-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DOASpCWUb7XSjsHc4Rzdc70cnWtPVsdfMs3LexcG8WsXHkq/Q0yT+Rb/sw3ggC7I SaTcQ/hOCqkkr1/x64aMNg== 0001005150-03-000005.txt : 20030103 0001005150-03-000005.hdr.sgml : 20030103 20030103165811 ACCESSION NUMBER: 0001005150-03-000005 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20030103 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ENTREMED INC CENTRAL INDEX KEY: 0000895051 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 581959440 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-46247 FILM NUMBER: 03503629 BUSINESS ADDRESS: STREET 1: 9640 MEDICAL CNTR DR STREET 2: STE 200 CITY: ROCKVILLE STATE: MD ZIP: 20850 BUSINESS PHONE: 3012179858 MAIL ADDRESS: STREET 1: 9640 MEDICAL CNTR SR STREET 2: STE 200 CITY: ROCKVILLE STATE: MD ZIP: 20850 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CELGENE CORP /DE/ CENTRAL INDEX KEY: 0000816284 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 222711928 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 7 POWDER HORN DR CITY: WARREN STATE: NJ ZIP: 07059 BUSINESS PHONE: 7322711001 MAIL ADDRESS: STREET 1: 7 POWDER HORN DRIVE STREET 2: P O BOX 4914 CITY: WARREN STATE: NJ ZIP: 07059 SC 13D 1 sch13d.txt SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- SCHEDULE 13D (RULE 13D-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13D-1(A) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13D-2(A) ENTREMED, INC. -------------------------------------------------------------- (Name of Issuer) COMMON STOCK, PAR VALUE $.01 PER SHARE -------------------------------------------------------------- (Title of Class of Securities) 29382F 10 3 -------------------------------------------------------------- (CUSIP Number) ------------------------------------------------------------------------------- Robert J. Hugin Robert A. Cantone, Esq. Celgene Corporation c/o Proskauer Rose LLP 7 Powder Horn Drive 1585 Broadway Warren, NJ 07059 New York, NY 10036 (732) 271-1001 (212) 969-3000 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) DECEMBER 31, 2002 -------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13(d)-1(f) or 13(d)- 1(g), check the following box [ ]. Note. Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent. (Continued on following pages) SCHEDULE 13D - ------------------------ CUSIP NO. 29382F 10 3 - ------------------------ - -------------------------------------------------------------------------------- NAME OF REPORTING PERSONS 1 CELGENE CORPORATION S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (Intentionally Omitted) - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ] (B) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES 16,750,000 --------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 0 --------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 16,750,000 --------------------------------------------- PERSON WITH 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 16,750,000 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 43.3% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- STATEMENT ON SCHEDULE 13D PURSUANT TO RULE 13D-1 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED ITEM 1. SECURITY AND ISSUER. This Statement on Schedule 13D (this "Statement") relates to the beneficial ownership of common stock, par value $0.01 per share (the "Common Stock") of EntreMed, Inc., a Delaware corporation (the "Company"). The principal executive offices of the Company are located at 9640 Medical Center Drive, Rockville, Maryland 20850. ITEM 2. IDENTITY AND BACKGROUND. (a) - (c) and (f) This statement is being filed by Celgene Corporation, a Delaware corporation (the "Reporting Person"). Celgene is engaged in the discovery, development and commercialization of novel therapies for the treatment of cancer and inflammatory diseases through gene and protein regulation. The principal executive offices of Celgene are located at 7 Powder Horn Drive, Warren, New Jersey 07059. Attached as Appendix A is information concerning the executive officers and directors of the Reporting Person, which information is required to be disclosed in response to Item 2 and Instruction C to Schedule 13D. (d) The Reporting Person has not been convicted in a criminal proceeding in the past five years (excluding traffic violations or similar misdemeanors). (e) During the past five years, the Reporting Person was not a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. The aggregate purchase price for the shares of Series A Convertible Preferred Stock, par value $1.00, of the Company ("Series A Stock") was $16,750,000. The Reporting Person will also be issued, at no further cost, a warrant to purchase up to seven million (7,000,000) shares of Common Stock of the Company at a purchase price of $1.50 per share, attached hereto as Exhibit 99.1 (the "Warrant"). The source of funds for the purchase of the shares of Series A Stock and the acquisition of the Warrant is the general working capital of the Reporting Person. ITEM 4. PURPOSE OF TRANSACTION. (a) The response to Item 3 is incorporated by reference herein. On December 31, 2002, the Reporting Person entered into a Securities Purchase Agreement with the Company, attached hereto as Exhibit 99.2 (the "Securities Purchase Agreement"). Pursuant to the Securities Purchase Agreement, the Reporting Person entered into a binding obligation to purchase from the Company 3,350,000 shares of the Company's newly created Series A Stock and to acquire the Warrant. The shares of Series A Stock and the Warrant will be issued in reliance on an exemption from the Nasdaq's stockholder approval requirements. Pursuant to Nasdaq Marketplace Rules, the acquisition by the Reporting Person of the shares of Series A Stock and the Warrant would be deemed to represent a change in control of the Company, requiring the Company to obtain stockholder approval of the transaction. The Audit Committee of the Board of Directors of the Company expressly approved the Company's reliance upon the exemption from Nasdaq's stockholder approval requirements, and Nasdaq granted the exemption based on the Company's financial condition. The Reporting Person will acquire the shares of Series A Stock and the Warrant upon the expiration of a ten day period which commenced on January 2, 2003, the date the Company began mailing to all shareholders of the Company a letter alerting such shareholders to the omission of the Company to seek shareholder approval that would otherwise be required and the approval of the Audit Committee of the reliance on the exemption, as specified in the Nasdaq Marketplace Rules. There are no other conditions to the acquisition of the shares of Series A Stock and the Warrant other than the expiration of such ten day period. The sale of the shares of Series A Stock and the issuance of the Warrant are registered under a prospectus supplement, dated December 31, 2002, to the Company's prospectus dated September 27, 2002. The Company also granted the Reporting Person preemptive rights, based on the Reporting Person's percentage interest in the Company on an as-converted to common basis, to purchase securities in certain future offerings of securities by the Company. Pursuant to the terms of the Certificate of Designation of Series A Convertible Preferred Stock attached hereto as Exhibit 99.3 (the "Certificate of Designation"), each share of Series A Stock is convertible into five shares of Common Stock at the option of the holder thereof at any time after the date of issuance. The shares of Series A Stock rank, with respect to rights to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding up of the Company, senior to the Common Stock and any other classes or series of capital stock that the Company may issue in the future, unless the Reporting Person approves the issuance of such securities. Pursuant to the terms of the Warrant, the Reporting Person is entitled to purchase from the Company up to a total of 7,000,000 shares of Common Stock, $0.01 par value per share, at an exercise price equal to $1.50 (as such number of shares and exercise price may be adjusted from time to time under the Warrant), at any time and from time to time after six months from the date of issuance through and including the seventh anniversary of the date of the Warrant. The Warrant is exercisable for cash or on a net exercise or "cashless" basis. The Company and the Reporting Person also entered into an Investor and Registration Rights Agreement, attached hereto as Exhibit 99.4 (the "Rights Agreement"), pursuant to which the Company is obligated to file a registration statement covering the resale of the shares of Common Stock issuable upon conversion of the shares of Series A Stock and upon exercise of the Warrant, and has also granted piggyback registration rights to the holders of such shares to participate, to a limited extent, in certain registered offerings of the Company's securities. Pursuant to a letter agreement between the Company and the Reporting Person, attached hereto as Exhibit 99.5 (the "Standstill Agreement"), the Company agreed that until April 1, 2003, neither the Company nor any of its affiliates will enter into any agreement or arrangement with respect to any merger, consolidation or other business combination involving the Company or the acquisition of all or any significant portion of the assets or capital stock of the Company (an "Acquisition Transaction"). However, the Company can enter into discussions to do any of the foregoing and may, directly or indirectly, solicit, initiate, facilitate or encourage any inquiries or the making of any proposal with respect to or which may lead to an Acquisition Transaction. The Company may also enter into certain types of transactions described in the Standstill Agreement. Prior to April 1, 2003, the Company must operate in the ordinary course of business consistent with past practice and must notify the Reporting Person of any proposals it receives regarding an Acquisition Transaction. The Reporting Person may from time to time, depending on prevailing market, economic and other conditions, acquire additional shares or dispose of shares of the capital stock of the Company through open market purchases or sales, or engage in discussions with the Company concerning further acquisitions of shares of the capital stock of the Company or further investments in the Company. The Reporting Person intends to review its investment in the Company on a continuing basis and, depending upon the price and availability of shares of Common Stock, subsequent developments affecting the Company, the Company's business and prospects, other investment and business opportunities available to such Reporting Person, general stock market and economic conditions, tax considerations and other factors considered relevant, may decide at any time to increase or to decrease the size of its investment in the Company. This Item 4(a) does not provide a complete description of the Securities Purchase Agreement, the Warrant, the Rights Agreement or the Standstill Agreement, and such descriptions are qualified in their entirety by reference to the full text of the Securities Purchase Agreement, the Warrant, the Rights Agreement and the Standstill Agreement, which are listed as exhibits and are attached hereto. (b) Not applicable. (c) In connection with the transactions described under Item 4(a) above, the Company, as Seller, and the Reporting Person, as Buyer, entered into an Asset Purchase Agreement, attached hereto as Exhibit 99.6 (the "Asset Purchase Agreement"), pursuant to which the Reporting Person acquired the exclusive rights to intellectual property covering thalidomide analogs from the Company and Children's Hospital, Boston. The Company and the Reporting Person also agreed to settle all outstanding litigation between them relating to such intellectual property. (d) Pursuant to the Securities Purchase Agreement, the Reporting Person has the right to request that the Company increase the size of its Board of Directors and/or create vacancies on its Board of Directors sufficient to appoint up to two (2) designees of the Reporting Person. (e) The responses to Items 3 and 4(a) are incorporated herein by reference. Pursuant to the Securities Purchase Agreement, the capitalization and dividend policy of the Company was altered by the Company's filing of the Certificate of Designation with the Secretary of State of Delaware and by the execution of the Rights Agreement and the issuance of the Warrant. A summary of the Certificate of Designation follows: Each share of Series A Stock is convertible into five shares of Common Stock, as adjusted for stock splits, stock combinations and similar transactions (the "Conversion Ratio"), at any time at the option of the holder thereof. There will be no change to the Conversion Ratio based on the future trading price or future issuances of the Common Stock. The Series A Stock is not redeemable. At any time after the December 31, 2003, each share of outstanding Series A Stock will automatically convert into the applicable number of shares of Common Stock if the Common Stock is then traded and the average per share closing price of the Common Stock on the Nasdaq National Market or the Nasdaq Smallcap Market, or similar quotation system or a national securities exchange, is greater than five dollars ($5.00) (as adjusted to reflect stock splits, stock dividends, combinations, recapitalizations and similar events) over a sixty (60) trading day period and certain other conditions are satisfied. The Series A Stock will accrue and cumulate dividends at a rate of 6% per year, payable when, as and if declared by the Company's Board of Directors. All accrued dividends must be paid before any dividends may be declared or paid on the Common Stock, and shall be paid as an increase in the liquidation preference of the Series A Stock payable upon the liquidation, dissolution or winding up of the Company. In the event of a liquidation, dissolution or winding up of the Company, the holders of the Series A Stock are entitled to a liquidation preference payment per share equal to the greater of (x) two times the original purchase price plus all accrued or declared but unpaid dividends or (y) the amount per share of Series A Stock that would be payable to a holder of shares of Series A Stock if all shares of Series A Stock had been converted to shares of Common Stock immediately prior to such liquidation, dissolution or winding up. A merger, consolidation or sale of the Company will not be treated as a liquidation event. Holders of the Series A Stock generally will vote together with the holders of shares of Common Stock, with each share of Series A Stock representing that number of votes equal to that number of shares of Common Stock into which it is then convertible. However, the holders of the Series A Stock will be entitled to a separate class vote with respect to certain matters, including (i) the creation of a class or series of stock having preferences or privileges senior to or on a parity with the Series A Stock, (ii) any amendment or waiver of any provision of the Company's Certificate of Incorporation or By-Laws that would adversely affect the rights, privileges and preferences of the Series A Stock, (iii) a proposed merger, consolidation, or sale of the Company, (iv) a change in the nature of the business of the Company, and (v) the declaration or payment of any dividend or the repurchase of any shares of the capital stock of the Company, other than certain specific exceptions. This Item 4(e) does not provide a complete description of the Certificate of Designation, and such description is qualified in its entirety by reference to the full text of the Certificate of Designation, which is listed as an exhibit and is attached hereto. (f) Not applicable. (g) The Certificate of Designation as filed with the Secretary of State of Delaware. Certain terms and conditions of the Certificate of Designation are described in Item 4(e) above. The Warrant issued pursuant to the Securities Purchase Agreement. Certain terms and conditions of the Warrant are described in Item 4(a) above. (h) Not applicable. (i) Not applicable. (j) Not applicable. Except as set forth above in this Statement (including the documents attached as exhibits hereto), the Reporting Person does not have any present plans or proposals that relate to or would result in: (i) the acquisition by any person of additional securities of the Company, or the disposition of securities of the Company; (ii) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries; (iii) a sale or transfer of a material amount of assets of the Company or any of its subsidiaries; (iv) any change in the present board of directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; (v) any material change in the present capitalization or dividend policy of the Company; (vi) any other material change in the Company's business or corporate structure; (vii) changes in the Company's charter, by-laws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Company by any person; (viii) causing a class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (ix) a class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or (x) any action similar to any of those enumerated above. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) and (b) The amount shown as beneficially owned by the Reporting Person represents the 16,750,000 shares of Common Stock into which the shares of Series A Stock to be issued to the Reporting Person may presently be converted, which would represent approximately 43.3% of the shares of Common Stock outstanding assuming the conversion of all outstanding shares of Series A Stock. The 7,000,000 shares of Common Stock subject to the Warrant are not currently exercisable and will not become exercisable by the Reporting Person within the next sixty days, thus those shares are excluded from the amount shown as beneficially owned by the Reporting Person and from the number of shares of Common Stock considered to be outstanding for purposes of determining the approximate percentages beneficially owned by the Reporting Person. The approximate percentages of shares of Common Stock reported as beneficially owned by the Reporting Persons are based upon 21,956,360 shares of Common Stock outstanding as of December 26, 2002, as represented to the Reporting Person by the Company in the Securities Purchase Agreement, plus shares currently issuable, or which will become issuable within the next 60 days, upon the conversion of shares of Series A Stock. The Reporting Person has sole voting and dispositive power over the subject shares held by the Reporting Person. Please see Items 7, 8, 9, 10, 11, and 13 of the cover sheet for the Reporting Person. (c) Except as set forth herein, the Reporting Person has not effected any transaction in the Common Stock of the Company during the past 60 days. (d) Except as set forth herein, no person other than the Reporting Person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, subject securities held by the Reporting Person. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Other than as described in Item 4 above, to the knowledge of the Reporting Person, there are no contracts, arrangements, understandings or relationships (legal or otherwise) among the persons named in Item 2 and between such person and any person with respect to any securities of the Company, including, but not limited to, transfers or voting of any securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit Description ------- ----------- 99.1 Warrant to Purchase Common Stock, dated January 13, 2003, issued by EntreMed, Inc. in favor of Celgene Corporation. 99.2 Securities Purchase Agreement, made and effective as of December 31, 2002, by and between EntreMed, Inc. and Celgene Corporation. 99.3 EntreMed, Inc. Certificate of Designation of Series A Convertible Preferred Stock, filed with the Delaware Secretary of State on December 31, 2002. 99.4 Investor and Registration Rights Agreement, made and effective as of December 31, 2002, by and between EntreMed, Inc. and Celgene Corporation. 99.5 Standstill Agreement, dated December 31, 2002, by and between EntreMed, Inc. and Celgene Corporation. 99.6 Asset Purchase Agreement, dated as of December 31, 2002, by and between Celgene Corporation and EntreMed, Inc. SIGNATURES After reasonable inquiry and to the best knowledge and belief of the undersigned, the information set forth in this statement is true, complete and correct. Dated: January 3, 2003 CELGENE CORPORATION By: /s/ Robert J. Hugin ------------------------------------ Robert J. Hugin Senior Vice President and Chief Financial officer APPENDIX A Executive Officers and Directors of Celgene Corporation ------------------------------------------------------- - -------------------------------------------------------------------------------- NAME PRINCIPAL OCCUPATION OR EMPLOYMENT - -------------------------------------------------------------------------------- John W. Jackson Chairman of the Board and Chief Executive Officer of the Reporting Person - -------------------------------------------------------------------------------- Sol J. Barer Director, President and Chief Operating Officer of the Reporting Person - -------------------------------------------------------------------------------- Robert J. Hugin Director, Chief Financial Officer and Senior Vice President of the Reporting Person - -------------------------------------------------------------------------------- Jack L. Bowman Retired - -------------------------------------------------------------------------------- Frank T. Cary Retired - -------------------------------------------------------------------------------- Arthur Hull Hayes, Jr., M.D. President and Chief Operating Officer - -------------------------------------------------------------------------------- Gilla Kaplan, Ph. D. Head of Lab and Member - -------------------------------------------------------------------------------- Richard C.E. Morgan Chairman and Chief Executive Officer - -------------------------------------------------------------------------------- Walter L. Robb, Ph.D. Private Consultant and President - -------------------------------------------------------------------------------- The business address of each of the above persons is c/o Celgene Corporation, 7 Powder Horn Drive, Warren, New Jersey 07059. EX-99.1 3 ex99-1.txt EXHIBIT 99.1 EXHIBIT 99.1 EXECUTION COPY ENTREMED, INC. WARRANT ------- Warrant No. 1 Dated: January 13, 2003 EntreMed, Inc., a Delaware corporation (the "COMPANY"), hereby certifies that, for value received, Celgene Corporation, a Delaware corporation, or its registered assigns (the "HOLDER"), is entitled to purchase from the Company up to a total of Seven Million (7,000,000) shares of common stock, $0.01 par value per share (the "COMMON STOCK"), of the Company (each such share, a "WARRANT SHARE" and all such shares, the "WARRANT SHARES") at an exercise price equal to $1.50 (as such number of shares and exercise price may be adjusted from time to time as provided in Section 8, the "EXERCISE PRICE"), at any time and from time to time from and after six months from the date hereof through and including the seventh anniversary of the date hereof (the "EXPIRATION DATE"), and subject to the following terms and conditions. This Warrant (this "WARRANT") is being issued pursuant to that certain Securities Purchase Agreement, dated as of the date hereof, by and among the Company and the Holder (the "PURCHASE AGREEMENT"). 1. Definitions. (a) "CLOSING PRICE" means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on an Eligible Market or any other national securities exchange, the closing bid price per share of the Common Stock for such date (or the nearest preceding date) on the primary Eligible Market or exchange on which the Common Stock is then listed or quoted; (b) if prices for the Common Stock are then quoted on the OTC Bulletin Board, the closing bid price per share of the Common Stock for such date (or the nearest preceding date) so quoted; (c) if prices for the Common Stock are then reported in the "Pink Sheets" published by the National Quotation Bureau Incorporated (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder. (b) "ELIGIBLE MARKET" means any of the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market. (c) "TRADING DAY" means (i) any day on which the Common Stock is listed or quoted and traded on the Nasdaq National Market, (ii) if the Common Stock is not then listed or quoted and traded on any Eligible Market, then a day on which trading occurs on the Nasdaq National Market (or any successor thereto), or (iii) if trading does not occur on the Nasdaq National Market (or any successor thereto), any Business Day. (d) In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Purchase Agreement. 2. Registration of Warrant. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the "WARRANT REGISTER"), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary. 3. Registration of Transfers. The Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Transfer Agent or to the Company at its address specified herein. Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a "NEW WARRANT"), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder of a Warrant. 4. Exercise and Duration of Warrant. (a) This Warrant shall be exercisable by the registered Holder at any time and from time to time on or after the date hereof to and including the Expiration Date; provided, however, that the Expiration Date shall be extended for each day (i) the Registration Statement is not effective, or (ii) the Company fails to have a sufficient number of authorized but unissued and otherwise unreserved shares of Common Stock available to issue Warrant Shares upon exercise of this Warrant. At 6:30 P.M., New York City time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value; provided that, if the average of the Closing Prices for the five Trading Days immediately prior to (but not including) the Expiration Date exceeds the Exercise Price on the Expiration Date, then this Warrant shall be deemed to have been exercised in full (to the extent not previously exercised) on a "cashless exercise" basis at 6:30 P.M. New York City time on the Expiration Date. (b) A Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the form attached hereto (the "EXERCISE NOTICE"), appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised (which may take the form of a "cashless exercise" if so indicated in the Exercise Notice and if a "cashless exercise may occur at such time pursuant to Section 9 below), and the date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an "EXERCISE DATE." The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. Execution and delivery of the Exercise Notice shall have the same effect as cancellation of the original Warrant and issuance of a New Warrant evidencing the right to purchase the remaining number of Warrant Shares. (c) The Company shall (i) keep the Registration Statement continuously effective until the Expiration Date (including such day), and (ii) have a sufficient number of authorized but unissued and otherwise unreserved shares of Common Stock available to issue Warrant Shares upon exercise of this Warrant. 5. Delivery of Warrant Shares. 