Exhibit 10.3


 


CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY

WITH THE SECURITIES AND EXCHANGE COMMISSION.

ASTERISKS (*) DENOTE SUCH OMISSIONS.


 


AMENDMENT NO. 2 TO SUPPLY AGREEMENT


 


This Amendment
No. 2 to the Supply Agreement (this “Amendment”) is entered into as of July 1,
2004 by and between PRAECIS PHARMACEUTICALS INCORPORATED (“PRAECIS”) and
Cambrex Charles City, Inc. (formerly known as Salsbury Chemicals, Inc.)
(“CAMBREX”).  This Amendment amends the
Supply Agreement, dated as of July 23, 1998, and supercedes as of July 1, 2004
the amendment made on November 1, 2000, by and between PRAECIS and Salsbury
Chemicals, Inc. (the “Supply Agreement”). 
Capitalized terms used but not defined herein shall have the meanings
given to them in the Supply Agreement. 
All references herein to sections shall be understood to be references
to sections of the Supply Agreement.


 


WHEREAS, the
parties hereto desire to amend the Supply Agreement to make certain
modifications to the rights and obligations of the parties thereunder; and


 


WHEREAS, in
accordance with Section 23 of the Supply Agreement, the Supply Agreement may be
amended by a writing signed by both parties;


 


NOW,
THEREFORE, in consideration of the foregoing and the agreements contained
herein, and intending to be legally bound, the parties hereto hereby agree as
follows:


 


1.             References to Party Names.  The parties hereto acknowledge and agree that
all references in the Supply Agreement to Salsbury Chemicals, Inc. shall be
deemed to refer to CAMBREX.


 


2.             Amendment of Section 2.  Section 2 of the Supply Agreement is hereby
amended in its entirety to read as follows:


 


“2.           TERM


 


Subject to earlier termination as provided in Section 20 of the Supply
Agreement below or extension as provided in this Section 2, this Agreement
shall continue until July 23, 2010 (the “Original Term”); provided that,
PRAECIS shall have the right to extend the term of this Agreement for up to an
additional five years from the expiration of the Original Term by delivering
written notice to CAMBREX of its intent to so extend the term at least twelve
months prior to the expiration of the Original Term (the term of this
Agreement, as so extended or earlier terminated, being referred to as the
“Term”), provided that if PRAECIS extends the term of this Agreement beyond the
Original Term, (i) the then current base price in effect at the scheduled
expiration date of the Original


 
















 


Term shall be
increased by [*] and (ii) the minimum revenue per calendar year as set forth in
Section 6.B. below, shall increase to [*].”


 


3.             Amendment of Section 4.A.  Section 4.A. of the Supply Agreement is
hereby amended in its entirety to read as follows:


 


“A.          The parties recognize that additional
equipment must be installed at the Facility to permit CAMBREX to produce CMC in
the required commercial quantities. 
CAMBREX shall be responsible for the design, engineering, installation
and qualification of the additional equipment and facility for the CMC
Production Facility (the “Production Facility”), and PRAECIS shall be
responsible for the capital and other costs incurred by CAMBREX associated with
constructing and completing the Production Facility (the “Costs”).  The Costs shall be recovered by CAMBREX in
monthly payments by PRAECIS (on an invoice pass through basis) over the length
of the engineering, construction and commission phase of the project.  CAMBREX shall provide the project management
team and the Costs shall be capped at Five Million Nine Hundred and Sixty
Thousand Dollars ($5,960,000).  Although
the Costs shall be paid for by PRAECIS in the manner described above, CAMBREX
shall own the Production Facility and all installed equipment and PRAECIS shall
have no claim thereon whatsoever.  Any
additional equipment or process modifications required in connection with the
manufacture of CMC hereunder as a result of changes in regulatory requirements,
requests from Praecis and/or its partners for quality enhancements, changes in
Sodium carboxymethylcellulose or the Peptide quantity or material processing
characteristics or for the benefit of process optimization shall be borne by
Praecis, unless a separate contract amendment for a shared cost / benefit
approach is agreed to by both parties. 
However, CAMBREX is responsible for any costs to maintain the Production
Facility to U.S. cGMP standards in effect as of the date hereof.


