ENTREMED INC
8-K, 1999-08-10
MEDICAL LABORATORIES
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<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 8-K

                                 CURRENT REPORT


     Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

         Date of Report (Date of earliest event reported): July 27, 1999


                                 ENTREMED, INC.
                 (Exact name of issuer as specified in charter)


          Delaware                       0-20713                58-1959440
       --------------                  ------------          -----------------
(State or other jurisdiction     (Commission File Number)    (I.R.S. Employer
of incorporation)                                            Identification No.)


                            9640 Medical Center Drive
                               Rockville, Maryland
                               -------------------
                    (Address of principal executive offices)

                                      20850
                                      -----
                                   (Zip code)

                                 (301) 217-9858
                                 --------------
              (Registrant's telephone number, including area code)


<PAGE>   2


Item 5.  Other Events

       As of July 27, 1999, EntreMed, Inc. (the "Company") completed an offering
of 1,478,118 shares of its common stock, par value $.01 per share (the "Common
Stock"), Series 1 Warrants to purchase a total of 739,059 shares of Common Stock
and Series 2 Warrants to purchase a total of 739,059 shares of Common Stock. The
offering resulted in gross proceeds to the Company, prior to the deduction of
fees and commissions, of approximately $30.1 million. The net proceeds from the
offering will be used by the Company for continued clinical development of the
Company's products, working capital and general corporate purposes, at the
discretion of the Company's management.

       The Series 1 Warrant is exercisable until July 27, 2004, at an exercise
price of $33.02. The Series 2 Warrant is exercisable until January 18, 2001, at
an exercise price of $25.45. The Series 1 Warrant and Series 2 Warrant are
referred to herein collectively as the "Warrants." The exercise price and the
number of shares of Common Stock issuable upon exercise of a Warrant are both
subject to adjustment in certain circumstances which would otherwise have the
effect of depriving the Warrant holders of the benefit of all or a portion of
the purchase rights evidenced by the Warrants.

       Under certain circumstances, the Company will have the ability to require
the holders of the Warrants to exercise their Warrants in full or lose the
Warrants. The Company will be able to cause the holders to "use or lose" their
Series 1 Warrants at any time after January 27, 2002, if the average closing bid
price of the shares of Common Stock is more than 187.5% of the then exercise
price of the Series 1 Warrant during the ten consecutive days prior to the date
of the mandatory exercise. The Company will be able to cause the holders to "use
or lose" their Series 2 Warrants at any time after April 22, 2000, if the
average closing bid price of the shares of Common Stock is more than 150% of the
then exercise price of the Series 2 Warrant during the ten consecutive days
prior to the date of the mandatory exercise.

       The purchasers in the offering (the "Purchasers") have certain
registration rights with respect to the shares of Common Stock purchased in the
offering and the shares of Common Stock issuable upon exercise of the Warrants.
The Company entered into a registration rights agreement, dated as of July 27,
1999 with the Purchasers (the "Registration Rights Agreement"), pursuant to
which the Company agreed to register for resale under the Securities Act of 1933
all of the shares of Common Stock and shares issuable upon exercise of the
Warrants that would be held by the Purchasers. The Warrants will not be
registered for resale and may not be freely transferred.

       The Company has agreed that until October 25, 1999, it will not, without
the prior written consent of the Purchasers or their designees, contract with
any party to obtain additional financing in any transaction in which the Company
issues any equity securities to such party pursuant to an offering which is
exempt from the registration requirements of the Securities Act and which grants
registration rights to such party that are exercisable within six months of July
27, 1999. The foregoing lock-up provisions do not prevent the Company from
issuing securities in connection with: a merger (or similar business
combination), a strategic partnership, collaboration or joint venture (so long
as the primary purpose of such venture is not



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<PAGE>   3
to raise additional capital), an underwritten public offering, the exercise or
conversion of any of the Company's convertible securities that were outstanding
as of July 27, 1999 or an authorized employee benefit plan.

       Purchasers in the offering included John W. Holaday, Ph.D., Chairman of
the Board, Chief Executive Officer and President of the Company, Wendell M.
Starke, Vice-Chairman of the Company, Dr. Joanna Horobin, Senior Vice President
for Commercial Development and James D. Johnson, Ph.D., of Jones & Askew, patent
counsel to the Company. Each of such Purchasers has advised the Company that he
or she has no present intention to sell shares acquired in the offering or to be
acquired on exercise of the Warrants.

       Copies of the Registration Rights Agreement, the Series 1 Warrant and
Series 2 Warrant and the Securities Purchase Agreement dated as of July 22, 1999
between the Company and the Purchasers, are included as exhibits to this report
and incorporated by reference herein.

       On July 28, 1999, the Company issued a press release relating to the
offering, a copy of which is also included as an exhibit to this report and
incorporated by reference herein.




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<PAGE>   4

Item 7.  Financial Statements, Pro Forma Financial Information and Exhibits

(c)  Exhibits

4.1      Form of Series 1 Warrant.

4.2      Form of Series 2 Warrant.

10.1     Form of Securities Purchase Agreement, dated as of July 22, 1999, by
         and among EntreMed, Inc. and the purchasers in the offering.

10.2     Form of Registration Rights Agreement, dated as of July 27, 1999, by
         and among EntreMed, Inc. and the purchasers in the offering.

99.1     Text of Press Release, dated July 28, 1999.



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<PAGE>   5



                                   SIGNATURES

       Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                       ENTREMED, INC.
                                       (Registrant)


                                       /s/ R. Nelson Campbell
                                       -------------------------------
                                       R. Nelson Campbell
                                       Chief Financial Officer


Date:  August 10, 1999



                                       5
<PAGE>   6

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit No.                                  Description
- ----------                                   -----------

<S>             <C>
 4.1            Form of Series 1 Warrant.

 4.2            Form of Series 2 Warrant.

 10.1           Form of Securities Purchase Agreement, dated as of July 22, 1999, by
                and among EntreMed, Inc. and the purchasers in the offering.

 10.2           Form of Registration Rights Agreement, dated as of July 27, 1999, by
                and among EntreMed, Inc. and the purchasers in the offering.

 99.1           Text of Press Release, dated February 9, 1999.
 </TABLE>



<PAGE>   1
                                                                     EXHIBIT 4.1


                                                                     SERIES 1-__

         VOID AFTER 5:00 P.M., NEW YORK CITY TIME,
         ON JULY 27, 2004

         THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
         NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
         "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
         STATES OR ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY
         NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
         STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS
         OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
         THE REGISTRATION REQUIREMENTS OF THOSE LAWS.

                                       Right to Purchase __________ shares
                                       of Common Stock, $.01 par value per share

Date:  July 27, 1999

                                 ENTREMED, INC.
                         SERIES 1 STOCK PURCHASE WARRANT

       THIS CERTIFIES THAT, for value received, __________________, or its
registered assigns, is entitled to purchase from ENTREMED, INC., a corporation
organized under the laws of the State of Delaware (the "COMPANY"), at any time
or from time to time during the period specified in Section 2 hereof, __________
fully paid and nonassessable shares of the Company's common stock, par value
$.01 per share (the "COMMON STOCK"), at an exercise price per share (the
"EXERCISE PRICE") of $33.02. The number of shares of Common Stock purchasable
hereunder (the "WARRANT SHARES") and the Exercise Price are subject to
adjustment as provided in Section 5 hereof. The term "WARRANTS" or "SERIES 1
WARRANTS" means this Warrant and the other Series 1 Warrants of the Company
issued pursuant to the Securities Purchase Agreement dated as of July 22, 1999,
by and among the Company and the Purchasers (the "SECURITIES PURCHASE
AGREEMENT").



<PAGE>   2

       This Warrant is subject to the following terms, provisions and
conditions:

       1.   Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 8 hereof, this Warrant may be exercised at any time during
the Exercise Period (as defined below) by the holder hereof, in whole or in
part, by the surrender of this Warrant, together with a completed exercise
agreement in the form attached hereto (the "EXERCISE AGREEMENT"), to the Company
by 5:00 p.m. New York time on any Business Day at the Company's principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof) and upon payment to the Company in
cash, by certified or official bank check or by wire transfer for the account of
the Company, of the applicable Exercise Price for the Warrant Shares specified
in the Exercise Agreement. The Warrant Shares so purchased shall be deemed to be
issued to the holder hereof or such holder's designee, as the record owner of
such shares, as of the close of business on the date on which this Warrant shall
have been surrendered and the completed Exercise Agreement shall have been
delivered and payment shall have been made for such shares as set forth above
or, if such day is not a Business Day, on the next succeeding Business Day. The
Warrant Shares so purchased, representing the aggregate number of shares
specified in the Exercise Agreement, shall be delivered to the holder hereof
within a reasonable time, not exceeding three Business Days, after this Warrant
shall have been so exercised (the "DELIVERY PERIOD"). If the Company's transfer
agent is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, and so long as the certificates therefor do not
bear a legend and the holder is not obligated to return such certificate for the
placement of a legend thereon, the Company shall cause its transfer agent to
electronically transmit the Warrant Shares so purchased to the holder by
crediting the account of the holder or its nominee with DTC through its Deposit
Withdrawal Agent Commission system ("DTC TRANSFER"). If the aforementioned
conditions to a DTC Transfer are not satisfied, the Company shall deliver to the
holder physical certificates representing the Warrant Shares so purchased.
Further, the holder may instruct the Company to deliver to the holder physical
certificates representing the Warrant Shares so purchased in lieu of delivering
such shares by way of DTC Transfer. Any certificates so delivered shall be in
such denominations as may be requested by the holder hereof, shall be registered
in the name of such holder or such other name as shall be designated by such
holder and, following the date on which the Warrant Shares may be sold by the
holder pursuant to Rule 144(k) promulgated under the Securities Act (or a
successor rule), shall not bear any restrictive legend. Upon a sale of any
Warrant Shares pursuant to an effective registration statement, any restrictive
legend on the certificates representing such Warrant Shares shall be removed. If
this Warrant shall have been exercised only in part, then, unless this Warrant
has expired, the Company shall, at its expense, at the time of delivery of such
certificates, deliver to the holder a new Warrant representing the number of
shares with respect to which this Warrant shall not then have been exercised.