2 (a) Upon exercise of this Warrant, the Company shall promptly (but in no event later than three Trading Days after the Exercise Date) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends. If the Holder provides or previously provided the necessary account information to the Company, the Company shall issue and deliver such Warrant Shares in a balance account of the Holder with the Depository Trust Company through its Deposit Withdrawal Agent Commission System. The Holder, or any Person so designated by the Holder to receive Warrant Shares, shall be deemed to have become holder of record of such Warrant Shares as of the Exercise Date. The Company shall, upon request of the Holder, use best efforts to deliver Warrant Shares hereunder electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions. (b) This Warrant is exercisable, either in its entirety or, from time to time, for a portion of the number of Warrant Shares. Upon surrender of this Warrant following one or more partial exercises, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares. (c) In addition to any other rights available to a Holder, if the Company fails to deliver to the Holder a certificate representing Warrant Shares on the date on which delivery of such certificate is required by this Warrant, such Holder may notify the Company via facsimile, mail or any other means, of its failure to deliver the certificate (a "DELIVERY FAILURE NOTICE"). If the Company fails to deliver to the Holder a certificate representing Warrant Shares by the third Trading Day after delivery of the Delivery Failure Notice by the Holder and if after such third Trading Day after the delivery of the Delivery Failure Notice the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares that the Holder anticipated receiving from the Company (a "BUY-IN"), then the Company shall, within three Trading Days after the Holder's request and in the Holder's discretion, either (i) pay cash to the Holder in an amount equal to the Holder's total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the "BUY-IN PRICE"), at which point the Company's obligation to deliver such certificate (and to issue such Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Common Stock and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the Closing Price on the date of the event giving rise to the Company's obligation to deliver such certificate. (d) The Company's obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares. Nothing herein shall limit a Holder's right to pursue any other remedies available to it hereunder, at law or in equity including, without 3 limitation, a decree of specific performance and/or injunctive relief with respect to the Company's failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof. 6. Charges, Taxes and Expenses. Issuance and delivery of certificates for shares of Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or this Warrant in a name other than that of the Holder or an affiliate thereof. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof. 7. Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 8). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. The Company will take all such action as may be necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any securities exchange or automated quotation system upon which the Common Stock may be listed. 8. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 8. (a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. (b) Pro Rata Distributions. If the Company, at any time while this Warrant is outstanding, distributes to holders of Common Stock (i) evidences of its indebtedness, (ii) any security (other than a distribution of 4 Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each case, "DISTRIBUTED PROPERTY"), then in each such case the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution (and the Exercise Price thereafter applicable) shall be adjusted (effective on and after such record date) to equal the product of such Exercise Price times a fraction of which the denominator shall be the average of the Closing Prices for the five Trading Days immediately prior to (but not including) such record date and of which the numerator shall be such average less the then fair market value of the Distributed Property distributed in respect of one outstanding share of Common Stock, as determined by the Company's independent certified public accountants that regularly examine the financial statements of the Company (an "APPRAISER"). In such event, the Holder, after receipt of the determination by the Appraiser, shall have the right to select an additional appraiser (which shall be a nationally recognized accounting firm), in which case such fair market value shall be deemed to equal the average of the values determined by each of the Appraiser and such appraiser. As an alternative to the foregoing adjustment to the Exercise Price, at the request of the Holder delivered before the 90th day after such record date, the Company will deliver to such Holder, within five Trading Days after such request (or, if later, on the effective date of such distribution), the Distributed Property that such Holder would have been entitled to receive in respect of the Warrant Shares for which this Warrant could have been exercised immediately prior to such record date. If such Distributed Property is not delivered to a Holder pursuant to the preceding sentence, then upon expiration of or any exercise of the Warrant that occurs after such record date, such Holder shall remain entitled to receive, in addition to the Warrant Shares otherwise issuable upon such exercise (if applicable), such Distributed Property. (c) Fundamental Transactions. If, at any time while this Warrant is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a "FUNDAMENTAL TRANSACTION"), then the Holder shall, for the same aggregate Exercise Price provided herein, have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have received if this Warrant had been exercised or converted immediately prior to the Fundamental Transaction (the "ALTERNATE CONSIDERATION"). The Company shall apportion the aggregate Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. At the Holder's request, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder's right to purchase the Alternate Consideration for the aggregate Exercise Price upon exercise thereof. The terms of any agreement 5 pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (c) and insuring that the Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. (d) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraphs (a) or (b) of this Section, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment. (e) Calculations. All calculations under this Section 8 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock. (f) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 8, the Company at its expense will promptly compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company's Transfer Agent. (g) Notice of Corporate Events. If the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including, without limitation, any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the Company shall deliver to the Holder a notice describing the material terms and conditions of such transaction, at least 20 calendar days prior to the applicable record or effective date on which a Person would need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company will take all steps reasonably necessary in order to insure that the Holder is given the practical opportunity to exercise this Warrant prior to such time so as to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice. 9. Payment of Exercise Price. The Holder shall pay the Exercise Price in immediately available funds; provided, however, the Holder may satisfy its obligation to pay the Exercise Price through a "cashless exercise," in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows: 6 X = Y [(A-B)/A] where: X = the number of Warrant Shares to be issued to the Holder. Y = the number of Warrant Shares with respect to which this Warrant is being exercised. A = the average of the Closing Prices for the five Trading Days immediately prior to (but not including) the Exercise Date. B = the Exercise Price. For purposes of Rule 144 promulgated under the Securities Act of 1933, as amended (the "SECURITIES ACT"), it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued pursuant to the Purchase Agreement. 10. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. 11. Fractional Shares. The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. If any fraction of a Warrant Share would, except for the provisions of this Section, be issuable upon exercise of this Warrant, the number of Warrant Shares to be issued will be rounded up to the nearest whole share. 12. Notices. Any and all notices or other communications or deliveries hereunder (including without limitation any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices or communications shall be as set forth in the Purchase Agreement. 13. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon 30 days' notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the 7 Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Warrant Register. 14. Miscellaneous. (a) This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder and their successors and assigns. (b) The Company will not, by amendment of its governing documents or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any Warrant Shares above the amount payable therefor on such exercise, (ii) will take all such action as may be reasonably necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares on the exercise of this Warrant, and (iii) will not close its shareholder books or records in any manner which interferes with the timely exercise of this Warrant. (c) This Warrant shall be governed and construed in accordance with the laws of the State of New York, as applied to agreements between New York residents entered into and to be performed entirely within New York. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT OR THE TRANSACTIONS CONTEMPLATED HEREBY. (d) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof. (e) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant. 8 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE FOLLOWS] 9 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above. ENTREMED, INC. By: /s/ Neil Campbell --------------------------- Name: Neil Campbell Title: President 10 FORM OF EXERCISE NOTICE (To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant) To: Entremed, Inc. The undersigned is the Holder of Warrant No. _______ (the "WARRANT") issued by Entremed, Inc., a Delaware corporation (the "COMPANY"). Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Warrant. 1. The Warrant is currently exercisable to purchase a total of ______________ Warrant Shares. 2. The undersigned Holder hereby exercises its right to purchase _________________ Warrant Shares pursuant to the Warrant. 3. The Holder intends that payment of the Exercise Price shall be made as (check one): ____ "Cash Exercise" ____ "Cashless Exercise" 4. If the holder has elected a Cash Exercise, the holder shall pay the sum of $____________ to the Company in accordance with the terms of the Warrant. 5. Pursuant to this exercise, the Company shall deliver to the holder _______________ Warrant Shares in accordance with the terms of the Warrant. 6. Following this exercise, the Warrant shall be exercisable to purchase a total of ______________ Warrant Shares. Dated: _____________, _______ Name of Holder: (Print) ____________________________ By: ________________________________ Name: ______________________________ Title: _____________________________ (Signature must conform in all respects to name of holder as specified on the face of the Warrant) FORM OF ASSIGNMENT [To be completed and signed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________________________ the right represented by the within Warrant to purchase ____________ shares of Common Stock of Entremed, Inc. to which the within Warrant relates and appoints ________________ attorney to transfer said right on the books of Entremed, Inc. with full power of substitution in the premises. Dated: _____________________, ____________________________________ (Signature must conform in all respects to name of holder as specified on the face of the Warrant) ____________________________________ Address of Transferee ____________________________________ ____________________________________ In the presence of: ____________________________________ EX-99.2 4 ex99-2.txt EXHIBIT 99.2 EXHIBIT 99.2 EXECUTION COPY SECURITIES PURCHASE AGREEMENT This Securities Purchase Agreement (this "AGREEMENT") is made and effective as of December 31, 2002 by and among EntreMed, Inc., a Delaware corporation (the "COMPANY"), and Celgene Corporation, a Delaware corporation (the "PURCHASER"). WHEREAS, subject to the terms and conditions set forth in this Agreement, the Company desires to sell to the Purchaser and the Purchaser desires to purchase from the Company Three Million Three Hundred Fifty Thousand (3,350,000) shares of the Company's Series A convertible preferred stock, $1.00 par value per share (the "SERIES A STOCK"), and, as an inducement to the Purchaser to purchase the Series A Stock, the Company desires to issue to the Purchaser, and the Purchaser desires to acquire from the Company, a warrant to purchase Seven Million (7,000,000) shares of the Company's common stock, par value $0.01 per share ("COMMON STOCK"), in the form of Exhibit A hereto (the "WARRANT"), as more fully set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Purchaser agree as follows: 1. CLOSING. (a) The closing of the sale of the securities contemplated hereby (the "CLOSING") shall take place at the offices of Proskauer Rose LLP ("PURCHASER COUNSEL"), 1585 Broadway, New York, New York 10036, on the date hereof, or on such date or location as the parties shall otherwise agree. The date of the Closing is hereinafter referred to as the "CLOSING DATE." At the Closing: (x) the Company shall issue and deliver to the Purchaser (i) a stock certificate, registered in the name of the Purchaser and free of all restrictive legends, representing Three Million Three Hundred Fifty Thousand (3,350,000) shares of Series A Stock (the shares of Series A Stock issued and sold to the Purchaser hereunder are sometimes collectively referred to herein as the "SHARES"), (ii) the Warrant, registered in the name of the Purchaser, pursuant to which the Purchaser shall have the right to acquire Seven Million (7,000,000) shares of Common Stock, on the terms set forth therein (the shares of Common Stock issuable upon exercise of the Warrant and upon conversion of the Shares are sometimes collectively referred to herein as the "UNDERLYING SHARES;" and the Shares, the Warrant and the Underlying Shares are sometimes collectively referred to herein as the "Securities"), (iii) a prospectus supplement with respect to the Registration Statement (as defined in Section 2(c)) reflecting the sale of the Shares and the Underlying Shares (the "SUPPLEMENT"), (iv) an investor and registration rights agreement in the form of Exhibit C attached hereto (the "INVESTOR AND REGISTRATION RIGHTS AGREEMENT"), and (v) any other documents reasonably requested by the Purchaser or Purchaser Counsel; and (y) the Purchaser shall deliver to the Company Sixteen Million Seven Hundred Fifty Thousand Dollars ($16,750,000), representing the aggregate purchase price for the Shares, in immediately available funds by wire transfer to an account designated in writing by the Company for such purpose. (b) The obligation of the Purchaser to purchase and acquire the Shares and Warrant under this Agreement is subject to the fulfillment (or waiver by the Purchaser) of each of the following conditions: (i) The Company shall have adopted and filed with the Secretary of State of the State of Delaware a Certificate of Designation of Series A Convertible Preferred Stock in the form of Exhibit B hereto (the "CERTIFICATE") and the Certificate shall be in full force and effect; (ii) The Registration Statement shall be effective on the Closing Date as to all Underlying Shares, not subject to any threatened or actual stop order and will not on the Closing Date contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (iii) The Company shall have duly executed and delivered the Investor and Registration Rights Agreement; (iv) The Company shall have notified the Nasdaq National Market (the "TRADING MARKET") of the issuance of the Underlying Shares; (v) The Company shall have received written notice from the Trading Market that the sale and issuance of the Securities is exempted from the requirements of Section 4350(i)(1) by virtue of the fact that a delay in obtaining stockholder approval of the sale and issuance of the Securities and the other transactions contemplated hereby would seriously jeopardize the financial viability of the Company (the "EXEMPTION"); and (vi) The Company shall have provided a certificate from a duly authorized officer certifying on behalf of the Company that each of the conditions set forth in this Section 1(b) shall have been satisfied. 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby makes the following representations and warranties to the Purchaser: (a) SUBSIDIARIES. The Company does not directly or indirectly control or own any interest in any other corporation, partnership, joint venture or other business association or entity, other than MaxCyte, Inc. and Cytokine Sciences, Inc. (each a "SUBSIDIARY" and, collectively, the "SUBSIDIARIES"). (b) ISSUANCE OF THE SECURITIES. The Securities (including the Underlying Shares) are duly authorized and, when issued and paid for in accordance with the terms hereof, will be duly and validly issued, fully paid and nonassessable, free and clear of free and clear of any lien, charge, claim, security interest, encumbrance, right of first refusal or other restriction and shall not be subject to preemptive rights or similar rights of stockholders. The Company has reserved a sufficient number of duly authorized shares of Common Stock to issue all of the Underlying Shares. At the Closing, the Underlying Shares shall have been listed for trading on the Trading Market. 2 (c) REGISTRATION STATEMENT. The Company's Registration Statement on Form S-3 (No. 333-87940) (the "REGISTRATION STATEMENT") was declared effective by the Securities and Exchange Commission (the "COMMISSION") on September 27, 2002. The Registration Statement is effective on the date hereof and the Company has not received notice that the Commission has issued or intends to issue a stop order with respect to the Registration Statement or that the Commission otherwise has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, or intends or has threatened in writing to do so. The Registration Statement (including the information or documents incorporated by reference therein), as of the time it was declared effective and as of the date hereof, and any amendments or supplements thereto, each as of the time of filing and as of the date hereof, did not and do not contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. The issuance of the Underlying Shares to the Purchaser is registered by the Registration Statement. (d) LISTING AND MAINTENANCE REQUIREMENTS, Except as described in Schedule 2(d), the Company has not, in the two years preceding the date hereof, received notice (written or oral) from the Trading Market to the effect that the Company is not in compliance with the listing or maintenance requirements thereof. (e) CERTAIN FEES. Except for listing fees to be paid by the Company to the Trading Market and fees and commissions due to Ferghana Partners Inc., no fees or commissions will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. The Purchaser shall have no obligation with respect to any fees incurred by the Company or any other Person (other than the Purchaser, if the Purchaser has agreed in writing to pay such fees) or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement. The Company shall indemnify and hold harmless the Purchaser, its employees, officers, directors, agents, and partners, and its affiliates, from and against all claims, losses, damages, costs (including the reasonable costs of preparation and reasonable attorney's fees) and expenses suffered in respect of any such claimed or existing fees incurred by the Company or any other Person (other than the Purchaser, if the Purchaser has agreed in writing to pay such fees), as such fees and expenses are incurred. "PERSON" means any court or other federal, state, local or other governmental authority or other individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. (f) DISCLOSURE. Subject to Section 4.8 below, no event or circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company's reports filed under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") are being incorporated into an effective registration statement filed by the Company under the Securities Act of 1933, as amended (the "SECURITIES ACT")). The Company acknowledges and agrees that the 3 Purchaser is not making and has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3. (g) NO VIOLATION. The issuance and sale of the Securities hereunder does not conflict with or violate any rules or regulations of the Trading Market. (h) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed all reports required to be filed by it under the Securities Act and the Exchange Act, including, without limitation, pursuant to Section 13(a) or 15(d) of the Exchange Act, for the two years preceding the date hereof (the foregoing materials being collectively referred to herein as the "SEC REPORTS" and, together with this Agreement and the Schedules to this Agreement, the "DISCLOSURE MATERIALS") on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. The Company has delivered to the Purchaser a copy of all SEC Reports filed within the 20 days preceding the date hereof. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved ("GAAP"), except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. All material agreements to which the Company or any Subsidiary is a party or to which the property or assets of the Company or any Subsidiary are subject are included as part of or specifically identified in the SEC Reports. (i) CAPITALIZATION. The number of shares and type of all authorized, issued and outstanding capital stock, options and other securities of the Company (whether or not presently convertible or exchangeable for shares of capital stock of the Company) is set forth in Schedule 2(i). All outstanding shares of capital stock are duly authorized, validly issued, fully paid and nonassessable and have been issued in compliance with all applicable securities laws. Except as disclosed in Schedule 2(i), there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. There are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) and the issue and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price 4 under such securities. To the knowledge of the Company, except as specifically disclosed in Schedule 2(i), no Person or group of related Persons beneficially owns (as determined pursuant to Rule 13d-3 under the Exchange Act), or has the right to acquire, by agreement with or by obligation binding upon the Company, beneficial ownership of in excess of five percent (5%) of the outstanding Common Stock, ignoring for such purposes any limitation on the number of shares of Common Stock that may be owned at any single time. (j) MATERIAL CHANGES. Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in the SEC Reports, (i) there has been no event, occurrence or development that has had or that could (x) adversely affect the legality, validity or enforceability of this Agreement, (y) have or result in a material adverse effect on the results of operations, assets, prospects, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (z) adversely impair the Company's ability to perform fully on a timely basis its obligations under this Agreement (any of (x), (y) or (z), a "MATERIAL ADVERSE EFFECT"), (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company's financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting or the identity of its auditors, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, and (v) the Company has not issued any equity securities to any officer, director or affiliate, except pursuant to existing Company stock option plans or employment termination agreements. (k) LITIGATION. There is no action, suit, claim, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, public board, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an "ACTION") which (i) adversely affects or challenges the legality, validity or enforceability of this Agreement or the Securities or (ii) could, if there were an unfavorable decision, individually or in the aggregate, have or result in a Material Adverse Effect. Schedule 2(k) contains a complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the Company or any of its Subsidiaries, without regard to whether it would have a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. The Company does not have pending before the Commission any request for confidential treatment of information. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act. No strike, work stoppage, slow down or other material labor problem exists or, to the knowledge of the Company, is threatened or imminent with respect to any of the employees of the Company or the Subsidiaries. 5 (l) COMPLIANCE. Neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not, individually or in the aggregate, have or result in a Material Adverse Effect. (m) SOLVENCY. Based on the financial condition of the Company as of the Closing Date, and after giving effect to the Asset Purchase Agreement by and between the Company and the Purchaser, dated as of the date hereof, and the sale and issuance of the Shares, (i) the Company's fair saleable value of its assets exceeds the amount that will be required to be paid on or in respect of the Company's existing debts and other liabilities (including known contingent liabilities) as they mature; (ii) the Company's assets do not constitute unreasonably small capital to carry on its business for the current fiscal year as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, and projected capital requirements and capital availability thereof; and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its debt when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). (n) ACKNOWLEDGMENT REGARDING PURCHASER'S PURCHASE OF SECURITIES. The Company acknowledges and agrees that the Purchaser is acting solely in the capacity of an arm's length purchaser with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that the Purchaser is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by the Purchaser or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to the Purchaser's purchase of the Securities. 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby represents, warrants and covenants to the Company that (i) the Purchaser is an entity duly organized, validly existing and in good standing under the laws of the State of Delaware with the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder; (ii) the purchase by the Purchaser of the Shares and Warrant hereunder has been duly authorized by all necessary action on the part of the Purchaser; and (iii) this Agreement has been duly executed and delivered by the Purchaser and constitutes the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. The Company acknowledges and agrees that the 6 Purchaser is not making and has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 3. 4. OTHER AGREEMENTS OF THE PARTIES. 