Document:

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                             STOCK OPTION AGREEMENT

     THIS STOCK OPTION AGREEMENT (this  "Agreement") is made and entered into as
of January 23,  2001,  by and  between  VIRGINIA  CAPITAL  BANCSHARES,  INC.,  a
Virginia corporation ("Virginia Capital" or "Issuer"),  and BB&T CORPORATION,  a
North Carolina corporation ("Grantee");

                                R E C I T A L S:
                                - - - - - - - -

     WHEREAS,  Grantee and Issuer have entered into that certain  Agreement  and
Plan of Reorganization, dated this date (the "Merger Agreement"), providing for,
among other things, the merger of Issuer with and into Grantee; and

     WHEREAS, as a condition and inducement to Grantee's execution of the Merger
Agreement,  Grantee has required  that Issuer agree,  and Issuer has agreed,  to
grant to Grantee the Option (as defined below);

     NOW,  THEREFORE,  in  consideration  of  the  respective   representations,
warranties,  covenants  and  agreements  set  forth  herein  and in  the  Merger
Agreement, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:

     1.  DEFINED TERMS.  Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Merger Agreement.

     2. GRANT OF OPTION.  Subject to the terms and  conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 1,848,560  shares (as adjusted as set forth herein,  the "Option  Shares,"
which term shall  refer to the Option  Shares  before and after any  transfer of
such Option  Shares),  of the common  stock of Issuer,  par value $.01 per share
("Issuer  Common  Stock"),  at a purchase  price per Option  Share  (subject  to
adjustment as set forth herein, the "Purchase Price") equal to $15.00.

     3.  EXERCISE OF OPTION.

         (a) Provided that  (i)Grantee or Holder (as  hereinafter  defined),  as
applicable,  shall not be in  material  breach of its  agreements  or  covenants
contained  in  this  Agreement  or the  Merger  Agreement,  and  (ii) no
preliminary  or  permanent  injunction  or other order  against the  delivery of
shares  covered by the Option issued by any court of competent  jurisdiction  in
the United States shall be in effect,  Holder may exercise the Option,  in whole
or in part,  at any time and from time to time  following  the  occurrence  of a
Purchase  Event  (as  hereinafter  defined);  PROVIDED,  that the  Option  shall
terminate  and be of no further  force and effect upon the  earliest to occur of
(A) the  Effective  Time,  (B) subject to clause (E) below,  termination  of the
Merger Agreement in accordance with

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the terms thereof prior to the  occurrence of a Purchase  Event or a Preliminary
Purchase Event (as hereinafter  defined) (other than a termination of the Merger
Agreement   by  Grantee   pursuant  to  Section   7.1(b)   thereof  (a  "Default
Termination")),  (C) 12 months after a Default Termination,  (D) 12 months after
any  termination  of the Merger  Agreement  (other  than a Default  Termination)
following the  occurrence of a Purchase Event or a Preliminary  Purchase  Event,
and (E) subject to clause (D) above,  12 months after  termination of the Merger
Agreement  pursuant  to  Section  7.1(e)  thereof;  PROVIDED  FURTHER,  that any
purchase of shares upon  exercise of the Option  shall be subject to  compliance
with applicable law, including, without limitation, the Bank Holding Company Act
of 1956, as amended (the "BHC Act").  Subject to  compliance  with Section 12(h)
hereof,  the term  "Holder"  shall mean the holder or holders of the Option from
time to time,  including  initially  Grantee.  The rights set forth in Section 8
hereof shall terminate when the right to exercise the Option  terminates  (other
than as a result of a complete exercise of the Option) as set forth herein.

         (b) As used  herein,  a  "Purchase  Event"  means any of the  following
events subsequent to the date of this Agreement:

              (i) without  Grantee's  prior written  consent,  Issuer shall have
     authorized,   recommended,  publicly  proposed  or  publicly  announced  an
     intention to authorize,  recommend or propose, or entered into an agreement
     with any person (other than Grantee or any Subsidiary of Grantee) to effect
     an Acquisition  Transaction  (as defined below).  As used herein,  the term
     "Acquisition Transaction" shall mean (A) a merger,  consolidation or
     similar transaction involving Issuer or any of its Subsidiaries (other than
     transactions  solely  between  Issuer's  Subsidiaries  or between  Issuer's
     Subsidiaries  and Issuer),  (B) the  disposition,  by sale,  lease,
     exchange  or  otherwise,  of assets  of  Issuer or any of its  Subsidiaries
     representing  in  either  case 15% or more of the  consolidated  assets  of
     Issuer and its  Subsidiaries  (other than a sale of loan  receivables  in a
     financing transaction in the normal course of business consistent with past
     practices),   or  (C) the  issuance,   sale  or  other  disposition
     (including by way of merger,  consolidation,  share exchange or any similar
     transaction) of securities  representing 15% or more of the voting power of
     Issuer or any of its Subsidiaries; or

              (ii)any  person (other than Grantee or any  Subsidiary of Grantee)
     shall have acquired  beneficial  ownership (as such term is defined in Rule
     13d-3  promulgated  under  the  Exchange  Act) of or the  right to  acquire
     beneficial  ownership of, or any "group" (as such term is defined under the
     Exchange  Act),  other  than  a  group  of  which  Grantee  or  any  of the
     Subsidiaries  of  Grantee  is  a  member,  shall  have  been  formed  which
     beneficially owns or has the right to acquire beneficial  ownership of, 15%
     or more of the then-outstanding shares of Issuer Common Stock.

         (c) As used herein,  a  "Preliminary  Purchase  Event" means any of the
following events:

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              (i) any person  (other than Grantee or any  Subsidiary of Grantee)
     shall have  commenced  (as such term is  defined  in Rule  14d-2  under the
     Exchange  Act),  or shall have  filed a  registration  statement  under the
     Securities  Act  with  respect  to, a tender  offer  or  exchange  offer to
     purchase any shares of Issuer Common Stock such that, upon  consummation of
     such  offer,  such  person  would  own  or  control  15%  or  more  of  the
     then-outstanding  shares  of  Issuer  Common  Stock  (such an  offer  being
     referred  to  herein  as  a  "Tender   Offer"  or  an   "Exchange   Offer,"
     respectively); or

              (ii)the holders of Issuer Common Stock shall not have approved the
     Merger Agreement at the meeting of such  shareholders  held for the purpose
     of voting on the Merger Agreement, such meeting shall not have been held or
     shall have been canceled prior to termination of the Merger  Agreement,  or
     Issuer's  Board of Directors  shall have  withdrawn or modified in a manner
     adverse to Grantee the  recommendation  of Issuer's Board of Directors with
     respect to the Merger Agreement,  in each case after any person (other than
     Grantee or any  Subsidiary  of  Grantee)  shall have  (A) made,  or
     disclosed  an  intention  to make,  a proposal to engage in an  Acquisition
     Transaction,  (B) commenced  a Tender Offer or filed a registration
     statement  under the Securities Act with respect to an Exchange  Offer,  or
     (C) filed an application  (or given a notice),  whether in draft or
     final form, under any federal or state statute or regulation  (including an
     application  or notice  filed under the BHC Act,  the Bank Merger Act,  the
     Home Owners'  Loan Act or the Change in Bank  Control Act of 1978)  seeking
     the  consent  to an  Acquisition  Transaction  from  any  federal  or state
     governmental or regulatory authority or agency.

As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.

         (d) Notwithstanding  the foregoing,  the obligation of Virginia Capital
to issue Option  Shares upon exercise of the Option shall be deferred (but shall
not terminate): (i) until the receipt of all required governmental or regulatory
approvals or consents  necessary for Virginia Capital to issue the Option Shares
or Holder to exercise the Option,  or until the expiration or termination of any
waiting  period  required  by law,  or (ii) so long as any  injunction  or other
order,  decree  or ruling  issued by any  federal  or state  court of  competent
jurisdiction  is in effect  which  prohibits  the sale or delivery of the Option
Shares.

         (e) In the event Holder wishes to exercise the Option, it shall send to
Issuer a written  notice  (the date of which  being  herein  referred  to as the
"Notice  Date")  specifying  (i) the  total  number of Option  Shares it
intends to purchase  pursuant to such  exercise and (ii) a place and date
not earlier than three  business  days nor later than 15 business  days from the
Notice Date for the closing  (the  "Closing")  of such  purchase  (the  "Closing
Date").  If prior consent of any governmental or regulatory  agency or authority
is required in connection with such purchase, Issuer shall cooperate with Holder
in the filing of the  required  notice or  application  for such consent and the
obtaining of such consent at Holder's  expense,  and the Closing shall occur not
earlier  than three  business

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days nor later than 15 business  days  following  receipt of such  consents (and
expiration of any mandatory waiting periods).

     4.  PAYMENT AND DELIVERY OF CERTIFICATES.

         (a)  On  each  Closing  Date,  Holder  shall  (i)  pay  to  Issuer,  in
immediately  available  funds by wire  transfer to a bank account  designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on such Closing Date, and (ii) present and surrender this
Agreement to the Issuer at the address of the Issuer referenced in Section 12(f)
hereof.

         (b) At each Closing,  simultaneously  with the delivery of  immediately
available  funds and  surrender  of this  Agreement  as provided in Section 4(a)
hereof,  (i) Issuer shall  deliver to Holder (A) a certificate  or  certificates
representing  the Option  Shares to be purchased at such  Closing,  which Option
Shares shall be free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever and subject to no preemptive  rights,  and (B) if the Option
is exercised in part only, an executed new agreement with the same terms as this
Agreement  evidencing  the right to purchase the balance of the shares of Issuer
Common Stock  purchasable  hereunder,  and (ii) Holder shall deliver to Issuer a
letter evidencing  Holder's agreement not to offer, sell or otherwise dispose of
such Option  Shares in violation of  applicable  federal and state law or of the
provisions of this Agreement.

         (c) In addition to any other legend that is required by applicable law,
certificates  for the Option Shares  delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:

         THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
         RESTRICTIONS  ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
         PURSUANT TO THE TERMS OF A STOCK OPTION  AGREEMENT  DATED AS OF JANUARY
         23,  2001.  A COPY OF SUCH  AGREEMENT  WILL BE  PROVIDED  TO THE HOLDER
         HEREOF WITHOUT  CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN  REQUEST
         THEREFOR.

It is  understood  and agreed that the above legend shall be removed by delivery
of substitute  certificate(s) without such legend if Holder shall have delivered
to Issuer a copy of a letter from the staff of the Commission,  or an opinion of
counsel in form and substance reasonably satisfactory to Issuer and its counsel,
to the effect that such legend is not required  for  purposes of the  Securities
Act.

         5.  REPRESENTATIONS AND WARRANTIES OF ISSUER.  Issuer hereby represents
and warrants to Grantee as follows:

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         (a) Issuer has all  requisite  corporate  power and  authority to enter
into this  Agreement  and,  subject to its  obtaining  any approvals or consents
referred to herein,  to consummate the  transactions  contemplated  hereby.  The
execution  and  delivery  of  this  Agreement  and  the   consummation   of  the
transactions  contemplated  hereby have been duly  authorized  by all  necessary
corporate  action on the part of Issuer.  This  Agreement has been duly executed
and delivered by Issuer.

         (b)  Issuer  has  taken all  necessary  corporate  and other  action to
authorize  and reserve and to permit it to issue and, at all times from the date
hereof until the  obligation to deliver Issuer Common Stock upon the exercise of
the Option  terminates,  will have reserved for  issuance,  upon exercise of the
Option,  the number of shares of Issuer  Common  Stock  necessary  for Holder to
exercise  the Option,  and Issuer will take all  necessary  corporate  action to
authorize and reserve for issuance all additional  shares of Issuer Common Stock
or other  securities  which  may be issued  pursuant  to  Section 7 hereof  upon
exercise of the Option.  The shares of Issuer Common Stock to be issued upon due
exercise of the Option,  including all additional  shares of Issuer Common Stock
or other  securities  which may be issuable  pursuant to Section 7 hereof,  upon
issuance  pursuant  hereto,  shall be duly and validly  issued,  fully paid, and
nonassessable,  and  shall be  delivered  free and clear of all  liens,  claims,
charges,  and  encumbrances  of any kind or  nature  whatsoever,  including  any
preemptive rights of any shareholder of Issuer.