                                       2
<PAGE>   3
       2.   Period of Exercise. Except as set forth in Section 3 below, this
Warrant may be exercised at any time or from time to time (an "EXERCISE DATE")
during the period (the "EXERCISE PERIOD") beginning on (a) the date hereof and
ending (b) at 5:00 p.m., New York City time, on the fifth annual anniversary of
the date of original issuance hereof.

       3.   Mandatory Exercise. On any Notification Date (as defined below), the
Company may request that the Purchaser exercise this Warrant in whole but not in
part (the "MANDATORY EXERCISE") within twenty (20) Business Days after the date
of the Mandatory Exercise Notice (as defined below) by delivering a written
notice to the holder at such address as such holder shall have provided to the
Company in writing pursuant to Section 10 hereof (the "MANDATORY EXERCISE
NOTICE"). The Mandatory Exercise Notice shall set forth the Exercise Price and
the Closing Price of a share of Common Stock on each of the ten (10) consecutive
Trading Days immediately preceding the date of the Mandatory Exercise Notice and
shall state that this Warrant be exercised in conformity with this Section 3
within twenty (20) Business Days. Within ten (10) calendar days of receipt of a
Mandatory Exercise Notice, the holder shall deliver a written notice to the
Company (the "PARTICIPATION NOTICE"), stating whether or not the holder agrees
to participate in such Mandatory Exercise. If the holder states in its
Participation Notice that it elects not to participate in the Mandatory
Exercise, or if the holder fails to deliver a Participation Notice within the
time period specified in this Section 3, then (i) the holder shall forfeit such
holder's rights, title and interest under this Warrant, (ii) this Warrant shall
be deemed terminated and (iii) the holder shall deliver to the Company within
two (2) Business Days of the date of such holder's Participation Notice this
Warrant marked "cancelled." If the holder states in its Participation Notice
that it elects to participate in the Mandatory Exercise, then this Warrant shall
be deemed to be exercised without any further action on the part of the holder
hereof pursuant to this Section 3 for all of the Warrant Shares that can be
obtained pursuant to such exercise on the twentieth (20th) Business Day after
the Mandatory Exercise Notice (the "AUTOMATIC MANDATORY EXERCISE DATE"), unless
prior to noon New York City time on the Automatic Mandatory Exercise Date, the
holder shall have exercised this Warrant in whole, but not in part, in the
manner set forth in Section 1 hereof. Notwithstanding the foregoing, no
Mandatory Exercise may occur unless: at all times from the Notification Date
through the Automatic Mandatory Exercise Date, a Registration Statement covering
all Registrable Securities (as those terms are defined in the Registration
Rights Agreement): (i) is effective, (ii) does not require any amendment or
supplement and (iii) discloses directly or through incorporation by reference
all material facts relating to the Company and the Registrable Securities. For
purposes of this Section 3, "NOTIFICATION DATE" shall mean any Business Day
during the Exercise Period but after the Trigger Date (as defined below) which
Business Day is immediately preceded by ten (10) consecutive Trading Days on
each of which the Closing Price for the Common Stock was greater than 187.5% of
the greater of the original Exercise Price or the Exercise Price; and "TRIGGER
DATE" shall mean the date which is 30 months after the date Series 1 Warrants
were first issued under and pursuant to the Securities Purchase Agreement.



                                       3
<PAGE>   4

       4.   Certain Agreements of the Company. The Company hereby covenants
and agrees as follows:

            (a)   Shares to be Fully Paid. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid and nonassessable and free from all taxes, liens, claims and encumbrances.

            (b)   Reservation of Shares. During the Exercise Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise in full of this Warrant (without giving effect to the
limitations on exercise set forth in Section 8(g) hereof).

            (c)   Listing. The Company has secured the listing of the shares of
Common Stock issuable upon exercise of or otherwise pursuant to this Warrant
upon each national securities exchange or automated quotation system, if any,
upon which shares of Common Stock are then listed or become listed (subject to
official notice of issuance upon exercise of this Warrant) and shall maintain,
so long as any other shares of Common Stock shall be so listed, such listing of
all shares of Common Stock from time to time issuable upon the exercise of or
otherwise pursuant to this Warrant; and the Company shall so list on each
national securities exchange or automated quotation system, as the case may be,
and shall maintain such listing of, any other shares of capital stock of the
Company issuable upon the exercise of or otherwise pursuant to this Warrant if
and so long as any shares of the same class shall be listed on such national
securities exchange or automated quotation system.

            (d)   Certain Actions Prohibited. The Company will not, by amendment
of its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issuance 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 by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant. Without
limiting the generality of the foregoing, the Company (i) will not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the Exercise Price then in effect, and (ii) will take all such
actions as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant.

            (e)  Successors and Assigns. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all of the Company's assets.

            (f)   Blue Sky Laws. The Company shall, on or before the date of
issuance of any Warrant Shares, take such actions as the Company shall
reasonably determine are necessary to qualify the Warrant Shares for, or obtain
exemption for the Warrant Shares for, sale to the




                                       4
<PAGE>   5
holder of this Warrant upon the exercise hereof under applicable securities or
"blue sky" laws of the states of the United States, and shall provide evidence
of any such action so taken to the holder of this Warrant prior to such date;
provided, however, that the Company shall not be required to qualify as a
foreign corporation or file a general consent to service of process in any such
jurisdiction.

       5.   Antidilution Provisions. During the Exercise Period, the Exercise
Price and the number of Warrant Shares issuable upon the exercise of the
Warrants, shall be subject to adjustment from time to time as provided in this
Section 5.

       In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up or down
to the nearest cent; provided that, in no event shall the Exercise Price per
share be reduced below $.01.

            (a)   Subdivision or Combination of Common Stock. If the Company, at
any time during the Exercise Period, subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company, at
any time during the Exercise Period, combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a smaller number of shares, then, after the date of record for
effecting such combination, the Exercise Price in effect immediately prior to
such combination will be proportionately increased.

            (b)   Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 5, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be increased
or decreased to equal the quotient obtained by dividing (i) the product of (A)
the Exercise Price in effect immediately prior to such adjustment, multiplied by
(B) the number of shares of Common Stock issuable upon exercise of this Warrant
immediately prior to such adjustment, by (ii) the adjusted Exercise Price .

            (c)   Consolidation, Merger or Sale. In case of any consolidation of
the Company with, or merger of the Company into, any other entity, or in case of
any sale or conveyance of all or substantially all of the assets of the Company
other than in connection with a plan of complete liquidation of the Company at
any time during the Exercise Period, then as a condition of such consolidation,
merger or sale or conveyance, adequate provision will be made whereby the holder
of this Warrant will have the right to acquire and receive upon exercise of this
Warrant in lieu of the shares of Common Stock immediately theretofore acquirable
upon the exercise of this Warrant, such shares of stock, securities, cash or
assets as may be issued or payable with respect to or in exchange for the number
of shares of Common Stock immediately theretofore acquirable and receivable upon
exercise of this Warrant had such consolidation, merger or sale or conveyance
not taken place. In any such case, the Company will make



                                       5
<PAGE>   6

appropriate provision to insure that the provisions of this Section 5 will
thereafter be applicable as nearly as may be in relation to any shares of stock
or securities thereafter deliverable upon the exercise of this Warrant. The
Company will not effect any consolidation, merger or sale or conveyance unless
prior to the consummation thereof, the successor entity (if other than the
Company) assumes by written instrument the obligations under this Warrant and
the obligations to deliver to the holder of this Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the holder
may be entitled to acquire. Notwithstanding the foregoing, in the event of any
consolidation of the Company with, or merger of the Company into, any other
entity, or the sale or conveyance of all or substantially all of the assets of
the Company, at any time during the Exercise Period, the holder of the Warrant
shall, at its option, have the right to receive, in connection with such
transaction, cash consideration equal to the fair value of this Warrant as
determined in accordance with customary valuation methodology used in the
investment banking industry.