4.1 Preemptive Rights. The Company hereby grants to the Purchase a preemptive right to purchase all or any part of the Purchaser's Pro Rata Share (as defined below) of any New Securities (as defined below) that the Company may, from time to time, propose to issue or sell. Such preemptive right shall be subject to the following provisions of this Section 4.1. (a) Procedure. In the event that the Company proposes to undertake an issuance of New Securities, the Company shall give the Purchaser written notice of its intention, describing the type of New Securities and the price and other terms and conditions upon which the Company proposes to issue such New Securities. The Purchaser shall have 20 days from the date any such notice is given to agree, by written notice to the Company, to purchase all or any part of its pro rata share of such New Securities at the price and upon the other terms and conditions specified in the Company's notice by giving written notice to the Company of its intention to exercise its preemptive right and stating therein the number of New Securities, up to its pro rata share, to be purchased. The failure of the Purchaser to notify the Company within such 20-day period shall constitute an election by the Purchaser not to exercise its preemptive right with respect to such issuance. If the Purchaser has elected to exercise all or any part of its preemptive right hereunder, the Company shall, within three days of the date of issuance of the New Securities, issue to the Purchaser such number of New Securities as the Purchaser requested in its notice to the Company and, simultaneously therewith, the Purchaser shall pay to the Company the purchase price therefor in immediately available funds by bank check or wire transfer to an account designated in writing by the Company. (b) Certain Definitions. (i) "AS-CONVERTED BASIS" shall mean, with respect to the calculation of the number of shares of Common Stock, (i) all shares of Common Stock outstanding at the time of determination and (ii) all shares of Common Stock issuable at the time of determination upon exercise, conversion or exchange of any Convertible Security. (ii) "CONVERTIBLE SECURITY" shall mean any evidences of indebtedness, shares (other than Common Stock) or other securities directly or indirectly convertible into or exercisable or exchangeable for Common Stock. (iii) "NEW SECURITIES" shall mean any shares of capital stock of the Company and any Convertible Securities; provided, however, that "New Securities" shall not include (i) securities issuable upon exercise, conversion or exchange of other securities of the Company, (ii) securities issued to officers, directors or employees of, or consultants to, the Company pursuant to stock options outstanding on the date hereof or stock options granted after the date hereof on terms approved by the Board of Directors of the Company (as adjusted for any stock splits, stock dividends, stock combinations or similar transactions), (iii) shares of the Company's capital 7 stock issued pursuant to any rights or agreements, including, without limitation, Convertible Securities, provided that the preemptive rights established by this Section 4.1 shall apply with respect to the initial sale or grant by the Company of such rights or agreements, (iv) shares of the Company's capital stock issued in connection with any stock split, stock dividend or recapitalization by the Company, (v) shares issued pursuant to any employment agreement or employee benefit plan or in satisfaction of liabilities in existence on the date hereof to creditors disclosed on Schedule 2(j), (vi) securities issued in connection with a merger or consolidation, or purchase of all or substantially all of the assets, shares or other interests, involving the Company, (vii) securities issued in connection with a strategic partnership, up to an aggregate of five percent of the outstanding capital stock of the Company on the date hereof after giving effect to the transactions contemplated by this Agreement (including, without limitation the issuance of the Shares and the Warrant); provided, that any -------- such issuance is not for the principal purpose of raising equity capital, or (viii) securities issued for cash consideration equal to or greater than $1.50 per share of Common Stock (as adjusted for any stock splits, stock dividends, stock combinations or similar transactions) in a transaction exempt from registration under the Securities Act with an aggregate value of $10 million or less. (iv) "PRO RATA SHARE" shall mean the ratio that (i) the total number of shares of Common Stock on an As-Converted Basis then held by the Purchaser bears to (ii) the total number of shares of Common Stock on an As-Converted Basis then outstanding. 4.2 Reservation and Listing of Underlying Shares. The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to this Agreement in such amount as may be required to fulfill its obligations in full under this Agreement and upon conversion of the Shares and exercise or conversion of the Warrant. In the event that at any time the then authorized shares of Common Stock are insufficient for the Company to satisfy its obligations in full under this Agreement and upon conversion of the Shares and exercise or conversion of the Warrant, the Company shall promptly take such actions as may be required to increase the number of authorized shares. The Company shall take such steps as may be required to cause and maintain the listing of the Underlying Shares on the Trading Market and such other exchange, market or quotation facility on which the Common Stock is traded. 4.3 Shareholders Rights Plan. No claim will be made or enforced by the Company that the Purchaser is an "Acquiring Person" under any shareholder rights plan or similar plan or arrangement in effect or hereafter adopted by the Company, or that the Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of purchasing the Securities hereunder or the acquisition of any other securities of the Company under any other arrangement between the Company and the Purchaser. 4.4 Board of Directors. (a) The Company shall use its best efforts to take all action necessary in accordance with the Delaware General Corporation Law and its 8 Certificate of Incorporation and Bylaws, and shall use its best efforts to take all other actions necessary, to ensure that the Purchaser shall have the right to designate up to two (2) individuals to serve as members of the Board of Directors of the Company (each, a "Purchaser Director"). Upon the Purchaser's written request, the Company shall (i) increase the size of the Board or otherwise create vacancies sufficient to create up to two vacancies effective no later than the date designated by Purchaser, (ii) appoint the Purchaser Director(s) as member(s) of the Board, and (iii) enter into an indemnification agreement reasonably acceptable to the Purchaser with each Purchaser Director. (b) If the Purchaser does not at any time have a designee on the Board of Directors of the Company) the Company shall give the Purchaser notice of each meeting of the Board of Directors of the Company at the same time and in the same manner as notice is given to the directors and permit a designee of the Purchaser (an "OBSERVER") to attend in person, as an observer, all meetings held in person and to participate in telephonic meetings of the Board of Directors of the Company solely for the purpose of allowing the Purchaser to have current information with respect to the affairs of the Company. The Company shall provide to the Purchaser in connection with each meeting it is entitled to have an Observer attend, whether or not present at such meeting, copies of all notices, minutes, consents, and all other materials or information that the Company provides to the directors of the Company with respect to such meeting, at the same time such materials and information are given to the directors of the Company (except that materials and information provided to directors of the Company at meetings of the Board of Directors of the Company at which an Observer is not present shall be provided to the Purchaser promptly after the meeting). If the Board of Directors proposes to take any action by written consent in lieu of a meeting, the Company shall give written notice thereof to the Purchaser prior to the effective date of such consent describing in reasonable detail the nature and substance of such action. 4.5 Furnishing of Information. As long as the Purchaser owns Securities, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Securities Act and the Exchange Act. Upon the request of the Purchaser, the Company shall deliver to such Purchaser a written certification of a duly authorized officer as to whether it has complied with the preceding sentence. As long as the Purchaser owns Securities, if the Company is not required to file reports pursuant to such laws, it will prepare and furnish to the Purchaser and make reasonably available the information concerning the Company specified in paragraphs (a)(5)(i) to (xiv), inclusive, and (xvi) of Rule 15c2-11 under the Exchange Act. 4.6 Disclosure of Material Non-Public Information. Upon the written request of the Purchaser, the Company shall not and shall cause each of its affiliates (as defined in Rule 405 under the Securities Act) and other Persons acting on behalf of the Company not to divulge to the Purchaser any information that it believes to be material non-public information unless the Purchaser has agreed in writing to receive such information prior to such divulgence. The Purchaser may rescind and deliver such written request at any time and from time to time. 4.7 Stockholder Notice. On December 31, 2002, the Company shall mail to all stockholders of the Company a letter alerting such stockholders to the omission of the Company to obtain stockholder approval of the issuance and sale of the Securities, which would otherwise be required by 9 the rules of the Trading Market, and indicating that the audit committee of the board of directors of the Company has expressly approved the Exemption. 4.8 Filing of Supplement. The Company shall file the Supplement with the Commission as soon as reasonably practicable, but in no event later than the date the Supplement is required to be filed pursuant to Rule 424(b) promulgated under the Securities Act. 5. MISCELLANEOUS. (a) Any notices or other communications required or permitted under, or otherwise in connection with, this Agreement shall be in writing and shall be deemed to have been duly given (w) when delivered in person, (x) upon confirmation of receipt when transmitted by facsimile transmission, (y) on receipt after dispatch by registered or certified mail, postage prepaid, or (z) on the next Business Day if transmitted by national overnight courier, addressed in each case as follows (or to such other address which has been delivered in accordance with this Section 5(a)): "BUSINESS DAY" shall mean any day on which banks are not required or authorized to close in New York, New York. (a) if to Purchaser, to: Celgene Corporation 7 Powder Horn Drive Warren, New Jersey 07059 Telephone: (732) 271-1001 Facsimile: (732) 805-3931 Attention: with a copy to: Proskauer Rose LLP 1585 Broadway New York, New York 10036 Telephone: (212) 969-3000 Facsimile: (212) 969-2900 Attention: Robert A. Cantone, Esq. (b) if to the Company, to: EntreMed, Inc. 9640 Medical Center Drive Rockville, Maryland 20850 Telephone: (240) 864-2600 Facsimile: (240) 864-2624 Attention: President 10 with a copy to: Arnold & Porter 555 Twelfth Street, NW Washington, D.C. 20004 Telephone: (202) 942-5000 Facsimile: (202) 942-5999 Attention: Richard E. Baltz, Esq. (b) Descriptive Headings. The descriptive headings herein are inserted for convenience only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. (c) Counterparts; Facsimile Signatures. This Agreement may be executed in counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (d) Entire Agreement. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into this Agreement and its exhibits and schedules. (e) Fees and Expenses. Regardless of whether or not the transactions contemplated by this Agreement are consummated, each party shall bear its own fees and expenses incurred in connection with the negotiation, execution, delivery and performance of this Agreement, except as otherwise expressly provided herein. The Company shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the issuance of the Securities. (f) Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of New York, as applied to agreements between New York residents entered into and to be performed entirely within New York. (g) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. (h) Assignment. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser. The Purchaser may assign its rights under this Agreement to any Person to whom the Purchaser assigns or transfers any Securities, provided such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions hereof that apply to the "Purchaser." 11 (i) Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and its successors and permitted assigns, and, except as expressly provided herein, nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any rights, interests, benefits or remedies of any nature whatsoever under or by reason of this Agreement. (j) Interpretation. In the event of an ambiguity or question of intent or interpretation, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. (k) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the parties shall negotiate in good faith with a view to the substitution therefor of a suitable and equitable solution in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid provision; provided, however, that the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law. (l) Payments. Unless otherwise provided herein, all payments required to be made pursuant to this Agreement shall be made in U.S. dollars in the form of cash or by wire transfer of immediately available funds to an account designated by the party receiving such payment. (m) Amendment; Waiver. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchaser or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right. (n) Further Assurances. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. (o) Survival. The representations, warranties, agreements and covenants contained herein shall survive the Closing and the delivery, exercise and/or conversion of the Securities, as applicable. (p) Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new 12 certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE FOLLOWS.] 13 IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. ENTREMED, INC. By: /s/ Neil Campbell -------------------------------- Name: Neil Campbell Title: President CELGENE CORPORATION By: /s/ Robert J. Hugin -------------------------------- Name: Robert J. Hugin Title: Senior Vice President and Chief Financial Officer EX-99.3 5 ex99-3.txt EXHIBIT 99.3 EXHIBIT 99.3 ENTREMED, INC. CERTIFICATE OF DESIGNATION OF SERIES A CONVERTIBLE PREFERRED STOCK (Pursuant to Section 151 of the Delaware General Corporation Law) We, Neil Campbell and James D. Johnson, Ph.D., the President and the Secretary, respectively, of EntreMed, Inc., a Delaware corporation (the "Corporation"), in accordance with the provisions of Section 103 of the Delaware General Corporation Law (the "DGCL") do hereby certify that, in accordance with Section 141(c) of the DGCL, the following resolution was duly adopted by the Board of Directors of the Corporation on December 28, 2002: RESOLVED, that a series of Preferred Stock, par value $1.00 per share, of the Corporation is hereby created and the designation, number of shares, powers, preferences, rights, qualifications, limitations and restrictions thereof (in addition to any provisions set forth in the Restated Certificate of Incorporation of the Corporation which are applicable to the preferred stock of all classes and series) are as follows: SERIES A CONVERTIBLE PREFERRED STOCK 1. Designation and Amount. The shares of such series shall be designated as "Series A Convertible Preferred Stock" (the "Series A Convertible Preferred Stock"), and the number of shares constituting the Series A Stock shall be Three Million Three Hundred Fifty Thousand (3,350,000). 2. Stated Capital. The amount to be represented in stated capital at all times for each share of Series A Convertible Preferred Stock shall be $1.00. 3. Dividend Provisions. a. The holders of shares of Series A Convertible Preferred Stock shall be entitled to receive, prior and in preference to the declaration or payment of any dividend or distribution to the holders of Common Stock or any other shares or securities of the Corporation ranking junior to such Series A Convertible Preferred Stock with respect to the payment of dividends or the distribution of assets on liquidation (as applicable, "Junior Securities"), and in addition to and not in limitation of the dividend rights provided in subsection 1(b) below, dividends which shall accrue cumulatively on each share of Series A Convertible Preferred Stock at the rate and in the manner prescribed in this subsection 3(a) from and including the date of issuance of such share of Series A Convertible Preferred Stock to but excluding the date on which any conversion of such share of Series A Convertible Preferred Stock shall have been effected, and payable when, as and if any dividend or distribution is declared by the Board of Directors of the Corporation. The date on which the Corporation initially issues a share of Series A Convertible Preferred Stock or, in the case of a share of Series A Convertible Preferred Stock issued upon or after one or more conversion(s) of other shares of Series A Convertible Preferred Stock, the date on which the Corporation initially issues the first such converting share of Series A Convertible Preferred Stock, will be deemed to be its "date of issuance" regardless of the number of times transfer of such share of Series A Convertible Preferred Stock is made or the number of certificates which may be issued to evidence a share of Series A Convertible Preferred Stock. (1) Dividends shall accrue on each share of Series A Convertible Preferred Stock at a rate per annum of six (6%) percent of the Original Series A Convertible Preferred Stock Issue Price (as defined below) (as adjusted for stock splits, stock dividends, combinations, recapitalizations and similar events). In the event of any liquidation, dissolution or winding up of the Corporation or the bankruptcy of the Corporation, all accrued and unpaid dividends on a share of Series A Convertible Preferred Stock shall be added to the liquidation preference of such share on the payment date under subsection 4(a) below, or on the date of conversion of such share or upon the bankruptcy of the Corporation, as the case may be, accrued cumulatively to but excluding such payment date or bankruptcy on a daily basis. As used herein, the "Original Series A Convertible Preferred Stock Issue Price" shall mean $5.00 per share of Series A Convertible Preferred Stock, as adjusted for any stock splits, stock dividends, stock combinations and similar transactions with respect to the Series A Convertible Preferred Stock. (2) No dividend or other distribution shall be paid on or set apart for payment on the shares of Common Stock of the Corporation (other than a dividend or distribution payable solely in shares of Common Stock) or other Junior Securities nor shall any payment be made on account of the purchase, redemption or retirement of any shares of Common Stock of the Corporation or other Junior Securities, unless all accrued and unpaid dividends on the Series A Convertible Preferred Stock have been or contemporaneously are paid or set apart for payment in accordance herewith; provided, however, that (A) the Corporation may repurchase shares of Common Stock owned by terminated employees of, or consultants to, the Corporation or its subsidiaries. A conversion of a convertible security which by its terms is convertible into shares of Common Stock by the holder thereof shall not be deemed a purchase, redemption or retirement of the security so converted for purposes of this subsection 3(a). b. In addition to and not in limitation of the dividends provided for in subsection 3(a), the holders of Series A Convertible Preferred Stock shall be entitled to receive dividends and other distributions equivalent to those declared or paid on shares of Common Stock (or any other Junior Securities), determined as if the Series A Convertible Preferred Stock had been converted into shares of Common Stock at the then effective Conversion Price (or, in the case of dividends or distributions on Junior Securities other than shares of Common Stock, determined on a comparable basis), and payable when, as and if declared by the Board of Directors of the Corporation on such shares of Common Stock (or other Junior Securities). 4. Liquidation Preference. a. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary (a "Liquidation Event"), the holders of Series A Convertible Preferred Stock shall be entitled to receive, 2 prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of Common Stock or any other Junior Securities by reason of their ownership thereof, an amount per share in cash equal to the greater of (A) two times the Original Series A Convertible Stock Issue Price, plus all accrued or declared but unpaid dividends on such share of Series A Convertible Preferred Stock as of the date of such event (together, the "Series A Stock Liquidation Preference") or (B) the amount per share that would be payable to a holder of a shares of Series A Convertible Preferred Stock had all shares of Series A Convertible Preferred Stock been converted to Common Stock immediately prior to such Liquidation Event. If, upon the occurrence of a Liquidation Event, the assets and funds thus distributed among the holders of the Series A Convertible Preferred Stock shall be insufficient to permit the payment to such holders of the full Series A Convertible Preferred Stock Liquidation Preference, then the entire assets and funds of the Corporation legally available for distribution shall be distributed, ratably among the holders of the Series A Convertible Preferred Stock in proportion to the aggregate Series A Convertible Preferred Stock Liquidation Preference that would otherwise be payable to such holders. b. Unless waived by the holders of a majority of the Series A Convertible Preferred Stock, the occurrence of any sale or transfer in any transaction or series of related transactions of all or substantially all of the assets of the Corporation or all its subsidiaries taken as a whole, other than a transaction in which the Corporation becomes a direct or indirect wholly-owned subsidiary of a holding company having the same stockholders (with the same relative amounts and type of securities) as the Corporation immediately prior to such transaction, shall be deemed to be a Liquidation Event. c. In the event of a Liquidation Event, if the consideration received by the Corporation is other than cash, its value will be deemed its fair market value. Any securities received as consideration shall be valued as follows: (1) Securities not subject to investment letter or other similar restrictions on free marketability covered by (2) below: (A) If traded on a securities exchange or through the Nasdaq National Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the 30-day period ending three (3) days prior to the closing; (B) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the 30-day period ending three (3) days prior to the closing; and (C) If there is no active public market, the value shall be the fair market value thereof, as jointly determined in good faith by the Board of Directors of the Corporation and the holders of a majority of the outstanding shares of Series A Convertible Preferred Stock. 3 (2) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (1)(A), (B) or (C) to reflect the approximate fair market value thereof, as jointly determined in good faith by the Board of Directors of the Corporation and the holders of a majority of the outstanding shares of Series A Convertible Preferred Stock. d. The Corporation shall mail to each holder of Series A Convertible Preferred Stock, at least thirty (30) days prior to a Liquidation Event, a notice setting forth the date on which such Liquidation Event is expected to become effective and the type and amount of anticipated proceeds per share of each then outstanding series of Preferred Stock and Common Stock to be distributed with respect thereto. e. In the event that, immediately prior to the closing of a transaction described in subsection 4(b) the cash distributions required by subsection 4(a) have not been made, the Corporation shall forthwith either: (1) cause such closing to be postponed until such time as such cash distributions have been made, or (2) cancel such transaction, in which event the rights, preferences and privileges of the holders of the Series A Convertible Preferred Stock shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in subsection 5(i) hereof. 5. Conversion. The holders of Series A Convertible Preferred Stock shall have conversion rights as follows (the "Conversion Rights"): a. Right to Convert. Each share of Series A Convertible Preferred Stock shall be convertible at the option of the holder thereof at any time after the date of issuance of such share, at the office of the Corporation or any transfer agent for the Series A Convertible Preferred Stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Series A Convertible Preferred Stock Issue Price by the "Conversion Price" at the time in effect for such share. The initial "Conversion Price" per share for shares of Series A Convertible Preferred Stock shall be $1.00; provided, however, that the Conversion Price in effect from time to time shall be subject to adjustment as provided hereinafter. b. Automatic Conversion. (1) At any time after the first anniversary of the date a share of Series A Convertible Preferred Stock is first issued, the Corporation may cause each share of Series A Convertible Preferred Stock to be automatically converted into fully paid and nonassessable shares of Common Stock, as provided herein (such conversion, the "Automatic Conversion"), by delivery of a notice to each registered holder of Series A Convertible Preferred Stock, which notice shall describe the Automatic Conversion and include a certification by the Corporation's Chief Executive Officer and Chief Financial Officer that each of the conditions to Automatic Conversion listed in Sections 5(b)(i) to 5(b)(iv), inclusive, have been satisfied (the "Automatic Conversion Notice"); provided, however, that the Corporation may not cause an Automatic Conversion unless each 4 of the following conditions is satisfied: (i) as of the "Automatic Conversion Date" (as defined below), the Common Stock is then traded, and was traded during the sixty (60) trading day period ending on the Automatic Conversion Date, on a national securities exchange, the Nasdaq National Market or the Nasdaq SmallCap Market (or a similar national quotation system), (ii) the average of the per share closing prices of the Common Stock on such exchange or system over the sixty (60) trading day period ending on the Automatic Conversion Date (such prices to be proportionately adjusted to reflect stock splits, stock dividends, combinations, recapitalizations and similar events) is greater than $5.00, and (iii) a registration statement with respect to the resale of the Common Stock issuable in the Automatic Conversion to holders of the Series A Convertible Preferred Stock has been filed with the Securities and Exchange Commission, such registration statement is then in effect, and the Corporation has agreed with the holders of the Series A Convertible Preferred Stock to maintain the effectiveness of such registration statement for at least 180 consecutive days beginning with the date of the Automatic Conversion. For purposes of this Section 5, the "Automatic Conversion Date" shall mean the date on which the Automatic Conversion Notice is, with respect to each registered holder of Series A Convertible Preferred Stock, either: (x) delivered to such registered holder by personal delivery, or (y) delivered to such registered holder by facsimile transmission to the facsimile address of such holder appearing on the books of the Corporation (with confirmation of receipt), and deposited with a recognized express courier for express delivery, fees prepaid, addressed to such registered holder at the address of such holder appearing on the books of the Corporation. (2) Upon an Automatic Conversion in accordance with the procedures specified in Section 5(b), and effective as of the close of business on the Automatic Conversion Date, the outstanding shares of Series A Convertible Preferred Stock shall be converted into Common Stock automatically without the need for any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Corporation or its transfer agent; provided, however, that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion unless the certificates evidencing such shares of Series A Convertible Preferred Stock are either delivered to the Corporation or its transfer agent as provided below, or the holder notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation and/or its transfer agent to indemnify the Corporation and/or its transfer agent from any loss incurred by it in connection with such certificates. Upon the occurrence of such Automatic Conversion of the Series A Convertible Preferred Stock, the holders of Series A Convertible Preferred Stock shall surrender the certificates representing such shares at the office of any transfer agent for the Series A Convertible Preferred Stock or Common Stock. Thereupon, there shall be issued and delivered to such holder promptly at such office and in its name as shown on such surrendered certificate or certificates, a certificate or certificates for the number of shares of Common Stock into which the shares of Series A Convertible Preferred Stock surrendered were convertible on the Automatic Conversion Date. c. Mechanics of Conversion. (1) Each conversion of shares of Series A Convertible Preferred Stock of the Corporation into