     6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents and
warrants to Issuer that:

         (a) Grantee has all  requisite  corporate  power and authority to enter
into this  Agreement  and,  subject to its  obtaining  any approvals or consents
referred to herein,  to consummate the  transactions  contemplated  hereby.  The
execution  and  delivery  of  this  Agreement  and  the   consummation   of  the
transactions  contemplated  hereby have been duly  authorized  by all  necessary
corporate  action on the part of Grantee.  This Agreement has been duly executed
and delivered by Grantee.

         (b) Grantee  represents  that it is acquiring  the Option for Grantee's
own  account  and not  with a view  to,  or for  sale in  connection  with,  any
distribution of the Option or the Option Shares.  Grantee  represents that it is
aware  that  neither  the  Option  nor the  Option  Shares is the  subject  of a
registration  statement  filed with and  declared  effective  by the  Commission
pursuant to Section 5 of the  Securities  Act, but instead each is being
offered  in  reliance  upon  the  exemption  from the  registration  requirement
provided by Section 4(2) thereof and the  representations and warranties
made by Grantee in connection  therewith.  Grantee  represents  that neither the
Option nor the Option Shares will be transferred or otherwise disposed of except
in a transaction  registered or exempt from  registration  under the  Securities
Laws, and that with respect to any transfer or other disposition  proposed to be
made in reliance  upon an exemption  from  registration,  such transfer or other
disposition  shall not be made unless Virginia Capital first receives an opinion
of counsel in form and  substance  reasonably  acceptable  to it  regarding  the
availability of such exemption.

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     7.  ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.

         (a) In the event of any  change in Issuer  Common  Stock by reason of a
stock dividend, stock split, split-up,  recapitalization,  combination, exchange
of shares or similar  transaction,  the type and number of shares or  securities
subject  to the  Option  and the  Purchase  Price  therefor  shall  be  adjusted
appropriately,  and proper  provision shall be made in the agreements  governing
such transaction so that Holder shall receive,  upon exercise of the Option, the
number and class of shares or other  securities  or property  that Holder  would
have received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable.  If
any  additional  shares of Issuer Common Stock are issued after the date of this
Agreement  (other than pursuant to an event  described in the first  sentence of
this Section  7(a)),  the number of shares of Issuer Common Stock subject to the
Option  shall be adjusted so that,  after such  issuance,  it, when added to the
number of shares of Issuer  Common  Stock  previously  issued  pursuant  hereto,
equals  19.9% of the number of shares of Issuer  Common  Stock  then  issued and
outstanding,  without giving effect to any shares subject to or issued  pursuant
to the Option.

         (b) In the event that Issuer  shall enter into an  agreement  (prior to
termination  of the Option  pursuant  to  Section 3(a)  hereof):  (i) to
consolidate  with or merge into any  person,  other  than  Grantee or one of its
Subsidiaries, and Issuer shall not be the continuing or surviving corporation of
such consolidation or merger;  (ii) to permit any person,  other than Grantee or
one of  its  Subsidiaries,  to  merge  into  Issuer,  and  Issuer  shall  be the
continuing or surviving  corporation,  but, in connection with such merger,  the
then  outstanding  shares  of  Issuer  Common  Stock  shall be  changed  into or
exchanged for stock or other securities of Issuer or any other person or cash or
any other property or the outstanding  shares of Issuer Common Stock immediately
prior to such  merger  shall after such  merger  represent  less than 50% of the
outstanding shares and share equivalents of the merged company;  (iii) to permit
any person, other than Grantee or one of its Subsidiaries, to acquire all of the
outstanding  shares  of  Issuer  Common  Stock  pursuant  to a  statutory  share
exchange;  or (iv) to sell or otherwise transfer all or substantially all of its
assets to any person,  other than Grantee or one of its Subsidiaries,  then, and
in each such case, the agreement  governing such  transaction  shall make proper
provisions  so  that  the  Option  shall,  upon  the  consummation  of any  such
transaction  and upon the terms and  conditions  set forth herein,  be converted
into, or exchanged for, an option (the "Substitute  Option"), at the election of
Grantee,  deemed  granted by either (x) the  Acquiring  Corporation  (as defined
below),  (y) any person that controls the Acquiring  Corporation,  or (z) in the
case of a merger described in clause (ii), the Issuer (in each case, such person
being referred to as the "Substitute Option Issuer").

         (c) The  Substitute  Option  shall have the same  terms as the  Option,
provided that, if the terms of the Substitute Option cannot,  for legal reasons,
be identical to those of the Option,  such terms shall be as similar as possible
and in no event less advantageous to Grantee. The Substitute Option Issuer shall
also enter into an agreement  with the  then-holder or holders of the Substitute
Option in substantially  the same form as this Agreement,  which agreement shall
be applicable to the Substitute Option.

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         (d) The  Substitute  Option  shall be  exercisable  for such  number of
shares of the Substitute  Common Stock (as  hereinafter  defined) as is equal to
the Assigned Value (as hereinafter  defined)  multiplied by the number of shares
of the Issuer  Common  Stock for which the Option was  theretofore  exercisable,
divided by the Average Price (as hereinafter defined). The exercise price of the
Substitute  Option per share of the  Substitute  Common  Stock (the  "Substitute
Purchase  Price")  shall then be equal to the  Purchase  Price  multiplied  by a
fraction  in which the  numerator  is the number of shares of the Issuer  Common
Stock for which the Option was  theretofore  exercisable  and the denominator is
the number of shares for which the Substitute Option is exercisable.

         (e)  The following terms have the meanings indicated:

              (i) "Acquiring Corporation" shall mean the continuing or surviving
     corporation  of a  consolidation  or merger  with  Issuer  (if  other  than
     Issuer),  Issuer in a merger in which Issuer is the continuing or surviving
     person, the corporation that shall acquire all of the outstanding shares of
     Issuer  Common  Stock  pursuant  to a  statutory  share  exchange,  or  the
     transferee  of all or  substantially  all of the  Issuer's  assets  (or the
     assets of its Subsidiaries).

              (ii)"Substitute  Common  Stock" shall mean the common stock issued
     by the Substitute Option Issuer upon exercise of the Substitute Option.

              (iii) "Assigned Value" shall mean the highest of (x) the price per
     share of the Issuer Common Stock at which a Tender Offer or Exchange  Offer
     therefor has been made by any person  (other than  Grantee),  (y) the price
     per share of the Issuer  Common Stock to be paid by any person  (other than
     the  Grantee)  pursuant to an agreement  with  Issuer,  and (z) the highest
     closing  sales price per share of Issuer  Common Stock quoted on the Nasdaq
     National Market System within the six-month  period  immediately  preceding
     the  agreement;  provided,  that in the event of a sale of less than all of
     Issuer's  assets,  the Assigned Value shall be the sum of the price paid in
     such sale for such assets and the  current  market  value of the  remaining
     assets  of Issuer  as  determined  by a  nationally  recognized  investment
     banking  firm  selected  by Grantee  (or by a majority  in  interest of the
     Grantees if there  shall be more than one Grantee (a "Grantee  Majority")),
     divided by the number of shares of the Issuer Common Stock  outstanding  at
     the time of such sale. In the event that an exchange  offer is made for the
     Issuer  Common  Stock or an  agreement  is  entered  into  for a merger  or
     consolidation  involving  consideration  other than cash,  the value of the
     securities or other  property  issuable or  deliverable in exchange for the
     Issuer  Common  Stock  shall  be  determined  by  a  nationally  recognized
     investment  banking  firm  mutually  selected  by Grantee and Issuer (or if
     applicable,  Acquiring  Corporation).  (If  there  shall  be more  than one
     Grantee, any such selection shall be made by a Grantee Majority.)

              (iv)"Average  Price"  shall mean the  average  closing  price of a
     share of the Substitute  Common Stock for the one-year  period  immediately
     preceding

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     effectiveness  of the  consolidation,  merger,  share  exchange  or sale in
     question,  but in no event  higher than the closing  price of the shares of
     the Substitute  Common Stock on the day preceding the effectiveness of such
     consolidation,  merger, share exchange or sale; provided, that if Issuer is
     the issuer of the  Substitute  Option,  the Average Price shall be computed
     with  respect  to a share of common  stock  issued by  Issuer,  the  person
     merging into Issuer or by any company  which  controls or is  controlled by
     such merger person, as Grantee may elect.

         (f) In no event  pursuant to any of the  foregoing  sections  shall the
Substitute  Option be  exercisable  for more than 19.9% of the  aggregate of the
shares of the  Substitute  Common  Stock  outstanding  prior to  exercise of the
Substitute  Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the  aggregate of the shares of  Substitute  Common Stock
but for this clause (f), the Substitute  Option Issuer shall make a cash payment
to Grantee equal to the excess of (i) the value of the Substitute Option without
giving  effect to the  limitation  in this clause (f) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (f). This
difference in value shall be determined  by a nationally  recognized  investment
banking firm selected by Grantee (or a Grantee Majority).

         (g) Issuer shall not enter into any transaction described in subsection
(b) of this  Section 7 unless the Acquiring  Corporation  and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer  hereunder  and take all other  actions that may be necessary so that the
provisions of this Section 7 are given full force and effect  (including,
without  limitation,  any  action  that may be  necessary  so that the shares of
Substitute  Common  Stock  are in no way  distinguishable  from or  have  lesser
economic value than other shares of common stock issued by the Substitute Option
Issuer).

         (h) The provisions of Sections 8, 9, 10 and 11 hereof shall apply, with
appropriate  adjustments,  to  any  securities  for  which  the  Option  becomes
exercisable pursuant to this Section 7 and, as applicable,  references in
such sections to "Issuer,"  "Option," "Purchase Price" and "Issuer Common Stock"
shall be deemed to be  references to  "Substitute  Option  Issuer,"  "Substitute
Option,"   "Substitute   Purchase   Price"  and   "Substitute   Common   Stock,"
respectively.

     8.  REPURCHASE AT THE OPTION OF HOLDER.

         (a) Subject to the last sentence of Section 3(a) hereof, at the
request  of  Holder  at any time  commencing  upon  the  first  occurrence  of a
Repurchase  Event (as  defined  in  Section 8(d))  and  ending 12 months
immediately  thereafter,  Issuer shall repurchase from Holder the Option and all
shares of Issuer Common Stock  purchased by Holder  pursuant hereto with respect
to  which  Holder  then has  beneficial  ownership.  The  date on  which  Holder
exercises its rights under this  Section 8 is referred to as the "Request
Date." Such  repurchase  shall be at an aggregate price (the  "Section 8
Repurchase Consideration") equal to the sum of:

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              (i)   the aggregate Purchase Price paid by Holder for any shares
      of Issuer Common Stock acquired by Holder pursuant to the Option with
      respect to which Holder then has beneficial ownership;

              (ii)  the  excess,  if any, of (x) the  Applicable  Price (as
      defined below) for each share of Issuer Common Stock over (y) the Purchase
      Price (subject to adjustment pursuant to Section 7), multiplied by the
      number of shares of Issuer Common Stock with respect to which the Option
      has not been exercised; and

              (iii) the  excess, if any, of the Applicable Price over the
      Purchase Price (subject to adjustment pursuant to Section 7) paid (or, in
      the case of Option Shares with respect to which the Option has been
      exercised but the Closing Date has not occurred, payable) by Holder for
      each share of Issuer Common Stock with respect to which the Option has
      been exercised and with respect to which Holder then has beneficial
      ownership, multiplied by the number of such shares.