            (d)   Distribution of Assets. In case the Company shall declare or
make any distribution of its assets (other than cash) (or rights to acquire its
assets (other than cash)) to holders of Common Stock as a partial liquidating
dividend, stock repurchase, by way of return of capital or otherwise (including
any dividend or distribution to the Company's shareholders of shares (or rights
to acquire shares) of capital stock of a subsidiary) (a "DISTRIBUTION"), at any
time during the Exercise Period, then, upon exercise of this Warrant for the
purchase of any or all of the shares of Common Stock subject hereto, the holder
of this Warrant shall be entitled to receive its pro-rata amount of such assets
(or such rights) as would have been payable to the holder had such holder been
the holder of such shares of Common Stock on the record date for the
determination of shareholders entitled to such Distribution.

            (e)   Notice of Adjustment. Upon the occurrence of any event which
requires any adjustment of the Exercise Price , then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares issuable upon exercise of this
Warrant, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be certified
by the chief financial officer of the Company.

            (f)   Minimum Adjustment of the Exercise Price . No adjustment of
the Exercise Price shall be made in an amount of less than 1% of the Exercise
Price in effect at the time such adjustment is otherwise required to be made,
but any such lesser adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.



                                       6
<PAGE>   7

            (g)   No Fractional Shares. No fractional shares of Common Stock are
to be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.

            (h)   Other Notices. In case at any time:

                  (i)   the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;

                  (ii)  the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;

                  (iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or

                  (iv)  there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;

then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date or estimated date on which the books of the Company shall
close or a record shall be taken for determining the holders of Common Stock
entitled to receive any such dividend, distribution, or subscription rights or
for determining the holders of Common Stock entitled to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, notice of the date (or, if not then known, a reasonable estimate
thereof by the Company) when the same shall take place. Such notice shall also
specify the date on which the holders of Common Stock shall be entitled to
receive such dividend, distribution, or subscription rights or to exchange their
Common Stock for stock or other securities or property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding-up, as the case may be. Such notice shall be given at
least fifteen (15) days prior to the record date or the date on which the
Company's books are closed in respect thereto. Failure to give any such notice
or any defect therein shall not affect the validity of the proceedings referred
to in clauses (i), (ii), (iii) and (iv) above. Notwithstanding the foregoing,
the Company may publicly disclose the substance of any notice delivered
hereunder prior to delivery of such notice to the holder of this Warrant.



                                       7
<PAGE>   8

            (i)   Certain Definitions.

                  (i)   "BUSINESS DAY" means any day, other than a Saturday or
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law, regulation or executive order to close.

                  (ii)  "CLOSING PRICE" shall mean for the Common Stock as of
any date, the closing bid price of such security on the principal United States
securities exchange or trading market on which such security is listed or traded
as reported by the Research Service of Nasdaq Trading and Market Services (or a
comparable reporting service of national reputation selected by the holder and
reasonably acceptable to the Company if the Research Service of Nasdaq Trading
and Market Services is not then reporting closing bid prices of such security)
(collectively, "NTMS"), or if the foregoing does not apply, the last reported
sale price of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by NTMS, or, if no sale price is
reported for such security by NTMS, the average of the bid prices of any market
makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc., in each case for such date or, if such date was not a
Trading Day (as defined below) for such security, on the next preceding day
which was a Trading Day. If the Closing Price cannot be calculated for a share
of Common Stock as of either of such dates on any of the foregoing bases, the
Closing Price of such security on such date shall be the fair market value as
determined by an investment banking firm selected by the holder and reasonably
acceptable to the Company, with the costs of such appraisal to be borne by the
Company. The manner of determining the Closing Price of the Common Stock set
forth in the foregoing definition shall apply with respect to any other security
in respect of which a determination as to market value must be made.

                  (iii) "COMMON STOCK," for purposes of this Section 5, includes
the Common Stock and any additional class of stock of the Company having no
preference as to dividends or distributions on liquidation, provided that the
shares purchasable pursuant to this Warrant shall include only Common Stock in
respect of which this Warrant is exercisable, or shares resulting from any
subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 5(c) hereof, the stock or other securities or
property provided for in such Section.

                  (iv)  "MARKET PRICE" shall mean, with respect to any date of
determination, the average Closing Price during the five (5) Trading Days ending
on the Trading Day immediately preceding such date of determination,
appropriately adjusted to reflect any stock dividend, stock split or similar
transaction during either such relevant period. The manner of determining the
Market Price of the Common Stock set forth in the foregoing definition shall
apply with respect to any other security in respect of which a determination as
to market value must be made hereunder.



                                       8
<PAGE>   9

                  (v)   "TRADING DAY" shall mean a Business Day on which at
least 10,000 shares of Common Stock are traded on the principal United States
securities exchange or trading market on which such security is listed or traded
as reported by NTMS.

       6.   Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.

       7.   No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.

       8.   Transfer, Exchange, Redemption and Replacement of Warrant.

            (a)   Restriction on Transfer. This Warrant and the rights granted
to the holder hereof are transferable in whole or in part, at any one time, upon
surrender of this Warrant, together with a properly executed assignment in the
form attached hereto, at the office or agency of the Company referred to in
Section 8(e) below, provided, however, that any transfer or assignment of this
Warrant in part shall be in minimum increments of 100,000 shares. Any transfer
or assignment of this Warrant shall be subject to the conditions set forth in
Sections 8(f), 8(g) and 9 hereof and to the provisions of Sections 4(e) and 4(f)
of the Securities Purchase Agreement. Until due presentment for registration of
transfer on the books of the Company, the Company may treat the registered
holder hereof as the owner and holder hereof for all purposes, and the Company
shall not be affected by any notice to the contrary. Notwithstanding anything to
the contrary contained herein, the registration rights described in Section 8
hereof are assignable only in accordance with the provisions of the Registration
Rights Agreement.

            (b)   Warrant Exchangeable for Different Denominations. This Warrant
is exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Section 8(e) below, for new Series 1
Warrants of like tenor of different denominations representing in the aggregate
the right to purchase the number of shares of Common Stock which may be
purchased hereunder, each of such new Series 1 Warrants to represent the right
to purchase such number of shares as shall be designated by the holder hereof at
the time of such surrender; provided, however, that no Series 1 Warrants shall
be exercisable for less than 5,000 shares of Common Stock, and provided further,
that in no event shall any exchange of this Warrant pursuant to this Section
8(b) affect in any way the restrictions on transferability set forth in Section
8(a) hereof.



                                       9
<PAGE>   10

            (c)   Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

            (d)   Cancellation; Payment of Expenses. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Section 8, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Series 1 Warrants pursuant to this Section 8. The Company shall
indemnify and reimburse the holder of this Warrant for all losses and damages
arising as a result of or related to any breach by the Company of the terms of
this Warrant, including costs and expenses (including legal fees) incurred by
such holder in connection with the enforcement of its rights hereunder.

            (e)   Warrant Register. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.

            (f)   Exercise or Transfer Without Registration. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such exercise, transfer, or exchange may be
made without registration under the Securities Act and under applicable state
securities or blue sky laws, (ii) that the holder or transferee execute and
deliver to the Company an investment letter in form and substance reasonably
acceptable to the Company and (iii) that the transferee be an "ACCREDITED
INVESTOR" as defined in Rule 501(a) promulgated under the Securities Act;
provided that no such opinion, letter, or status as an "accredited investor"
shall be required in connection with a transfer pursuant to Rule 144 under the
Securities Act.

            (g)   Additional Restrictions on Exercise or Transfer.
Notwithstanding anything in Section 1 or Section 3 hereof to the contrary, this
Warrant shall not be exercisable to the extent (but only to the extent) that (a)
the number of shares of Common Stock beneficially



                                       10
<PAGE>   11

owned by the holder of this Warrant and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unexercised portion of the Warrants or the unexercised or unconverted portion of
any other securities of the Company subject to a limitation on conversion or
exercise analogous to the limitation contained herein) and (b) the number of
shares of Common Stock issuable upon exercise of the Warrants (or portion
thereof) with respect to which the determination described herein is being made,
would result in beneficial ownership by such holder and its affiliates of more
than 9.99% of the outstanding shares of Common Stock. To the extent the above
limitation applies, the determination of whether and to what extent this Warrant
shall be exercisable with respect to other securities owned by such holder shall
be in the sole discretion of the holder and submission of this Warrant for full
or partial exercise shall be deemed to be the holder's determination of whether
and the extent to which this Warrant is exercisable, in each case subject to
such aggregate percentage limitation. No prior inability to exercise the
Warrants pursuant to this Section shall have any effect on the applicability of
the provisions of this Section with respect to any subsequent determination of
exercisability. For purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D-G thereunder, except as
otherwise provided in clause (a) hereof. The restrictions contained in this
Section 8(g) may not be amended without the consent of the holder of this
Warrant and the holders of a majority of the Company's then outstanding Common
Stock. Nothing in this Section 8(g) shall affect in any way the obligations of
any holder regarding a Mandatory Exercise as set forth in Section 3 hereof.