shares of Common Stock shall be effected by the surrender of the certificate(s) evidencing the shares of the class of 5 stock to be converted (the "Converting Shares") at the principal office of the Corporation (or such other office or agency of the Corporation as the Corporation may designate by notice in writing to the holders of such class of capital stock) at any time during its usual business hours, together with written notice by the holder of such Converting Shares, (i) stating that the holder desires to convert the Converting Shares or a specified number of such Converting Shares, evidenced by such certificate(s) into shares of the class into which such shares may be converted (the "Converted Shares"), and (ii) giving the name(s) (with addresses) and denominations in which the certificate(s) evidencing the Converted Shares shall be issued, and instructions for the delivery thereof. Upon receipt of the notice described in the first sentence of this subsection 5(c)(1), together with the certificate(s) evidencing the Converting Shares, the Corporation shall be obligated to, and shall, issue and deliver in accordance with such instructions the certificate(s) evidencing the Converted Shares issuable upon such conversion and a certificate (which shall contain such legends, if any, as were set forth on the surrendered certificate(s)) representing any shares which were represented by the certificate(s) surrendered to the Corporation in connection with such conversion but which were not Converting Shares and, therefore, were not converted. Such conversion, to the extent permitted by law, shall be deemed to have been effected as of the close of business on the date on which such certificate(s) shall have been surrendered and such written notice shall have been received by the Corporation, and at such time the rights of the holder of such Converting Shares as such holder shall cease, and the person(s) in whose name or names any certificate(s) evidencing the Converted Shares are to be issued upon such conversion shall be deemed to have become the holder(s) of record of the Converted Shares. (2) Upon the issuance of the Converted Shares in accordance with this Section 5, such shares shall be deemed to be duly authorized, validly issued, fully paid and non-assessable. (3) If the conversion is in connection with an underwritten offering of securities registered pursuant to the Securities Act of 1933, as amended, the conversion may, at the option of any holder tendering Series A Convertible Preferred Stock for conversion as permitted herein, be conditioned upon the closing of such underwritten sale of securities pursuant to such offering in which event the person(s) entitled to receive the shares issuable upon such conversion shall not be deemed to have converted such shares until immediately prior to the closing of such sale of securities. d. Conversion Price Adjustments for Subdivisions, Combinations or Consolidations of Common Stock. (1) In the event the Corporation should at any time or from time to time after the date hereof fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of shares of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Share Equivalents"), without payment of any consideration by such holder for the additional shares of Common Stock or the Common Share Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of 6 such dividend distribution, or subdivision if no record date is fixed), the Conversion Price of the Series A Convertible Preferred Stock shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of Series A Convertible Preferred Stock shall be increased in proportion to such increase of outstanding shares of Common Stock and shares issuable with respect to Common Share Equivalents. (2) If the number of shares of Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price of the Series A Convertible Preferred Stock shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of Series A Convertible Preferred Stock shall be decreased in proportion to such decrease in outstanding shares of Common Stock. e. Other Distributions. In the event the Corporation shall declare a distribution payable in securities of other entities or persons, evidences of indebtedness issued by the Corporation or other entities or persons, assets (excluding cash dividends) or options or rights not referred to in subsection 5(d)(1), the holders of the Series A Convertible Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock of the Corporation into which their shares of Series A Convertible Preferred Stock are convertible as of the record date fixed for the determination of the holders of shares of Common Stock of the Corporation entitled to receive such distribution or, if no such record date is fixed, as of the date such distribution is made. f. Recapitalizations. If at any time or from time to time there shall be a recapitalization of the shares of Common Stock (other than a subdivision, combination, merger or sale of assets transaction provided for elsewhere in this Section 5), provision shall be made so that the holders of Series A Convertible Preferred Stock shall thereafter be entitled to receive upon conversion of the Series A Convertible Preferred Stock the number of shares of stock or other securities or property of the Corporation to which a holder of Common Stock would have been entitled on recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 5 with respect to the rights of the holders of the Preferred Stock after the recapitalization to the end that the provisions of this Section 5 (including adjustment of the Conversion Price then in effect and the number of shares issuable upon conversion of the Series A Convertible Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable. g. No Impairment. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 5 and in the taking of all such actions as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series A Convertible Preferred Stock against impairment. h. No Fractional Shares and Certificate as to Adjustments. 7 (1) In lieu of any fractional shares to which a holder of Series A Convertible Preferred Stock would otherwise be entitled upon conversion, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of one share of Common Stock. Whether or not fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Series A Convertible Preferred Stock of each holder at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion. (2) Upon the occurrence of each adjustment or readjustment of the Conversion Price of the Series A Convertible Preferred Stock pursuant to this Section 5, the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series A Convertible Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series A Convertible Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment and readjustment, (B) the Conversion Price of the Series A Convertible Preferred Stock at the time in effect, and (C) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of such holder's shares of Series A Convertible Preferred Stock. i. Notices of Record Date. In the event that the Corporation shall propose at any time: (i) to declare any dividend or distribution upon any class or series of capital stock, whether in cash, property, stock or other securities; (ii) to effect any reclassification or recapitalization of its Common Stock outstanding involving a change in the Common Stock; (iii) to merge or consolidate with or into any other corporation (if the holders of Common Stock would receive any consideration for their shares of Common Stock as part of such merger or consolidation) or to sell, lease or convey all or substantially all of its property or business, or to effect a Liquidation Event; then, in connection with each such event, the Corporation shall mail to each holder of Series A Convertible Preferred Stock: (1) at least thirty (30) days' prior written notice of the date on which a record shall be taken for such dividend or distribution (and specifying the date on which the holders of the affected class or series of capital stock shall be entitled thereto) or for determining the rights to vote, if any, in respect of the matters referred to in clauses (ii) and (iii) above; and (2) in the case of the matters referred to in (ii) and (iii) above, written notice of such impending transaction not later than thirty (30) days prior to the stockholders' meeting called to approve such transaction, or thirty (30) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holder in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction (and specify the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon the occurrence of such event) and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than thirty (30) days after the Corporation has given the first notice provided for herein or sooner than twenty (20) days after the Corporation has given notice of any material changes provided for herein. 8 j. Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued Common Stock, solely for the purpose of effecting the conversion of the shares of Series A Convertible Preferred Stock, such number of its Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series A Convertible Preferred Stock; and if at any time the number of authorized but unissued Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series A Convertible Preferred Stock, in addition to such other remedies as shall be available to the holders of such Series A Convertible Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued Common Stock to such number of shares as shall be sufficient for such purposes. k. Notices. Any notice required by the provisions of this Section 5 to be given to the holders of shares of Series A Convertible Preferred Stock shall be deemed given if deposited in the United States mail, first class postage prepaid, and addressed to each holder of record at his, her or its address appearing on the books of the Corporation. l. Taxes and Costs. The issue of certificates evidencing Common Stock upon conversion of Series A Convertible Preferred Stock in accordance with the terms provided herein shall be made without charge to the holders of such shares for any issue tax in respect thereof or other cost incurred by the Corporation in connection with such conversion; provided, however, the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the holder of the Series A Convertible Preferred Stock so converted. 6. Voting Rights. In addition to any voting rights required by law and the special voting rights provided in this Certificate, the holders of Series A Convertible Preferred Stock shall have the right to one vote for each share of Common Stock into which such share of Series A Convertible Preferred Stock could then be converted (with any fractional share determined on an aggregate conversion basis being rounded to the nearest whole share), and with respect to such vote such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of shares of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders' meeting in accordance with the by-laws of the Corporation, and shall be treated for all purposes (including without limitation the determination of the presence of a quorum), and entitled to vote, together with holders of Common Stock as a single class, with respect to any issue, election, question or matter upon which holders of Common Stock have the right to vote. 7. Protective Provisions. a. In addition to any other rights provided by law or set forth herein, so long as any shares of Series A Convertible Preferred Stock are outstanding, the Corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of a majority of the outstanding shares of Series A Convertible Preferred Stock: 9 (1) authorize, create or issue any shares of any class or series of stock (or issue any securities that are convertible into or exercisable for such a class or series) that are on a parity with or senior to the Series A Convertible Preferred Stock with respect to the payment of dividends or the distribution of assets on liquidation; (2) declare or pay any dividend on (including a dividend payable in stock of the Corporation), make any other distribution with respect to, or repurchase, any stock of the Corporation (or any other securities that are convertible into or exercisable for such stock) that is junior to or on a parity with the Series A Convertible Preferred Stock with respect to the payment of dividends or the distribution of assets upon liquidation; provided, however, that the Corporation may repurchase shares of Common Stock (x) owned by terminated employees of, or consultants to, the Corporation or its subsidiaries and (y) in transactions effected on the open market; (3) effect any merger or consolidation of the Corporation with or into any other corporation or other entity; sell, lease, exchange or otherwise dispose of, in a single transaction or a series of related transactions, all or substantially all of the assets of the Corporation, effect any recapitalization of the Corporation, or effect any other Liquidation Event, in each case other than a transaction in which the Corporation becomes a direct or indirect wholly-owned subsidiary of a holding company having the same stockholders (with the same relative amounts and type of securities) as the Corporation immediately prior to such transaction; (4) amend this Certificate of Designation, the Certificate of Incorporation of Corporation, or the Corporation's By-Laws in any manner that adversely affects the rights, preferences or privileges of the Series A Convertible Preferred Stock; (5) change the nature of the Corporation's business; and (6) cause or permit any subsidiary of the Corporation directly or indirectly to take any actions described in clauses (1) through (6) above, other than issuing securities to the Corporation. 8. Status of Converted Stock. In the event any shares of Series A Convertible Preferred Stock shall be converted pursuant to Section 5 hereof, the shares so converted shall be returned to the status of authorized, but unissued, shares of Preferred Stock of the Corporation. * * * 10 [SIGNATURE PAGE TO CERTIFICATE OF DESIGNATION] Each of the undersigned, the President and the Secretary, respectively, of EntreMed, Inc., a Delaware corporation, declares under penalty of perjury that the matters set forth in this certificate are true and correct of his own knowledge. Executed on December 31, 2002. /s/ Neil Campbell ---------------------------------- Neil Campbell President /s/ James D. Johnson, Ph.D. ---------------------------------- James D. Johnson, Ph.D. Secretary 11 EX-99.4 6 ex99-4.txt EXHIBIT 99.4 EXHIBIT 99.4 EXECUTION COPY INVESTOR AND REGISTRATION RIGHTS AGREEMENT This INVESTOR AND REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and effective as of December 31, 2002 by and between EntreMed, Inc., a Delaware corporation (the "Company"), and Celgene Corporation, a Delaware corporation (the "Holder"). RECITALS: A. Concurrently with the execution of this Agreement, the Holder is agreeing to acquire from the Company shares of the Company's Preferred Stock and a Warrant to purchase shares of Common Stock pursuant to the Securities Purchase Agreement, of even date herewith (the "Securities Purchase Agreement"); and B. By entering into this Agreement, the Company wishes to provide a further inducement to the Holder to enter into the Securities Purchase Agreement and purchase the securities thereunder. NOW, THEREFORE, in consideration of the foregoing, the parties agree as follows: 1. Definitions. For purposes of this Agreement: (a) "Common Stock" means shares of common stock, par value $0.01, of the Company. (b) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (c) "Form S-3" means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC. (d) "Holder" means any Person owning or having the right to acquire Registrable Securities, or any assignee thereof in accordance with Section 11 hereof. (e) "Person" means any individual, partnership, limited liability company, joint venture, corporation, association, trust or any other entity or organization. (f) "Preferred Stock" means shares of the Series A Convertible Preferred Stock, par value $1.00, of the Company. (g) "Register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document. (h) "Registrable Securities" means (1) any Common Stock owned by the Holder, (2) any Common Stock directly or indirectly issuable or issued upon exercise of the Warrant or conversion of any Preferred Stock, and (3) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, or upon exercise or conversion of, such Warrant or Preferred Stock or such warrants, rights or securities; provided, however, that any Registrable Securities sold by the Holder in a transaction in which the Holder's rights under this Agreement are not assigned pursuant to Section 11 below shall cease to be Registrable Securities from and after the time of such sale. (i) "SEC" means the Securities and Exchange Commission. (j) "Securities Act" means the Securities Act of 1933, as amended. (k) "Violation" means any of the following statements, omissions or violations: (i) any untrue statement or alleged untrue statement of a material fact contained in a registration statement filed under or referred to in this Agreement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto or any documents filed under state securities or "blue sky" laws in connection therewith, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law arising from, relating to or in connection with the offer and sale of Registrable Securities pursuant to this Agreement. (l) "Warrant" means the warrant to purchase an aggregate of Six Million (6,000,000) shares of Common Stock dated as of the date hereof, as amended from time to time. 2. Request for Registration. (a) If at any time the Registration Statement (as defined in the Purchase Agreement) is not effective, the Company shall receive a written request from the Holder that the Company file a registration statement under the Securities Act, then the Company shall, subject to the limitations of Section 2(b) below, file (as expeditiously as practicable, and in any event within sixty (60) days of the receipt of such request) and use its best efforts to have declared effective as thereafter as is practicable, a registration statement under the Securities Act with respect to all Registrable Securities which the Holder requests to be registered. (b) Subject to Section 2(d) below, if the Holder intends to distribute the Registrable Securities covered by its request pursuant to Section 2(a) hereof by means of an underwriting, it shall so advise the Company as a part of its request made pursuant to this Section 2. The Holder shall select the managing underwriter or underwriters in such underwriting, such underwriter(s) to be reasonably acceptable to the Company. The Holder shall (together with the Company as provided in Section 4(f)) enter into an underwriting agreement in customary form with the underwriter or underwriters so selected for such 2 underwriting by the Holder; provided, however, that the Holder (or any of its Permitted Transferees) shall not be required to make any representations, warranties or indemnities except as they relate to the Holder's ownership of shares and authority to enter into the underwriting agreement and to the Holder's intended method of distribution, and the liability of the Holder shall be limited to an amount equal to the net proceeds from the offering received by the Holder. (c) The Company shall be obligated to effect only two (2) registrations pursuant to this Section 2 (an offering which is not consummated shall not be counted for this purpose); provided, however, that the Company shall be obligated to effect as many registrations (but not more than three (3) per year) as may be requested by the Holder in the event and so long as registration pursuant to Form S-3 or any similar "short-form" registration statement is available. (d) Notwithstanding the foregoing, if the Company shall furnish to the Holder a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its shareholders for such registration statement to be filed by reason of a material pending transaction and it is therefore essential to defer the filing of such registration statement, the Company shall have the right to defer such filing for a period of not more than ninety (90) days after receipt of the request of the Holder; provided, however, that the Company may not utilize this right more than once in any twelve (12) month period. 3. Company Registration. If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for shareholders other than the Holder) any of its stock or other securities under the Securities Act in connection with the public offering of such securities solely for cash (other than a registration on Form S-8 (or similar or successor form) relating solely to the sale of securities to participants in a Company stock plan or to other compensatory arrangements to the extent includable on Form S-8 (or similar or successor form), or a registration on Form S-4 (or similar or successor form)), the Company shall, at such time, promptly give the Holder written notice of such registration. Upon the written request of the Holder given within twenty (20) days after mailing of such notice by the Company in accordance with Section 19, the Company shall, subject to the provisions of Section 8, use its best efforts to cause to be registered under the Securities Act all of the Registrable Securities that the Holder has requested to be registered. The Company shall have no obligation under this Section 3 to make any offering of its securities, or to complete an offering of its securities that it proposes to make. 4. Obligations of the Company. Whenever required under this Agreement to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holder, keep such registration statement effective for up to one hundred eighty (180) days or until the Holder has completed the distribution referred to in such registration statement, whichever occurs first (but in any event for at least any period required under the Securities Act); provided that before filing such registration statement or any amendments thereto, the Company will furnish to the Holder copies of all such documents proposed to be filed. 3 (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement. (c) Furnish to the Holder such number of copies of such registration statement and of each amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents as the Holder may reasonably request in order to facilitate the disposition of Registrable Securities owned by it. (d) Use its best efforts to register and qualify the securities covered by such registration statement for offer and sale under such other securities or "blue sky" laws of such states or jurisdictions as shall be reasonably requested by the Holder, provided that the Company shall not be required in connection therewith or as a condition thereto (i) to qualify to do business in any state or jurisdiction where it would not otherwise be required to qualify but for the requirements of this clause (d), or (ii) to file a general consent to service of process in any such state or jurisdiction. (e) Use diligent efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the Company's business or operations to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities. (f) In the event of any underwritten public offering, cooperate with the managing underwriter in such customary marketing activities (including, without limitation, any "roadshow") that the managing underwriter may request, and enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. (g) Notify the Holder at any time when a prospectus relating to such registration statement is required to be delivered under the Securities Act of the happening of any event of which it has knowledge as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. (h) Notify the Holder and the Holder's underwriters, if any, and confirm such advice in writing: (i) when the registration statement has become effective, (ii) when any post-effective amendment to the registration statement becomes effective and (iii) of any request by the SEC for any amendment or supplement to the registration statement or prospectus or for additional information. 4 (i) Notify the Holder if at any time the SEC should institute or threaten to institute any proceedings for the purpose of issuing, or should issue, a stop order suspending the effectiveness of the Registration Statement. Upon the occurrence of any of the events mentioned in the preceding sentence, the Company will use its best efforts to prevent the issuance of any such stop order or to obtain the withdrawal thereof as soon as possible. The Company will promptly advise the Holder of any order or communication of any public board or body addressed to the Company suspending or threatening to suspend the qualification of any Registrable Securities for sale in any jurisdiction. (j) Furnish, at the request of the Holder, (i) on the date that Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Agreement, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holder requesting registration of Registrable Securities and (ii) on the date that the registration statement with respect to such securities becomes effective, a "comfort" letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holder, and, if such securities are being sold through underwriters, a reaffirmation of such letter on the date that such Registrable Securities are delivered to the underwriters for sale. (k) As soon as practicable after the effective date of the registration statement, and in any event within sixteen (16) months thereafter, have "made generally available to its security holders" (within the meaning of Rule 158 under the Securities Act) an earning statement (which need not be audited) covering a period of at least twelve (12) months beginning after the effective date of the registration statement and otherwise complying with Section 11(a) of the Securities Act. 5. Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Agreement with respect to the Registrable Securities of the Holder that the Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of the Holder's Registrable Securities. If any registration statement or comparable statement under the Securities Act refers to the Holder or any of its affiliates, by name or otherwise, as the holder of any securities of the Company then, unless counsel to the Company advises the Company that the Securities Act requires that such reference be included in any such statement, each the Holder shall have the right to require the deletion of such reference to itself and its affiliates. 5 6. Expenses of Demand Registration. All expenses, other than underwriting discounts and commissions relating to Registrable Securities, incurred in connection with registrations, filings or qualifications pursuant to Section 2, including without limitation all registration, filing and qualification fees, printers' and accounting fees, fees and disbursements of counsel for the Company, and the reasonable fees and disbursements of counsel (selected by the Holder) for each registration for the Holder shall be borne by the Company; provided, however, that such expenses shall not exceed $200,000 in the aggregate. 7. Expenses of Company Registration. The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to the registrations pursuant to Section 3 for the Holder, including without limitation all registration, filing and qualification fees, printers' and accounting fees relating or apportionable thereto and the fees and disbursements of counsel for each registration for the Holder (selected by the Holder), but excluding underwriting discounts and commissions relating to Registrable Securities. 