         (b) If Holder  exercises its rights under this Section 8, Issuer shall,
within ten business  days after the Request  Date,  pay the Section 8 Repurchase
Consideration to Holder in immediately  available  funds, and  contemporaneously
with  such  payment  Holder  shall  surrender  to  Issuer  the  Option  and  the
certificates  evidencing the shares of Issuer Common Stock purchased  thereunder
with respect to which  Holder then has  beneficial  ownership,  and Holder shall
warrant that it has sole record and beneficial ownership of such shares and that
the same are then free and clear of all liens, claims,  charges and encumbrances
of any kind whatsoever.  Notwithstanding the foregoing, to the extent that prior
notification  to or the consent or approval of any  governmental  or  regulatory
agency or  authority  is required in  connection  with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for  repurchase  pursuant to Section 8, in whole or
in part, or to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited from paying
and  promptly  file  the  required   notice  or  application  for  approval  and
expeditiously process the same (and each party shall cooperate with the other in
the  filing of any such  notice or  application  and the  obtaining  of any such
approval),  in  which  case the ten  business  day  period  of time  that  would
otherwise run pursuant to the preceding  sentence for the payment of the portion
of the Section 8  Repurchase  Consideration  shall run instead  from the date on
which, as the case may be, any required  notification period has expired or been
terminated  or such  approval  has been  obtained  and,  in  either  event,  any
requisite  waiting period shall have passed.  If any  governmental or regulatory
agency or  authority  disapproves  of any part of Issuer's  proposed  repurchase
pursuant to this  Section 8, Issuer shall  promptly  give notice of such fact to
Holder.  If any  governmental  or regulatory  agency or authority  prohibits the
repurchase  in part but not in whole,  then  Holder  shall have the right (i) to
revoke the repurchase  request or (ii) to the extent permitted by such agency or
authority,  determine  whether the repurchase  should apply to the Option and/or
Option Shares and to what extent to each,  and Holder shall  thereupon  have the
right to  exercise  the Option as to the  number of Option  Shares for which the
Option was  exercisable at the Request Date less the sum of the number of shares
covered  by the Option in respect of which  payment  has

                                       9

<PAGE> 10

been made pursuant to Section  8(a)(ii) and the number of shares  covered by the
portion of the Option (if any) that has been  repurchased.  Holder  shall notify
Issuer of its  determination  under the preceding  sentence within five business
days of receipt of notice of disapproval of the repurchase.

              Notwithstanding  anything herein to the contrary,  all of Holder's
rights under this Section 8 shall terminate on the date of termination of
this Option pursuant to Section 3(a) hereof.

         (c) For purposes of this Agreement,  the  "Applicable  Price" means the
highest of (i) the highest  price per share of Issuer  Common Stock paid for any
such share by the person or groups described in Section 8(d)(i) hereof, (ii) the
price per share of Issuer  Common  Stock  received  by holders of Issuer  Common
Stock in connection  with any merger or other business  combination  transaction
described in Sections 7(b)(i), 7(b)(ii),  7(b)(iii) or 7(b)(iv) hereof, or (iii)
the highest  closing  sales price per share of Issuer Common Stock quoted on the
Nasdaq  National  Market (or if Issuer  Common Stock is not quoted on the Nasdaq
National  Market,  the  highest  bid price per share as quoted on the  principal
trading  market or  securities  exchange  on which  such  shares  are  traded as
reported by a recognized  source  chosen by Holder)  during the 60 business days
preceding the Request Date;  PROVIDED,  HOWEVER,  that in the event of a sale of
less than all of Issuer's  assets,  the Applicable Price shall be the sum of the
price paid in such sale for such  assets  and the  current  market  value of the
remaining assets of Issuer as determined by an independent nationally recognized
investment  banking firm selected by Holder and reasonably  acceptable to Issuer
(which  determination  shall be conclusive for all purposes of this  Agreement),
divided by the number of shares of the Issuer  Common Stock  outstanding  at the
time of such sale. If the consideration to be offered, paid or received pursuant
to either of the foregoing  clauses (i) or (ii) shall be other than in cash, the
value of such consideration  shall be determined in good faith by an independent
nationally  recognized investment banking firm selected by Holder and reasonably
acceptable to Issuer,  which  determination shall be conclusive for all purposes
of this Agreement.

         (d) As used herein,  "Repurchase  Event" shall occur if (i) any
person (other than Grantee or any Subsidiary of Grantee) or "group"  (within the
meaning of the Exchange Act) shall have acquired beneficial  ownership of 50% or
more of the  then-outstanding  shares of Issuer Common Stock, or (ii) any
of the transactions described in Section 7(b)(i),  7(b)(ii), 7(b)(iii) or
7(b)(iv) shall be consummated.

     9.  REGISTRATION RIGHTS.

         (a) For a period  of 24  months  following  termination  of the  Merger
Agreement,  Issuer shall,  subject to the conditions of subsection (c) below, if
requested by any Holder,  including Grantee and any permitted  transferee of the
Option Shares ("Selling Holder"),  as expeditiously as possible prepare and file
a  registration  statement  under the  Securities  Laws if necessary in order to
permit the sale or other disposition of any or all shares of Issuer Common Stock
or other securities that have been acquired by or are issuable to Selling Holder
upon  exercise of the Option in accordance  with the

                                       10

<PAGE> 11

intended  method of sale or other  disposition  stated by the Selling  Holder in
such request,  including,  without limitation,  a "shelf" registration statement
under Rule 415 under the Securities Act or any successor  provision,  and Issuer
shall use its best efforts to qualify such shares or other  securities  for sale
under any applicable state securities laws.

         (b) If Issuer at any time after the exercise of the Option  proposes to
register  any  shares of  Issuer  Common  Stock  under  the  Securities  Laws in
connection  with an  underwritten  public  offering of such Issuer Common Stock,
Issuer will  promptly  give written  notice to Holder of its  intention to do so
and,  upon the written  request of Holder given within 30 days after  receipt of
any such  notice  (which  request  shall  specify the number of shares of Issuer
Common Stock  intended to be included in such  underwritten  public  offering by
Selling Holder),  Issuer will cause all such shares,  the holders of which shall
have  requested  participation  in such  registration,  to be so registered  and
included in such underwritten public offering;  PROVIDED,  that Issuer may elect
to cause any such shares not to be so registered (i) if the underwriters in good
faith object for a valid business reason,  or (ii) in the case of a registration
solely to implement a dividend reinvestment or similar plan, an employee benefit
plan or a registration filed on Form S4 or any successor form, or a registration
filed on a form  which  does  not  permit  registration  of  resales;  PROVIDED,
FURTHER, that such election pursuant to clause (i) may be made only one time. If
some but not all the shares of Issuer Common Stock, with respect to which Issuer
shall have received  requests for registration  pursuant to this subsection (b),
shall  be  excluded  from  such  registration,  Issuer  shall  make  appropriate
allocation of shares to be registered among Selling Holders and any other person
(other  than  Issuer or any  person  exercising  demand  registration  rights in
connection with such  registration)  who or which is permitted to register their
shares of Issuer Common Stock in connection with such  registration  PRO RATA in
the  proportion  that the number of shares  requested to be  registered  by each
Selling Holder bears to the total number of shares requested to be registered by
all persons then desiring to have Issuer Common Stock registered for sale.

         (c) Issuer shall use all reasonable  efforts to cause each registration
statement  referred to in subsection (a) above to become effective and to obtain
all consents or waivers of other parties which are required therefor and to keep
such  registration  statement  effective,  PROVIDED,  that  Issuer may delay any
registration  of Option Shares  required  pursuant to subsection (a) above for a
period  not  exceeding  90 days in the event  that  Issuer  shall in good  faith
determine  that any such  registration  would  adversely  affect an  offering or
contemplated  offering of other  securities  by Issuer,  and Issuer shall not be
required  to  register  Option  Shares  under the  Securities  Laws  pursuant to
subsection (a) above:

              (i)   prior to the occurrence of a Purchase Event;

              (ii)  on more than two occasions;

              (iii) more than once during any calendar year;

                                       11

<PAGE> 12

              (iv)  within  90 days after the effective  date of a  registration
     referred to in subsection (b) above  pursuant to which the Selling  Holders
     concerned  were afforded the  opportunity to register such shares under the
     Securities Laws and such shares were registered as requested; and

              (v) unless a request therefor is made to Issuer by Selling Holders
     holding at least 25% or more of the aggregate  number of Option Shares then
     outstanding.

              In  addition  to the  foregoing,  Issuer  shall not be required to
maintain the effectiveness of any registration statement after the expiration of
nine months from the effective date of such registration statement. Issuer shall
use all reasonable  efforts to make any filings,  and take all steps,  under all
applicable  state  securities laws to the extent necessary to permit the sale or
other  disposition  of the Option Shares so  registered  in accordance  with the
intended method of distribution for such shares, PROVIDED, that Issuer shall not
be required to consent to general  jurisdiction or qualify to do business in any
state where it is not otherwise  required to so consent to such  jurisdiction or
to so qualify to do business.

         (d) Except where applicable  state law prohibits such payments,  Issuer
will  pay  all  expenses   (including  without  limitation   registration  fees,
qualification  fees, blue sky fees and expenses (including the fees and expenses
of counsel),  accounting expenses, legal expenses, including reasonable fees and
expenses of one counsel to the Selling  Holders  whose  Option  Shares are being
registered,  printing expenses,  reasonable expenses of underwriters,  excluding
discounts and commissions but including liability insurance if Issuer so desires
or the  underwriters  so require,  and the  reasonable  fees and expenses of any
necessary  special  experts) in connection  with each  registration  pursuant to
subsection  (a) or (b)  above  (including  the  related  offerings  and sales by
Selling  Holders)  and all other  qualifications,  notifications  or  exemptions
pursuant to subsection (a) or (b) above.  Underwriting discounts and commissions
relating  to Option  Shares  and any other  expenses  incurred  by such  Selling
Holders in connection with any such registration  shall be borne by such Selling
Holders.

         (e) In connection  with any  registration  under  subsection (a) or (b)
above  Issuer  hereby  indemnifies  the Selling  Holders,  and each  underwriter
thereof,  including each person, if any, who controls such holder or underwriter
within the  meaning of  Section 15 of the  Securities  Act,  against all
expenses, losses, claims, damages and liabilities caused by any untrue statement
of a material  fact  contained in any  registration  statement or  prospectus or
notification  or offering  circular  (including  any  amendments or  supplements
thereto)  or any  preliminary  prospectus,  or caused by any  omission  to state
therein a material fact  required to be stated  therein or necessary to make the
statements  therein not  misleading,  except insofar as such  expenses,  losses,
claims,  damages  or  liabilities  of such  indemnified  party are caused by any
untrue  statement or alleged  untrue  statement or omission or alleged  omission
that was included by Issuer in any such registration  statement or prospectus or
notification  or offering  circular  (including  any  amendments or  supplements
thereto) in reliance  upon and in  conformity  with,  information  furnished  in
writing to Issuer by such  indemnified  party  expressly  for use  therein,  and
Issuer and each  officer,  director  and  controlling  person of Issuer shall be
indemnified by such Selling Holder, or by such underwriter,  as the case may be,
for all such expenses,  losses,  claims,  damages and liabilities  caused by any
untrue or alleged  untrue  statement  or omission or alleged  omission  that was
included  by  Issuer  in  any  such  registration  statement  or  prospectus  or
notification  or offering  circular  (including  any  amendments or  supplements
thereto) in reliance  upon,  and in conformity  with,

                                       12

<PAGE> 13

information  furnished in writing to Issuer by such indemnified  party expressly
for use therein, and Issuer and each officer, director and controlling person of
Issuer shall be indemnified by such Selling Holder, or by such  underwriter,  as
the case may be, for all such expenses,  losses, claims, damages and liabilities
caused by any untrue or alleged untrue statement or omission or alleged omission
that was included by Issuer in any such registration  statement or prospectus or
notification  or offering  circular  (including  any  amendments or  supplements
thereto) in reliance  upon,  and in conformity  with,  information  furnished in
writing  to  Issuer  by such  holder  or such  underwriter,  as the case may be,
expressly for such use.

              Promptly upon receipt by a party indemnified under this subsection
(e) of notice of the commencement of any action against such  indemnified  party
in  respect  of which  indemnity  or  reimbursement  may be sought  against  any
indemnifying  party under this  subsection  (e),  such  indemnified  party shall
notify the indemnifying party in writing of the commencement of such action, but
the  failure so to notify the  indemnifying  party  shall not  relieve it of any
liability  which it may  otherwise  have to any  indemnified  party  under  this
subsection (e). In case notice of commencement of any such action shall be given
to the indemnifying  party as above provided,  the  indemnifying  party shall be
entitled  to  participate  in and, to the extent it may wish,  jointly  with any
other  indemnifying  party  similarly  notified,  to assume the  defense of such
action at its own expense,  with counsel chosen by it and  satisfactory  to such
indemnified party. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof,  but the fees
and  expenses of such counsel  (other than  reasonable  costs of  investigation)
shall be paid by the indemnified party unless (i) the indemnifying  party agrees
to pay them,  (ii) the  indemnifying  party  fails to assume the defense of such
action  with  counsel  satisfactory  to the  indemnified  party,  or  (iii)  the
indemnified  party has been advised by counsel  that one or more legal  defenses
may be available to the indemnifying  party that may be contrary to the interest
of the indemnified party, in which case the indemnifying party shall be entitled
to assume the defense of such action notwithstanding its obligation to bear fees
and  expenses of such  counsel.  No  indemnifying  party shall be liable for any
settlement  entered  into  without  its  consent,   which  consent  may  not  be
unreasonably withheld.