 


From the commencement of the Original Term through the date of
Amendment No. 2 to this Supply Agreement (the Amendment No. 2 Date”), the
Production Facility has been dedicated solely to the manufacture of CMC.  From and after the Amendment No. 2 Date,
Cambrex shall be permitted to use the Production Facility for manufacturing
other products (each an “Other Product”), but only if and so long as the following
terms and conditions have been and continue to be complied with and satisfied
with respect to such use of the Production Facility for such manufacture of
each Other Product, and such compliance and satisfaction shall be obligations
of CAMBREX hereunder:  (i) CAMBREX shall
(A) have demonstrated, prior to the use of the Production Facility to
manufacture the Other Product, cleaning validation methods and processes
reasonably acceptable to PRAECIS with respect to the manufacture of such Other
Product at the Production Facility that, in the parties’ reasonable judgment,
could affect the safety, purity or quality of CMC manufactured or to be
manufactured at the Production Facility, and prior to and on an ongoing basis
in connection with such manufacture of such Other Product, CAMBREX shall timely
implement and validate such methods and processes, and (B) be solely
responsible for paying and shall pay all costs and expenses associated with
developing and implementing such methods and processes; (ii) such use of the
Production Facility to manufacture such Other Product shall not interfere with
or jeopardize the timely manufacture and delivery of CMC as ordered by PRAECIS
pursuant to Section 5.B., and in the event of conflicting manufacture or
delivery schedules, use of the Production Facility for the manufacture of CMC
hereunder shall have priority over use of the Production Facility for the
manufacture of any Other Product; (iii) manufacture of the Other Product at the
Production Facility will not commence unless and until all necessary regulatory
approvals have been obtained and shall continue only so long as such approvals
remain in full force and effect, it being understood and agreed that (a)
subject to the other terms and conditions of this Section 2, to the extent
CAMBREX wishes and is permitted hereunder to manufacture the Other Product at
the Production Facility, PRAECIS will, at its expense, make appropriate
amendments to regulatory filings with respect to


 


CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH

THE SECURITIES AND EXCHANGE COMMISSION.

ASTERISKS (*) DENOTE SUCH OMISSIONS.


 


2
















 


the
manufacture of CMC at the Production Facility solely to reflect that the
Production Facility is or may be used to manufacture the Other Product and (b)
except to the extent provided in clause (a) immediately above, in no event
shall PRAECIS be required to make or bear the cost of any regulatory filings or
to seek any regulatory approvals in connection with the manufacture of any
Other Product at the Production Facility; (iv) CAMBREX shall have demonstrated
to the reasonable satisfaction of PRAECIS that use of the Production Facility
for the manufacture of such Other Product will not, and such use does not,
jeopardize any regulatory approval(s) or the regulatory status of the
Production Facility with respect to the manufacture and delivery of CMC
hereunder; and (v) such use of the Production Facility is not to manufacture
any, or any component or part of, (A) a Competing Product or (B) any steroid,
antibiotic or other β-Lactams product. 
For purposes of this Section 4.A, “Competing Product” shall mean any
compound, product or preparation that includes an LHRH or GnRH agonist or LHRH
or GnRH antagonist (other than the Peptide) as an active pharmaceutical ingredient.”


 


4.             Amendment of Section 5.B.  Section 5.B. of the Supply Agreement is
hereby amended in its entirety to read as follows:


 


3
















 


“On or before
December 15th of each year, PRAECIS shall deliver to CAMBREX a firm
Purchase Order for PRAECIS’ requirements of CMC for the following calendar
year.


 


5.             Amendment of Section 6.A.  Section 6.A. of the Supply Agreement is
hereby amended in its entirety to read as follows:


 


“With respect to CMC manufactured during the calendar year 2004 and
during each calendar year thereafter, the base price (i) for quantities of CMC
ranging from[*] manufactured during such calendar year (for avoidance of doubt,
the first lot manufactured in 2004 is [*]) shall be [*], (ii) for incremental
quantities of CMC in excess of [*] manufactured during such calendar year shall
be [*] and (iii) for incremental quantities of CMC in excess of [*]
manufactured during such calendar year shall be [*].  The base price shall at all times include the
cost of the specific grade sodium carboxymethylcellulose and the components
necessary to manufacture and ship CMC. 
PRAECIS shall bear all costs to qualify any raw material suppliers.  For purposes of this Supply Agreement, CMC
shall be deemed to have been manufactured during the calendar year in which
such manufacture was commenced.  The base
price provided for in this Section 6.A. shall also apply retroactively to
quantities of CMC manufactured in 2004 prior to the Amendment No. 2 Date.


 


For certain lots of CMC supplied for use by PRAECIS in the European
Union, an additional [*] will be assessed for specific European pharmacopoeia
testing performed on such lots.  The
estimated size of each of the lots is [*]. 
CAMBREX will perform such European pharmacopoeia testing as set forth in
Exhibit C.


 


All prices are Ex-works Charles City, Iowa.  PRAECIS shall be responsible for all freight
costs.  CMC will be billed at the time
the CMC successfully passes Quality Control and Quality Assurance.  Payment is required thirty (30) days from
invoice date.  Risk of loss passes to
PRAECIS at the time of invoicing by CAMBREX.”