8. Underwriting Requirements. In connection with any offering initiated by the Company involving an underwriting of shares being issued by the Company, the Company shall not be required under Section 3 to include the Holder's securities in such underwriting unless the Holder accepts the terms of the underwriting as agreed upon between the Company and the underwriters selected by it, and then only in such quantity as will not, in the opinion of the underwriters, exceed the largest number of securities requested to be included in such offering which can be sold without having an adverse effect on such offering by the Company; provided, however, that the Holder shall not be required to make any representations, warranties or indemnities except as they relate to the Holder's ownership of shares and authority to enter into the underwriting agreement and to the Holder's intended method of distribution, and the liability of the Holder shall be limited to an amount equal to the net proceeds from the offering received by the Holder. If the total number of securities, including Registrable Securities, requested by shareholders to be included in such offering (or in any other offering in which the Holder shall have the right to include Registrable Securities pursuant to Section 3) exceeds the largest number of securities that the underwriters reasonably believe can be sold without having an adverse effect on such offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters believe will not have an adverse effect on such offering, and the number of shares that may be included in the underwriting shall be allocated as follows: (i) first, to the Holder and (ii) thereafter, to the extent additional securities may be included in such offering, to other selling shareholders, pro rata according to the total number of securities entitled to be included therein owned by each such other selling shareholder or in such other proportions as shall mutually be agreed to by such other selling shareholders. 9. Indemnification. In the event any Registrable Securities are included in a registration statement under this Agreement: (a) To the extent permitted by law, the Company will indemnify and hold harmless the Holder, its assigns, each of the Holder's partners, each of the Holder's, and each of the Holder's partners', officers, directors, partners, employees, agents, legal counsel, independent accountants and affiliates, any underwriter (as defined in the Securities Act) for the 6 Holder and each Person, if any, who controls the Holder or underwriter within the meaning of the Securities Act or the Exchange Act against any losses, claims, damages or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon a Violation; and, subject to the restrictions set forth in Section 9(c), the Company will pay to each such indemnified party promptly, as such expenses are incurred and are due and payable, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 9(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case to a particular indemnified party for any such loss, claim, damage, liability or action (i) to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such indemnified party; (ii) that is based on a failure of such indemnified party to deliver or to cause to be delivered the prospectus made available by the Company, if such prospectus was timely made available by the Company pursuant to Section 4(c) hereof; or (iii) that is due to the use by such indemnified party of an outdated or defective prospectus after the Company has notified such Person in writing that the prospectus is outdated or defective, if the untrue statement or omission of material fact contained in the preliminary prospectus giving rise to the Violation was corrected in the prospectus, as then amended or supplemented, and such prospectus, as so amended or supplemented, was timely made available by the Company pursuant to Section 4(c) hereof. (b) To the extent permitted by law, the Holder will, severally and not jointly, indemnify and hold harmless the Company, each of its directors, officers, agents, employees and its legal counsel and independent accountants, each Person, if any, who controls the Company within the meaning of the Securities Act, any underwriter, and any controlling Person of any such underwriter or other Holder, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing Persons may become subject, under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by the Holder expressly for use in connection with such registration; and the Holder will pay, as incurred, any legal or other expenses reasonably incurred by any Person intended to be indemnified pursuant to this Section 9(b), in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 9(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided further, that, in no event shall the liability of the Holder under this Section 9(b) exceed the net proceeds from the offering received by the Holder. (c) Promptly after receipt by an indemnified party under this Section 9 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 9, deliver to 7 the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties, acting reasonably; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if such indemnified party has been advised by counsel that representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding; provided further, however, that the indemnifying party shall not be responsible for the fees and expenses of more than one counsel for all indemnified parties. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the indemnified party under this Section 9 except if, and only to the extent that, the indemnifying party is materially prejudiced thereby; and such failure to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 9. An indemnifying party may settle any action or claim under this Section 9 at any time without the consent of the indemnified party so long as such settlement involves no cost or liability to the indemnified party and includes an unconditional release of the indemnified party from all liability with respect to such claim or action. (d) The obligations of the Company and the Holder under this Section 9 shall survive the completion of any offering of Registrable Securities in a registration statement under this Agreement, and otherwise. (e) Any indemnity agreements contained herein shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract and shall remain operative and in full force and effect regardless of any investigation made or omitted by or on behalf of any indemnified party. (f) If a court of competent jurisdiction holds that the foregoing indemnity is unavailable, then the indemnifying party, in lieu of indemnifying the indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other (taking into consideration, among other things, the fact that the provision of the registration rights and indemnification hereunder is a material inducement to the Holder to purchase Registrable Securities pursuant to the Securities Purchase Agreement) or (ii) if the allocation provided by clause (i) above is not permitted by applicable law or provides a lesser sum to the indemnified party than the amount hereinafter calculated, in such proportion as is appropriate to reflect not only the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other (taking into consideration, among other things, the fact that the provision of the registration rights and indemnification hereunder is a material inducement to the Holder to purchase Registrable Securities pursuant to the Securities Purchase Agreement) but also the relative fault of the indemnifying party and the indemnified party as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, 8 whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by or on behalf of the indemnifying party or the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. 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. Notwithstanding anything to the contrary in this Section 9, the Holder shall not be required, pursuant to this Section 9, to contribute any amount in excess of the net proceeds received by such indemnifying party from the sale of securities in the offering to which the losses, claims, damages, liabilities or expenses of the indemnified party relate. 10. Reports Under the Exchange Act. With a view to making available to the Holder the benefits of Rule 144 under the Securities Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the effective date of the first registration statement filed by the Company for the offering of its securities to the general public; (b) use its best efforts (without unreasonable expense) to enable the Holder to utilize Form S-3 for the sale of their Registrable Securities; (c) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (d) furnish to the Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144 under the Securities Act (at any time after the effective date of the first registration statement filed by the Company) and the Securities Act and Exchange Act (at any time after it has become subject to such reporting requirements) or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing the Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. 11. Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Agreement may be assigned in whole or in part by the Holder to one or more of its affiliates or to one or more transferees or assignees of not less than 10% of the Registrable Securities owned by the Holder on the date hereof, provided that (in each case) such transferee or assignee delivers to the Company a written instrument by which such transferee or assignee agrees to be bound by the obligations imposed on the Holder under this Agreement to the same extent as if such transferee or assignee was a party hereto. Except as specifically permitted in the preceding sentence, neither this Agreement nor the Holder's rights or privileges under this Agreement can be assigned or transferred in whole or in part without the prior written consent of the other parties. 9 12. No Other Registration Rights; Limitations on Subsequent Registration Rights. The Company, represents and warrants to the Holder that, except as listed on Schedule 12 attached hereto, no "registration rights" relating to securities of the Company will exist on the date hereof other than pursuant to this Agreement. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holder, enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder to include such securities in any registration filed under this Agreement, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such holder's securities will not reduce the amount of the Registrable Securities of the Holder which is included therein, other than on a pari passu and pro rata basis. 13. Amendment; Waiver. Any provision of this Agreement may be amended only with the written consent of the Company and the Holder. The observance of any provision of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the party to be charged. Any amendment or waiver effected in accordance with this Section 13 shall be binding upon the Holder, each future holder of all such securities, and the Company. 14. Changes in Registrable Securities. If, and as often as, there are any changes in the Registrable Securities by way of stock split, stock dividend, combination or reclassification, or through merger, consolidation, reorganization or recapitalization, or by any other means (including, without limitation, the reorganization of the Company as a subsidiary of a holding company), appropriate adjustment shall be made in the provisions of this Agreement, as may be required, so that the rights and privileges granted hereby shall continue with respect to the Registrable Securities as so changed. Without limiting the generality of the foregoing, the Company will require any successor by merger or consolidation (or the parent company thereof) to assume and agree to be bound by the terms of this Agreement, as a condition to any such merger or consolidation. 15. Entire Agreement. This Agreement constitutes the full and entire understanding and agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and any and all negotiations and oral understandings with respect thereto. Nothing in this Agreement, express or implied, is intended to confer upon any Person, other than the parties hereto and their respective successors and assigns, any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided herein. 16. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of New York, as applied to agreements between New York residents entered into and to be performed entirely within New York. 17. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 10 18. Successors and Assigns. The provisions hereof shall inure to the benefit of, and be binding upon, the successors, permitted assigns (as provided in Section 11), heirs, executors and administrators of the parties hereto. 19. Notices. Unless otherwise provided, any notices or other communications required or permitted under, or otherwise in connection with, this Agreement shall be in writing and shall be deemed to have been duly given (w) when delivered in person, (x) upon confirmation of receipt when transmitted by facsimile transmission, (y) on receipt after dispatch by registered or certified mail, postage prepaid, or (z) on the next Business Day if transmitted by national overnight courier, addressed in each case as specified in the Purchase Agreement (or to such other address which has been delivered in accordance with this Section 19): "Business Day" shall mean any day on which banks are not required or authorized to close in New York, New York. 20. Severability. Any invalidity, illegality or limitation on the enforceability of this Agreement or any part thereof, by any party whether arising by reason of the law of the respective party's domicile or otherwise, shall in no way affect or impair the validity, legality or enforceability of this Agreement with respect to other parties. If any provision of this Agreement shall be judicially determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 21. Titles and Subtitles. The titles of the Sections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 22. Delays or Omissions; Remedies Cumulative. It is agreed that no delay or omission to exercise any right, power or remedy accruing to the parties shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character by a party of any breach or default under this Agreement, or any waiver by a party of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in writing and that all remedies, either under this Agreement, or by law or otherwise afforded to a party, shall be cumulative and not alternative. 23. Attorneys' Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney's fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 11 24. Counterparts; Facsimile Signatures. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same document. This Agreement may be executed by facsimile signatures. 25. Investment Parameters. Holder agrees that, from the Closing Date, as defined in the Securities Purchase Agreement, until the date that Holder, together with its affiliates, no longer beneficially owns, as defined in Rule 13d-3 under the Securities Act, at least ten percent (10%) of the outstanding shares of the Company's Common Stock, Holder shall not, directly or indirectly, dispose of any of its shares of Common Stock except, subject to the terms and conditions of this Agreement and applicable law, (i) in a widely dispersed public distribution; (ii) in a private placement in which no one party acquires the right to purchase more than five percent (5%) of the outstanding shares of Common Stock; (iii) an assignment to a single party (such as a broker, underwriter or investment banker) for the purpose of conducting a widely dispersed public distribution on Holder's behalf; (iv) pursuant to Rule 144 under the Securities Act; or (v) pursuant to a tender or exchange offer to the Company's stockholders. [END OF TEXT. SIGNATURE PAGES FOLLOW.] 12 IN WITNESS WHEREOF, the parties hereto have caused this Investor and Registration Rights Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. ENTREMED, INC. By: /s/ Neil Campbell -------------------------------- Name: Neil Campbell Title: President CELGENE CORPORATION By: /s/ Robert J. Hugin -------------------------------- Name: Robert J. Hugin Title: Senior Vice President and Chief Financial Officer EX-99.5 7 ex99-5.txt EXHIBIT 99.5 EXHIBIT 99.5 CELGENE CORPORATION 7 Powder Horn Drive Warren, New Jersey 07059 December 31, 2002 EntreMed, Inc. 9640 Medical Center Drive Rockville, Maryland 20850 Ladies and Gentlemen: Reference is made to the Asset Purchase Agreement dated as of the date hereof between Celgene Corporation ("Celgene") and EntreMed, Inc. ("EntreMed"). In consideration of the undertakings of Celgene contained in the Asset Purchase Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged by EntreMed, EntreMed agrees as follows: 1. For a period of ninety (90) days from the date hereof (the "Review Period"), neither EntreMed nor any of its affiliates will enter into any agreement, arrangement or understanding with respect to any merger, consolidation or other business combination involving EntreMed or the acquisition of all or any significant portion of the assets or capital stock of EntreMed (an "Acquisition Transaction"); provided, however, that an Acquisition Transaction shall not be deemed to include any such transaction that only involves MaxCyte, Inc. However, EntreMed or any of its affiliates, and the respective directors, officers, employees, agents or representatives of the foregoing (including, without limitation, any investment banker, attorney or accountant retained by EntreMed) may, directly or indirectly, solicit, initiate, facilitate or encourage (including by way of furnishing or disclosing non-public information) any inquiries or the making of any proposal with respect to or which may reasonably be expected to lead to an Acquisition Transaction, or negotiate, explore or otherwise engage in discussions with any corporation, partnership, person, other entity or "group" (as defined in Section 13(d)(2) of the Securities Exchange Act of 1934, as amended) in furtherance of such inquiries or with respect to any Acquisition Transaction. EntreMed may also enter into any transaction exclusively regarding non-oncology indications. During the Review Period, EntreMed shall immediately advise Celgene in writing of any proposals (or desire to make a proposal) received by (or indicated to) it, any of its affiliates, or any of the respective directors, officers, employees, agents or representatives of any of the foregoing, from a corporation, partnership, person or other entity or group (other than Celgene and its representatives) with respect to an Acquisition Transaction, and the terms thereof, including the identity of such third party, and to update on an ongoing basis or upon Celgene's request the status thereof; provided, however, that no such notice is required for any transactions exclusively regarding non-oncology indications. 2. During the Review Period, except as contemplated by the Asset Purchase Agreement, the Related Instruments (as defined therein) or the Investor and Registration Rights Agreement, dated as of the date hereof (the "Investor and Registration Rights Agreement"), between EntreMed and Celgene, or unless Celgene shall otherwise consent in writing, EntreMed shall, and shall cause its Subsidiaries (as defined in the Asset Purchase Agreement) to, (x) operate its and their businesses in the ordinary course consistent with past practice and (y) use its and their reasonable best efforts to preserve such businesses substantially intact. Without limiting the generality of the foregoing, and except as otherwise contemplated by the Asset Purchase Agreement, the Related Instruments (as defined therein) or the Investor and Registration Rights Agreement, during the Review Period, without the prior written consent of Celgene, EntreMed shall not, and shall cause its Subsidiaries not to: (i) subject any of its or their assets to any Lien, other than Permitted Liens (as these terms are defined in the Asset Purchase Agreement); (ii) sell, assign, transfer, lease, sublease, license, sublicense or otherwise dispose of any material assets, other than in connection with any transaction exclusively regarding non-oncology indications; (iii) transfer to any third party any material rights, whether under licenses, sublicenses, other agreements or otherwise, with respect to any material assets, other than in connection with any transaction exclusively regarding non-oncology indications; (iv) enter into, terminate or amend any material contract, other than in the ordinary course of business or in connection with any transaction exclusively regarding non-oncology indications; (v) abandon or terminate any clinical trials relating to its or their respective businesses other than in the ordinary course of business (including for safety concerns), in accordance with the terms of existing arrangements with respect to such clinical trials, or as EntreMed reasonably believes is necessary to manage such trials or related costs; (vi) surrender, revoke or otherwise terminate any permit, authorization, license, registration, certificate, approval or clearance of any Governmental Entity (as that term is defined in the Asset Purchase Agreement), other than in the ordinary course of business; (vii) incur indebtedness for borrowed money, or incur any other liabilities, other than in the ordinary course of business; (viii) waive, release or assign any material rights in connection with its or their respective businesses, other than in the ordinary course of business or in connection with any transaction exclusively regarding non-oncology indications; 2 (ix) issue or sell any capital stock or rights to acquire capital stock, other than pursuant to (a) the exercise or conversion of warrants, options, convertible securities or similar rights outstanding on the date hereof, (b) any stock option plan currently in effect or as may be subsequently approved by EntreMed's Board of Directors, (c) any employment termination agreement, (d) work-out agreements with the Company's existing creditors in connection with liabilities outstanding on the date hereof, or (e) in connection with any transaction exclusively regarding non-oncology indications if such issuance does not exceed 5% of EntreMed's then-outstanding common stock; (x) merge or consolidate with another entity; (xi) acquire an equity interest in or a substantial portion of the assets of another entity; (xii) incur any obligation for capital expenditures in excess of $500,000 in the aggregate; (xiii) allow any insurance policy naming EntreMed or any of its Subsidiaries as a beneficiary, insured or loss payee to be cancelled or terminated; (xiv) form any Subsidiary; or (xv) agree, whether in writing or otherwise, to do any of the foregoing. [SIGNATURE PAGE FOLLOWS] 3 Kindly acknowledge your agreement with the foregoing by executing and delivering to Celgene at least one copy of this letter agreement. CELGENE CORPORATION By: /s/ Robert J. Hugin ---------------------------- Senior Vice President and Chief Financial Officer Agreed to and accepted: ENTREMED, INC. By: /s/ Neil Campbell ----------------------------- President 4 EX-99.6 8 ex99-6.txt EXHIBIT 99.6 EXHIHBIT 99.6 ================================================================================ ASSET PURCHASE AGREEMENT by and between Celgene Corporation as Purchaser and EntreMed, Inc. as Seller Dated as of December 31, 2002 ================================================================================ TABLE OF CONTENTS ARTICLE I CERTAIN DEFINITIONS Section 1.1 Certain Definitions..........................................1 ------------------- Section 1.2 Interpretation...............................................5 -------------- ARTICLE II SALE AND PURCHASE OF ASSETS Section 2.1 Transfer of Assets...........................................5 ------------------ Section 2.2 Assumed Liabilities..........................................7 ------------------- Section 2.3 Purchase Price...............................................7 -------------- Section 2.4 Closing......................................................7 ------- Section 2.5 Nonassignable Assets.........................................8 -------------------- Section 2.6 Opinion of Counsel...........................................8 ------------------ ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER Section 3.1 Organization.................................................8 ------------ Section 3.2 Authority....................................................9 --------- Section 3.3 No Conflict; Required Filings and Consents...................9 ------------------------------------------ Section 3.4 Permits; Compliance With Law.................................9 ---------------------------- Section 3.5 Absence of Certain Changes or Events........................10 ------------------------------------ Section 3.6 Title to Assets; Sufficiency of Assets......................11 -------------------------------------- Section 3.7 Assumed Contracts...........................................11 ----------------- Section 3.8 Conveyed Intellectual Property..............................11 ------------------------------ Section 3.9 Litigation..................................................12 ---------- Section 3.10 Brokers.....................................................12 ------- Section 3.11 Preclinical Testing and Clinical Trials.....................13 --------------------------------------- Section 3.12 Certain Regulatory Matters..................................13 -------------------------- Section 3.13 Taxes.......................................................14 ----- ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER Section 4.1 Organization................................................14 ------------ Section 4.2 Authority...................................................15 --------- Section 4.3 No Conflict; Required Filings and Consents..................15 ------------------------------------------ Section 4.4 Litigation..................................................15 ---------- Section 4.5 Brokers.....................................................16 ------- i ARTICLE V COVENANTS Section 5.1 Conduct of the Business.....................................16 ----------------------- Section 5.2 Access to Information; Confidentiality; Cooperation.........17 --------------------------------------------------- Section 5.3 Appropriate Action; Consents; Filings.......................18 ------------------------------------- Section 5.4 Further Assurances..........................................19 ------------------ Section 5.5 Tax Matters.................................................19 ----------- Section 5.6 Publicity...................................................20 --------- Section 5.7 Certain Provisions Relating to the Transfer.................20 ------------------------------------------- Section 5.8 Supplemental Disclosure.....................................20 ----------------------- Section 5.9 Closing Documents...........................................20 ----------------- Section 5.10 Patent Prosecution..........................................21 ------------------ Section 5.11 Non-Competition.............................................21 --------------- Section 5.12 Confidentiality.............................................22 --------------- Section 5.13 Rights to Certain Technologies of Seller....................23 ---------------------------------------- ARTICLE VI CONDITIONS Section 6.1 Conditions to Each Party's Obligations......................23 -------------------------------------- Section 6.2 Conditions to Obligations of Purchaser......................23 -------------------------------------- Section 6.3 Conditions to Obligations of Seller.........................24 ----------------------------------- ARTICLE VII TERMINATION AND AMENDMENT Section 7.1 Termination.................................................24 ----------- Section 7.2 Effect of Termination.......................................25 --------------------- Section 7.3 Amendment...................................................25 --------- Section 7.4 Extension; Waiver...........................................25 ----------------- ARTICLE VIII SURVIVAL; INDEMNIFICATION Section 8.1 Survival Period.............................................26 --------------- Section 8.2 Indemnification.............................................26 --------------- Section 8.3 Indemnification Procedures..................................27 -------------------------- Section 8.4 Qualifications on Liability.................................28 --------------------------- ii ARTICLE IX MISCELLANEOUS Section 9.1 Notices.....................................................28 ------- Section 9.2 Descriptive Headings........................................29 -------------------- Section 9.3 Counterparts; Facsimile Signatures..........................29 ---------------------------------- Section 9.4 Entire Agreement............................................30 ---------------- Section 9.5 Fees and Expenses...........................................30 ----------------- Section 9.6 Governing Law...............................................30 ------------- Section 9.7 WAIVER OF JURY TRIAL........................................30 -------------------- Section 9.8 Assignment..................................................30 ---------- Section 9.9 Parties in Interest.........................................31 ------------------- Section 9.10 Interpretation..............................................31 -------------- Section 9.11 Severability................................................31 ------------ Section 9.12 Payments....................................................31 -------- Section 9.13 Bulk Sales Laws.............................................31 --------------- iii THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of the 31st day of December, 2002, by and between Celgene Corporation, a Delaware corporation ("Purchaser"), and EntreMed, Inc., a Delaware corporation ("Seller"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, Seller is engaged in the Business; WHEREAS, Purchaser has agreed to acquire from Seller, and Seller has agreed to sell to Purchaser, the Conveyed Assets on the terms and subject to the conditions set forth herein; and WHEREAS, Purchaser has agreed to assume the Assumed Liabilities on the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the premises, covenants, representations and warranties contained herein, and other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: ARTICLE I CERTAIN DEFINITIONS Section 1.1 Certain Definitions. As used in this Agreement, the following terms shall have the following meanings: "Affiliate" of a specified Person shall mean another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person. "Analog Patents" has the meaning ascribed thereto in the Exclusive License Agreement. "Assignment of Intellectual Property" shall mean the instrument evidencing the assignment to Purchaser of all of Seller's and its Subsidiaries' right, title and interest in and to the Conveyed Intellectual Property, which shall be in form and substance reasonably satisfactory to Purchaser and Seller. "Bill of Sale" shall mean the bill of sale transferring to Purchaser all of Seller's and its Subsidiaries' right, title and interest in and to the Conveyed Assets, which shall be in form and substance reasonably satisfactory to Purchaser and Seller. 