              If the  indemnification  provided,  for in this  subsection (e) is
unavailable  to a party  otherwise  entitled to be indemnified in respect of any
expenses,  losses,  claims,  damages or liabilities referred to herein, then the
indemnifying  party, in lieu of indemnifying such party otherwise entitled to be
indemnified,  shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative  benefits  received
by Issuer,  all Selling  Holders and the  underwriters  from the offering of the
securities  and also the relative fault of Issuer,  all Selling  Holders and the
underwriters  in connection  with the statements or omissions  which resulted in
such expenses,  losses,  claims,  damages or  liabilities,  as well as any other
relevant  equitable  considerations.  The amount paid or payable by a party as a
result of the expenses,  losses,  claims,  damages and  liabilities  referred to
above shall be deemed to include any legal or other fees or expenses  reasonably
incurred by such party in connection with  investigating

                                       13

<PAGE> 14

or defending  any action or claim;  PROVIDED,  that in no case shall any Selling
Holder be  responsible,  in the  aggregate,  for any amount in excess of the net
offering proceeds attributable to its Option Shares included in the offering. No
person  guilty of  fraudulent  misrepresentation  (within the meaning of Section
11(f) of the Securities Act) shall be entitled to  contribution  from any person
who was not guilty of such fraudulent  misrepresentation.  Any obligation by any
holder to indemnify shall be several and not joint with other holders.

              In connection with any registration  pursuant to subsection (a) or
(b) above,  Issuer and each Selling Holder (other than Grantee) shall enter into
an agreement containing the indemnification provisions of this subsection (e).

         (f) Issuer shall comply with all reporting requirements and will do all
such other things as may be necessary to permit the expeditious sale at any time
of any Option Shares by the Selling Holders in accordance with and to the extent
permitted by any rule or regulation  promulgated by the Commission  from time to
time,  including,  without  limitation,  Rules 144 and 144A. Issuer shall at its
expense provide the Selling Holders with any information necessary in connection
with the  completion  and filing of any reports or forms required to be filed by
them under the  Securities  Laws, or required  pursuant to any state  securities
laws or the rules of any stock exchange.

         (g) Issuer will pay all stamp taxes in connection with the issuance and
the sale of the Option Shares and in connection with the exercise of the Option,
and will save Holder harmless,  without  limitation as to time,  against any and
all liabilities, with respect to all such taxes.

     10. QUOTATION;  LISTING.  If Issuer Common Stock or any other securities to
be acquired  upon  exercise of the Option are then  authorized  for quotation or
trading  or  listing  on the  Nasdaq  National  Market or any  other  securities
exchange or any automated  quotations  system  maintained  by a  self-regulatory
organization,  Issuer  will  promptly  file  an  application,  if  required,  to
authorize  for quotation or trading or listing the shares of Issuer Common Stock
or other  securities  to be acquired  upon  exercise of the Option on the Nasdaq
National  Market or any other  securities  exchange or any automated  quotations
system  maintained  by a  self-regulatory  organization  and  will  use its best
efforts to obtain approval, if required, of such quotation or listing as soon as
practicable.

     11.  DIVISION OF OPTION.  This Agreement (and the Option granted hereby) is
exchangeable,  without expense,  at the option of Holder,  upon presentation and
surrender  of this  Agreement  at the  principal  office  of  Issuer  for  other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the  aggregate the same number of shares of Issuer Common
Stock purchasable  hereunder.  The terms "Agreement" and "Option" as used herein
include any other  Agreements and related  Options for which this Agreement (and
the Option granted hereby) may be exchanged.  Upon receipt by Issuer of evidence
reasonably  satisfactory to it of the loss, theft,  destruction or mutilation of
this  Agreement,  and (in the case of loss,  theft or destruction) of reasonably
satisfactory  indemnification,  and  upon  surrender

                                       14

<PAGE> 15

and  cancellation  of this  Agreement,  if  mutilated,  Issuer will  execute and
deliver a new Agreement of like tenor and date. Any such new Agreement  executed
and delivered shall constitute an additional  contractual obligation on the part
of Issuer, whether or not the Agreement so lost, stolen,  destroyed or mutilated
shall at any time be enforceable by anyone.

     12. MISCELLANEOUS.

         (A) EXPENSES. Except as otherwise provided, herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions  contemplated hereunder,  including fees and
expenses of its own financial consultants,  investment bankers,  accountants and
counsel.

         (B) WAIVER AND AMENDMENT. Any provision of this Agreement may be waived
at any time by the party that is  entitled to the  benefits  of such  provision.
This Agreement may not be modified, amended, altered or supplemented except upon
the  execution  and  delivery  of a written  agreement  executed  by the parties
hereto.

         (C) ENTIRE AGREEMENT; NO THIRD-PARTY  BENEFICIARY;  SEVERABILITY.  This
Agreement,  together  with the  Merger  Agreement  and the other  documents  and
instruments  referred  to herein and  therein,  between  Grantee  and Issuer (a)
constitutes  the  entire  agreement  and  supersedes  all prior  agreements  and
understandings,  both written and oral,  between the parties with respect to the
subject  matter  hereof and (b) is not  intended to confer upon any person other
than the parties hereto (other than any  transferees of the Option Shares or any
permitted  transferee  of this  Agreement  pursuant to Section 12(h) hereof) any
rights or remedies hereunder. If any term, provision, covenant or restriction of
this  Agreement  is held by a court of  competent  jurisdiction  or a federal or
state  governmental  or  regulatory  agency or authority to be invalid,  void or
unenforceable,   the   remainder  of  the  terms,   provisions,   covenants  and
restrictions  of this Agreement  shall remain in full force and effect and shall
in no way be affected,  impaired or invalidated. If for any reason such court or
regulatory  agency determines that the Option does not permit Holder to acquire,
or does not require  Issuer to  repurchase,  the full number of shares of Issuer
Common  Stock as provided,  in Sections 3 and 8 hereof (as adjusted  pursuant to
Section 7 hereof),  it is the  express  intention  of Issuer to allow  Holder to
acquire or to require  Issuer to repurchase  such lesser number of shares as may
be permissible without any amendment or modification hereof.

         (D) GOVERNING  LAW. This  Agreement  shall be governed by and construed
and enforced in accordance with the laws of the State of North Carolina  without
regard to any applicable  conflicts of law rules,  except to the extent that the
federal laws of the United States shall govern.

         (E) DESCRIPTIVE HEADINGS. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.

                                       15

<PAGE> 16

         (F) NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed  given if  delivered  personally,  telecopied  (with
confirmation)  or  mailed  by  registered  or  certified  mail  (return  receipt
requested) to the parties at the addresses set forth in the Merger Agreement (or
at such other address for a party as shall be specified by like notice).

         (G)  COUNTERPARTS.  This  Agreement  and any  amendments  hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.

         (H) ASSIGNMENT; TRANSFER. Neither this Agreement nor any of the rights,
interests  or  obligations  hereunder  or under the Option  shall be assigned or
transferred  by  any of the  parties  hereto  (whether  by  operation  of law or
otherwise)  without the prior  written  consent of the other party,  except that
Grantee may assign this  Agreement to a wholly owned  subsidiary  of Grantee and
Grantee may assign or transfer  its rights  hereunder  in whole or in part after
the occurrence of a Purchase Event.  In the case of any permitted  assignment or
transfer of the Option,  Issuer shall do all things  necessary to facilitate the
same,  and the Holder to whom the Option is assigned or  transferred  shall make
the  representations  contained in Section 6 hereof (with Holder substituted for
Grantee) and shall agree in writing to the terms and conditions hereof.  Subject
to the preceding  sentence,  this Agreement shall be binding upon,  inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.

         (I) FURTHER  ASSURANCES.  In the event of any exercise of the Option by
Holder,  Issuer and Holder  shall  execute and deliver all other  documents  and
instruments and take all other action that may be reasonably  necessary in order
to consummate the transactions provided, for by such exercise.

         (J) SPECIFIC PERFORMANCE.  The parties hereto agree that this Agreement
may be enforced by either party through specific performance,  injunctive relief
and other equitable relief.  Both parties further agree to waive any requirement
for the securing or posting of any bond in connection  with the obtaining of any
such equitable relief and that this provision is without  prejudice to any other
rights  that the  parties  hereto  may  have for any  failure  to  perform  this
Agreement.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       16

<PAGE> 17

      IN WITNESS  WHEREOF,  Issuer and Grantee  have  caused  this Stock  Option
Agreement to be signed by their respective  officers  thereunto duly authorized,
all as of the day and year first written above.

VIRGINIA CAPITAL BANCSHARES, INC.        BB&T CORPORATION

By: /s/ Samuel C. Harding, Jr.           By: /s/ John A. Allison, IV
    ----------------------------             -----------------------------------
   Name: Samuel C. Harding, Jr.            Name: John A. Allison, IV
         -----------------------                 -------------------------------
     Title: President                        Title: Chairman and Chief Executive
            --------------------                    ----------------------------
                                                    Officer
                                                    -------

                                       17<PAGE>

                                                                 EXHIBIT 10.13

              CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN
               PORTIONS OF THIS DOCUMENT. SUCH PORTIONS HAVE BEEN
            REDACTED AND MARKED WITH ASTERISKS (**). THE NON-REDACTED
                  VERSION OF THIS DOCUMENT HAS BEEN SENT TO THE
                 SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
                   AN APPLICATION FOR CONFIDENTIAL TREATMENT.

                                LICENSE AGREEMENT

                                     Between

                   PHARMACEUTICAL APPLICATIONS ASSOCIATES LLC
                         C. DONALD WILLIAMS, M.D.C.G.P.
                              ROBERT MURDOCK, R.Ph.

                                       and

                      PRAECIS PHARMACEUTICALS INCORPORATED

                           Dated as of: April 15, 1999
<PAGE>

                                TABLE OF CONTENTS

WITNESSETH.................................................................    1

DEFINITIONS................................................................    2

GRANT OF LICENSE...........................................................    7

DEVELOPMENT AND COMMERCIALIZATION..........................................   10

CONSIDERATION..............................................................   12

PATENT PROSECUTION.........................................................   17

THIRD-PARTY INFRINGEMENT...................................................   19

PRODUCT LIABILITY..........................................................   21

REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION............................   21

ASSIGNMENT.................................................................   25

TERM AND TERMINATION.......................................................   26

INFORMATION................................................................   29

PUBLICATIONS...............................................................   32

NOTICES AND OTHER COMMUNICATIONS...........................................   33

DISPUTE RESOLUTION.........................................................   34

MISCELLANEOUS PROVISIONS...................................................   36

EXHIBIT A (U.S. Patent Application No. 3742-901-2-IPROV
and related filings).......................................................  A-1

EXHIBIT B ( List of Individuals and Entities)..............................  B-1

                                        i
<PAGE>

                                LICENSE AGREEMENT

            This Agreement is made and entered into as of the 15th day of April,
1999, (the "Effective Date") by and between Pharmaceutical Applications
Associates LLC, a limited liability company organized and existing under the
laws of the State of [ ] and having its principal office at 402 East Yakima
Avenue, Suite 330, Yakima, Washington 98901-2760 (hereinafter referred to as
"PAA"), C. Donald Williams, M.D.C.G.P. and Robert Murdock, R.Ph., each of whom
is a member of PAA (collectively, the "PAA Principals"), and PRAECIS
PHARMACEUTICALS INCORPORATED, a corporation organized and existing under the
laws of the State of Delaware and having its principal office at One Hampshire
Street, 5th Floor, Cambridge, Massachusetts 02139-1532 (hereinafter referred to
as "Licensee").