       9.   Registration Rights. The initial holder of this Warrant (and certain
assignees thereof) are entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in the Registration Rights
Agreement, including the right to assign such rights to certain assignees, as
set forth therein; provided that such initial holder and any assignee agrees, in
writing, to be bound by the terms and conditions of the Securities Purchase
Agreement and the Registration Rights Agreement.

       10.  Notices. Any notices required or permitted to be given under the
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier, or by confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:


                                       11
<PAGE>   12

       If to the Company:

                EntreMed, Inc.
                9640 Medical Center Drive
                Rockville, MD 20850
                Telephone No.:   (301) 217-9858
                Facsimile No.:   (301) 217-9594
                Attention:       John W. Holaday, PhD.
                                 Chairman, President and Chief
                                 Executive Officer

                  With a copy to:

                           Arnold & Porter
                           555 Twelfth Street, N.W.
                           Washington, D.C. 20004
                           Telephone No.:   (202) 942-5000
                           Facsimile No.:   (202) 942-5999
                           Attention:       Robert B. Ott, Esq.

If to the holder, at such address as such holder shall have provided in writing
to the Company, or at such other address as such holder furnishes by notice
given in accordance with this Section 10, and for purposes of notices provided
pursuant to Section 3 hereof, with a copy to:

                           First Security Van Kasper
                           600 California Street, Suite 1700
                           San Francisco, CA 94108
                           Telephone No.:  (415) 675-2490
                           Facsimile No.:  (415) 954-8309
                           Attention:  Ronald F. Richards
                                       Senior Vice President

       11.  Governing Law; Jurisdiction. This Warrant shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed in the State of New York. Each of the Company
and the holder irrevocably consents to the jurisdiction of the United States
federal courts and state courts located in the State of New York in any suit or
proceeding based on or arising under this Warrant and irrevocably agrees that
all claims in respect of such suit or proceeding may be determined in such
courts. Each of the Company and the holder irrevocably waives any objection to
the laying of venue and the defense of an inconvenient forum to the maintenance
of such suit or proceeding. Each of the Company and the holder further agrees
that service of process upon the Company or the holder mailed by certified or
registered mail to the address set forth in Section 10 shall be deemed in every
respect



                                       12
<PAGE>   13
effective service of process upon the Company or the holder in any such suit or
proceeding. Nothing herein shall affect the holder's or the Company's right to
serve process in any other manner permitted by law. Each of the Company and the
holder agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.

       12.  Miscellaneous.

            (a)   Amendments. Except as provided in Section 8(g) hereof, this
Warrant and any provision hereof may only be amended by an instrument in writing
signed by the Company and the holder hereof.

            (b)   Descriptive Headings. The descriptive headings of the several
Sections of this Warrant are inserted for purposes of reference only, and shall
not affect the meaning or construction of any of the provisions hereof.

            (c)   Definitions. Capitalized terms not otherwise defined herein
shall have the meanings set forth in the Securities Purchase Agreement.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]



                                       13
<PAGE>   14



       IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.

                              ENTREMED, INC.

                              By: _________________________________
                              Name:   John W. Holaday, Ph.D.
                              Title:  Chairman of the Board and Chief Executive
                                      Officer



                                       14
<PAGE>   15




                           FORM OF EXERCISE AGREEMENT

         (TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT)

To:      EntreMed, Inc.
         9640 Medical Center Drive
         Rockville, MD 20850
         Telephone No.:   (301) 217-9858
         Facsimile No.:   (301) 217-9594
         Attention:       John W. Holaday, PhD.
                          Chairman, President and Chief Executive Officer

       The undersigned hereby irrevocably exercises the right to purchase
_____________ shares of the Common Stock of ENTREMED, INC., a corporation
organized under the laws of the State of Delaware (the "COMPANY"), and herewith
makes payment of the applicable Exercise Price with respect to such shares in
full, all in accordance with the conditions and provisions of said Warrant.

       The undersigned agrees not to offer, sell, transfer or otherwise dispose
of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws.

       The undersigned requests that the Company cause its transfer agent to
       electronically transmit the Common Stock issuable pursuant to this
       Exercise Agreement to the account of the undersigned or its nominee
       (which is _________________) with DTC through its Deposit Withdrawal
       Agent Commission System ("DTC TRANSFER").

       In lieu of receiving the shares of Common Stock issuable pursuant to this
       Exercise Agreement by way of DTC Transfer, the undersigned hereby
       requests that the Company cause its transfer agent to issue and deliver
       to the undersigned physical certificates representing such shares of
       Common Stock.

       The undersigned requests that a Warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant, in the name of the Holder and
delivered to the undersigned at the address set forth below:

Dated:
      -----------------                 -------------------------------------
                                        Signature of Holder


                                        -------------------------------------
                                        Name of Holder (Print)
                                        Address:

                                        -------------------------------------
                                        -------------------------------------
                                        -------------------------------------



<PAGE>   16
                               FORM OF ASSIGNMENT

       FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the attached Warrant, with respect to
the number of shares of Common Stock covered thereby issuable pursuant to the
attached Warrant set forth hereinbelow, to:


Name of Assignee                   Address                          No of Shares
- ----------------                   -------                          ------------


, and hereby irrevocably constitutes and appoints _____________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.



Dated:
       ---------------------, ----


In the presence of

- ------------------

                      Name:
                            ----------------------------
                            Signature:
                                       -----------------------
                            Title of Signing Officer or Agent (if any):

                                     ------------------------
                            Address: ------------------------
                                     ------------------------

                            Note:    The above signature should correspond
                                     exactly with the name on the face of the
                                     within Warrant.



<PAGE>   1
                                                                     EXHIBIT 4.2


                                                                     SERIES 2-__


         THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT
         HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
         (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE
         UNITED STATES OR ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED
         HEREBY MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE
         REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES
         LAWS UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE
         EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.

                                      Right to Purchase __________  shares
                                      of Common Stock, $.01 par value per share

Date: July 27, 1999

                                 ENTREMED, INC.
                        SERIES 2 STOCK PURCHASE WARRANT

         THIS CERTIFIES THAT, for value received, _____________ , or its
registered assigns, is entitled to purchase from ENTREMED, INC., a corporation
organized under the laws of the State of Delaware (the "COMPANY"), at any time
or from time to time during the period specified in Section 2 hereof,
__________ fully paid and nonassessable shares of the Company's common stock,
par value $.01 per share (the "COMMON STOCK"), at an exercise price per share
(the "EXERCISE PRICE") of $25.45.  The number of shares of Common Stock
purchasable hereunder (the "WARRANT SHARES") and the Exercise Price are subject
to adjustment as provided in Section 5 hereof.  The term "WARRANTS" and "SERIES
2 WARRANTS" means this Warrant and the other Series 2 Warrants of the Company
issued pursuant to the Securities Purchase Agreement dated as of July 22, 1999,
by and among the Company and the Purchasers (the "SECURITIES PURCHASE
AGREEMENT").

         This Warrant is subject to the following terms, provisions and
conditions:

         1.      Manner of Exercise; Issuance of Certificates; Payment for
Shares.  Subject to the provisions hereof, including, without limitation, the
limitations contained in Section 8 hereof, this Warrant may be exercised at any
time during the Exercise Period (as defined below) by the holder hereof, in
whole or in part, by the surrender of this Warrant, together with a completed
exercise agreement in the form attached hereto (the "EXERCISE AGREEMENT"), to
the Company by 5:00 p.m. New York time on any Business Day at the Company's
principal executive offices (or such other office or agency of the Company as
it may designate by notice to the holder hereof) and upon payment to the
Company in cash, by certified or official bank check or by wire transfer for
the account of the Company, of the applicable Exercise Price for the Warrant
Shares specified in the Exercise Agreement.  The Warrant Shares so purchased
shall be deemed to be



<PAGE>   2
issued to the holder hereof or such holder's designee, as the record owner of
such shares, as of the close of business on the date on which this Warrant
shall have been surrendered and the completed Exercise Agreement shall have
been delivered and payment shall have been made for such shares as set forth
above or, if such day is not a Business Day, on the next succeeding Business
Day.  The Warrant Shares so purchased, representing the aggregate number of
shares specified in the Exercise Agreement, shall be delivered to the holder
hereof within a reasonable time, not exceeding three Business Days, after this
Warrant shall have been so exercised (the "DELIVERY PERIOD").  If the Company's
transfer agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, and so long as the certificates therefor
do not bear a legend and the holder is not obligated to return such certificate
for the placement of a legend thereon, the Company shall cause its transfer
agent to electronically transmit the Warrant Shares so purchased to the holder
by crediting the account of the holder or its nominee with DTC through its
Deposit Withdrawal Agent Commission system ("DTC TRANSFER").  If the
aforementioned conditions to a DTC Transfer are not satisfied, the Company
shall deliver to the holder physical certificates representing the Warrant
Shares so purchased. Further, the holder may instruct the Company to deliver to
the holder physical certificates representing the Warrant Shares so purchased
in lieu of delivering such shares by way of DTC Transfer.  Any certificates so
delivered shall be in such denominations as may be requested by the holder
hereof, shall be registered in the name of such holder or such other name as
shall be designated by such holder and, following the date on which the Warrant
Shares may be sold by the holder pursuant to Rule 144(k) promulgated under the
Securities Act (or a successor rule), shall not bear any restrictive legend.
Upon a sale of any Warrant Shares pursuant to an effective registration
statement, any restrictive legend on the certificates representing such Warrant
Shares shall be removed.  If this Warrant shall have been exercised only in
part, then, unless this Warrant has expired, the Company shall, at its expense,
at the time of delivery of such certificates, deliver to the holder a new
Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised.

