Document:

Exhibit 10.18

 

CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY

WITH THE SECURITIES AND EXCHANGE COMMISSION.

ASTERISKS (*) DENOTE SUCH OMISSIONS.

 

LETTER AGREEMENT

 

This Letter Agreement (this “Agreement”)
dated as of January 6, 2006, is entered by and between:

 

UCB S.A., Bioproducts Division,
with registered offices at Allée de la Recherche, 60, 1070 Brussels, Belgium,
hereafter “UCB”

 

and

 

PRAECIS PHARMACEUTICALS
INCORPORATED, with registered offices at
830 Winter Street, Waltham, Massachusetts 02451, hereafter “Praecis”

 

Hereafter individually referred to as a “Party”
and jointly as the “Parties”

 

Whereas, on June 21, 2000, UCB and Amgen Inc. (“AMGEN”) executed a contract for
the development and supply of bulk API for a compound identified as Abarelix (the
“Original Agreement”), as assigned by AMGEN to Praecis effective on December 17,
2001 and as amended by Amendment No. 1
dated as of March 26, 2002 (“Amendment No. 1”) and Amendment No. 2 dated as of August 30,
2004 (“Amendment No. 2”) (the Original Agreement, as so amended by
Amendments No. 1 and 2, the “Development and Supply Agreement”); and

 

Whereas, in connection with
the Development and Supply Agreement, UCB agreed to commence certain process
development activities which are the subject of several scopes of work (the “Process
Improvements”) and Praecis agreed to pay UCB for the Process Improvements upon
completion of such activities; and

 

Whereas, pursuant to Section C.1.
of Exhibit A of the Development and Supply Agreement entitled “Supply of
Product in 2005” (which Section was added pursuant to Amendment No. 2),
Praecis committed to purchase *** of API during
2005 (the “2005 Manufacturing Campaign”), a portion of which was paid for at
the end of 2004 and the remainder of which shall be due upon the later of December 31,
2005 and the delivery by UCB of the *** to Praecis;
and

 

Whereas, Praecis is now requesting UCB, and
UCB agrees, each subject to the terms and conditions of this Letter Agreement, to suspend the
Process Improvements and the 2005 Manufacturing Campaign;

 

NOW, THEREFORE, in consideration of
the foregoing and the agreements contained herein, and intending to be legally
bound, the Parties have agreed as follows:

 

 

ARTICLE 1 – SUSPENSION OF ACTIVITIES

 

1.1           UCB shall immediately suspend the Process Improvements
and shall issue to Praecis, within ninety (90) days of the date hereof, a
comprehensive status report on such Process Improvements.  In consideration of such suspension, Praecis
shall pay UCB, on the date hereof, one hundred and thirty thousand dollars (USD
130,000) for the work completed to date on such Process Improvements.

 

1.2           Praecis may elect to resume the Process Improvements (as
described in the previously agreed upon scopes of work relating to such Process
Improvements) at any time prior to December 31, 2007 by providing written
notice to UCB of such election. Upon completion of such Process Improvements and
release of the final development report, Praecis shall pay UCB an additional eighty
four thousand dollars (USD 84,000), representing the remaining amount due for
the Process Improvements.

 

1.3           UCB shall immediately suspend the 2005 Manufacturing
Campaign at an intermediate stage where the future quality of the product is
not jeopardized and shall store until December 31, 2007, at no charge to
Praecis, the inventory of process intermediates in appropriate GMP conditions
maintaining the quality and security of such process intermediates. UCB shall
issue to Praecis, within ninety (90) days of the date hereof, a comprehensive
status report on the 2005 Manufacturing Campaign.  In consideration of such suspension, Praecis
shall pay UCB, on the date hereof, one million five hundred thousand dollars
(USD 1,500,000) for the work completed to date on the 2005 Manufacturing
Campaign.  Upon such payment, title to
the process intermediates shall pass to Praecis.

 

1.4           Praecis may elect to resume the 2005 Manufacturing Campaign
at any time prior to December 31, 2007 by providing written notice to UCB
of such election.  Upon completion of the
2005 Manufacturing Campaign and receipt by Praecis of the certificate of
analysis and batch record in accordance with the terms of the Development and
Supply Agreement, Praecis shall pay UCB an additional six hundred thousand
dollars (USD 600,000), representing the remaining amount due for the 2005
Manufacturing Campaign.