                                   WITNESSETH

            WHEREAS, PAA is the sole owner of the Technology (as later defined
herein), and has the right to grant the licenses granted herein with respect to
the Technology;

            WHEREAS, Licensee wishes to acquire certain exclusive license rights
with respect to the Technology for the purpose of developing and commercially
exploiting the Technology, upon the terms and conditions hereinafter set forth;

            WHEREAS, PAA is the sole owner of the Patent Application (as later
defined herein), and has the right to grant the licenses granted herein with
respect to the

<PAGE>

Patent Rights, the Licensed Products and the Licensed Processes (each as later
defined herein), upon the terms and conditions hereinafter set forth; and

            WHEREAS, Licensee desires to obtain a license to the Patent Rights,
the Licensed Products and the Licensed Processes, upon the terms and conditions
hereinafter set forth.

            NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

                                 1 - DEFINITIONS

            For the purposes of this Agreement, the following words and phrases
shall have the following meanings:

            1.1 An "Affiliate" of a party shall mean a company or other entity
which controls, is controlled by, or is under common control with such party. A
corporation or other entity shall be regarded as in control of another
corporation or entity if it owns or directly or indirectly controls more than
fifty percent (50%) of the voting stock or other ownership interest of the other
corporation or entity, or if it possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of the corporation
or other entity or the power to elect or appoint fifty percent (50%) or more of
the members of the governing body of the corporation or other entity.

                                       2
<PAGE>

            1.2 "Developments" shall mean any findings, discoveries, inventions,
additions, modifications, formulations or changes made by or on behalf of either
party during the term of this Agreement which relate to the Technology, any
Licensed Product or any Licensed Process including, without limitation, new or
improved formulations or methods of administration, improvements in clinical
efficacy, improved side effect profiles, new medical indications for any
Licensed Product and improvements in the manufacturing process for any Licensed
Product; provided that Developments shall not include any of the foregoing as to
which Licensee is the owner pursuant to Section 3.3 hereof.

            1.3 "Net Sales" shall mean gross invoiced price for Licensed
Products sold by Licensee or its Affiliates to a Third Party, after deduction of
(i) all customary trade and quantity discounts actually allowed, (ii) allowance
for credits and returns, and (iii) sales, purchase or turnover taxes (if any).
In the event a Licensed Product is sold in combination with one or more
components which are not Licensed Products, Net Sales, for purposes of
determining royalties on such combination sale, will be calculated by
multiplying Net Sales of the combination by the fraction A/(A+B), in which A is
the gross invoiced price of the Licensed Product if sold separately and B is the
invoiced price of the other components in the combination if sold separately. If
the Licensed Products and the other components in the combination are not sold
separately, then Net Sales will be calculated based upon the gross invoiced
price of the combination less (x) the foregoing discounts, allowances and
taxes, if any, and (y) the direct cost of manufacturing the

                                       3
<PAGE>

components that are not Licensed Products. For purposes of this definition as
used throughout this Agreement, and as used in this Section 1.3, any Sublicensee
which sells Licensed Products shall be deemed an Affiliate of Licensee and not a
Third Party. For the avoidance of doubt, subject to the immediately preceding
sentence, Net Sales includes sales of Licensed Products by any Sublicensee to a
Third Party. Unless otherwise required by United Stated generally accepted
accounting principles, "Net Sales" of a Licensed Product shall be recognized on
the earlier of the date of issuance of an invoice in respect of such sale, or
the date of shipment of such Licensed Product, to a Third Party, in either case
by Licensee, its Affiliates or any Sublicensee.

            1.4 "Technology" shall mean and collectively include (i) any and all
inventions, formulas, methods, know-how, plans, processes and products, whether
patentable or not or confidential or not, developed, conceived, discovered or
reduced to practice by or on behalf of PAA, any PAA Principal or their
respective Affiliates, on or before the Effective Date, including, without
limitation, any and all of the foregoing relating to the Patent Application, and
(ii) all tangible work in progress and tangible research materials, including,
without limitation, notebooks, samples, experimental and test results, technical
and non-technical data and specifications, characteristics and designs, whether
patentable or not or confidential or not, relating to the foregoing.

            1.5 "Patent Application" shall mean the United States Patent
Application, together with its related continuations-in-part and counterpart
foreign patent filings, as listed on Exhibit A attached hereto.

                                       4
<PAGE>

            1.6 "Patent Rights" shall mean any and all rights arising from any
and all of the following:

            (a)   United States and foreign patents and/or patent applications
                  derived from or arising out of the Technology, PAA
                  Developments or Work Product (as defined in Section 3.3)
                  including, without limitation, the Patent Application;

            (b)   United States and foreign patents issued from the applications
                  described in (a) above and from divisions, continuations and
                  continuations-in-part of such applications; and

            (c)   any reissues, re-examinations or extensions of the patents and
                  applications described in (a) or (b) above.

            1.7 "Licensed Product" shall mean any product or part thereof in the
Field of Use which (i) is covered in whole or in part by a Valid Claim in the
country in which any such product or part thereof is made, used, sold or
imported; or (ii) embodies, incorporates, is based upon or derived from, or is
manufactured using a Licensed Process.

            1.8 "Licensed Product Launch" in a country shall mean the first
commercial sale (i.e., not for development purposes or in connection with the
obtaining of regulatory approval) of Licensed Product in such a country by
Licensee, its Affiliates, or any Sublicensee to a Third Party subsequent to
regulatory approval of such sale in such country.

            1.9 "Licensed Process" shall mean any method, formula, formulation,
plan or process (including manufacturing process) in the Field of Use (i) which
is covered in whole or in part by a Valid Claim in the country in which such
method, formula,

                                       5
<PAGE>

formulation, plan or process is used or practiced or (ii) which embodies,
incorporates or is based upon or derived from the Technology or the PAA
Developments.

            1.10 "Field of Use" shall mean the management or treatment of any
type of pain or muscular or skeletal discomfort arising from any cause,
including without limitation trauma, diseases such as diabetes, herpes zoster,
arthritis, osteoporosis, cancer, chemotherapy or chemical injury.

            1.11 "Third Party" shall mean any person or entity other than PAA, a
PAA Principal, Licensee and their respective Affiliates, subject, however, to
Section 1.3.

            1.12 "Valid Claim" means a claim within a Patent Right contained in
any (i) unexpired and issued patent that has not been dedicated to the public,
disclaimed, revoked or held invalid by a final unappealable decision or
unappealed decision of a court of competent jurisdiction, or (ii) pending patent
application which has been on file with the applicable patent office for seven
(7) years or less from the date on which the patent application was filed.

            1.13 "IND" shall mean an Investigational New Drug Application or
foreign equivalent.

            1.14 "Sublicensee" shall mean any direct or indirect grantee of any
or all rights granted to Licensee hereunder.

            1.15 "PAA Developments" shall mean any and all Developments created
by or on behalf of PAA.

                                       6
<PAGE>

            1.16 "Licensee Developments" shall mean any and all Developments
created by or on behalf of Licensee.

            1.17 As used herein, unless the context clearly indicates otherwise,
(i) the singular includes the plural and the plural includes the singular; and
(ii) the conjunctive includes the disjunctive and the disjunctive includes the
conjunctive.

                              2 - GRANT OF LICENSE

            2.1 PAA hereby grants to Licensee a worldwide, exclusive (even as
against PAA, subject to Section 2.2) license, with the right to grant
sublicenses, to use the Technology and Developments, to practice under the
Patent Rights, and to make, have made, use, have used, develop, have developed,
offer for sale, sell, have sold, market, have marketed, import and have
imported, Licensed Products, and to use or practice the Licensed Processes, in
each case in the Field of Use. Without limitation of the foregoing, each party
acknowledges and agrees that Licensee shall have the exclusive right for the
duration of the license rights granted pursuant to this Agreement to engage in
development activities with respect to the Technology or any Licensed Product
or Licensed Process, in each case in the Field of Use, and that neither PAA nor
any PAA Principal or their respective Affiliates will engage in any such
development activity, except pursuant to Section 3.3 hereof or a separate
agreement in writing between the parties.

            2.2 PAA and each PAA Principal hereby agrees not to grant any other
license with respect to the Technology, the Patent Rights, the Licensed Products
or the Licensed Processes, except that PAA may grant (i) non-conflicting
licenses (with the

                                       7
<PAGE>

right to grant sublicenses) having terms consistent with this Agreement in the
Technology, Patent Rights and PAA Developments, in each case outside the Field
of Use and (ii) licenses (without the right to grant sublicenses) to each of the
PAA Principals, to use the Technology and PAA Developments and to practice under
the Patent Rights, to use Licensed Products, and to use or practice the Licensed
Processes, in each case in the Field of Use solely for the therapeutic treatment
of individual patients (current or future) in the ordinary course of such PAA
Principal's clinical practice substantially as currently conducted; provided,
however, that (x) Licensee shall have no obligation to provide PAA or any PAA
Principal with any Licensed Products or any documentation or other materials
relating to the Technology, Licensed Products, Licensed Processes or
Developments, except as expressly set forth herein and (y) neither PAA nor any
PAA Principal shall in connection with the exercise of the rights granted under
subsection (ii) represent that it is in any manner affiliated or associated with
Licensee or any Affiliate or Sublicensee and (z) neither PAA nor any PAA
Principal shall in connection with the rights granted under subsection (ii) make
use of any clinical data owned or developed by or on behalf of Licensee or its
Affiliates or Sublicensees. Any and all licenses (or sublicenses) granted
pursuant to this Section 2.2 shall be in writing and shall be submitted for and
subject to Licensee's prior review and written approval, which approval shall
not be withheld unless Licensee determines, in its reasonable judgment, that the
terms of such license (or sublicense) conflict with the terms of this Agreement.
The terms of any such license granted pursuant to clause (i) of this Section 2.2
shall require (and PAA or

                                       8
<PAGE>

the licensing PAA Principal, as applicable, shall enforce such requirement) that
any sublicense, if permitted by such license, shall be subject to prior review
by and written approval of Licensee as provided in this Section 2.2. Licensee
agrees to enter into a reasonable written confidentiality agreement prior to the
disclosure of a license or sublicense for review pursuant to this Section 2.2.

            2.3 PAA and each PAA Principal acknowledges and agrees that it has,
and will have, no rights of any kind with respect to any intellectual property
or work product of any kind owned or created by Licensee in connection with the
development of Licensed Products or otherwise, including without limitation any
Licensee Developments, except as separately agreed in writing by the parties.

            2.4 Each party shall retain all right, title and interest in, and no
license is granted hereunder with respect to, any trademarks, trade names, logos
or similar identifying marks used by it in connection with any Licensed
Products or Licensed Processes, except that Licensee may state that it is
licensed by PAA to the extent provided herein.

            2.5 Any and all sublicenses (including sublicenses granted by any
Affiliate of Licensee or any Sublicensee) granted pursuant to Section 2.1 hereof
shall be in writing and shall be consistent with the terms of this Agreement.
Copies of any and all such sublicenses shall be made available for review by
PAA, subject to PAA's entering into a confidentiality agreement on terms
reasonably satisfactory to Licensee (or the relevant Affiliate of Licensee or
Sublicensee) prior to any such review.

                      3 - DEVELOPMENT AND COMMERCIALIZATION

                                       9
<PAGE>

            3.1 Licensee, at its own cost and expense, shall use commercially
reasonable efforts to bring one or more Licensed Products to market through a
diligent clinical development and commercialization program; provided that
Licensee shall be deemed to have satisfied its obligations under this Section
3.1 if its uses efforts consistent with those which it would use for a product
owned by it which evidences substantially similar clinical and commercial
promise, taking into account Licensee's capital resources and other development
and commercialization commitments and programs.

            3.2 Licensee shall have the sole right, in its own name and at its
own expense, to make any and all regulatory filings and submissions relating to
the development and commercialization of Licensed Products or Licensed
Processes in the Field of Use, including without limitation any IND filings.

