fee in the form of payment of future costs (including attorney’s fees) arising out of the filing and prosecution of the Patents covering the Inventions pursuant to Article XI of this Agreement. Payment of such costs shall be non-refundable and shall not be a credit against any other amounts due hereunder.

3.3. (i) Beginning on the Effective Date of this Agreement and continuing, on a country-by-country basis, until the last to expire Valid Claim of Patents covering such Licensed Products, Licensee will pay University a running patent royalty on all Net Sales of Licensed Products in the Licensed Field covered by a Valid Claim of the Patents, in accordance with the chart below:

(ii) During the Term of this Agreement, Licensee will pay University a running technology royalty on all Net Sales of Licensed Products in the Licensed Field not covered by a Valid Claim of the Patents but whose manufacture, use, sale, offer for sale or importation is covered by University Technology, in accordance with the chart below:

(iii) In addition to the foregoing, the parties acknowledge and agree that in the event a claim of a pending patent application ceases to be a Valid Claim pursuant to the last sentence of Article 1.23, and such pending patent application later issues during the Term of this Agreement, Licensee shall pay University [***] if such claim of the pending patent application had not ceased to be a Valid Claim in the first instance pursuant to Article 1.23, and [***].

3.4. (i) In the event any Licensed Product in the Licensed Field is a combination of one or more Licensed Compounds with one or more other active ingredients not licensed hereunder, Net Sales for purposes of determining royalty payments on such combination shall be calculated by [***].

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(ii) In the event that it is not possible to determine the gross selling price for each ingredient, Net Sales shall be calculated by [***].

3.5. Beginning with the date of First Commercial Sale of any Licensed Product in the Licensed Field, Licensee agrees to make quarterly written reports to University within [***] ([***]) days after the first (1st) days of each January, April, July, and October during the Term of this Agreement and as of such dates, stating in each such report the number, description, and aggregate Net Sales of Licensed Products sold, used, or otherwise disposed of during the preceding [***] calendar months (each such three calendar months a “Royalty Quarter”) and upon which a royalty or percentage of Sublicense Income is payable as provided in Articles 3.3 or IV hereof, as appropriate. The [***] such report shall include all Net Sales of Licensed Products made prior to the date of such report. Until Licensee has achieved the First Commercial Sale of Licensed Product, a report shall be submitted by Licensee at the end of each January after the Effective Date of this Agreement and will include a full written report summarizing Licensee’s technical and other efforts made towards such First Commercial Sale of a Licensed Product.

3.6. In the event that it is necessary or required for Licensee to make royalty or other payments to one or more third parties in order for Licensee or any Sublicensee to make, use, or sell Licensed Products, Licensee may offset a total of [***] percent ([***]%) of such third-party payments against any royalty payments and/or percentage of Sublicense Income, as appropriate and in the Royalty Quarter they are due, that are otherwise due University hereunder, provided that in no event shall the royalty payments or percentage of Sublicense Income otherwise due University be reduced by more than [***] percent ([***]%) in any Royalty Quarter. Notwithstanding the foregoing, in no event shall Licensee offset third-party payments against any royalty payments and/or percentage of Sublicense Income that are otherwise due University hereunder [***].

3.7. Concurrently with the making of each report pursuant to Article 3.5 above, Licensee shall pay to the University all payments due University under Articles 3.3, 3.8 or IV, as appropriate.

3.8. Licensee will make milestone payments upon the first of either Licensee or a Sublicensee reaching the designated stages of development listed in the table below, for each Licensed Product. Payment shall be the greater of the compensation due University pursuant to Article IV (if applicable), or the amount listed in the table below.

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For the avoidance of doubt, the parties acknowledge and agree that in no event shall Licensee owe University payments under both this Article 3.8 and Article IV with respect to milestone payments received by Licensee from Sublicensees for the milestones listed hereunder.

In the event of default of any payment owing to University under the terms of this Agreement, and if it becomes necessary for University to undertake legal action to collect said payment, Licensee shall pay [***] legal fees and costs incurred by University in connection therewith.

3.9. The parties recognize that different Licensed Products may contain the same Licensed Compound. However, the parties agree that [***] [***] shall be payable pursuant to Section 3.8 or IV (as applicable) for each individual Licensed Compound, regardless of the number of Licensed Products containing such Licensed Compound. For purposes of this Agreement, [***] shall not be considered distinct Licensed Compounds.

3.10. Nothing in this Agreement shall be construed to require the payment of more than [***] of Sublicense Income with regard to the Net Sale of an individual Licensed Product in the Licensed Field. No [***] of Sublicense Income shall be payable because any Licensed Product, or its manufacture, use, sale, offer for sale or importation is covered by more than one Valid Claim in a given country.

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In the case of income derived by Licensee from Sublicensees, Licensee shall pay University a share of Sublicense Income, whose share shall be in accordance with the following table, on a Sublicensee by Sublicensee ba