         2.      Period of Exercise.  Except as set forth in Section 3 below,
this Warrant may  be exercised at any time or from time to time during the
period (the "EXERCISE PERIOD") beginning on (a) the date hereof and ending (b)
at 5:00 p.m. New York City time on the 540th day after the Closing Date (as
defined in the Securities Purchase Agreement), and, if  such date is not a
Business Day, the next succeeding Business Day (the "EXERCISE DATE"), beginning
at 12:01 a.m. New York City time on the relevant date until 5:00 p.m., New York
City time, on the relevant date.

         3.      Mandatory Exercise.  On any Notification Date (as defined
below), the Company may request that the Purchaser exercise this Warrant in
whole but not in part (the "MANDATORY EXERCISE") within twenty (20) Business
Days after the date of the Mandatory Exercise Notice (as defined below) by
delivering a written notice to the holder at such address as such holder shall
have provided to the Company in writing pursuant to Section 10 hereof (the
"MANDATORY EXERCISE NOTICE").  The Mandatory Exercise Notice shall set forth
the Exercise Price and the Closing Price of a share of Common Stock on each of
the ten (10) consecutive Trading Days immediately preceding the date of the
Mandatory Exercise Notice and shall state that this Warrant be exercised in
conformity with this Section 3 within twenty (20) Business Days.  Within ten
(10) calendar days of receipt of a Mandatory Exercise Notice, the holder shall
deliver a written notice to the Company (the "PARTICIPATION NOTICE"), stating
whether or not the holder agrees to participate in such Mandatory Exercise. If
the holder states in its Participation Notice


                                       2
<PAGE>   3
that it elects not to participate in the Mandatory Exercise, or if the holder
fails to deliver a Participation Notice within the time period specified in
this Section 3, then (i) the holder shall forfeit such holder's rights, title
and interest under this Warrant, (ii) this Warrant shall be deemed terminated
and (iii) the holder shall deliver to the Company within two (2) Business Days
of the date of such holder's Participation Notice this Warrant marked
"cancelled."  If the holder states in its Participation Notice that it elects
to participate in the Mandatory Exercise, then this Warrant shall be deemed to
be exercised without any further action on the part of the holder hereof
pursuant to this Section 3 for all of the Warrant Shares that can be obtained
pursuant to such exercise on the twentieth (20th) Business Day after the
Mandatory Exercise Notice (the "AUTOMATIC MANDATORY EXERCISE DATE"), unless
prior to noon New York City time on the Automatic Mandatory Exercise Date, the
holder shall have exercised this Warrant in whole, but not in part, in the
manner set forth in Section 1 hereof.  Notwithstanding the foregoing, no
Mandatory Exercise may occur unless:   at all times from the Notification Date
through the Automatic Mandatory Exercise Date, a Registration Statement
covering all Registrable Securities (as those terms are defined in the
Registration Rights Agreement):  (i) is effective, (ii) does not require any
amendment or supplement and (iii) discloses directly or through incorporation
by reference all material facts relating to the Company and the Registrable
Securities.  For purposes of this Section 3, "NOTIFICATION DATE" shall mean any
Business Day during the Exercise Period but after the Trigger Date (as defined
below) which Business Day is immediately preceded by ten (10) consecutive
Trading Days on each of which the Closing Price for the Common Stock was
greater than 150% of the greater of the original Exercise Price or the Exercise
Price; and "TRIGGER DATE" shall mean the date that is 270 days after the date
Series 2 Warrants were first issued under and pursuant to the Securities
Purchase Agreement.

         4.      Certain Agreements of the Company.  The Company hereby
covenants and agrees as follows:

                 (a)      Shares to be Fully Paid.  All Warrant Shares will,
upon issuance in accordance with the terms of this Warrant, be validly issued,
fully paid and nonassessable and free from all taxes, liens, claims and
encumbrances.

                 (b)      Reservation of Shares.  During the Exercise Period,
the Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise in full of this Warrant (without giving
effect to the limitations on exercise set forth in Section 8(g) hereof).

                 (c)      Listing.  The Company has secured the listing of the
shares of Common Stock issuable upon exercise of or otherwise pursuant to this
Warrant upon each national securities exchange or automated quotation system,
if any, upon which shares of Common Stock are then listed or become listed
(subject to official notice of issuance upon exercise of this Warrant) and
shall maintain, so long as any other shares of Common Stock shall be so listed,
such listing of all shares of Common Stock from time to time issuable upon the
exercise of or otherwise pursuant to this Warrant; and the Company shall so
list on each national securities exchange or automated quotation system, as the
case may be, and shall maintain such listing of, any other shares of capital
stock of the Company issuable upon the exercise of  or otherwise pursuant to
this Warrant  if and so long as any shares of the same class shall be listed on
such national securities exchange or automated quotation system.


                                       3
<PAGE>   4
                 (d)      Certain Actions Prohibited.  The Company will not, by
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issuance 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 by it hereunder, but will at all
times in good faith assist in the carrying out of all the provisions of this
Warrant.  Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.

                 (e)      Successors and Assigns.  This Warrant will be binding
upon any entity succeeding to the Company by merger, consolidation, or
acquisition of all or substantially all of the Company's assets.

                 (f)      Blue Sky Laws.  The Company shall, on or before the
date of issuance of any Warrant Shares, take such actions as the Company shall
reasonably determine are necessary to qualify the Warrant Shares for, or obtain
exemption for the Warrant Shares for, sale to the holder of this Warrant upon
the exercise hereof under applicable securities or "blue sky" laws of the
states of the United States, and shall provide evidence of any such action so
taken to the holder of this Warrant prior to such date; provided, however, that
the Company shall not be required to qualify as a foreign corporation or file a
general consent to service of process in any such jurisdiction.

         5.      Antidilution Provisions.  During the Exercise Period, the
Exercise Price and the number of Warrant Shares issuable upon the exercise of
the Warrants, shall be subject to adjustment from time to time as provided in
this Section 5.

         In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
or down to the nearest cent; provided that in no event shall the Exercise Price
per share be reduced below $.01.

                 (a)      Subdivision or Combination of Common Stock.  If the
Company, at any time during the Exercise Period, subdivides (by any stock
split, stock dividend, recapitalization, reorganization, reclassification or
otherwise) its shares of Common Stock into a greater number of shares, then,
after the date of record for effecting such subdivision, the Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced.
If the Company, at any time during the Exercise Period, combines (by reverse
stock split, recapitalization, reorganization, reclassification or otherwise)
its shares of Common Stock into a smaller number of shares, then, after the
date of record for effecting such combination, the Exercise Price in effect
immediately prior to such combination will be proportionately increased.

                 (b)      Adjustment in Number of Shares.  Upon each adjustment
of the Exercise Price pursuant to the provisions of this Section 5, the number
of shares of Common Stock issuable upon exercise of this Warrant shall be
increased or decreased to equal the quotient obtained by dividing (i) the
product of (A) the Exercise Price in effect immediately prior to such
adjustment, multiplied by (B) the number of shares of Common Stock issuable
upon exercise of this Warrant immediately prior to such adjustment, by (ii) the
adjusted Exercise Price.


                                       4
<PAGE>   5
                 (c)      Consolidation, Merger or Sale.  In case of any
consolidation of the Company with, or merger of the Company into, any other
entity, or in case of any sale or conveyance of all or substantially all of the
assets of the Company other than in connection with a plan of complete
liquidation of the Company at any time during the Exercise Period, then as a
condition of such consolidation, merger or sale or conveyance, adequate
provision will be made whereby the holder of this Warrant will have the right
to acquire and receive upon exercise of this Warrant in lieu of the shares of
Common Stock immediately theretofore acquirable upon the exercise of this
Warrant, such shares of stock, securities, cash or assets as may be issued or
payable with respect to or in exchange for the number of shares of Common Stock
immediately theretofore acquirable and receivable upon exercise of this Warrant
had such consolidation, merger or sale or conveyance not taken place.  In any
such case, the Company will make appropriate provision to insure that the
provisions of this Section 5 will thereafter be applicable as nearly as may be
in relation to any shares of stock or securities thereafter deliverable upon
the exercise of this Warrant.  The Company will not effect any consolidation,
merger or sale or conveyance unless prior to the consummation thereof, the
successor entity (if other than the Company) assumes by written instrument the
obligations under this Warrant and the obligations to deliver to the holder of
this Warrant such shares of stock, securities or assets as, in accordance with
the foregoing provisions, the holder may be entitled to acquire.
Notwithstanding the foregoing, in the event of any consolidation of the Company
with, or merger of the Company into, any other entity, or the sale or
conveyance of all or substantially all of the assets of the Company, at any
time during the Exercise Period, the holder of the Warrant shall, at its
option, have the right to receive, in connection with such transaction, cash
consideration equal to the fair value of this Warrant as determined in
accordance with customary valuation methodology used in the investment banking
industry.