            3.3 During the term of this Agreement, PAA, through one or more PAA
Principals, shall provide reasonable consulting services as requested by
Licensee with respect to the Technology and the development of Licensed Products
and Licensed Processes. Such consulting services shall include, without
limitation, disclosing to Licensee all information known by or otherwise in the
possession of PAA or any PAA Principal with respect to any and all aspects of
the Technology, Developments, Licensed Products or Licensed Processes; provided,
however, that no PAA Principal shall be obligated to provide such consulting
services for more than two days in any one month. Such consulting services shall
be compensated at the rate of $** per day or $** per half day, plus
reimbursement for reasonable, documented travel (coach class) and lodging

                                       10
<PAGE>

expenses. The parties agree that Licensee shall own all right, title and
interest in and to any and all inventions, discoveries, intellectual property
and work product resulting from the performance of such consulting services
(including any of the foregoing conceived or discovered by PAA, any PAA
Principal or their respective Affiliates, but excluding intellectual property
claimed in the Patent Application as in effect on the Effective Date or
otherwise disclosed in writing to Licensee by PAA on or prior to the Effective
Date) (collectively, the "Work Product"). For the avoidance of doubt, to the
extent that any Patent Rights arise from the Work Product, Licensee shall pay
royalties as set forth in Article 4 based upon Net Sales of Licensed Products
covered by a Valid Claim that is within such Patent Rights. Licensee shall
grant, and hereby does grant, to PAA a perpetual, non-exclusive, worldwide,
royalty-free, unlimited license, including the right to grant sublicenses, in
Licensee's rights in the Work Product outside the Field of Use. PAA and each PAA
Principal shall execute and deliver to Licensee such instruments of assignment,
releases or other documents as Licensee may request to effect or confirm
Licensee's ownership of the Work Product.

                                4 - CONSIDERATION

            4.1 In order to induce PAA to enter into this Agreement, and in
consideration of the rights and license granted hereunder, subject to the
further provisions of this Article 4, Licensee shall pay or cause to be paid
royalties to PAA during the term of this Agreement as follows:

            (a)   a license issuance fee of ** ($**), which shall be deemed
                  earned and due immediately upon the Effective Date;

                                       11
<PAGE>

            (b)   **% of annual Net Sales up to $**;

            (c)   **% of annual Net Sales between $** and $**;

            (d)   **% of annual Net Sales in excess of $**.

            4.2 The royalty percentages set forth in Section 4.1 shall each be
reduced by ** (so that **% shall instead be **%, **% shall instead be **% and
**% shall instead be **%) at any time and in any country in which Licensee's,
its Affiliates, or any Sublicensees' making, having made, using, having used,
offering for sale, selling or having sold, marketing or having marketed or
importing or having imported a Licensed Product in such country without a
license or sublicense, as applicable, would not infringe a Valid Claim in that
country or a Valid Claim in the country where such Licensed Product is made or a
Valid Claim in the country where such Licensed Product is sold or used. In
addition, Licensee shall be entitled to reduce any royalties owed by it pursuant
to Section 4.1 by an amount equal to the sum of (i) any royalty or other
payments required to be paid by Licensee to any Third Party in order to use,
develop, manufacture or sell any Licensed Product or use or practice the
Technology or any Licensed Process as contemplated hereunder, whether in
connection with settlement of a third-party claim of infringement or otherwise,
and (ii) any and all damages, costs and expenses (including, without limitation,
reasonable attorneys' fees) incurred by Licensee in connection with the defense
of any claim that the intellectual property licensed by it from PAA hereunder
infringes any Third Party's rights, to the extent that such costs are not paid
to Licensee pursuant to the indemnification obligation set forth in Section 8.3
below. Notwithstand-

                                       12
<PAGE>

ing the foregoing, Licensee shall not be entitled to reduce royalties owed
pursuant to Section 4.1 as provided for in this Section 4.2 by more than **
percent (**%) in any quarter, with any amounts by which Licensee would have been
entitled to reduce royalties owed hereunder but for the reaching of such limit
("Unutilized Amounts") being carried forward to future reporting periods. Within
thirty (30) days after the expiration of Licensee's royalty obligation with
respect to a particular country pursuant to Section 4.4, PAA shall reimburse
Licensee in an amount equal to the cumulative Unutilized Amounts for such
country.

            4.3 (i) Royalty payments hereunder are due and payable and shall be
made quarterly, in arrears, within sixty (60) days after the end of each
calendar quarter in which the royalty accrues. All royalty payments shall be in
United States funds. The exchange rate applied, if applicable, shall be the
exchange rate published in the Wall Street Journal on the last business day of
the calendar quarter in which the royalty accrued. Royalty payments shall be
made to PAA by wire transfer to a bank account designated in writing, and shall
be accompanied by mailing to PAA a report, certified to be true and correct by
an officer of Licensee, setting forth, in reasonable detail, the basis on which
such royalty payment was calculated.

      (ii) Royalties in respect of any Net Sales shall accrue at the time of
recognition of such Net Sales as provided in Section 1.3. In no event shall a
royalty be paid on an individual unit of Licensed Product more than once.

                                       13
<PAGE>

      (iii) Licensee shall be responsible for payment to PAA of royalties
accruing on Net Sales by an Affiliate or Sublicensee regardless of whether such
Affiliate or Sublicensee meets its royalty and other obligations, if any, to
Licensee.

      (iv) Licensee agrees to pay interest to PAA on the amount of any
underpayment of royalties from the date payment was due until the date payment
is made. The applicable interest rate will be the average prime rate as
published in the Wall Street Journal plus three percent (3%) during such time.

      (v) In the event Licensee asserts any monetary claim against PAA or any
PAA Principal, PAA hereby agrees and acknowledges that Licensee shall have the
right to set off against any royalty payment when due any amount claimed by
Licensee against PAA or such PAA Principal.

            4.4 The duration of payment of royalties under this Article 4 in any
country shall continue for the longer of (i) ten (10) years from Licensed
Product Launch in that country or (ii) the date of the last to expire Valid
Claim which, except for the license granted hereby, would be infringed by
Licensee making, having made, using, having used, offering for sale or selling
or having offered for sale or sold, marketing or having marketed, or importing
or having imported, Licensed Product in that country. In the case of trade
secrets deemed to be Valid Claims pursuant to Section 5.2, the duration of
payment of royalties shall be as set forth in clause (i) of this Section 4.4.
Licensee's license granted hereunder shall continue in full force and effect and
shall be fully paid up

                                       14
<PAGE>

and royalty free in any country where royalty obligations as provided for in
this Section 4.4 have expired.

            4.5 (i) Licensee shall at all times during the term of this
Agreement keep accurate books of account, and maintain supporting documents,
which show the royalties to which PAA is entitled under this Agreement
(including royalties based upon Net Sales by Affiliates of Licensee and by
Sublicensees). Said books of account and supporting documentation, which shall
be retained by Licensee for at least two (2) years after any termination of this
Agreement, shall be open for audit and inspection during the term of this
Agreement and for a period of two (2) years after any termination of this
Agreement upon reasonable prior written notice by an independent certified
public accountant chosen by PAA and reasonably acceptable to Licensee, at PAA's
expense (except as hereinafter provided with respect to the expense of an audit
and inspection). Such certified public accountant shall have the right to audit
and inspect the books of account and supporting documentation of Licensee in
order to ensure compliance with Licensee's royalty obligations hereunder and
shall, upon execution of a confidentiality agreement on terms reasonably
acceptable to Licensee, have the right to make copies and extracts of said books
of account and supporting documentation and to prepare a written report
(including any such copies or extracts) detailing the results of the audit and
inspection and deliver such written report to PAA and PAA's financial advisors
and attorneys. Audits and inspections shall not take place more than once in
each calendar year and shall be limited

                                       15
<PAGE>

to royalty obligations accruing not more than three (3) years prior to the date
of the audit and inspection.

      (ii) In the event that an audit and inspection reveals that Licensee has
underpaid any royalty due PAA under this Agreement, PAA shall provide Licensee
with written notice of such underpayment and, in addition to any other available
remedy PAA may have, Licensee shall forthwith remit such underpayment to PAA in
the manner prescribed in subsection (i) of Section 4.3 with interest calculated
in accordance with subsection (iv) of Section 4.3. In the event that an audit
and inspection reveal that Licensee has under paid royalties due under this
Agreement by an amount exceeding ten percent (10%) in any twelve (12) month
period, PAA shall provide Licensee with written notice thereof, and in addition
to Licensee's obligation to remit payment in accordance with the preceding
clause (iv) and in addition to any other available remedy PAA may have, the cost
of such audit and inspection shall be payable by Licensee.

            4.6 In the event that Licensee elects, in its sole discretion, to
file an IND in its own name with respect to a Licensed Product, Licensee
shall pay to PAA the sum of fifty thousand dollars ($50,000) within sixty
(60) days of such filing.

                             5 - PATENT PROSECUTION

            5.1 During the term of this Agreement, Licensee shall have the sole
initial right (i) to file such United States and/or foreign patent applications
covering patentable inventions included within the Technology or any
Developments created by or on behalf of PAA as Licensee shall, in its sole
discretion, deem advisable, (ii) to prosecute and

                                       16
<PAGE>

defend all patent applications referred to in clause (i), and (iii) to maintain
in force any patents resulting from such applications. Licensee shall bear all
costs associated with the foregoing filing, prosecution, defense and
maintenance incurred after the Effective Date. Without limitation of the
foregoing, Licensee shall prosecute with reasonable diligence and at its sole
expense the Patent Application, except that Licensee shall not be obligated to
prosecute any divisional resulting from the Patent Application if such
divisional does not include at least one claim with substantial application in
the Field of Use, as determined by Licensee in its reasonable discretion.

            5.2 If Licensee determines not to file any such patent application
after request by PAA, or not to prosecute any such patent application or to
maintain any such patents, Licensee shall timely provide PAA with written notice
of such determination, in which event PAA shall have the right to file or
prosecute such application or maintain such patents entirely at its own expense,
unless Licensee has a reasonable basis for such determination (including,
without limitation, Licensee's preference for keeping the relevant Technology or
Development a trade secret). Licensee's written notice of such determination
shall state the reasonable basis. If the reasonable basis is Licensee's
preference for keeping the relevant Technology or Development a trade secret,
the trade secret shall be identified in the written notice and such Trade Secret
shall become a Valid Claim for purposes of this Agreement. It shall be
unreasonable for Licensee to prefer to keep any Technology or Development a
trade secret if such Technology or Development is not material to the Field of
Use.

                                       17
<PAGE>

            5.3 Each party shall (i) timely advise the other in writing of its
intentions with respect to the filing, prosecution and maintenance of patent
applications and patents as set forth above in order to allow the other the
opportunity to comment thereon, which comments the party shall consider in good
faith, and (ii) at its own expense, provide the other with reasonable assistance
to facilitate the filing, prosecution and maintenance of patent applications and
patents as set forth above, and shall execute all documents which the other
party reasonably deems necessary or desirable therefor. Without limitation of
the foregoing clause (ii), PAA shall, within seven (7) days of the Effective
Date, cause to be delivered to Licensee all prosecution file history and other
documents relating to the Patent Application.

                          6 - THIRD-PARTY INFRINGEMENT

            6.1 Each party shall inform the other promptly in writing if it
becomes aware of any (i) applications for a patent or issued patent that may
conflict with either party's intellectual property rights hereunder or (ii) acts
of infringement or unfair competition by any third party involving such
intellectual property rights, and shall provide the other with any evidence
thereof in its possession or control.

            6.2 During the term of this Agreement, Licensee shall have the
right, but not the obligation, to prosecute and to settle any and all
infringement actions involving the Technology, Developments and/or the Patent
Rights in the Field of Use, provided that if the settlement, consent judgment or
other voluntary final disposition of any such action would affect the rights of
PAA outside the Field of Use, PAA's consent to such settlement

                                       18
<PAGE>

shall be required, such consent not to be unreasonably withheld. In furtherance
of the foregoing right, PAA hereby agrees that PAA will, at Licensee's request
and expense, join as a party plaintiff in any such infringement action. Licensee
shall keep PAA reasonably informed of the litigation strategy and of the status
of the litigation in any such infringement action and consider in good faith
PAA's comments. The entire cost of any such infringement action prosecuted by
Licensee shall be borne by Licensee, and Licensee shall keep any damages and
costs recovered in connection therewith.

            6.3 If within six (6) months after having been notified of any
alleged infringement, Licensee shall have been unsuccessful in persuading the
alleged infringer to desist and shall not have brought and shall not be
diligently prosecuting an infringement action, or if Licensee shall notify PAA
at any time prior thereto of its intention not to bring suit against any such
alleged infringer in the Field of Use, then, and in those events only, PAA shall
have the right, but not the obligation, to prosecute at its own cost and expense
any infringement action involving the Patent Rights, and PAA may, for such
purposes, join Licensee as a plaintiff as necessary to maintain standing. No
settlement, consent judgment or other voluntary final disposition of any such
action may be entered into without the consent of Licensee, which consent shall
not be unreasonably withheld. PAA shall keep any damages and costs recovered in
connection with its prosecution of an infringement action pursuant to this
Section 6.3.