 


6.             Amendment of Section 6.


 


(a)           Section 6.B. of the Supply Agreement
is hereby amended in its entirety to read as follows:


 


“Commencing in 2004 and for each calendar year thereafter, the base
price determined in accordance with Section 6.A. (including such base price as
adjusted pursuant to this Section 6.B.) for CMC manufactured during such
calendar year (the “Manufacture Year”) shall be adjusted by a factor not to
exceed the quotient obtained by dividing (i) the Producer Price Index for
Chemicals and Allied Products (the “Producer


 


CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY

WITH THE SECURITIES AND EXCHANGE COMMISSION.

ASTERISKS (*) DENOTE SUCH OMISSIONS.


 


4
















 


Price Index”)
as published by the Bureau of Labor Statistics of the U.S. Department of Labor
(the “BLS”) for the month of December of the calendar year preceding the
Manufacture Year, by (ii) the Producer Price Index as published by the BLS for
the month of July 1998 (144.9).  For the
avoidance of doubt, an example of the operation of this Section 6.B. is set
forth below.


 


	
  Quantity

  	
   

  	
  2004

  Base Price

  	
   

  	
  July 1998

  Producer

  Price

  Index

  	
   

  	
  December

  2003

  Producer

  Price

  Index

  	
   

  	
  Adjustment Factor

  	
   

  	
  2004 Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  144.9

  	
   

  	
  163.1

  	
   

  	
  163.1/144.9 =1.125

  	
   

  	
  [*]

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  144.9

  	
   

  	
  163.1

  	
   

  	
  163.1/144.9 =1.125

  	
   

  	
  [*]

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  144.9

  	
   

  	
  163.1

  	
   

  	
  163.1/144.9 =1.125

  	
   

  	
  [*]

  	
   

  



 


The adjustment
of the price applicable to a ManufactureYear as provided in this Section 6.B.
shall be made promptly upon the publication by the BLS of the Producer Price
Index for December of the Preceding Year and shall also apply retroactively
with respect to any previously shipped lots of CMC the manufacture of which
commenced in such Manufacture Year prior to such adjustment.  Any amount owed by a party to the other as a
result of such retroactive application of such adjustment shall be paid
promptly.  Once the base price applicable
to a Manufacture Year has been determined pursuant to the adjustment provision
set forth in this Section 6.B., such base price shall apply to all CMC
manufactured during such Manufacture Year, subject to and without limitation of
the provisions of Section 6.D.  The
parties shall negotiate in good faith adjustments to the base price of CMC in
the event either party experiences an extraordinary economic event(s) that
result(s) from an external event outside such party’s control and such event continues
for a period of six (6) consecutive months.


 


(b)           Section 6. of the Supply Agreement is
hereby further amended by adding the following subsection F.:


 


“F.  During the Term, CAMBREX shall be entitled to
receive minimum revenue from PRAECIS of at least $900,000 per year, even if the
aggregate price of PRAECIS’ actual orders of CMC shipped from CAMBREX during
such year is less than such amount. 
CAMBREX shall invoice PRAECIS for any such difference on or about December
31st of each year, and PRAECIS shall pay such invoice within thirty
(30) days after its receipt of such invoice.”


 


CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY

WITH THE SECURITIES AND EXCHANGE COMMISSION.

ASTERISKS (*) DENOTE SUCH OMISSIONS.


 


5
















 


7.             Amendment of Section 6.D.


 


(a)           The definitions of “Yield #1” and
“Yield #2” set forth in Section 6.D. of the Supply Agreement after the
definition of “Adjusted Price” are hereby amended to read as follows:


 


“Yield #1 is [*]”


 


“Yield #2 is the
actual Yield of a lot of CMC beginning with [*].”


 


(b)           Section 6.D. of the Supply Agreement
is hereby further amended by adding the following as the last sentence thereof:


 


“For the
avoidance of doubt, in no event shall any adjustment pursuant to this Section
6.D. result in CAMBREX being required to pay or reimburse any amount to
PRAECIS.”


 


8.             Amendment of Section 7.B.  Section 7.B. of the Supply Agreement is
hereby amended by adding the following as the last sentence thereof:


 


“In no event
shall CAMBREX’s liability to PRAECIS for monetary damages under this Agreement
exceed [*].”


 


9.             Amendment of Section 7.C.  Section 7.C. of the Supply Agreement is
hereby amended by adding the following as the last sentence thereof:


 


“PRAECIS will
use commercially reasonable efforts so that any lot(s) of CMC which CAMBREX has
notified PRAECIS in writing is (are) ready for shipment to PRAECIS’ designated
locations, subject only to PRAECIS’ confirmation with respect to Quality
Control and Quality Assurance based on the batch records for such lot(s), may
be shipped by CAMBREX by the end of the month in which such notification is
received by PRAECIS, provided that in the event of any issue with respect to
the compliance of such lot(s) with applicable specifications or quality
standards, CAMBREX will promptly cooperate in good faith with PRAECIS to
resolve.