 

1.5           For the avoidance of doubt, UCB is responsible to
ensure that there is sufficient GMP process intermediate inventory necessary to
complete the 2005 Manufacturing Campaign. 
If there are any discrepancies, both Parties, in good faith, will
reconcile the final quantity delivered to Praecis against the agreed upon
purchase price.

 

1.6           Should Praecis elect to resume either the Process
Improvements or the 2005 Manufacturing Campaign, or both programs, at any time
prior to December 31, 2007, the Parties will define together the best
possible timeline and format towards reinitiating either or both such programs.

 

1.7           If Praecis elects not to resume the Process
Improvements and/or the 2005 Manufacturing Campaign by December 31, 2007,
UCB’s shall be relieved of all further obligations with respect to such
suspended program(s).  Praecis shall, in
its discretion and at its own costs, take possession of or dispose of or have
UCB

 

 

dispose of all process intermediates stored by UCB in
connection with the suspension of the 2005 Manufacturing Campaign.

 

1.8           Except as specifically set forth herein, all terms and
conditions of the Development and Supply Agreement shall remain in full force
and effect.

 

ARTICLE 2
- MISCELLANEOUS

 

2.1           Capitalized terms
used in this Agreement and not otherwise defined shall have the meanings
ascribed to such terms in the Development and Supply Agreement.

 

2.2           This Agreement shall
be binding on and inure to the benefit of the Parties, their subsidiaries,
affiliates, officers, directors, related companies, representatives, successors
and assigns.

 

2.3           This Agreement shall effect the modifications
to the Development and Supply Agreement provided for herein. All other provisions
of the Development and Supply Agreement not modified hereby shall remain in
full force and effect.

 

2.4           No amendment or
variation of this Agreement shall be valid and effective unless in writing and
signed by or on behalf of both Parties.

 

2.5           Each Party shall
promptly, without further consideration, execute, and take such other actions,
as the other Party may reasonably request, to carry out the transactions
contemplated by this Agreement.

 

2.6           This Agreement
contains the entire agreement and understanding of the Parties with respect to
its subject matter, and supersedes any and all other written or oral contract,
understanding, negotiation or arrangement between the Parties relating to said
subject matter.

 

2.7           This Agreement is
governed by the laws of the state of New York, U.S.A., without giving effect to
that state’s choice of law doctrine. Both Parties consent to the exclusive
jurisdiction of the Courts of New York, both state and federal.

 

2.8           This Agreement may be executed in counterparts,
each of which, when so executed and delivered, will be deemed an original and
which shall together constitute one and the same instrument.  Signatures delivered by facsimile or e-mail
shall be enforceable as originals.

 

[Remainder of this page intentionally
left blank. Signature Page Follows.]

 

 

IN WITNESS WHEREOF, the Parties
have caused this Agreement to be signed by their duly authorized
representatives in two counterparts.

 

 

	
  UCB S.A.

  	
   

  	
   

  	
   

  	
  PRAECIS PHARMACEUTICALS

  INCORPORATED

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  /s/ Alain Scarso

  	
   

  	
   

  	
   

  	
  /s/ Kevin F. McLaughlin

  	
   

  
	
  Name:

  	
   

  	
  Alain Scarso

  	
   

  	
  Name:

  	
  Kevin F. McLaughlin

  
	
  Title:

  	
  Vice President

  	
   

  	
  Title:

  	
  President and Chief

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Executive Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  /s/ Andre’ Jordens

  	
   

  	
   

  	
   

  	
  /s/ Edward C. English

  	
   

  
	
  Name:

  	
   

  	
  André Jordens

  	
   

  	
  Name:

  	
  Edward C. English

  
	
  Title:

  	
   

  	
  President

  	
   

  	
  Title:

  	
  Vice President and Chief

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Financial OfficerExhibiot 10.20

 

	
   

  	
  EXECUTION

  
	
   

  	
  COPY

  

 