            6.4 In any action brought by either party in accordance with the
foregoing, the other party shall, at the request and expense of the party
bringing such suit,

                                       19
<PAGE>

cooperate in all respects, including, to the extent possible, by having its
employees testify when requested and making available relevant records, papers,
information, samples, specimens, and the like.

                              7 - PRODUCT LIABILITY

      Licensee shall at all times during the term of this Agreement and
thereafter indemnify, defend and hold harmless PAA, its members, stockholders,
directors, officers, employees and Affiliates, and each PAA Principal
(collectively, "Indemnified Persons") against all claims, proceedings, demands
and liabilities of any kind whatsoever, including legal expenses and reasonable
attorneys' fees, arising out of (i) the death of or injury to any person or
persons or out of any damage to property resulting from Licensee's, or any
Affiliate's or Sublicensee's use of the Technology or Developments, practicing
under the Patent Rights, making or having made, using or having used, offering
for sale or selling or having sold, marketing or having marketed or importing or
having imported, any product, or using or practicing any process, except where
attributable to the gross negligence or willful misconduct of any Indemnified
Person.

               8 - REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

            8.1 PAA and each of the PAA Principals, jointly and severally,
represent and warrant to Licensee as follows:

                  (i) Except to the extent licensed to Licensee hereby, as of
      the Effective Date PAA owns the entire right, title and interest in and to
      all intellectual property licensed to Licensee hereunder (the entire
      right, title

                                       20
<PAGE>

      and interest of each of the PAA Principals therein having been duly,
      validly and effectively assigned to PAA pursuant to instruments of
      assignment, copies of which have previously been delivered to Licensee),
      and PAA has all required right, power and authority to grant the licenses
      granted hereunder.

                  (ii) To the best knowledge of PAA and each of the PAA
      Principals, the Technology, Patent Rights and any PAA Developments in
      existence as of the Effective Date do not and will not infringe any third-
      party intellectual property rights when used in accordance with this
      Agreement.

                  (iii) Except as set forth on Exhibit B hereto, there are no
      outstanding options, licenses or agreements of any kind, as of the
      Effective Date, between PAA, any PAA Principal or any Affiliate thereof
      and any Third Party relating to the Technology, the Patent Rights or any
      Licensed Product or Licensed Process.

                  (vi) To the best knowledge of PAA and each of the PAA
      Principals, as of the Effective Date, there is and has been no
      unauthorized use, infringement or misappropriation of any of PAA's
      intellectual property rights in the Technology or the Patent Rights by
      any person or entity.

                  (v) To the best knowledge of PAA and each of the PAA
      Principals, as of the Effective Date, (A) all data describing clinical
      obser-

                                       21
<PAGE>

      vations relating to the Technology or any Licensed Product or Licensed
      Process prepared by or on behalf of PAA or any PAA Principal and
      previously delivered to Licensee are true and correct in all material
      respects, and (B) Licensee has been provided with all material information
      in the possession or control of PAA, any PAA Principal or any Affiliate
      thereof which is reasonably believed by them to be material to Licensee
      entering into this Agreement, and such information does not knowingly
      contain any untrue statement of material fact or knowingly omit to state
      any material fact.

            8.2 Each party represents and warrants to the other parties that (i)
it has the full right, power and authority to enter into this Agreement and to
perform its obligations hereunder, (ii) the execution of this Agreement and the
performance of its obligations hereunder does not and will not conflict with or
result in a breach (including with the passage of time) of any other agreement
to which it is a party, and (iii) this Agreement has been duly executed and
delivered by such party and constitutes the valid and binding agreement of such
party, enforceable against such party in accordance with its terms.

            8.3 PAA and the PAA Principals, jointly and severally, on the one
hand, and Licensee, on the other, shall indemnify and hold harmless the other
against any loss, damages or expense (including, without limitation, reasonable
attorneys' fees) resulting

                                       22
<PAGE>

from any breach of this agreement by such party, including without limitation
any of the representations and warranties of such party contained herein.

            8.4 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, PAA,
ITS MEMBERS, DIRECTORS, OFFICERS, EMPLOYEES, AND AFFILIATES AND EACH PAA
PRINCIPAL MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER
EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANT
ABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF PATENT RIGHTS CLAIMS,
ISSUED OR PENDING, AND THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE OR THAT THE SUBJECT MATTER LICENSED HEREIN CAN BE SUCCESSFULLY
COMMERCIALIZED.

            8.5 IN NO EVENT SHALL A PARTY BE LIABLE HEREUNDER FOR INCIDENTAL OR
CONSEQUENTIAL OR PUNITIVE DAMAGES OF ANY KIND, INCLUDING ECONOMIC DAMAGE OR
INJURY TO PROPERTY AND LOST PROFITS, REGARDLESS OF WHETHER THE PARTY SHALL BE
ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE
POSSIBILITY OF SUCH DAMAGES.

            8.6 PAA and the PAA Principals, jointly and severally, represent and
warrant to, and covenant and agree with, Licensee, that (i) PAA has in place
with each PAA Principal, and will require as a condition of employment of each
PAA employee, agreements assigning to PAA all rights to inventions and other
intellectual property which relate to the Technology and any Developments,
Licensed Product or Licensed Process as are created or discovered by each such
PAA Principal or PAA employee, in the case of each PAA Principal, while a member
of PAA, and, in the case of each PAA employee, while employed by PAA, and (ii)
neither PAA nor any PAA Principal has entered, or will enter, into any agreement
inconsistent with the foregoing.

                                       23
<PAGE>

                                 9 - ASSIGNMENT

            Neither party may assign this Agreement or its rights and
obligations hereunder without the prior, written consent of the other party,
such consent not to be unreasonably withheld; provided, however, that (i) the
foregoing shall not limit or impair in any manner Licensee's right to grant
sublicenses as provided herein, (ii) Licensee may assign this Agreement or its
rights hereunder to an entity which acquires, by sublicense or otherwise, rights
to Licensed Products (provided that in such event Licensee shall continue to be
obligated to perform Licensee's obligations hereunder), and (iii) Licensee or
PAA may assign this Agreement and its rights hereunder to an entity which
acquires or acquires control of its entire business or that part of its business
to which this Agreement relates, whether pursuant to a merger, consolidation,
stock purchase, recapitalization, asset sale or otherwise (provided that in any
such event, Licensee or the successor entity or PAA or the successor entity in
such transaction shall continue to be liable to perform Licensee's or PAA's
obligations hereunder, as the case may be. This Agreement shall inure to the
benefit of and be binding upon the parties and their respective heirs,
executors, administrators, successors and permitted assigns. Notwithstanding any
assignment or anything in the foregoing to the contrary, PAA shall be and remain
solely liable under Section 3.3 hereof.

                                       24
<PAGE>

                            10 - TERM AND TERMINATION

            10.1 The term of this Agreement shall commence on the Effective Date
and, unless sooner terminated as provided in this Article 10, shall expire on a
country-by-country basis on the expiration of Licensee's royalty payment
obligations as provided in Section 4.5.

            10.2 Licensee shall have the right to terminate this Agreement on a
country-by-country basis or in its entirety at any time (for any reason or no
reason) by providing PAA with at least sixty (60) days prior written notice of
termination, such termination to become effective at the expiration of such
sixty (60) day period or such later date as may be specified in such notice.

            10.3 In the event a material breach of this Agreement (including,
without limitation, a material breach of any representation or warranty
contained in Article 8 hereof) by PAA or any PAA Principal on the one hand, or
Licensee on the other, the non-breaching party shall have the right to
terminate this Agreement by providing written notice of such termination to the
breaching party, but only if (i) the non-breaching party shall first have
provided the breaching party with written notice of such breach, specifying the
nature of such breach ("Breach Notice"), (ii) either (A) such breach, by its
nature, cannot be cured within ninety (90) days after receipt of such Breach
Notice or (B) if such breach is curable within such ninety (90) day period, the
breaching party fails to cure such breach within such ninety (90) day period and
(iii) such breach, either alone or in

                                       25
<PAGE>

combination with other uncured breaches as to which Breach Notice has been
given, materially impairs the value of the Agreement as a whole to the
non-breaching party.

            10.4 In the event of termination of this Agreement by Licensee under
Section 10.2 or by PAA under Section 10.3 or 10.8, (i) all licenses granted by
PAA to Licensee hereunder shall terminate, and (ii) at the request of PAA,
Licensee shall assign to PAA all regulatory filings, regulatory approvals and
clinical data owned and controlled by Licensee, and shall deliver to PAA all
documentation in its possession, relating to Licensed Products, Licensed
Processes or any Technology, or, to the extent such assignment is not legally
permissible, Licensee shall grant PAA the right to access, use and cross
reference such filings, approval and data. In the event of termination of this
Agreement by Licensee under Section 10.2, then PAA shall pay Licensee a royalty
upon any sales of Licensed Product which are made by or on behalf of PAA, its
Affiliates or any licensee or sublicensee (or sub-sublicensee) thereof after the
effective date of such termination. The amount of such royalty shall be
consistent with industry standards and shall be determined by mutual agreement
of PAA and Licensee after good faith negotiations; provided, however, that if
PAA and Licensee are unable to reach mutual agreement thereon, the matter shall
be submitted to arbitration generally in accordance with the procedures set
forth in Article 13 of this Agreement, and the arbitrator shall base his/her
decision on the following factors: (i) the value of any assigned filings,
approvals and/or data to the development and commercialization of the Licensed
Product; and (ii) the

                                       26
<PAGE>

relative contributions of the parties to the development and commercialization
of the Licensed Product.

            10.5 In the event of termination of the Agreement by Licensee under
Section 10.3, the rights and licenses granted by PAA to Licensee under this
Agreement shall, at Licensee's option, remain in effect, except that such rights
and licenses shall be on a royalty-free basis.

            10.6 Upon termination of this Agreement for any reason, nothing
herein shall be construed to release either party from performance of any
obligation incurred or liability or payment accrued prior to the effective date
of such termination, and such termination shall be without prejudice to any
remedy that any party may have in addition to those rights as provided under
this Agreement. Articles 7 and 8, this Article 10, Article 11 and Articles 12
through 14 (with respect to such Articles 12 through 14, solely to the extent
applicable to provisions, rights or obligations which survive termination) shall
survive any such termination. Licensee and any permitted Sublicensees may,
however, after the effective date of any such termination, sell any and all
Licensed Products in inventory, and complete and sell any and all Licensed
Products in the process of manufacture, at the effective date of such
termination for a period of one year after the effective date of such
termination, subject to payment of royalties to PAA as herein provided.

            10.7 In the event of termination of this Agreement by Licensee
pursuant to Section 10.3, any and all sublicenses to which a Sublicensee is a
party and which is in

                                       27
<PAGE>

effect as of the effective date of such termination shall continue in full force
and effect, provided that such Sublicensee timely pays all royalties on Net
Sales by such Sublicensee directly to PAA and continues to comply with the other
terms of such sublicense. In the event of termination of the Agreement by either
party for any other reason, any Sublicensee hereunder not then in default shall
have the right to seek a license under reasonable terms and conditions from PAA,
which license PAA agrees to negotiate in good faith.

            10.8 In the event that Licensee does not file an IND within three
(3) years of the Effective Date of this Agreement, PAA shall have the right to
terminate this Agreement upon thirty (30) days written notice to Licensee.

            10.9 In the event that Licensee alleges in a proceeding in a court
or tribunal of competent jurisdiction or in an arbitration that any patent or
patent claim within the Patent Rights is invalid or unenforceable, PAA shall
have the right to terminate this Agreement upon thirty (30) days written notice
to Licensee.

                                11 - INFORMATION

            11.1 As a result of the exercise of the rights and performance of
the obligations under this Agreement, each party (the "disclosing party") may
disclose to the other party (the "receiving party"), or the receiving party may
obtain access to, proprietary and confidential information of the disclosing
party.

            11.2 Information shall be considered proprietary and confidential
only if (i) it is in written or other tangible form and is marked as being the
confidential informa-

                                       28
<PAGE>

tion of the disclosing party or (ii) if disclosed verbally, it is reduced to
written form, marked as the confidential information of the disclosing party,
and transmitted to the receiving party within one week of the verbal disclosure
(individually and collectively, "Information").