1 "Business" shall mean the business of researching and developing pharmaceutical drug products, medical devices, diagnostic products, veterinary products, vaccines, prophylactics and other commercial products that contain Thalidomide Analogs as an active ingredient, including, without limitation, Thalidomide Analogs of a type contemplated by the Analog Patents. "Business Day" shall mean any day on which banks are not required or authorized to close in New York, New York. "Code" shall mean the Internal Revenue Code of 1986, as amended. "control" (including the terms "controlled by" and "under common control with") shall mean, with respect to a Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of securities or as trustee or executor, by contract or credit arrangement or otherwise. "Exclusive License Agreement" shall mean the Exclusive License Agreement among Purchaser, Children's Medical Center Corporation and, for purposes of certain provisions thereof, Seller, in the form attached as Exhibit 1 to the Settlement Agreement. "GAAP" shall mean United States generally accepted accounting principles consistently applied. "Governmental Entity" shall mean a domestic or foreign court, legislature, governmental agency, governmental commission, or a judicial or regulatory authority of any government. "Instrument of Assignment and Assumption" shall mean the instrument evidencing Seller's and its Subsidiaries' assignment to Purchaser of the Assumed Liabilities, which shall be in form and substance reasonably satisfactory to Purchaser and Seller. "Intellectual Property" shall mean statutory and common law trademarks, service marks, trade names, Internet domain names, designs, trade dress, logos, slogans and general intangibles of like nature, together with registrations and applications relating to any of the foregoing; patents and copyrights, together with registrations and applications relating to any of the foregoing; Software; confidential information, data, compilations, technology, Know-How and goodwill relating to any of the foregoing, and all rights to sue and recover damages or obtain injunctive relief for past and future infringement, misappropriation, violation, dilution or breach of any of the foregoing. "IRS" shall mean the Internal Revenue Service. "Know-How" shall mean any information, in any form whatsoever, relating to Thalidomide Analogs, whether such information is patentable or not, including without limitation technical and non-technical information, marketing, 2 cost, and sales information, know-how, skill, knowledge, experience, machinery, equipment and equipment designs, inventions, invention disclosure statements, notebooks, practices, methods, processes, procedures, manufacturing technology, compositions, reagents, devices, formulae, chemical structures and models, formulations, protocols, methodologies, techniques, algorithms, designs, drawings, plans, diagrams, specifications, models, samples, materials (including without limitation chemical and biological materials), data (including without limitation pharmacological, toxicological and clinical test data, analytical and quality assurance and quality control data), assays, and the results (including without limitation of experimentation, tests and assays), to the extent such information relates to or is used, useful, or potentially useful in, the conduct of the Business, expressly including, without limitation, the items set forth in Section 1.1 of the Seller Disclosure Letter. "knowledge" of any Person that is not an individual shall mean, with respect to any specific matter, the knowledge, after reasonable inquiry, of such Person's executive officers and any other officer having responsibility for such matter. "Law" shall mean any foreign or domestic law, including the common law, statute, code, rule, regulation, ordinance, order, judgment, writ, injunction or decree. "Lien" shall mean any lien, security interest, pledge, mortgage, claim, charge, hypothecation or other encumbrance of any nature whatsoever. "Litigations" has the meaning ascribed thereto in the Settlement Agreement. "Material Adverse Effect" shall mean any fact, event, circumstance or condition (excluding general economic conditions) that has a material adverse effect, individually or in the aggregate, on the financial condition, results of operations, assets, liabilities or prospects of the Business or the ability of Seller to perform any of its material obligations under, or to consummate the transactions contemplated by, this Agreement. "Permitted Liens" shall mean: (i) Liens for Taxes or assessments which are not yet due and payable or are being contested in good faith by appropriate proceedings; (ii) mechanics', warehousemens', materialmens', contractors', workmens', repairmens', carriers' and other similar Liens; and (iii) Liens incurred in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security. "Person" shall mean any individual, group, corporation, partnership or other organization or entity. "Prosecution" has the meaning ascribed thereto in the Exclusive License Agreement. "Regulatory Filings" shall mean any and all applications made to the United States Food and Drug Administration or any other analogous United 3 States or foreign regulatory agency or authority, seeking approval to investigate, market, or sell any Thalidomide Analog, including without limitation all Investigational New Drug Applications, New Drug Applications, Abbreviated New Drug Applications and Orphan Drug Status applications, and all grants of any such applications, and of any other rights to investigate, market or sell any Thalidomide Analog, and all extensions of all such grants and rights. "Related Instruments" shall mean the Bill of Sale, the Instrument of Assignment and Assumption, the Assignment of Intellectual Property, the Exclusive License Agreement, the Securities Purchase Agreement and the Settlement Agreement. "Securities Purchase Agreement" shall mean the Securities Purchase Agreement between Purchaser and Seller in the form of Exhibit A hereto, together with all exhibits thereto. "Seller Disclosure Letter" shall mean the disclosure letter delivered by Seller to Purchaser in connection with the execution of this Agreement. "Settlement Agreement" shall mean the Settlement and Mutual Release Agreement between Purchaser and Seller in the form of Exhibit B hereto, and all Exhibits thereto, including without limitation the Exclusive License Agreement among Purchaser, Children's Medical Center Corporation, and, for purposes of certain provisions thereof, Seller, attached thereto as Exhibit 1, and the Stipulations of Dismissal executed on behalf of both Seller and Purchaser, attached thereto as Exhibits 2 and 3. "Software" shall mean computer programs, including any and all software implementations of algorithms, models and methodologies whether in source code or object code form, databases and compilations, including any and all data and collections of data, all documentation, including user manuals and training materials, related to any of the foregoing and the content and information contained on any Web site. "Subsidiary" of any Person means any corporation, partnership, joint venture or other legal entity of which such Person owns, directly or indirectly, a majority of the stock or other equity interests the holders of which are generally entitled to vote for the election of the Board of Directors or other governing body of such corporation or other legal entity. "Tax Return" shall mean any report, declaration, statement, return or other information filed in respect of Taxes, and any claims for refund of Taxes, including any amendments or supplements to any of the foregoing with any taxing authority with respect to Taxes imposed upon or attributable to the operations of the Business. "Taxes" shall mean any and all taxes, levies or other like assessments, including, but not limited to, income, transfer, gains, gross receipts, excise, inventory, property (real, personal or intangible), custom, duty, sales, use, license, withholding, payroll, employment, capital stock and franchise taxes (including any fee, assessment or other charge in the nature of or in lieu of any tax), imposed by the United States, or any state, local or foreign government or subdivision or agency thereof, any interest, penalties, 4 additions to tax or additional amounts in respect of any of the foregoing (whether disputed or not), any transferee or secondary liability in respect of tax (whether imposed by Law, contractual agreement or otherwise) and any liability in respect of any tax as a result of being a member of any affiliated, consolidated, combined, unitary or similar group. "Thalidomide Analogs" has the meaning ascribed thereto in the Exclusive License Agreement. "Transaction Taxes" shall mean any and all sales, use, transfer, filing, conveyance, recording, gross receipts, value added and similar taxes imposed by the United States, or any state, local or foreign government or subdivision or agency thereof, any interest, penalties, additions to tax or additional amounts in respect of any of the foregoing (whether disputed or not), and any transferee or secondary liability in respect of any of the foregoing (whether imposed by Law, contractual agreement or otherwise). Section 1.2 Interpretation. Unless otherwise indicated to the contrary in this Agreement by the context or use thereof: (a) the words, "herein," "hereto," "hereof" and words of similar import refer to this Agreement as a whole and not to any particular Section or paragraph hereof; (b) words importing the masculine gender shall also include the feminine and neutral genders, and vice versa; (c) words importing the singular shall also include the plural, and vice versa; and (d) the word "including" means "including without limitation." ARTICLE II SALE AND PURCHASE OF ASSETS Section 2.1 Transfer of Assets. (a) On the terms and subject to the conditions set forth in this Agreement, at the Closing, Seller shall sell, assign, convey, transfer and deliver (and Seller shall cause its Subsidiaries to sell, assign, convey, transfer and deliver) to Purchaser, and Purchaser shall purchase, all assets, properties and rights owned by Seller or any of its Subsidiaries, or to which any of them is entitled, belonging to, used or intended to be used in the Business, of every kind and description and wherever located, free and clear of all Liens (except for Permitted Liens), including, without limitation, all of Seller's and its Subsidiaries' rights, title and interest in and to the assets set forth below, but excluding the Excluded Assets (collectively, the "Conveyed Assets"): (i) all Intellectual Property relating to the Business, including the Intellectual Property set forth in Section 2.1(a)(i) of the Seller Disclosure Letter (the "Conveyed Intellectual Property"), all tangible embodiments of all such Conveyed Intellectual Property and true and complete files relating to the Prosecution, assertion, enforcement or defense of any of the Conveyed Intellectual Property; 5 (ii) all rights and interest as of the Closing in and to the contracts, agreements, arrangements, commitments and understandings (collectively, "Contracts") relating to the Business and listed on Section 2.1(a)(ii) of the Seller Disclosure Letter, which schedule shall include all applicable patent licenses and consulting agreements regarding FDA and patent matters (the "Assumed Contracts"); (iii) all pre-clinical and clinical data and market research data used in connection with the Business, all web site content and all records, including supplier lists, manufacturing records, sampling records, product samples, standard operating procedures and batch records relating to the Business; (iv) all Permits and applications for Permits, but only to the extent Seller is permitted to transfer such Permits and applications; (v) All books, records, files and papers, whether in hard copy or computer format, to the extent they contain information relating to the Business, including, without limitation, all financial records, correspondence and other documents and all notices to or from, and filings and other communications with, the FDA, the U.S. Patent and Trademark Office and other patent offices; (vi) All claims, causes of action, rights of recovery and rights of set-off of any kind pertaining solely to, or arising solely out of, the Business; (vii) All Regulatory Filings; and (viii) The goodwill of the Business together with the right of Purchaser to represent itself to third parties as the successor-in-interest to the Business. (b) Notwithstanding anything to the contrary contained in this Agreement, the term "Conveyed Assets" shall not include: (i) any cash, cash equivalents, bank deposits or similar cash items of Seller as of the Closing Date; (ii) rights under the Assumed Contracts relating to the performance or non-performance of such Assumed Contracts prior to the Closing; (iii) all rights of Seller under this Agreement and the Related Instruments; (iv) any interests in any real estate; (v) any rights to refunds, rebates or abatements of any Taxes with respect to the Conveyed Assets or the Business that relate to any period ending on or prior to the Closing Date; (vi) any insurance policies of Seller or its Affiliates or rights thereunder or proceeds thereof; and (vii) assets under any employee benefit plan of Seller or any of its Subsidiaries (the rights, properties and assets expressly excluded from "Conveyed Assets" by this Section 2.1(b) are referred to collectively as the "Excluded Assets"). 6 Section 2.2 Assumed Liabilities. (a) In partial consideration of the sale of the Conveyed Assets to Purchaser, at the Closing, Purchaser shall assume only the following liabilities and obligations of Seller and its Subsidiaries to the extent related to the Business or the Conveyed Assets, in each case only to the extent arising and relating solely to the period after the Closing (collectively, the "Assumed Liabilities"): (i) all liabilities and obligations under the Assumed Contracts; (ii) all liabilities and obligations specifically assumed by Purchaser pursuant to other provisions of this Agreement; (iii) all liabilities and obligations with respect to the Permits to the extent such Permits are Conveyed Assets. (b) Except as otherwise provided in Section 2.2(a), Seller and its Subsidiaries shall retain all, and Purchaser shall not assume, pay, perform, defend or discharge any, liabilities and obligations of Seller and its Subsidiaries of any and every kind whatsoever, whether disclosed, undisclosed, direct, indirect, absolute, contingent, secured, unsecured, accrued, known, unknown or otherwise (collectively, the "Excluded Liabilities"). Section 2.3 Purchase Price. In consideration for the sale of the Conveyed Assets and the Settlement Agreement, at the Closing Purchaser shall (i) assume the Assumed Liabilities and (ii) pay to Seller a purchase price equal to $10,000,000 (the "Purchase Price"). The Purchase Price shall be payable in cash by wire transfer of immediately available funds to an account designated in writing by Seller at least two Business Days prior to the Closing Date. Section 2.4 Closing. (a) The consummation of the transactions contemplated by this Agreement (the "Closing") will take place on the second Business Day following the satisfaction or waiver of the conditions set forth in Article VI hereof (other than those conditions which, by their nature, can only be satisfied at Closing), at 10:00 a.m. (New York City time), at the offices of Proskauer Rose LLP, 1585 Broadway, New York, New York 10036, or at such other time and place as shall be mutually agreed upon by the parties. The date on which the Closing occurs is referred to herein as the "Closing Date." (b) At the Closing, Seller shall deliver or cause to be delivered to Purchaser the following: (i) a duly executed Bill of Sale; (ii) a duly executed Instrument of Assignment and Assumption; (iii) a duly executed Assignment of Intellectual Property; (iv) the Exclusive License Agreement duly executed by Seller and Children's Medical Center Corporation; (v) a duly executed Securities Purchase Agreement; (vi) a duly executed Settlement Agreement, together with duly executed originals of the Stipulations of Dismissal attached thereto as Exhibits 2 and 3; (vii) an opinion of counsel to Seller, in form and substance reasonably satisfactory to Purchaser; (viii) consents, approvals, authorizations, waivers and Permits of all Persons and 7 Governmental Entities necessary for Purchaser to operate the Business and use the Conveyed Assets substantially as heretofore operated and used; (ix) evidence of the release of all Liens on the Conveyed Assets, in form and substance reasonably satisfactory to Purchaser; and (x) such other documents as may be reasonably requested by Purchaser to vest in Purchaser good and marketable to the Conveyed Assets. (c) At the Closing, Purchaser shall deliver or cause to be delivered to Seller the following: (i) cash in the amount of the Purchase Price by wire transfer of immediately available funds; (ii) a duly executed Instrument of Assignment and Assumption; (iii) a duly executed Exclusive License Agreement; (iv) a duly executed Securities Purchase Agreement; and (v) a duly executed Settlement Agreement, together with duly executed originals of the Stipulations of Dismissal attached thereto as Exhibits 2 and 3. Section 2.5 Nonassignable Assets. Nothing in this Agreement, nor the consummation of the transactions contemplated hereby, shall be construed as an attempt or agreement to assign or transfer any Conveyed Asset (including any Assumed Contract) to Purchaser which by its terms or by Law is nonassignable without the consent of a third party or a Governmental Entity (a "Nonassignable Asset"), unless and until such consent shall have been obtained. From and after the Closing, Seller shall use reasonable best efforts and shall cooperate with Purchaser to the extent requested by Purchaser to obtain any such necessary consents and, to the extent that such consents are not obtained, use reasonable best efforts to assure Purchaser of the benefits of such Conveyed Assets under reasonable and lawful arrangements. Notwithstanding anything to the contrary contained in this Agreement, to the extent that such consents are not obtained, or the benefits of such Conveyed Assets are not provided to Purchaser, Purchaser shall have no obligations with respect thereto. Section 2.6 Opinion of Counsel. Contemporaneously with the execution and delivery of this Agreement, Arnold & Porter, counsel to Seller, is delivering its opinion addressed to Purchaser with respect to the matters set forth in Sections 3.1 and 3.2 hereof. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Purchaser as follows (reference to Seller in this Article III shall include its Subsidiaries, unless the context otherwise requires): Section 3.1 Organization. Seller is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware. Seller has the requisite power and authority to own, lease and operate the Conveyed Assets and to conduct the Business as it is now being conducted. 8 Section 3.2 Authority. Seller has the requisite power and authority to execute and deliver this Agreement and the Related Instruments, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Seller of this Agreement and the Related Instruments, the performance by Seller of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby have been authorized by all requisite corporate action on the part of Seller and no other authorization of Seller or its shareholders is required to authorize the execution and delivery by Seller of this Agreement or the Related Instruments, the performance by Seller of its obligations hereunder and thereunder or the consummation of the transactions contemplated hereby or thereby. This Agreement has been validly executed and delivered by Seller and constitutes, and each Related Instrument that is to be executed and delivered by Seller will constitute when executed and delivered by Seller, a legal, valid and binding obligation of Seller enforceable against Seller in accordance with its terms. Section 3.3 No Conflict; Required Filings and Consents. (a) Except as set forth in Section 3.3(a) of the Seller Disclosure Letter, the execution and delivery by Seller of this Agreement and the Related Instruments do not, and the performance by Seller of its obligations under this Agreement and the Related Instruments will not, (i) conflict with or violate any provision of Seller's certificate of incorporation or Seller's bylaws, (ii) assuming that all consents, approvals, authorizations and permits described in Section 3.3(b) have been obtained and that all filings and notifications described in Section 3.3(b) have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to Seller or by which any of the Conveyed Assets is bound, or (iii) assuming that all consents, approvals, authorizations and permits described in Section 3.3(b) have been obtained and that all filings and notifications described in Section 3.3(b) have been made and any waiting periods thereunder have terminated or expired, require any consent or approval under, result in any breach of or any loss of any benefit under, constitute a change of control or default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, acceleration or cancellation of, any Assumed Contract or result in the creation of a Lien on any Conveyed Asset. (b) The execution and delivery by Seller of this Agreement and the Related Instruments do not, and the performance by Seller of its obligations under this Agreement and the Related Instruments will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity, except (i) as set forth in Section 3.3(b) of the Seller Disclosure Letter and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the performance or consummation of this Agreement or the Related Instruments by Seller. Section 3.4 Permits; Compliance With Law. (a) Seller is in possession of all authorizations, licenses, permits, registrations, certificates, approvals and clearances of Governmental Entities (including under 9 the Federal Food, Drug and Cosmetic Act of 1938, as amended (the "FDCA"), and the regulations of the United States Food and Drug Administration (the "FDA") promulgated thereunder) necessary to own, lease and operate the Conveyed Assets and to carry on the Business as it is being conducted as of the date hereof (the "Permits"), and all such Permits are valid and in full force and effect. (b) Seller's conduct of the Business has not and does not conflict with or violate in any material respect (i) any Law applicable to the Business or by which any Conveyed Asset is bound or affected or (ii) any Permits. There are no outstanding notices of violations, demands, claims, orders, judgments, writs, injunctions or decrees of any Governmental Entity or any third party that apply to the Conveyed Assets or the Business that restrict the ownership, disposition or use of the Conveyed Assets or the conduct of the Business in any material respect or that otherwise seek to impose liability or obligations on Seller under applicable Law. Section 3.5 Absence of Certain Changes or Events. Except as set forth in Section 3.5 of the Seller Disclosure Letter, since December 31, 2001, except as expressly contemplated by this Agreement, with regard to the Conveyed Assets, Seller has not suffered a Material Adverse Effect with respect to the Business and has conducted the Business in the ordinary course and Seller has not, with respect to the Business: (a) subjected any of the Conveyed Assets to any Liens, other than Permitted Liens; (b) sold, assigned, transferred, leased, subleased, licensed, sublicensed or otherwise disposed of, to any third party, any properties or assets necessary for the conduct of, or used in, the Business, other than in the ordinary course of business; (c) entered into, terminated or amended any Contract, other than in the ordinary course of business; (d) transferred to any third party any rights under any license, sublicense or other agreement with respect to any Conveyed Intellectual Property or any Intellectual Property that is the subject of the Exclusive License Agreement; (e) surrendered, revoked or otherwise terminated any Permit, other than in the ordinary course of business; (f) incurred any Assumed Liabilities, other than in the ordinary course of business; (g) waived, released or assigned any rights in connection with the Business, other than in the ordinary course of business; or 10 (h) agreed, whether in writing or otherwise, to do any of the foregoing, except as expressly contemplated by this Agreement. Section 3.6 Title to Assets; Sufficiency of Assets. (a) Seller has, and at the Closing Seller will deliver to Purchaser, good, valid and marketable title to all of the Conveyed Assets free and clear of all Liens, other than Permitted Liens. (b) The Conveyed Assets and the rights of Purchaser under the Exclusive License Agreement include all assets and Intellectual Property that are necessary for the conduct of the Business immediately following the Closing in substantially the same manner as currently conducted by Seller, except for the Excluded Assets. None of the Conveyed Assets is used by Seller or any Affiliate of Seller in connection with any business or enterprise other than the Business. Section 3.7 Assumed Contracts. True and complete copies of all Assumed Contracts have been delivered or made available to Purchaser. Each of the Assumed Contracts is valid and binding on Seller and the other parties thereto and is in full force and effect, and, upon consummation of the transactions contemplated by this Agreement, except to the extent that any consents set forth in Section 3.3(a) of the Seller Disclosure Letter are not obtained, shall continue in full force and effect without penalty or other adverse consequences. Except as set forth in Section 3.7 of the Seller Disclosure Letter, neither Seller nor, to the