SETTLEMENT AGREEMENT AND MUTUAL
GENERAL RELEASE

 

This Settlement Agreement and Mutual General Release
(hereinafter referred to as this “Release Agreement”) is entered into as of the
19th day of October, 2005 by and between PRAECIS PHARMACEUTICALS, INC., a
corporation organized and existing under the laws of the State of Delaware
having its principal place of business at 830 Winter Street, Waltham,
Massachusetts 02451, USA (hereinafter referred to as “Praecis”) and SCHERING
AG, a corporation organized and existing under the laws of Germany having its
principal place of business at 13442 Berlin, Germany (hereinafter referred to
as “Schering”), who may be referred to individually herein as a “Party” and
collectively as the “Parties”

 

WITNESSETH:

 

WHEREAS, Praecis and Schering had entered into a
License, Supply and Distribution Agreement dated April 27, 2004 (the “Agreement”)
for the pharmaceutical product(s) containing an active ingredient known as “PPI-149”,
defined as the “Product” in the Agreement, and marketed under the Praecis
trademark of PLENAXIS®;

 

WHEREAS the Parties wish to terminate the Agreement and
release each other from any and all claims arising thereunder;

 

NOW THEREFORE, in consideration of the foregoing
recitals and the mutual covenants and agreements contained herein, and for
other valuable consideration, the Parties, intending to be legally bound, do
agree as follows:

 

1.                                      Definitions

 

All capitalized terms, unless defined herein, shall
have the meanings ascribed to them as set forth in the Agreement.

 

2.                                      Termination of Agreement

 

The Agreement is terminated in its entirety and in
all countries by Schering pursuant to Section 16.2(a) effective September 28,
2005. As the Parties acknowledge that the Agreement has been validly terminated
in its entirety, Praecis shall be entitled to Develop, manufacture and Commercialize
the Product in any and all countries in the Territory.

 

 

3.                                      Reversion of Licenses

 

Any and all rights and licenses in or with respect
to the Product that were granted to Schering in the Agreement have reverted
back to Praecis, effective September 28, 2005.

 

4.                                      Settlement Payment

 

No later than 16:00 Central European Time five (5) business
days after Schering receives an executed copy of this Release Agreement by fax
or email, Schering shall pay to Praecis the sum of $4,000,000.00 (Four Million
U.S. Dollars) (hereinafter referred to as the “Settlement Payment”) by wire transfer
to Praecis’ account in accordance with the following wire transfer instructions:

 

UBS AG

ABA number 026007993

UBS Financial Services Inc.

Account number XXX-XX-XXXXXX-000

F/C PRAECIS Pharmaceuticals Inc.

Praecis’ account number CP-XXXXX

 

5.                                      Extinguishment of Schering’s
Payment Obligations

 

Upon Praecis’ receipt of the Settlement Payment,
Schering shall have no further obligation to pay Praecis any Milestone Payments
under Article VIII  and/or Schedule 8.1
of the Agreement and/or any other provision under the Agreement and/or any
other compensation regardless of whether any additional “Events” for Milestone
Payments occur before Praecis’ receipt of the Settlement Payment. Upon receipt
of the Settlement Payment, Praecis agrees that it shall not seek any further
payment or other compensation from Schering. Schering shall have no
responsibility for income taxes or other taxes, if any, that may be payable
by Praecis as a result of the receipt of the Settlement Payment by Praecis, and
any such tax liability shall be the responsibility of Praecis.

 

6.                                      General Releases

 

(a)                                  Schering’s Release.

 

In consideration for the covenants stated herein,
Schering hereby fully releases, remises, acquits and forever discharges
Praecis and its parents, subsidiaries, affiliates, and all their agents,
servants, heirs, administrators, executors, insurers, employees, officers,
directors, shareholders, legal representatives and all other related entities,
predecessors, successors and assigns from any

 

2

 

and all claims, demands,
judgments, damages, liabilities, costs or expenses (including attorney’s fees
or court costs), actions or causes of action at
law or in equity, whether based in contract, tort, statute, regulation or any
other legal or equitable theory of recovery, whether direct or indirect, whether
known or unknown, whether presently discoverable or undiscoverable, whether
suspected or claimed, arisen or yet to arise, which it ever had, now has or may in the future have against Praecis by reason of
any matter, cause or thing whatsoever arising on or before the date of this
Release Agreement and in any way related to the Agreement and/or the manufacture,
Commercialization, Development, Improvement, Marketing Authorization
Application, Licensed Activities, supply and/or distribution of the Product, excluding
claims, actions or causes of action under this Release Agreement.