            11.3 Each party acknowledges the confidential character of the
Information and agrees that the Information is the valuable property of the
disclosing party. The receiving party agrees not to use any Information for any
purpose or disclose Information to any Third Party (other than a party's
officers, directors, members, employees, stock holders, attorneys, financial
advisors and other representatives), except as permitted by or in the
performance of this Agreement.

            11.4 PAA further agrees to take reasonable measures which are
designed to ensure the continued secrecy of Information disclosed by it to
Licensee hereunder, subject to the exceptions contained in clauses (i) and
(ii)(A) of Section 11.5; provided that for purposes of this Section 11.4, (1)
the exception contained in clause (i)(C) of Section 11.5 shall apply only if
such Information entering into the public domain was not the result of action by
PAA or a PAA Principal or was in accordance with Section 12 and (2) references
in clause (ii)(A) of Section 11.5 to the "receiving party" shall be deemed to
refer to PAA.

            11.5 The acknowledgments, agreements, and restrictions set forth in
the preceding provisions of this Article 11 shall not (i) apply to any
Information which (A) was rightfully in the receiving party's possession, as
evidenced by written records, prior

                                       29
<PAGE>

to the date of this Agreement (other than by disclosure from the disclosing
party), without similar restrictions, (B) was disclosed to the receiving party
by a Third Party (without actual knowledge of the receiving party that such
disclosure was in breach of a duty of confidentiality of such Third Party), (C)
entered into the public domain without a breach of this Agreement, or (D) the
receiving party determines in good faith must be disclosed to comply with law or
an order or request of a governmental body, or (ii) (A) prevent Licensee or PAA,
upon and subject to the terms of this Agreement, from preparing, filing,
prosecuting or maintaining any patent applications or its resulting patents
related to the Technology, Licensed Products or Licensed Processes, (B) prevent
Licensee, its Affiliates or any Sublicensee (1) from disclosing Information to
persons or entities working on their behalf or to governmental agencies, to the
extent Licensee or such other persons or entities reasonably believe is required
or desirable to secure any government approval for the development, manufacture,
marketing or sale of any Licensed Product, or (2) upon imminent approval or
actual approval for registration by a governmental agency in a country of a drug
application for any Licensed Product, from disclosing Information to the extent
reasonably necessary to promote the use, marketing or sale of Licensed Product
in that country or (C) prevent Licensee or its Affiliates from disclosing
Information which Licensee determines in good faith is required by law or
reasonably necessary in connection with any financing, strategic transaction,
acquisition or disposition involving Licensee or any Affiliate thereof.

                                12 - PUBLICATIONS

                                       30
<PAGE>

      During the term of the Agreement, the following restrictions shall apply
with respect to disclosure by PAA or any PAA Principal or Affiliate (the
"Publishing Party") in any publication or presentation, in oral or written form,
of information or data relating to the Technology (collectively,
"Publications"):

            (a)   The Publishing Party shall provide Licensee with a copy of any
                  proposed Publication at least forty-five (45) days prior to
                  submission for publication (or presentation) so as to provide
                  Licensee with the opportunity to recommend any changes it
                  deems necessary to continue to maintain the confidentiality
                  of information or data disclosed by Licensee to the Publishing
                  Party in accordance with the requirements of this Agreement.
                  The incorporation of such recommended changes shall not be
                  unreasonably refused; and

            (b)   If Licensee notifies the Publishing Party ("Notice") within
                  thirty (30) days of receipt of the copy of the proposed
                  Publication that such Publication, in its reasonable judgment
                  (i) contains an invention for which Licensee desires to (and
                  is hereunder entitled to) pursue patent protection, or (ii)
                  could be expected to have a material adverse effect on the
                  commercial value of the information or data contained therein,
                  of any Information disclosed to Licensee hereunder or of any
                  aspect of the Technology disclosed to Licensee or licensed
                  hereunder, the Publishing Party shall prevent such

                                       31
<PAGE>

                  publication (or presentation) or delay such publication (or
                  presentation) for a reasonable period of time as specified by
                  Licensee. In the case of inventions, such delay shall be for a
                  period of time sufficient to permit the timely preparation and
                  filing of a patent application or applications on the
                  invention, and in no event less than one hundred eighty (180)
                  days from the date of Notice. Any dispute or disagreement
                  under this subsection (b) may be submitted to arbitration in
                  accordance with the procedures set forth in Article 14 hereof.

                      13 - NOTICES AND OTHER COMMUNICATIONS

      Any notice or communication (including invoices) required to be given
hereunder shall be in writing and shall be considered properly given (a) on the
date delivered or sent if personally delivered against written receipt, (b) on
the date of receipt if sent by certified or registered mail, or (c) on the date
of receipt if sent by overnight mail or reputable over night courier, as
follows:

            If to PAA or any PAA Principal:

                  PHARMACEUTICAL APPLICATIONS ASSOCIATES, LLC
                  402 East Yakima Avenue, Suite 330
                  Yakima, Washington 98901-2755
                  Attn: C. Donald Williams
                  Facsimile: (509) 454-3295

or such other address (and/or facsimile number) that PAA may advise in writing
in accordance with this Article 12;

                                       32
<PAGE>

            If to Licensee:

                  PRAECIS PHARMACEUTICALS INCORPORATED
                  1 Hampshire Street
                  Cambridge, Massachusetts 02139
                  Attn.: Vice President of Corporate Development
                  Facsimile: (617) 494-8414

or such other address (and/or facsimile number) that Licensee may advise in
writing in accordance with this Article 12.

                             14 - DISPUTE RESOLUTION

            14.1 Unless otherwise explicitly set forth in this Agreement, in the
event that the parties are unable to resolve any dispute, controversy or claim
arising out of, or in relation to this Agreement, or the breach, termination or
invalidity thereof (collectively "Issue"), the parties shall first refer such
Issue to the respective Chief Executive Officers of Licensee and PAA. In the
event that such Issue cannot be resolved by these individuals after a good
faith discussion to resolve the Issue, then either party may initiate
arbitration in Boston, Massachusetts in accordance with this subsection under
the guidelines of the American Arbitration Association ("AAA") and the
commercial rules then in effect for AAA, except as otherwise provided for
herein.

            14.2 A party shall notify the other in writing should it intend to
initiate arbitration. The parties shall select, by mutual agreement, one
arbitrator within a time period of thirty (30) days after receipt of such
notice. Should no arbitrator be chosen within the above period, the AAA shall
appoint the arbitrator within thirty (30) days after the end of such period.

                                       33
<PAGE>

            14.3 Unless otherwise agreed to by the parties, the arbitrator shall
make such decision based on the following factors in descending order of
importance: (a) consistency with the provisions of this Agreement; (b)
consistency with the intent of the parties as reflected in this Agreement; and
(c) customary and reasonable provisions included in comparable agreements. The
decision of the arbitrator will be binding upon the parties without the right of
appeal, and judgment upon the decision rendered by the arbitrator may be entered
in any court having jurisdiction thereof.

            14.4 The parties shall share equally the reasonable documented cost
of such arbitration proceeding. Each party shall be responsible for its own
costs and expenses in any such arbitration proceeding.

                          15 - MISCELLANEOUS PROVISIONS

            15.1 This Agreement shall be construed, governed, interpreted and
applied in accordance with the laws of The Commonwealth of Massachusetts,
without giving effect to its conflicts of law principles, except that questions
affecting the construction and effect of any patent shall be determined by the
law of the country in which the patent was granted.

            15.2 The parties hereto acknowledge that this Agreement (including
its Exhibits) sets forth the entire Agreement and understanding of the parties
with respect to the subject matter hereof, and shall not be subject to any
change or modification except by the execution of a written instrument
subscribed to by Licensee and PAA.

                                       34
<PAGE>

            15.3 The invalidity or enforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, each of which shall remain in full force and effect. In
addition, any such invalid or unenforceable provision shall be deemed amended or
replaced with a provision that is valid and enforceable which achieves, to the
fullest extent possible, the original objectives and intent of the parties as
reflected in the offending provision.

            15.4 Licensee agrees to mark the Licensed Products sold in the
United States with all applicable United States patent numbers. All Licensed
Products shipped to or sold in other countries shall be marked in such manner as
to conform with the patent laws and practices of the country of manufacture
and/or sale.

            15.5 The failure of either party to assert a right hereunder or to
insist upon compliance with any term or condition of this Agreement shall not
constitute a waiver of that right or excuse a subsequent failure to perform any
such term or condition by the other party.

            15.6 Nothing herein shall be deemed to constitute either party as
the agent or representative of the other party. Each party shall be an
independent contractor, not an employee or partner of the other party. Each
party shall be responsible for the conduct of activities at its own facilities
and for any liabilities resulting therefrom. Neither party shall be responsible
for the acts or omissions of the other party, and neither party will have
authority or represent to have authority to speak for, represent or obligate the
other party in any way without prior written authority from the other party.

                                       35
<PAGE>

            15.7 No party will disclose the terms or conditions of this
Agreement to any Third Party (other than a party's officers, directors, members,
employees, stockholders, attorneys, financial advisors and other
representatives) or issue any press release relating to the terms and conditions
of this Agreement for any purpose, without the prior written consent of the
other party except as required by law (including without limitation upon order
or request of any regulatory agency or commission of competent jurisdiction);
provided that such consent will not be unreasonably withheld and shall not be
required for any such disclosure by Licensee which Licensee determines in good
faith is required by law or reasonably necessary in connection with any
financing, strategic transaction, acquisition or disposition involving Licensee.
The restriction on disclosure contained herein shall not apply to any
information which is essentially identical to that contained in a previous
disclosure authorized hereunder.

            15.8 In the event that PAA shall become insolvent, shall make an
assignment for the benefit of creditors, or shall have a petition in bankruptcy
filed for or against it (which, in the case of an involuntary petition, is not
dismissed or stayed within sixty (60) days after such petition is filed), all
rights and licenses granted under or pursuant to this Agreement by PAA to
Licensee are, and shall otherwise be deemed to be, for purposes of Section
365(n) of Title 11, US Code (the "Bankruptcy Code"), licenses of rights to
"intellectual property" as defined under Section 101(60) of the Bankruptcy Code.
The parties agree that Licensee, as a licensee of such rights under this
Agreement,

                                       36
<PAGE>

shall retain and may fully exercise all of its rights and elections under the
Bankruptcy Code, subject to the continued performance of its obligations under
this Agreement.

            15.9 The waiver by a party of a breach or a default of any provision
of this Agreement by the other party shall not be construed as a waiver of any
succeeding breach of the same or any other provision, nor shall any delay or
omission on the part of a party to exercise or avail itself of any right, power
or privilege that it has or may have hereunder operate as a waiver of any right,
power or privilege by such party.

            15.10 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.

            15.11 Each of the parties hereto covenants and agrees that at all
times hereafter it will execute, acknowledge and deliver all such instruments
and documents which may be necessary, or with the other party may reasonably
request, to effectuate the rights and perform the obligations contemplated by
this Agreement.

                                       37
<PAGE>

            IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first written above.

                                        PRAECIS PHARMACEUTICALS
                                        INCORPORATED

                                        /s/ Mark A. Silver
                                        ----------------------------------------
                                        Mark A. Silver
                                        Vice President of Corporate Development

                                        /s/ William L. Kubasek
                                        ----------------------------------------
                                        William L. Kubasek
                                        Director of Business Development

                                        PHARMACEUTICAL APPLICATIONS
                                        ASSOCIATES LLC

                                        /s/ C. Donald Williams
                                        ----------------------------------------
                                        By:  C. Donald Williams
                                        Its: President

                                        /s/ C. Donald Williams
                                        ----------------------------------------
                                        C. Donald Williams, M.D., C.G.P.

                                        /s/ Robert Murdock
                                        ----------------------------------------
                                        Robert Murdock, R.Ph.

                                       38
<PAGE>

                                                                       EXHIBIT A

        U.S. Patent Application No. 3742-901-2-IPROV and related filings.

                                       A-1
<PAGE>

                                                                       EXHIBIT B

PAA has entered into Confidentiality Agreements with each of the following
individuals and entities:

            **
            **
            **
            **
            **
            **
            **
            **
            **
            **
            **
            **
            **
            **
            **
            **
            **
            **
            **
            **
            **
            **
            **
            **
            **
            **

PAA has not entered into any license agreements relating to the Technology, the
Patent Rights, or any Licensed Product or Licensed Process.

                                       B-1

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