knowledge of Seller, any other party thereto is in material default under any Assumed Contract (and no condition exists that, with notice or lapse of time or both, would become such a material default by any such party). Section 3.8 Conveyed Intellectual Property. Except as set forth in Section 3.8 of the Seller Disclosure Letter: (i) Seller owns or has exclusive rights to the Conveyed Intellectual Property free and clear of all Liens, other than Permitted Liens; (ii) the Conveyed Intellectual Property and the Intellectual Property that is the subject of the Exclusive License Agreement have been duly maintained and have not been cancelled, expired or abandoned; (iii) Except for the Litigations, Seller has not received notice from any third party regarding any actual or potential infringement or misappropriation by Seller of any Intellectual Property of such third party relating to the Conveyed Assets, the Business or any Intellectual Property that is the subject of the Exclusive License Agreement, and Seller has no knowledge of any reasonable basis for such a claim against Seller. Seller is not aware of any issued third party patents or other third party intellectual property rights that would be infringed by the exercise by Purchaser of any right granted to it under this Agreement or the Exclusive License Agreement; 11 (iv) Except for the Litigations, Seller has not received notice from any third party regarding any assertion or claim challenging the validity of any Conveyed Intellectual Property or any Intellectual Property that is the subject of the Exclusive License Agreement and Seller has no knowledge of any reasonable basis for such a claim; (v) Except for the Litigations, to the knowledge of Seller, no third party is misappropriating, infringing, diluting or violating any Conveyed Intellectual Property or any Intellectual Property that is the subject of the Exclusive License Agreement. Seller has not notified any third party that it may be misappropriating, infringing, diluting or violating any Conveyed Intellectual Property or any Intellectual Property that is the subject of the Exclusive License Agreement; (vi) Except for the Litigations, Seller has not received any notice of interfering subject matter with respect to any Conveyed Intellectual Property or any Intellectual Property that is the subject of the Exclusive License Agreement, and is not aware of any third party patents or patent applications that contain any interfering subject matter with any of same or any inventorship challenges raised by a third party relating to any of same; (vii) Seller has complied with the required duty of candor and good faith in dealing with the United States Patent and Trademark Office with respect to the Conveyed Intellectual Property, including the duty to disclose all information believed to be material to the patentability of same; and (viii) To the knowledge of Seller, no third party, including any academic organization or Governmental Entity, possesses rights to any of the Conveyed Intellectual Property or any Intellectual Property that is the subject of the Exclusive License Agreement. Section 3.9 Litigation. Except as set forth in Section 3.9 of the Seller Disclosure Letter, there is no material suit, claim, action, proceeding or investigation pending or, to the knowledge of Seller, threatened against Seller or any of its licensors (including Children's Medical Center Corporation) in respect of the Conveyed Assets or the Business. There is no suit, claim, action, proceeding or investigation pending or, to the knowledge of Seller, threatened against Seller that challenges the transactions contemplated by this Agreement or the Related Instruments and would be reasonably expected to prevent or materially interfere with or delay the performance or consummation of the transactions contemplated hereby or thereby. Section 3.10 Brokers. No broker, finder or investment banker (other than Ferghana Partners Inc., all fees of which shall be paid by Seller in 12 connection with the transactions contemplated hereby) is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Seller. Section 3.11 Preclinical Testing and Clinical Trials. To Seller's knowledge, the human clinical trials, animal studies and other preclinical tests conducted by Seller or in which Seller has participated, and such studies and tests conducted on behalf of Seller, with respect to the Business were and, if still pending, are being conducted in accordance with experimental protocols, informed consents, procedures and controls generally used by qualified experts in the preclinical or clinical study of comparable products. Neither Seller nor any agent or representative of Seller has received any written notice or correspondence from the FDA or any other Governmental Entity requiring the termination, suspension or modification (other than such modifications as are normal in the regulatory process) of any animal studies, preclinical tests or clinical trials conducted by or on behalf of Seller or in which Seller has participated with respect to the Business. To Seller's knowledge, no clinical investigator acting for Seller with respect to the Business has been or is now, or is threatened to become, the subject of any disbarment or disqualification proceedings by any Governmental Entity. Section 3.12 Certain Regulatory Matters. With respect to the Business: (a) Section 3.12(a) of the Seller Disclosure Letter sets forth a complete and accurate list of all Regulatory Filings and all material written communications between the Seller, on the one hand, and the FDA or any other Governmental Entity, on the other hand, and all written summaries of material discussions between any such parties. Seller has made available to Purchaser copies of all such documents. (b) Seller has filed with the FDA and all applicable state, local and foreign regulatory bodies for, and received approval of, all Regulatory Filings and all other registrations, applications, licenses, requests for exemptions, permits and other regulatory authorizations necessary to conduct the Business as currently conducted and as currently proposed to be conducted. Seller is and has been in compliance in all material respects with all such Regulatory Filings, registrations, applications, licenses, requests for exemptions, permits and other regulatory authorizations. Seller is and has been in compliance in all material respects with all FDA, state, local and foreign rules, regulations, guidelines and policies, including, but not limited to, FDA, state, local and foreign rules, regulations, guidelines and policies relating to good manufacturing practice ("GMP") and good laboratory practice ("GLP"). Seller has no reason to believe that any party granting any such Regulatory Filing, registration, application, license, request for exemption, permit or other regulatory authorization is considering terminating, limiting, suspending, revoking, canceling, rescinding, refusing to renew in the ordinary course or modifying the same and knows of no basis for any such action. 13 (c) Seller is in compliance in all material respects with all obligations arising under any consent decree, consent agreement, warning letter, Form 483 issued by or entered into with the FDA or other notice, response or commitment made to the FDA or any comparable state, local or foreign Governmental Entity. (d) Seller has disclosed to Purchaser any warning letters or Form 483s or similar notices, or other correspondence relating to Seller's compliance status under applicable legal requirements, from the FDA or any comparable state, local or foreign Governmental Entity within the last three years. (e) Neither Seller nor, to Seller's knowledge, any of its officers, employees, independent contractors or agents has knowingly committed any act, made any statement or failed to make any statement that would reasonably be expected to provide a basis for the FDA to invoke its policy respecting "Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities," set forth in 56 Fed. Reg. 46191 (September 10, 1991) and any amendments thereto. (f) Neither Seller nor, to Seller's knowledge, any of its officers, employees, independent contractors or agents has been convicted of any crime or engaged in any conduct which could result in debarment under 21 U.S.C. ss. 335a or any similar state, local or foreign Law. (g) There are no proceedings pending or, to Seller's knowledge, threatened with respect to a violation by Seller of the Food, Drug and Cosmetic Act, FDA regulations adopted thereunder, the Controlled Substance Act or any other legislation or regulation promulgated by any other Governmental Entity that reasonably might be expected to result in criminal liability. Section 3.13 Taxes. Seller has timely filed all material Tax Returns required to be filed with respect to Taxes pertaining, in whole or in part, to the Conveyed Assets or the Business. All such Tax Returns are true, correct and complete in all material respects, and Seller has duly paid all Taxes shown on such Tax Returns and has paid or made adequate provision for payment of all accrued but unpaid Taxes anticipated in respect of such Tax Returns. Seller has not received notice from a taxing authority in a jurisdiction where Seller does not file Tax Returns that Seller is or may be subject to taxation by such jurisdiction. There are no Tax Liens upon any of the Conveyed Assets, except Permitted Liens. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser represents and warrants to Seller as follows: Section 4.1 Organization. Purchaser is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware. 14 Section 4.2 Authority. Purchaser has the requisite power and authority to execute and deliver this Agreement and the Related Instruments, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Purchaser of this Agreement and the Related Instruments, the performance by Purchaser of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby have been authorized by all requisite corporate action on the part of Purchaser and no other authorization of Purchaser or its shareholders is required to authorize the execution and delivery by Purchaser of this Agreement or the Related Instruments, the performance by Purchaser of its obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby. This Agreement has been validly executed and delivered by Purchaser and constitutes, and each Related Instrument that is to be executed and delivered by Purchaser will constitute when executed and delivered by Purchaser, a legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms. Section 4.3 No Conflict; Required Filings and Consents. (a) The execution and delivery by Purchaser of this Agreement and the Related Instruments do not, and the performance by Purchaser of its obligations under this Agreement and the Related Instruments will not, (i) conflict with or violate any provision of Purchaser's certificate of incorporation or Purchaser's bylaws, (ii) assuming that all consents, approvals, authorizations and permits described in Section 4.3(b) have been obtained and that all filings and notifications described in Section 4.3(b) have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to Purchaser or by which any material property or asset of Purchaser is bound or (iii) assuming that all consents, approvals, authorizations and permits described in Section 4.3(b) have been obtained and that all filings and notifications described in Section 4.3(b) have been made and any waiting periods thereunder have terminated or expired, require any consent or approval under, result in any breach of, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, any material contract to which Purchaser is a party or by which Purchaser is bound. (b) The execution and delivery by Purchaser of this Agreement and the Related Instruments do not, and the performance by Purchaser of this Agreement and the Related Instruments will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity, except where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the performance or consummation of this Agreement or the Related Instruments by Purchaser. Section 4.4 Litigation. There is no suit, claim, action, proceeding or investigation pending or, to the knowledge of Purchaser, threatened against Purchaser that challenges the transactions contemplated by this Agreement or the Related Instruments and would be reasonably expected to 15 prevent or materially interfere with or delay the performance or consummation of the transactions contemplated hereby or thereby. Section 4.5 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Purchaser. ARTICLE V COVENANTS Section 5.1 Conduct of the Business. During the period from the date hereof to the Closing, except as otherwise expressly provided in this Agreement, or unless Purchaser shall otherwise consent in writing, Seller shall, and shall cause its Subsidiaries to, (x) operate the Business in the ordinary course of business consistent with past practice and (y) use its reasonable best efforts to preserve substantially intact the Conveyed Assets and the Business. Without limiting the generality of the foregoing, and except as otherwise expressly provided in this Agreement, during the period from the date hereof to the Closing, without the prior written consent of Purchaser, Seller shall not, and shall cause its Subsidiaries not to: (i) subject any of the Conveyed Assets to any Lien, other than Permitted Liens; (ii) sell, assign, transfer, lease, sublease, license, sublicense or otherwise dispose of any Conveyed Assets, other than in the ordinary course of business; (iii) transfer to any third party any rights, whether under licenses, sublicenses, other agreements or otherwise, with respect to any Conveyed Intellectual Property or any Intellectual Property that is the subject of the Exclusive License Agreement; (iv) enter into, terminate or amend any Contract that constitutes or would constitute an Assumed Contract, except in the ordinary course of business; (v) abandon or terminate any clinical trials relating to the Business other than in the ordinary course of business (including for safety concerns) or in accordance with the terms of existing arrangements with respect to such clinical trials; (vi) surrender, revoke or otherwise terminate any Permit, other than in the ordinary course of business; (vii) incur any Assumed Liabilities, other than in the ordinary course of business; 16 (viii) waive, release or assign any rights in connection with the Business, other than in the ordinary course of business; or (ix) agree, whether in writing or otherwise, to do any of the foregoing. Section 5.2 Access to Information; Confidentiality; Cooperation. (a) After the date hereof and prior to the Closing, Seller shall permit Purchaser and its authorized representatives to have reasonable access during normal business hours, upon reasonable prior notice to Seller, to Seller's properties, books, records, contracts, commitments and personnel relating to the Conveyed Assets, the Assumed Liabilities or the Business, and Seller shall furnish promptly to Purchaser such information concerning the Conveyed Assets, the Assumed Liabilities or the Business as Purchaser may reasonably request; provided, however, that any such access shall be conducted in such a manner as not to materially interfere with the operation of Seller's business. Notwithstanding the foregoing, (i) Seller need not disclose to Purchaser any information that would violate applicable Law, result in a breach of attorney-client privilege or violate any confidentiality agreement or similar agreement or arrangement to which Seller is a party and (ii) Seller may redact such portions of its books and records that do not directly relate to the Conveyed Assets, the Assumed Liabilities or the Business. (b) Purchaser will, and will cause its representatives to, hold any such information obtained pursuant to Section 5.2(a) in confidence, except to the extent any such information (i) is or becomes publicly available other than as a result of a breach of this Section 5.2(b), (ii) is or becomes available to Purchaser on a non-confidential basis from a source other than Seller, provided that such source is not known to Purchaser to be bound by a confidentiality agreement with Seller or otherwise prohibited from transmitting the information to Purchaser by a contractual, legal or fiduciary obligation, (iii) was in the possession of Purchaser prior to its being furnished to it by Seller, (iv) has been or is independently developed by Purchaser or (v) is required to be disclosed by Law or Governmental Entity. (c) Following the Closing, for so long as such information is retained by Purchaser (which shall be for no less than the period of time that Purchaser customarily would retain similar information), Purchaser shall permit Seller and its authorized representatives to have reasonable access during normal business hours, upon reasonable prior notice to Purchaser, to the books, records and personnel relating to the Conveyed Assets, the Assumed Liabilities or the conduct of the Business by Seller, to the extent that such access may be reasonably required (i) in connection with the preparation of Seller's accounting records or with any audits, (ii) in connection with the preparation of any Tax Returns or with any Tax audits, (iii) in connection with any suit, claim, action, proceeding or investigation relating to Seller's conduct of the Business or (iv) in connection with any regulatory filing or matter; provided, that such access shall be conducted in such a manner as not to materially interfere with Purchaser's business, and provided, further, that Seller shall reimburse Purchaser promptly for all reasonable out-of-pocket costs and expenses incurred by Purchaser in connection with any such request. Notwithstanding the foregoing, (i) Purchaser need not disclose to Seller any information which would 17 violate applicable Law, result in a breach of attorney-client privilege or violate any confidentiality agreement or similar agreement or arrangement to which Purchaser is a party and (ii) Purchaser may redact such portions of its books and records that do not directly relate to the Conveyed Assets, the Assumed Liabilities or the Business. Purchaser may, as it deems reasonably necessary or advisable, designate any competitively sensitive information provided to Seller under this Section 5.2(c) as available to "outside counsel and retained experts only." (d) Purchaser shall, and shall instruct its employees to, at Seller's request, cooperate with Seller as may be reasonably required in connection with the investigation and defense of any suit, claim, action, proceeding or investigation relating to the Business that is brought against Seller or any of its Affiliates at any time after the Closing; provided, however, that Seller shall reimburse Purchaser promptly for all reasonable out-of-pocket costs and expenses incurred by Purchaser in connection with any such request. (e) Seller shall, and shall instruct its employees to, at Purchaser's request, cooperate with Purchaser as may be reasonably required in connection with the investigation and defense of any suit, claim, action, proceeding or investigation relating to the Business that is brought against Purchaser or any of its Affiliates at any time after the Closing; provided, however, that Purchaser shall reimburse Seller promptly for all reasonable out-of-pocket costs and expenses incurred by Seller in connection with any such request. Section 5.3 Appropriate Action; Consents; Filings. (a) Subject to Section 5.3(c) hereof, Seller and Purchaser shall use their reasonable best efforts to take, or cause to be taken, all actions and do, or cause to be done, all things necessary, proper or advisable under applicable Law or otherwise to consummate and make effective the transactions contemplated by this Agreement as promptly as practicable, including to: (i) obtain from Governmental Entities any consents, licenses, permits, waivers, approvals, authorizations or orders required (A) to be obtained by Seller or Purchaser or any of their respective Affiliates to consummate the transactions contemplated by this Agreement or (B) to avoid any action or proceeding by any Governmental Entity in connection with the authorization, execution and delivery of this Agreement and to permit the consummation of the transactions contemplated hereby to occur as promptly as practicable; (ii) make all necessary filings, and thereafter make any other required submissions, with respect to this Agreement required under the FDCA or any other applicable Law; (iii) obtain all necessary consents, waivers, approvals and authorizations of third parties; and (iv) defend any suits or proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated hereby. Seller and Purchaser shall cooperate with each other in connection with the making of all filings referenced in the preceding sentence, including providing copies of all such documents to the non-filing party and its advisors prior to filing and, if requested, to accept all reasonable additions, deletions or changes suggested in connection therewith. Seller and Purchaser shall have the right to review in advance, and, to the extent practicable and reasonable, each shall consult the other on, all the information relating to Seller or Purchaser, as the case may be, that appears in any filing made with, or written materials submitted to, any 18 third party and/or any Governmental Entity in connection with the transactions contemplated by this Agreement. Seller and Purchaser may, as each deems reasonably necessary or advisable, designate any competitively sensitive information provided to the other under this Section 5.3(a) as available to "outside counsel and retained experts only." Such information shall be given only to outside counsel of the recipient. In addition, Purchaser and Seller may redact any information from such documents shared with the other party or its counsel that is not pertinent to the subject matter of the filing or submission. (b) Without limiting Section 5.3(a), but subject to Section 5.3(c), Purchaser and Seller shall use their respective reasonable best efforts to obtain, or to cause to be obtained, any consent, substitution, approval, authorization or amendment from, and to provide any notice to, applicable Governmental Entities and third parties required to assign or transfer any Conveyed Asset to Purchaser. (c) Notwithstanding anything in this Agreement to the contrary (including paragraphs (a) and (b) of this Section 5.3), neither Purchaser nor any of its Affiliates shall be required to commit to any divestitures, licenses or hold separate or similar arrangements with respect to its assets or conduct of business arrangements, whether as a condition to obtaining any approval from a Governmental Entity or any other Person or for any other reason. Section 5.4 Further Assurances. From time to time following the Closing, Seller and Purchaser shall, and shall cause their respective Affiliates to, execute, acknowledge and deliver all such further conveyances, notices and other instruments, and take such further actions, as may be necessary or appropriate to assure fully to Purchaser, its successors and assigns all of the properties, rights, titles, interests, estates, remedies, powers and privileges intended to be conveyed to Purchaser under this Agreement and to otherwise make effective the transactions contemplated hereby. Such actions shall include, without limitation, causing the release of any Liens on the Conveyed Assets, including any Liens in connection with the Master Loan and Security Agreement No. 7711, dated November 19, 1999, between Oxford Venture Finance, LLC and Seller, and the filing of UCC-3 Termination Statements to reflect the release of such Liens. Section 5.5 Tax Matters. (a) Seller shall pay any and all Transaction Taxes imposed in connection with the transfer of the Conveyed Assets, the assumption of the Assumed Liabilities and the execution, delivery or performance of any of the Related Instruments, and shall file such applications and documents as shall permit any such Transaction Taxes to be assessed and paid on or prior to the Closing Date in accordance with any available pre-sale filing procedures. (b) Seller shall pay all Taxes with respect to the Conveyed Assets, regardless of when due and payable, (i) with respect to all taxable periods ending on or prior to the Closing Date and (ii) with respect to all taxable periods beginning before the Closing Date and ending after the Closing Date, but only with respect to the portion of such periods up to and including the Closing Date. After the Closing Date, all refunds of Taxes paid by Seller that are attributable to any such periods shall be for the account of Seller. 