 


10.           Amendment of Section 19.  Section 19 of the Supply Agreement is hereby
amended in its entirety to read as follows:


 


“19.         INSURANCE


 


CAMBREX shall maintain (and provide evidence to PRAECIS of) worker’s
compensation, employer’s liability and comprehensive general liability
insurance coverage in commercially reasonably amounts, provided that such
coverage through self-insurance shall be permitted.  In addition, CAMBREX shall maintain (and
provide evidence to PRAECIS of) an appropriate property and casualty insurance
policy or policies


 


CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY

WITH THE SECURITIES AND EXCHANGE COMMISSION.

ASTERISKS (*) DENOTE SUCH OMISSIONS.


 


6
















 


providing for replacement cost coverage for any loss of or damage to
the Production Facility, any equipment used by CAMBREX in the manufacture and
supply of CMC, and any equipment used for in-process CMC or in-process
Peptide.  CAMBREX shall promptly apply
any insurance proceeds received by it under any such property and casualty
insurance policy or policies in a manner intended to enable it to continue to
timely perform its obligations under this Agreement.  Notwithstanding Section 21.A. or any other
provision of the Agreement, in case any loss or damage referred to in the
second sentence of this Section 19 is caused by one or more force majeure
events described in Section 21.A. and results in a failure of CAMBREX to supply
in accordance with this Agreement, CAMBREX’s obligations, and liability for
such failure, to supply shall not be suspended or relieved if CAMBREX has
failed to comply in all material respects with its obligations set forth in the
second and third sentences of this Section 19.”


 


11.           Amendment of Section 26.A.  Section 26.A. of the Supply Agreement is
hereby amended to change the address for delivery of notices to PRAECIS to be
as follows:


 


“PRAECIS
PHARMACEUTICALS INCORPORATED


830 Winter
Street


Waltham, MA
02451-1420


Attention:
Chief Financial Officer


Facsimile No.
: 781-890-7471”


 


12.           Parties in Interest; No Other
Modification.  This Amendment shall
be binding upon and inure solely to the benefit of each party hereto and its
respective successors and assigns. 
Nothing in this Amendment, express or implied, is intended to or shall
confer upon any other person any rights, benefits or remedies of any nature
whatsoever under or by reason of this Amendment.  This Amendment shall effect the modifications
to the Supply Agreement provided for herein. All other provisions of the Supply
Agreement not modified hereby shall remain in full force and effect.


 


13.           Counterparts.  This Amendment 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.


 


14.           Effect of this Amendment.  Except as set forth herein, all terms and
conditions of the Supply Agreement as amended by Amendment #1 remain in full
force and effect.


 


[The remainder of this page is intentionally left blank.]


 


7
















 


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


 


	
   

  	
  PRAECIS PHARMACEUTICALS
  INCORPORATED

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Kevin F. McLaughlin

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
  Exec. V.P.
  and C.F.O.

  
	
   

  	
   

  
	
   

  	
  CAMBREX
  CHARLES CITY, INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Gary L. Mossman

  	
   

  
	
   

  	
  Name:

  	
  Gary L.
  Mossman

  
	
   

  	
  Title:

  	
  President
  & CEO

  
	
   

  	
  Cambrex
  Pharma & Biopharmaceuticals

  
					



 


8
















 


Exhibit C


 


 


Sodium
Carboxymethylcellulose (2002 EP)


 


•                  Identity


 


•                  pH (6.0 - 8.0)


 


•                  Apparent
Viscosity


 


•                  Appearance of
Solution


 


•                  Sodium
Glycollate


 


•                  Chloride


 


•                  Heavy Metals


 


•                  Loss on Drying


 


•                  Sulfated Ash


 


Isopropyl
alcohol


 


•                  Characters


 


•                  Identification


 


•                  A Relative
Density


 


•                  Identification B
Reflective Index


 


•                  Identification


 


•                  Appearance


 


•                  Acidity or
Alkalinity


 


•                  Absorbance


 


•                  Benzene and
Related Substances


 


•                  Peroxide


 


•                  Water


 


•                  Non-volatile Substances


 


Water: 2000,
EP “Water for Injections - Water for Injections in Bulk” and “Water - Purified
Water in Containers”


 


•                  Bacterial
Endotoxins


 


•                  Acidity /
Alkalinity


 


•                  Oxidizable
Substances


 


•                  Chloride


 


C-1
















 


•                  Sulfates


 


•                  Ammonium


 


•                  Calcium and
Magnesium


 


•                  Residual on
Evaporation


 


•                  Microbial
Contamination


 


•                  Nitrates


 


•                  Heavy Metals


 


C-2