 

(b)                                  Praecis’ Release.

 

Effective upon its receipt of the aforementioned Settlement
Payment, Praecis hereby fully releases, remises, acquits and forever
discharges Schering and its parents, subsidiaries, affiliates, and all their
agents, servants, heirs, administrators, executors, insurers, employees,
officers, directors, shareholders, legal representatives and all other related
entities, predecessors, successors and assigns from any and all claims,
demands, judgments, damages, liabilities, costs or expenses (including attorney’s
fees or court costs), actions or
causes of action at law or in equity, whether based in contract, tort, statute,
regulation or any other legal or equitable theory of recovery, whether direct
or indirect, whether known or unknown, whether presently discoverable or
undiscoverable, whether suspected or claimed, arisen or yet to arise, which it
ever had, now has or may in the future have
against Schering by reason of any matter, cause or thing whatsoever arising on
or before the date of this Release Agreement and in any way related to the Agreement
and/or the manufacture, Commercialization, Development, Improvement, Marketing
Authorization Application, licensing, supply and/or distribution of the Product,
excluding claims, actions or causes of action under this Release Agreement.

 

7.                                      Confidentiality

 

The terms and conditions of this Release Agreement
shall be confidential and shall be subject to the Confidentiality obligations
of the Parties set forth in Article XII of the Agreement, which terms
shall survive termination.

 

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8.                                      No Admission of Liability

 

This Release
Agreement and the Settlement Payment represent a compromise and settlement of
the dispute and are not an admission of liability on the part of either
Party, nor an admission that either Party bears any fault or concedes any point,
and is solely for the purpose of avoiding the expense and inconvenience of litigation
and terminating the Agreement.

 

9.                                      Advice
of Counsel.

 

Each
party has had the opportunity to obtain the advice of counsel with respect to
this Release Agreement, and in executing this Release Agreement, there was no
promise or representation made other than as set forth herein.

 

10.                               Binding
on Successors and Assigns.

 

This
Release Agreement shall be binding upon and inure to the benefit of each Party’s
respective successors and assigns.

 

11.                               Execution
in Counterparts.

 

This document may be executed in counterparts. Signatures
delivered by facsimile or email shall be enforceable as originals.

 

12.                               Termination.

 

If Praecis has not received the Settlement Payment
by 12:00 noon (Boston time) on Thursday, October 27, 2005, Praecis may, by
notice to Schering, terminate this Release Agreement whereupon this Release
Agreement shall be void ab  initio and without any force or
effect.

 

13.                               Governing Law; Jurisdiction.

 

The provisions of Section 18.12 of the
Agreement shall apply to this Release Agreement.

 

[Remainder of this page intentionally
left blank; Signature Page Follows]

 

4

 

IN WITNESS WHEREOF, Schering and Praecis have caused this Settlement Agreement and Mutual
General Release to be executed as of the date stated above by their respective
authorized representatives.

 

	
  Berlin, Germany: October 19, 2005

  	
  Waltham, Massachusetts: October 19, 2005

  
	
  SCHERING AKTIENGESELLSCHAFT

  	
  PRAECIS PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/ Steffen Schroeder

  	
  /s/ Oliver Kohlhaas

  	
   

  	
  By:

  	
  /s/ Kevin F. McLaughlin

  	
   

  
	
   

  	
  Name: Steffen Schroeder

  	
  Oliver Kohlhaas

  	
   

  	
   

  	
  Name: Kevin F. McLaughlin

  	
   

  
	
   

  	
  Title: Legal Department

  	
  Head of Strategy

  and Business

  Development Europe

  	
   

  	
   

  	
  Title: President and Chief Executive Officer

  	
   

  

 

[Signature Page to Settlement Agreement
and Mutual Geneal Release]

 

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