19 (c) Except as otherwise provided in Section 5.5(a), Purchaser shall pay all Taxes with respect to the Conveyed Assets, regardless of when due and payable, (i) with respect to all taxable periods beginning after the Closing Date and (ii) with respect to all taxable periods beginning before the Closing Date and ending after the Closing Date, but only with respect to the portion of such periods commencing after the Closing Date. All refunds of Taxes paid by Purchaser that are attributable to any such periods shall be for the account of Purchaser. Section 5.6 Publicity. Except as otherwise required by applicable Law or applicable stock exchange or Nasdaq National Market System requirements, neither Purchaser nor Seller shall, and each of them shall cause their respective Affiliates, representatives and agents not to, issue or cause the publication of any press release or public announcement with respect to the transactions contemplated by this Agreement without the express prior approval of the other party, which approval shall not be unreasonably withheld or delayed.; provided, however, that each of Seller and Purchaser may make any public statement in response to questions by the press, analysts, investors or those attending industry conferences or financial analyst calls, or issue press releases, so long as any such public statement or press release is not inconsistent with prior public disclosures, press releases or public statements approved by the other party in accordance with this Section 5.6 and which do not reveal non-public information about the other party. Section 5.7 Certain Provisions Relating to the Transfer. Except in respect of Nonassignable Assets (which are the subject of Section 2.5 hereof), in the event that record or beneficial ownership or possession of any Conveyed Asset has not been transferred to Purchaser on the Closing Date, Seller and Purchaser shall cooperate and shall use their reasonable best efforts to transfer, or cause to be transferred, as promptly as practicable, from Seller to Purchaser such Conveyed Asset, and pending such transfer to Purchaser, Seller shall hold such Conveyed Asset and provide to Purchaser all of the benefits and liabilities associated with the ownership and operation of such Conveyed Asset and, accordingly, Seller shall cause such Conveyed Asset to be operated or retained as may reasonably be instructed by Purchaser. Section 5.8 Supplemental Disclosure. Each party will promptly notify the other party in writing if it is in, or becomes aware of any fact or condition that causes or constitutes a, breach of any of its representations or warranties as of the date of this Agreement, or if it becomes aware of the existence or occurrence after the date of this Agreement of any fact or condition that would (except as expressly contemplated by this Agreement) cause or constitute a breach of any of its representations or warranties had any such representation or warranty been made as of the time of the existence, occurrence or discovery of such fact or condition. The delivery of any notice pursuant to this Section 5.8 shall not limit or otherwise affect the remedies available hereunder to a party receiving such notice. Section 5.9 Closing Documents. At or prior to the Closing, (i) Seller shall execute and deliver, or cause to be executed and delivered, to Purchaser the documents and instruments described in Section 2.4(b) and (ii) 20 Purchaser shall execute and deliver, or cause to be executed and delivered, to Seller the documents and instruments described in Section 2.4(c). Section 5.10 Patent Prosecution Seller shall render reasonable assistance to Purchaser in the Prosecution of the Conveyed Intellectual Property whenever requested to do so, at Purchaser*s expense, including without limitation to cooperate, and to require each past or present employee, consultant, representative, contractor, agent or other individual under the custody or control of Seller (including without limitation any such individual that is, or is identified as, an inventor of any of the Conveyed Intellectual Property) to cooperate, with Purchaser, its attorneys, agents, successors and assigns, to Prosecute, assert, enforce and defend, and to otherwise protect any and all of the Conveyed Intellectual Property and Purchaser's rights and title therein, including, without limitation, to (a) execute such documents, sign all lawful papers, and make all rightful oaths as Purchaser deems reasonably necessary or appropriate in connection with same; (b) communicate any facts known or reasonably available respecting any of the Conveyed Intellectual Property; and (c) provide all documents, samples and other tangible materials necessary or useful testimony to Prosecute, assert, enforce and/or defend any of the Conveyed Intellectual Property. Section 5.11 Non-Competition (a) For a period of fifteen (15) years after the Closing Date, neither Seller nor any of its Subsidiaries (each, a "Restricted Party" and, collectively, the "Restricted Parties") shall, directly or indirectly, anywhere in the world, engage in the Business as currently conducted ("Competitive Activity"); provided, however, that it shall not be a violation of this Section 5.10(a) for a Restricted Party to (i) own any debt securities or other debt obligations (other than convertible debt) of any Person, (ii) invest in, own an interest in or acquire all or a majority of the stock or assets of any Person that is not "significantly engaged in a Competitive Activity" (as defined below) or (iii) invest in securities representing less than five percent (5%) of the outstanding capital stock of any Person, the securities of which are publicly traded or listed on any securities exchange or automated quotation system. For purposes of this Section 5.10(a), "significantly engaged in a Competitive Activity" shall mean that at least 10% of the consolidated net revenue derived during the last complete fiscal year of the acquired Person is derived from a Competitive Activity. (b) The parties hereto agree that the covenants set forth in this Section 5.10 shall be enforced to the fullest extent permissible under applicable Law. If all or any part of this Section 5.10 is held invalid, illegal or incapable of being enforced by any Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect. Seller agrees that in the event of a breach or threatened breach by it or any of its Subsidiaries of the provisions of this Section 5.10, money damages would not be an adequate remedy and that Purchaser shall be entitled to seek temporary, preliminary or permanent injunctive relief without the necessity of posting a bond. If any part of this Section 5.10 is held to be excessively broad as to 21 duration, scope, activity or subject, such part will be construed by limiting and reducing it so as to be enforceable to the maximum extent compatible with applicable Law. Section 5.12 Confidentiality. For purposes of this Agreement, all information pertaining to the Conveyed Assets, including without limitation the Conveyed Intellectual Property, the Prosecution, assertion, enforcement or defense of any of same, and the Regulatory Filings, shall be treated by Seller as the "Confidential Information" of Purchaser. Restrictions on Disclosure and Use. With regard to Confidential Information, for a period beginning on the Closing Date and continuing for a period of ten (10) years, Seller agrees: (a) not to use the Confidential Information except for the sole purpose of performing under the terms of this Agreement; (b) to use its best efforts to safeguard Confidential Information against disclosure to others; and (c) not to disclose Confidential Information to others (except to its employees, agents or consultants who are bound by a like obligation of confidentiality) without the express prior written permission of Purchaser, except that Seller shall not be prevented from using or disclosing any of the Confidential Information which: (i) is now, or becomes in the future, public knowledge other than through any act or omission by or on behalf of Seller or any past or present employee, agent, contractor or consultant thereof; (ii) is lawfully obtained by Seller from a source independent of Purchaser, provided that such source is not known to Seller to be bound by a confidentiality agreement with Purchaser or otherwise prohibited from transmitting the information to Seller by a contractual, legal or fiduciary obligation; or (iii) is required by Law to be disclosed, only to the extent so required and provided that Seller notifies Purchaser sufficiently prior to the deadline for such disclosure to permit Purchaser to seek, at Seller's expense, a protective order or confidential treatment or otherwise limit the extent of such disclosure, and cooperates with Purchaser in obtaining same. 22 Section 5.13 Rights to Certain Technologies of Seller. At any time during the period commencing on the Closing Date and ending on the date that is one year after the Closing Date, Purchaser may notify Seller in writing of Purchaser's election (the "Election") to enter into a license agreement with Seller for Purchaser to develop one of the following pre-clinical products (each, a "Pre-Clinical Product"): (1) hepatocyte growth factor (HGF) proteins and fragments thereof; (2) prostate specific antigen (PSA) and fragments thereof; and (3) tissue factor pathway inhibitor protein (TFPI). Following Seller's receipt of Purchaser's Election, Purchaser and Seller shall negotiate in good faith the terms of such license agreement for a period of 60 days, consistent with commercially reasonable terms in the biotechnology industry, provided that such license agreement shall provide for no up-front license fee and royalty payments of no more than 5% of revenues derived from such Pre-Clinical Product. Seller may not enter into any license agreement with respect to such Pre-Clinical Product with a third party unless Purchaser and Seller do not reach agreement by the end of such 60-day period, after which time Seller may only enter into a license agreement with respect to such Pre-Clinical Product on terms and conditions that are no more favorable to such third party than the most favorable terms and conditions proposed by Seller to Purchaser at any time during such 60-day period. ARTICLE VI CONDITIONS Section 6.1 Conditions to Each Party's Obligations. The respective obligations of each party to effect the transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing of the following condition: There shall not be in effect any Law of any Governmental Entity that makes illegal, enjoins or prevents the consummation of the transactions contemplated by this Agreement. Section 6.2 Conditions to Obligations of Purchaser. The obligation of Purchaser to effect the transactions contemplated by this Agreement shall be further subject to the satisfaction at or prior to the Closing of the following conditions, any or all of which may be waived, in whole or in part, by Purchaser: (a) The representations and warranties of Seller contained in Article III of this Agreement that are qualified by reference to materiality or Material Adverse Effect shall be true and correct in all respects, and the representations and warranties of Seller contained in Article III of this Agreement that are not so qualified shall be true and correct in all material respects, at and as of the Closing Date as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such earlier date); 23 (b) Seller shall have performed and complied with in all material respects all agreements and covenants required to be performed or complied with by Seller under this Agreement at or prior to the Closing; (c) Purchaser shall have received from Seller a certificate, dated the Closing Date, duly executed by an officer of Seller, to the effect of Section 6.2(a) and Section 6.2(b) above; and (d) Seller shall have delivered or caused to be delivered to Purchaser each of the documents specified in Section 2.4(b) hereof. Section 6.3 Conditions to Obligations of Seller. The obligation of Seller to effect the transactions contemplated by this Agreement shall be further subject to the satisfaction at or prior to the Closing of the following conditions, any or all of which may be waived, in whole or in part, by Seller: (a) The representations and warranties of Purchaser contained in Article IV of this Agreement that are qualified by reference to materiality or Material Adverse Effect shall be true and correct in all respects, and the representations and warranties of Purchaser contained in Article IV of this Agreement that are not so qualified shall be true and correct in all material respects, at and as of the Closing Date as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such earlier date); (b) Purchaser shall have performed and complied with in all material respects all agreements and covenants required to be performed or complied with by Purchaser under this Agreement at or prior to the Closing; (c) Seller shall have received from Purchaser a certificate dated the Closing Date, duly executed by an officer of Purchaser, to the effect of Section 6.3(a) and Section 6.3(b) above; and (d) Purchaser shall have delivered or caused to be delivered to Seller each of the documents specified in Section 2.4(c) hereof. ARTICLE VII TERMINATION AND AMENDMENT Section 7.1 Termination. This Agreement may be terminated at any time prior to the Closing by: (a) mutual written consent of Seller and Purchaser; (b) either Seller or Purchaser, if the Closing shall not have occurred on or before December 31, 2002 (the "Outside Date"); provided, however, that the right to terminate this Agreement under this Section 7.1(b) shall not 24 be available to a party whose failure to perform its obligations under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before the Outside Date; (c) either Seller or Purchaser, if a competent Governmental Entity shall have issued a ruling, decree, order or injunction or taken any other action which, in any such case, permanently restrains, enjoins or prohibits the consummation of the transactions contemplated hereby and such ruling, decree, order or injunction or other action shall have become final and non-appealable; provided, however, that in the event that such ruling, decree, order or injunction or other action has been entered, the party seeking to terminate this Agreement pursuant to this Section 7.1(c) shall have used its reasonable best efforts to remove such ruling, decree, order, injunction or other action; or (d) either Seller or Purchaser (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein), if there shall have been a breach of any of the representations, warranties, covenants or agreements set forth in this Agreement on the part of the other party such that any of the conditions set forth in Article VI would not be satisfied, such breach has not been waived by the terminating party, and such breach has not been cured within 30 days following the terminating party's written notice of such breach to the other party. Section 7.2 Effect of Termination. In the event of the termination of this Agreement pursuant to Section 7.1 hereof, this Agreement shall forthwith become null and void and have no effect, without any liability on the part of either party hereto or its Affiliates, directors, officers or stockholders, other than the provisions of Article IX and Sections 5.2(b) and 7.2 hereof; provided, however, that nothing contained in this Section 7.2 shall relieve either party to this Agreement from liability to the other party for any breach of this Agreement. Section 7.3 Amendment. This Agreement may be amended or modified at any time by Seller and Purchaser, but only by an instrument in writing signed by or on behalf of each of Seller and Purchaser. Section 7.4 Extension; Waiver. At any time prior to the Closing, either party hereto may (i) extend the time for the performance of any of the obligations or acts of the other party, (ii) waive any inaccuracies in the representations and warranties of the other party contained herein or in any document delivered pursuant hereto, (iii) waive compliance with any of the agreements of the other party contained herein or (iv) waive any condition to its obligations hereunder. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed by or on behalf of such party. Except as otherwise expressly provided herein, no failure to exercise, delay in exercising, or single or partial exercise of any right, power or remedy by any party, and no course of dealing between the parties, shall constitute a waiver of any such right, power or remedy. 25 ARTICLE VIII SURVIVAL; INDEMNIFICATION Section 8.1 Survival Period. The representations and warranties of the parties contained in Articles III and IV hereof shall survive the Closing until the second anniversary of the Closing Date; provided, however, that the representations and warranties of Seller contained in Section 3.13 hereof shall survive the Closing until the date that is 90 days after the expiration of the applicable statute of limitations and the representations and warranties of Seller contained in Sections 3.1, 3.2 and 3.10 hereof and of Purchaser contained in Sections 4.1, 4.2 and 4.5 hereof shall survive the Closing indefinitely. The period of time a representation or warranty survives the Closing pursuant to the preceding sentence shall be the "Survival Period" with respect to such representation or warranty. The covenants and agreements of the parties hereto contained herein shall survive in accordance with their respective terms. In the event notice of any claim for indemnification under Sections 8.2(a)(i) or 8.2(b)(i) hereof shall have been given within the applicable Survival Period and such claim has not been finally resolved by the expiration of such Survival Period, the representations and warranties that are the subject of such claim shall survive with respect to such claim until such claim is finally resolved. Section 8.2 Indemnification. Subject to the terms and conditions set forth in this Article VIII, from and after the Closing: (a) Seller shall defend, indemnify and hold harmless Purchaser and its Affiliates and their respective directors, officers, equity holders, employees, agents, legal counsel, independent accountants and representatives and their respective heirs, successors and assigns (collectively, the "Purchaser Indemnified Parties") from and against any and all Losses that are directly or indirectly imposed on, suffered or incurred by any Purchaser Indemnified Party arising out of or relating to (i) any breach of, or inaccuracy in, any representation or warranty of Seller in this Agreement or any of the Related Instruments, (ii) any failure to perform, or breach of, any covenant or agreement of Seller set forth in this Agreement or any of the Related Instruments, (iii) any of the Excluded Liabilities or (iv) the conduct of the Business prior to the Closing or in connection with the performance by Seller of this Agreement. "Losses" shall mean any and all liabilities, obligations, losses, assessments, judgments, fines, damages, deficiencies, demands, claims, actions, causes of action, costs and expenses (including, without limitation, interest, penalties, court costs and reasonable attorneys' fees and expenses and any amounts paid in investigation, defense or settlement of any of the foregoing), of any kind, manner or nature whatsoever, whether or not arising out of third-party claims. (b) Purchaser shall defend, indemnify and hold harmless Seller and its Affiliates and their respective directors, officers, equity holders, employees, agents, legal counsel, independent accountants and representatives and their respective heirs, successors and assigns (collectively, the "Seller Indemnified Parties") from and against any and all Losses that are directly or indirectly imposed on, suffered or incurred by any Seller Indemnified Party 26 arising out of or relating to (i) any breach of, or inaccuracy in, any representation or warranty of Purchaser in this Agreement or any of the Related Instruments, (ii) any failure to perform, or breach of, any covenant or agreement of Purchaser set forth in this Agreement or any of the Related Instruments, (iii) any of the Assumed Liabilities or (iv) the conduct of the Business after the Closing. Section 8.3 Indemnification Procedures. (a) All claims for indemnification by any party entitled to indemnification under this Article VIII (an "Indemnified Party") with respect to a third-party claim shall be asserted and resolved as set forth in this Section 8.3. In the event that any claim or demand by a third party for which a party hereto (the "Indemnifying Party") may be required to indemnify any Indemnified Party hereunder (a "Claim") is asserted against or sought to be collected from any such Indemnified Party by a third party, such Indemnified Party shall as promptly as practicable notify the Indemnifying Party in writing of such Claim, and such notice shall specify (to the extent known) in reasonable detail the amount of such Claim and any relevant facts and circumstances relating thereto (the "Claim Notice"); provided, however, that any failure to give such prompt notice or to provide any such facts and circumstances shall not constitute a waiver of any rights of the Indemnified Party, except to the extent that the rights of the Indemnifying Party are materially prejudiced thereby. (b) The Indemnifying Party shall have 15 days from delivery of the Claim Notice to notify the Indemnified Party whether or not the Indemnifying Party elects to defend the Indemnified Party against such Claim. In the event that the Indemnifying Party notifies the Indemnified Party that it elects to defend the Indemnified Party against such Claim, the Indemnifying Party shall have the right to defend the Indemnified Party by appropriate proceedings and shall control such defense at the Indemnifying Party's expense. After notice to the Indemnified Party of the Indemnifying Party's election to assume the defense of such Claim, the Indemnifying Party shall not be liable to the Indemnified Party for any legal expenses subsequently incurred by the Indemnified Party in connection with the defense thereof unless the Indemnifying Party fails to diligently pursue the defense of such Claim; provided that the Indemnified Party shall have the right to employ counsel to represent it if the Indemnified Party has been advised by counsel that either (x) such Claim involves remedies which, in the Indemnified Party's reasonable judgment, could have a material adverse effect on such Indemnified Party, (y) the Indemnified Party may have available to it one or more defenses or counterclaims which are inconsistent with or additional to those available to the Indemnifying Party or (z) the use of counsel chosen by the Indemnifying Party would present such counsel with a conflict of interest, and in any such event the fees and expenses of such separate counsel shall be paid by the Indemnifying Party; provided, however, that the Indemnifying Party shall not be responsible for the fees and expenses of more than one counsel for all Indemnified Parties with respect to such Claim. If the Indemnifying Party elects not to defend the Indemnified Party against such Claim, then the Indemnified Party shall defend such Claim by appropriate proceedings and shall control such defense, at the expense of the Indemnifying Party. (c) The parties shall render to each other such assistance as may reasonably be requested, at the expense of the Indemnifying Party, in order 27 to insure the proper and adequate defense of any such Claim, including making employees available on a mutually convenient basis to provide additional information and explanation of any relevant materials or to testify at any proceedings relating to such Claim and giving the other party reasonable access to any books, records and other documents and information relating to the defense of such Claim. (d) The Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to a Claim without the prior written consent of the Indemnified Party, unless the judgment or settlement (x) involves only the payment of money damages and (y) includes as an unconditional term thereof the giving by the claimant or plaintiff to the Indemnified Party of an unconditional release from all liability in respect of the Claim. The Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to a Claim without the prior written consent of the Indemnifying Party, which shall not be unreasonably withheld or delayed. Section 8.4 Qualifications on Liability. (a) In no event shall Seller be liable for indemnification pursuant to Section 8.2(a)(i) unless and until the aggregate amount of all Losses which are incurred or suffered by the Purchaser Indemnified Parties thereunder exceeds $60,000, in which case the Purchaser Indemnified Parties shall only be entitled to indemnification for such Losses in excess of such amount; provided, however, that Seller shall not be required to make payments for indemnification pursuant to Section 8.2(a)(i) in an aggregate amount in excess of the Purchase Price. (b) In no event shall Purchaser be liable for indemnification pursuant to Section 8.2(b)(i) unless and until the aggregate amount of all Losses which are incurred or suffered by the Seller Indemnified Parties thereunder exceeds $60,000, in which case the Seller Indemnified Parties shall only be entitled to indemnification for such Losses in excess of such amount; provided, however, that Purchaser shall not be required to make payments for indemnification pursuant to Section 8.2(b)(i) in an aggregate amount in excess of the Purchase Price.(c) (c) Although a representation, warranty, covenant or agreement of either party hereto may not be deemed breached or inaccurate unless or until a certain standard as to "material," "materiality" or "Material Adverse Effect" has been met, for purposes of calculating Losses in connection with this Article VIII, once such standard has been met, the Indemnified Party shall be entitled to indemnification for all Losses arising out of or relating to such breach or inaccuracy of any such representation, warranty, covenant or agreement without giving effect to any such standard. ARTICLE IX MISCELLANEOUS Section 9.1 Notices. Any notices or other communications required or permitted under, or otherwise in connection with, this Agreement shall be in writing and shall be deemed to have been duly given (w) when delivered in person, (x) upon confirmation of receipt when transmitted by facsimile transmission, (y) on receipt after dispatch by registered or certified mail, postage prepaid, or (z) on the next Business Day if transmitted by 28 national overnight courier, addressed in each case as follows (or to such other address which has been delivered in accordance with this Section 9.1): (a) if to Purchaser, to: Celgene Corporation 7 Powder Horn Drive Warren, New Jersey 07059 Telephone: (732) 271-1001 Facsimile: (732) 805-3931 Attention: Robert J. Hugin with a copy to: Proskauer Rose LLP 1585 Broadway New York, New York 10036 Telephone: (212) 969-3000 Facsimile: (212) 969-2900 Attention: Robert A. Cantone, Esq. (b) if to Seller, to: EntreMed, Inc. 9640 Medical Center Drive Rockville, Maryland 20850 Telephone: (240) 864-2600 Facsimile: (240) 864-2601 Attention: President with a copy to: Arnold & Porter 555 Twelfth Street, NW Washington, DC 20004 Telephone: (202) 942-5000 Facsimile: (202) 942-5999 Attention: Richard E. Baltz, Esq. Section 9.2 Descriptive Headings. The descriptive headings herein are inserted for convenience only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. Section 9.3 Counterparts; Facsimile Signatures. This Agreement may be executed in counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same agreement. In the event 29 that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. Section 9.4 Entire Agreement. This Agreement, the exhibits and schedules hereto, the Seller Disclosure Letter and the Related Instruments constitute the entire agreement of the parties hereto, and supersede all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof, including, without limitation, the Confidentiality Agreement, dated December 16, 2002, between Seller and Purchaser. Section 9.5 Fees and Expenses. Regardless of whether or not the transactions contemplated by this Agreement are consummated, each party shall bear its own fees and expenses incurred in connection with the negotiation, execution, delivery and performance of this Agreement and the Related Instruments, except as otherwise expressly provided herein. Section 9.6 Governing Law. This Agreement shall be governed and construed in accordance with the Laws of the State of New York, without regard to any applicable principles of conflicts of law. Each of the parties hereto hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of New York located in New York County and of the United States District Court for the Southern District of New York, as well as any courts of appeal therefrom, for any litigation arising out of or relating to this Agreement, any of the Related Instruments or any of the transactions contemplated hereby or thereby (and agrees not to commence any litigation relating thereto except in such courts). Each of the parties hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any litigation arising out of or relating to this Agreement, any of the Related Instruments or any of the transactions contemplated hereby or thereby in the courts of the State of New York located in New York County and of the United States District Court for the Southern District of New York, as well as any courts of appeal therefrom, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such litigation brought in any such court has been brought in an inconvenient forum. The parties agree that a final judgment in any such litigation shall be conclusive and may be enforced in other jurisdictions by suits on the judgment or in any other manner provided by Law. Section 9.7 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OF THE RELATED INSTRUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. Section 9.8 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be transferred, assigned or 30 delegated by either of the parties hereto, in whole or in part, without the prior written consent of the other party hereto, and any attempt to make any such transfer, assignment or delegation without such consent shall be null and void. Section 9.9 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and its successors and permitted assigns, and, except as expressly provided herein, nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any rights, interests, benefits or remedies of any nature whatsoever under or by reason of this Agreement. Section 9.10 Interpretation. In the event of an ambiguity or question of intent or interpretation, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. Section 9.11 Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the parties shall negotiate in good faith with a view to the substitution therefor of a suitable and equitable solution in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid provision; provided, however, that the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the parties hereto shall be enforceable to the fullest extent permitted by Law. Section 9.12 Payments. Unless otherwise provided herein, all payments required to be made pursuant to this Agreement shall be made in U.S. dollars in the form of cash or by wire transfer of immediately available funds to an account designated by the party receiving such payment. Section 9.13 Bulk Sales Laws. Purchaser waives compliance by Seller with any bulk sales or similar Laws applicable to the transactions contemplated hereby. 31 IN WITNESS WHEREOF, the parties hereto have executed this Asset Purchase Agreement as of the date first written above. CELGENE CORPORATION By: /s/ Robert J. Hugin -------------------------------- Name: Robert J. Hugin Title: Senior Vice President and Chief Financial Officer ENTREMED, INC. By: /s/ Neil Campbell -------------------------------- Name: Neil Campbell Title: President 32 -----END PRIVACY-ENHANCED MESSAGE-----