                 (d)      Distribution of Assets.  In case the Company shall
declare or make any distribution of its assets (other than cash) (or rights to
acquire its assets (other than cash)) to holders of Common Stock as a partial
liquidating dividend, stock repurchase, by way of return of capital or
otherwise (including any dividend or distribution to the Company's shareholders
of shares (or rights to acquire shares) of capital stock of a subsidiary) (a
"DISTRIBUTION"), at any time during the Exercise Period, then, upon exercise of
this Warrant for the purchase of any or all of the shares of Common Stock
subject hereto, the holder of this Warrant shall be entitled to receive its
pro-rata amount of such assets (or such rights) as would have been payable to
the holder had such holder been the holder of such shares of Common Stock on
the record date for the determination of shareholders entitled to such
Distribution.

                 (e)      Notice of Adjustment.  Upon the occurrence of any
event which requires any adjustment of the Exercise Price, then, and in each
such case, the Company shall give notice thereof to the holder of this Warrant,
which notice shall state the Exercise Price resulting from such adjustment and
the increase or decrease in the number of Warrant Shares issuable upon exercise
of this Warrant, setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based.  Such calculation shall be
certified by the chief financial officer of the Company.

                 (f)      Minimum Adjustment of the Exercise Price.  No
adjustment of the Exercise Price shall be made in an amount of less than 1% of
the Exercise Price in effect at the time such adjustment is otherwise required
to be made, but any such lesser adjustment shall be


                                       5
<PAGE>   6
carried forward and shall be made at the time and together with the next
subsequent adjustment which, together with any adjustments so carried forward,
shall amount to not less than 1% of such Exercise Price.

                 (g)      No Fractional Shares.  No fractional shares of Common
Stock are to be issued upon the exercise of this Warrant, but the Company shall
pay a cash adjustment in respect of any fractional share which would otherwise
be issuable in an amount equal to the same fraction of the Market Price of a
share of Common Stock on the date of such exercise.

                 (h)      Other Notices.  In case at any time:

                          (i)     the Company shall declare any dividend upon
the Common Stock payable in shares of stock of any class or make any other
distribution (other than dividends or distributions payable in cash out of
retained earnings consistent with the Company's past practices with respect to
declaring dividends and making distributions) to the holders of the Common
Stock;

                          (ii)    the Company shall offer for subscription pro
rata to the holders of the Common Stock any additional shares of stock of any
class or other rights;

                          (iii)   there shall be any capital reorganization of
the Company, or reclassification of the Common Stock, or consolidation or
merger of the Company with or into, or sale of all or substantially all of its
assets to, another corporation or entity; or

                          (iv)    there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;

then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date or estimated date on which the books of the Company
shall close or a record shall be taken for determining the holders of Common
Stock entitled to receive any such dividend, distribution, or subscription
rights or for determining the holders of Common Stock entitled to vote in
respect of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up and (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, notice of the date (or, if not then known, a
reasonable estimate thereof by the Company) when the same shall take place.
Such notice shall also specify the date on which the holders of Common Stock
shall be entitled to receive such dividend, distribution, or subscription
rights or to exchange their Common Stock for stock or other securities or
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, or winding-up, as the case may be.
Such notice shall be given at least fifteen (15) days prior to the record date
or the date on which the Company's books are closed in respect thereto.
Failure to give any such notice or any defect therein shall not affect the
validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv)
above.  Notwithstanding the foregoing, the Company may publicly disclose the
substance of any notice delivered hereunder prior to delivery of such notice to
the holder of this Warrant.



                                       6
<PAGE>   7
                 (i)      Certain Definitions.

                          (i)     "BUSINESS DAY" means any day, other than a
Saturday or Sunday or a day on which banking institutions in the State of New
York are authorized or obligated by law, regulation or executive order to
close.

                          (ii)    "CLOSING PRICE" shall mean for the Common
Stock as of any date, the closing bid price of such security on the principal
United States securities exchange or trading market on which such security is
listed or traded as reported by the Research Service of Nasdaq Trading and
Market Services (or a comparable reporting service of national reputation
selected by the holder and reasonably acceptable to the Company if the Research
Service of Nasdaq Trading and Market Services is not then reporting closing bid
prices of such security) (collectively, "NTMS"), or if the foregoing does not
apply, the last reported sale price of such security in the over-the-counter
market on the electronic bulletin board for such security as reported by NTMS,
or, if no sale price is reported for such security by NTMS, the average of the
bid prices of any market makers for such security as reported in the "pink
sheets" by the National Quotation Bureau, Inc., in each case for such date or,
if such date was not a Trading Day (as defined below) for such security, on the
next preceding day which was a Trading Day.  If the Closing Price cannot be
calculated for a share of Common Stock as of either of such dates on any of the
foregoing bases, the Closing Price of such security on such date shall be the
fair market value as determined by an investment banking firm selected by the
holder and reasonably acceptable to the Company, with the costs of such
appraisal to be borne by the Company.  The manner of determining the Closing
Price of the Common Stock set forth in the foregoing definition shall apply
with respect to any other security in respect of which a determination as to
market value must be made.

                          (iii)   "COMMON STOCK," for purposes of this Section
5, includes the Common Stock and any additional class of stock of the Company
having no preference as to dividends or distributions on liquidation, provided
that the shares purchasable pursuant to this Warrant shall include only Common
Stock in respect of which this Warrant is exercisable, or shares resulting from
any subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 5(c) hereof, the stock or other securities or
property provided for in such Section.

                          (iv)    "MARKET PRICE" shall mean, with respect to
any date of determination, the average Closing Price during the five (5)
Trading Days ending on the Trading Day immediately preceding such date of
determination, appropriately adjusted to reflect any stock dividend, stock
split or similar transaction during either such relevant  period.  The manner
of determining the Market Price of the Common Stock set forth in the foregoing
definition shall apply with respect to any other security in respect of which a
determination as to market value must be made hereunder.

                          (v)     "TRADING DAY" shall mean a Business Day on
which at least 10,000 shares of Common Stock are traded on the principal United
States securities exchange or trading market on which such security is listed
or traded as reported by NTMS.

         6.      Issue Tax.  The issuance of certificates for Warrant Shares
upon the exercise of this Warrant shall be made without charge to the holder of
this Warrant or such shares for any


                                       7
<PAGE>   8
issuance tax or other costs in respect thereof, provided that the Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other than
the holder of this Warrant.

         7.      No Rights or Liabilities as a Shareholder.  This Warrant shall
not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company.  No provision of this Warrant, in the absence of
affirmative action by the holder hereof to purchase Warrant Shares, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the Exercise Price or as a shareholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.

         8.      Transfer, Exchange, Redemption and Replacement of Warrant.

                 (a)      Restriction on Transfer.  This Warrant and the rights
granted to the holder hereof are transferable in whole or in part, at any one
time, upon surrender of this Warrant, together with a properly executed
assignment in the form attached hereto, at the office or agency of the Company
referred to in Section 8(e) below, provided, however, that any transfer or
assignment of this Warrant in part shall be in minimum increments of 100,000
shares.  Any transfer or assignment of this Warrant shall be subject to the
conditions set forth in Sections 8(f), 8(g) and 9 hereof and to the provisions
of Sections 4(e) and 4(f) of the Securities Purchase Agreement.  Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary.  Notwithstanding anything to the contrary contained herein, the
registration rights described in Section 8 hereof are assignable only in
accordance with the provisions of the Registration Rights Agreement.

                 (b)      Warrant Exchangeable for Different Denominations.
This Warrant is exchangeable, upon the surrender hereof by the holder hereof at
the office or agency of the Company referred to in Section 8(e) below, for new
Series 2 Warrants of like tenor of different denominations representing in the
aggregate the right to purchase the number of shares of Common Stock which may
be purchased hereunder, each of such new Series 2 Warrants to represent the
right to purchase such number of shares as shall be designated by the holder
hereof at the time of such surrender; provided, however, that no Series 2
Warrants shall be exercisable for less than 5,000 shares of Common Stock, and
provided further, that in no event shall any exchange of this Warrant pursuant
to this Section 8(b) affect in any way the restrictions on transferability set
forth in Section 8(a) hereof.

                 (c)      Replacement of Warrant.  Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss, theft, or
destruction, upon delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its expense, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.

                 (d)      Cancellation; Payment of Expenses.  Upon the
surrender of this Warrant in connection with any transfer, exchange, or
replacement as provided in this Section 8, this Warrant shall be promptly
canceled by the Company.  The Company shall pay all taxes (other than
securities transfer taxes) and all other expenses (other than legal expenses,
if any, incurred


                                       8
<PAGE>   9
by the holder or transferees) and charges payable in connection with the
preparation, execution, and delivery of Series 2 Warrants pursuant to this
Section 8. The Company shall indemnify and reimburse the holder of this Warrant
for all losses and damages arising as a result of or related to any breach by
the Company of the terms of this Warrant, including costs and expenses
(including legal fees) incurred by such holder in connection with the
enforcement of its rights hereunder.

                 (e)      Warrant Register.  The Company shall maintain, at its
principal executive offices (or such other office or agency of the Company as
it may designate by notice to the holder hereof), a register for this Warrant,
in which the Company shall record the name and address of the person in whose
name this Warrant has been issued, as well as the name and address of each
transferee and each prior owner of this Warrant.

                 (f)      Exercise or Transfer Without Registration.  If, at
the time of the surrender of this Warrant in connection with any exercise,
transfer, or exchange of this Warrant, this Warrant (or, in the case of any
exercise, the Warrant Shares issuable hereunder), shall not be registered under
the Securities Act and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such exercise, transfer, or
exchange, (i) that the holder or transferee of this Warrant, as the case may
be, furnish to the Company a written opinion of counsel (which opinion shall be
in form, substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such exercise, transfer, or exchange may be
made without registration under the Securities Act and under applicable state
securities or blue sky laws, (ii) that the holder or transferee execute and
deliver to the Company an investment letter in form and substance reasonably
acceptable to the Company and (iii) that the transferee be an "ACCREDITED
INVESTOR" as defined in Rule 501(a) promulgated under the Securities Act;
provided that no such opinion, letter, or status as an "accredited investor"
shall be required in connection with a transfer pursuant to Rule 144 under the
Securities Act.

                 (g)      Additional Restrictions on Exercise or Transfer.
Notwithstanding anything in Section 1 or Section 3 hereof to the contrary, this
Warrant shall not be exercisable to the extent (but only to the extent) that
(a) the number of shares of Common Stock beneficially owned by the  holder of
this Warrant and its affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unexercised portion of
the Warrants or the unexercised or unconverted portion of any other securities
of the Company subject to a limitation on conversion or exercise analogous to
the limitation contained herein) and (b) the number of shares of Common Stock
issuable upon exercise of the Warrants (or portion thereof) with respect to
which the determination described herein is being made, would result in
beneficial ownership by such holder and its affiliates of more than 9.99% of
the outstanding shares of Common Stock.  To the extent the above limitation
applies, the determination of whether and to what extent this Warrant shall be
exercisable with respect to other securities owned by such holder shall be in
the sole discretion of the holder and submission of this Warrant for full or
partial exercise shall be deemed to be the holder's determination of whether
and the extent to which this Warrant is exercisable, in each case subject to
such aggregate percentage limitation.  No prior inability to exercise the
Warrants pursuant to this Section shall have any effect on the applicability of
the provisions of this Section with respect to any subsequent determination of
exercisability.  For purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder,
except as otherwise provided in clause (a) hereof.  The restrictions contained
in this Section 8(g) may not


                                       9
<PAGE>   10
be amended without the consent of the holder of this Warrant and the holders of
a majority of the Company's then outstanding Common Stock.  Nothing in this
Section 8(g) shall affect in any way the obligations of any holder regarding a
Mandatory Exercise as set forth in Section 3 hereof.

         9.      Registration Rights.  The initial holder of this Warrant (and
certain assignees thereof) are entitled to the benefit of such registration
rights in respect of the Warrant Shares as are set forth in the Registration
Rights Agreement, including the right to assign such rights to certain
assignees, as set forth therein; provided that such initial holder and any
assignee agrees, in writing, to be bound by the terms and conditions of the
Securities Purchase Agreement and the Registration Rights Agreement.

         10.     Notices.  Any notices required or permitted to be given under
the terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier, or by confirmed telecopy, in each case addressed to a party.  The
addresses for such communications shall be:

                 If to the Company:

                          EntreMed, Inc.
                          9640 Medical Center Drive
                          Rockville, MD 20850
                          Telephone No.:  (301) 217-9858
                          Facsimile No.:  (301) 217-9594
                          Attention:      John W. Holaday, PhD.
                                          Chairman, President and Chief
                                          Executive Officer

                 With a copy to:

                          Arnold & Porter
                          555 Twelfth Street, N.W.
                          Washington, D.C. 20004
                          Telephone No.:  (202) 942-5000
                          Facsimile No.:  (202) 942-5999
                          Attention:      Robert B. Ott, Esq.

If to the holder, at such address as such holder shall have provided in writing
to the Company, or at such other address as such holder furnishes by notice
given in accordance with this Section 10, and for purposes of notices provided
pursuant to Section 3 hereof, with a copy to:

                          First Security Van Kasper
                          600 California Street, Suite 1700
                          San Francisco, CA 94108
                          Telephone No.:  (415) 675-2490
                          Facsimile No.:  (415) 954-8309


                                       10
<PAGE>   11
                          Attention:  Ronald F. Richards
                                      Senior Vice President

         11.     Governing Law; Jurisdiction.  This Warrant shall be governed
by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed in the State of New York.
Each of the Company and the holder irrevocably consents to the jurisdiction of
the United States federal courts and state courts located in the State of New
York in any suit or proceeding based on or arising under this Warrant and
irrevocably agrees that all claims in respect of such suit or proceeding may be
determined in such courts.  Each of the Company and the holder irrevocably
waives any objection to the laying of venue and the defense of an inconvenient
forum to the maintenance of such suit or proceeding. Each of the Company and
the holder further agrees that service of process upon the Company or the
holder mailed by certified or registered mail to the address set forth in
Section 10 shall be deemed in every respect effective service of process upon
the Company or the holder in any such suit or proceeding.  Nothing herein shall
affect the holder's or the Company's right to serve process in any other manner
permitted by law.  Each of the Company and the holder agrees that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.

         12      Miscellaneous.

                 (a)      Amendments.  Except as provided in Section 8(g)
hereof, this Warrant and any provision hereof may only be amended by an
instrument in writing signed by the Company and the holder hereof.

                 (b)      Descriptive Headings.  The descriptive headings of
the several Sections of this Warrant are inserted for purposes of reference
only, and shall not affect the meaning or construction of any of the provisions
hereof.

                 (c)      Definitions.  Capitalized terms not otherwise defined
herein shall have the meanings set forth in the Securities Purchase Agreement.


                                       11
<PAGE>   12
         IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.

                                         ENTREMED, INC.



                                         By:
                                            -----------------------------------
                                         Name:  John W. Holaday, Ph.D.
                                         Title: Chairman of the Board and
                                                Chief Executive Officer


                                       12
<PAGE>   13
                           FORM OF EXERCISE AGREEMENT

        (TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT)

To:      EntreMed, Inc.
         9640 Medical Center Drive
         Rockville, MD 20850
         Telephone No.:   (301) 217-9858
         Facsimile No.:   (301) 217-9594
         Attention:       John W. Holaday, PhD.
                          Chairman, President and Chief Executive Officer

         The undersigned hereby irrevocably exercises the right to purchase
_____________ shares of the Common Stock of ENTREMED, INC., a corporation
organized under the laws of the State of Delaware (the "COMPANY"), and herewith
makes payment of the applicable Exercise Price with respect to such shares in
full, all in accordance with the conditions and provisions of said Warrant.

         The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of
1933, as amended, or any state securities laws.

[ ]      The undersigned requests that the Company cause its transfer agent to
         electronically transmit the Common Stock issuable pursuant to this
         Exercise Agreement to the account of the undersigned or its nominee
         (which is _________________) with DTC through its Deposit Withdrawal
         Agent Commission System ("DTC TRANSFER").

[ ]      In lieu of receiving the shares of Common Stock issuable pursuant to
         this Exercise Agreement by way of DTC Transfer, the undersigned hereby
         requests that the Company cause its transfer agent to issue and
         deliver to the undersigned physical certificates representing such
         shares of Common Stock.

         The undersigned requests that a Warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant, in the name of the Holder
and delivered to the undersigned at the address set forth below:


Dated:
      -----------------                    -------------------------------------
                                           Signature of Holder


                                           -------------------------------------
                                           Name of Holder (Print)


                                           Address:
                                           -------------------------------------

                                           -------------------------------------

                                           -------------------------------------


                                       13
<PAGE>   14
                               FORM OF ASSIGNMENT


         FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the attached Warrant, with
respect to the number of shares of Common Stock covered thereby issuable
pursuant to the attached Warrant set forth hereinbelow, to:

<TABLE>
<CAPTION>
Name of Assignee                           Address                                   No. of Shares
- ----------------                           -------                                   -------------

<S>                                        <C>                                       <C>
- ----------------------------               -------------------------------           -----------------

- ----------------------------               -------------------------------           -----------------

- ----------------------------               -------------------------------           -----------------

- ----------------------------               -------------------------------           -----------------
</TABLE>


, and hereby irrevocably constitutes and appoints_______________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.


Dated:
       ---------------------, ----

In the presence of

- -------------------------------


                          Name:
                               -------------------------------------------------


                               Signature:
                                         ---------------------------------------
                               Title of Signing Officer or Agent (if any):

                                       -----------------------------------------
                               Address:
                                       -----------------------------------------

                                       -----------------------------------------


                               Note:   The above signature should
                                       correspond exactly with the
                                       name on the face of the
                                       within Warrant.

<PAGE>   1
                                                                   EXHIBIT 10.1


                         SECURITIES PURCHASE AGREEMENT

         SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of July 22,
1999, by and among ENTREMED, INC., a corporation organized under the laws of
the State of Delaware (the "COMPANY"), and the purchasers (the "PURCHASERS")
set forth on the execution pages hereof (the "EXECUTION PAGES").

         WHEREAS:

         A.      The Company and each Purchaser are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by the provisions of Regulation D ("REGULATION D"), as promulgated by
the United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "SECURITIES ACT").

         B.      Each Purchaser desires to purchase, severally and not jointly,
subject to the terms and conditions stated in this Agreement, (i) shares of the
Company's common stock, par value $.01 per share (the "COMMON STOCK"), (ii)
warrants in the form attached hereto as Exhibit A (including any warrants
issued in replacement thereof, the "SERIES 1 WARRANTS"), to acquire shares of
Common Stock and (iii) warrants in the form attached hereto as Exhibit B
(including any warrants issued in replacement thereof, the "SERIES 2 WARRANTS,"
and, together with the Series 1 Warrants, the "WARRANTS"), to acquire shares of
Common Stock.  The shares of Common Stock issuable upon exercise of or
otherwise pursuant to the Warrants are referred to herein as the "WARRANT
SHARES."

         C.      Contemporaneous with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement in the form attached hereto as Exhibit C (the "REGISTRATION
RIGHTS AGREEMENT"), pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act and the rules and regulations
promulgated thereunder, and applicable state securities laws.

         NOW, THEREFORE, the Company and the Purchasers hereby agree as
follows:

1.       CERTAIN DEFINITIONS.

         For purposes of this Agreement, the following terms shall have the
meanings ascribed to them as provided below:

         "BUSINESS DAY" shall mean any day on which the principal United States
securities exchange or trading market on which the Common Stock is listed or
traded as reported by NTMS (as defined below) is open for trading.

         "CLOSING PRICE" shall mean for the Common Stock as of any date, the
closing bid price of such security on the principal United States securities
exchange or trading market on which such security is listed or traded as
reported by the Research Service of Nasdaq Trading and Market Services (or a
comparable reporting service of national reputation selected by the Purchasers
as provided in Section 8(o) hereof, and reasonably acceptable to the Company if
the Research





<PAGE>   2
Service of Nasdaq Trading and Market Services is not then reporting closing bid
prices of such security) (collectively, "NTMS"), or if the foregoing does not
apply, the last reported sale price of such security in the over-the-counter
market on the electronic bulletin board for such security as reported by NTMS,
or, if no sale price is reported for such security by NTMS, the average of the
bid prices of any market makers for such security as reported in the "pink
sheets" by the National Quotation Bureau, Inc., in each case for such date or,
if such date was not a Trading Day (as defined below) for such security, on the
next preceding day which was a Trading Day.  If the Closing Price cannot be
calculated for a share of Common Stock as of either of such dates on any of the
foregoing bases, the Closing Price of such security on such date shall be the
fair market value as determined by an investment banking firm selected by the
Company and reasonably acceptable to the Purchasers, with the costs of such
appraisal to be borne by the Company.

         "INVESTMENT AMOUNT" shall mean the dollar amount to be invested in the
Company at the Closing pursuant to this Agreement by a Purchaser, as set forth
on the Execution Page hereto executed by such Purchaser.

         "MARKET PRICE" shall mean, with respect to any date of determination,
the average Closing Price during the five (5) Trading Days ending on the
Trading Day immediately preceding such date of determination, appropriately
adjusted to reflect any stock dividend, stock split or similar transaction
during either such relevant period.

         "MATERIAL ADVERSE EFFECT" shall mean any material adverse effect on
(i) the Securities, (ii) the ability of the Company to perform its obligations
hereunder (including the issuance of the Shares and the Warrants), under the
Warrants (including the issuance of the Warrant Shares) or under the
Registration Rights Agreement or (iii) the business, operations, properties,
prospects or financial condition of the Company and its subsidiaries, taken as
a whole.

         "PRO RATA PERCENTAGE" shall mean, with respect to any Purchaser, a
percentage computed by dividing such Purchaser's Investment Amount by the
aggregate Investment Amounts of all  Purchasers.

         "SECURITIES" shall mean the Shares, the Warrants and the Warrant
Shares.

         "SHARES" means the shares of Common Stock to be issued and sold by the
Company and purchased by the Purchasers at the Closing.

         "TRADING DAY" shall mean a Business Day on which at least 10,000
shares of  Common Stock are traded on the principal United States securities
exchange or trading market on which such security is listed or traded as
reported by NTMS.

2.       PURCHASE AND SALE OF SHARES AND WARRANTS.

         a.      Generally.  Except as otherwise provided in this Section 2 and
subject to the satisfaction (or waiver) of the conditions set forth in Section
6 and Section 7 below, each  Purchaser shall purchase the number of Shares and
Warrants determined as provided in this





                                       2
<PAGE>   3
Section 2, and the Company shall issue and sell such number of Shares and
Warrants to each Purchaser for such  Purchaser's Investment Amount as provided
below.

         b.      Number of Closing Shares and Warrants; Form of Payment;
Closing Date.

                 i.       On the Closing Date (as defined below), the Company
shall sell and each  Purchaser shall buy (A) the number of Shares as is equal
to the quotient of (I) such Purchaser's Investment Amount divided by (II) a
number of dollars equal to 92.5% of the Market Price as of the Closing Date,
(B) Series 1 Warrants exercisable for a number of shares of Common Stock equal
to 50% of the number of Shares referred to in subclause (A) above, and (C)
Series 2 Warrants exercisable for a number of shares of Common Stock equal to
50% of the number of Shares referred to in subclause (A) above.  On the Closing
Date, each Purchaser shall pay the Company an amount equal to such Purchaser's
Investment Amount.

                 ii.      On the Closing Date, each Purchaser shall pay its
Investment Amount in immediately available funds by wire transfer to the
Company, in accordance with the Company's written wiring instructions against
delivery of certificates representing the Shares and duly executed Warrants
being purchased by such Purchaser, and the Company shall deliver such Shares
and Warrants against delivery of the such  Purchaser's Investment Amount.

                 iii.     The date and time of the sale of the Shares and the
Warrants pursuant to this Agreement (the "CLOSING") shall be deemed to occur
when each of the conditions set forth in Section 6 and Section 7 below has been
satisfied or waived by the Company and all of the Purchasers, respectively, but
in no event shall the Closing occur later than 2:00 p.m. New York City time on
July 27, 1999 or such other date or time as First Security Van Kasper ("FSVK")
and the Company may mutually agree ("CLOSING DATE").  The Closing shall occur
at the offices of Arnold & Porter, 555 Twelfth Street, N.W., Washington, D.C.
20004, or at such other place as FSVK and the Company may otherwise mutually
agree.  The Company shall send written notice to each of the Purchasers
confirming that Closing has occurred.  After the Closing but prior to the
filing of any registration statement pursuant to Section 2(a) of the
Registration Rights Agreement, (A) the Company may, in its sole discretion,
sell additional Securities on terms substantially identical to the terms set
forth in this Agreement (including the exhibits hereto) and (B) each purchaser
of such additional Securities shall execute joinders to this Agreement and to
the Registration Rights Agreement.

3.       THE PURCHASER'S REPRESENTATIONS AND WARRANTIES.

         Each Purchaser severally and not jointly represents and warrants to
the Company as follows:

         a.      Purchase for Own Account.  The Purchaser is purchasing the
Securities for the  Purchaser's own account and not with a present view towards
the distribution thereof.  The Purchaser understands that the Purchaser must
bear the economic risk of this investment indefinitely, unless the Securities
are registered pursuant to the Securities Act and any applicable state
securities or blue sky laws or an exemption from such registration is
available, and that the Company has no present intention of registering any
such Securities other than as contemplated by the Registration Rights
Agreement.  Notwithstanding anything in this Section 3(a) to the





                                       3
<PAGE>   4
contrary, by making the foregoing representation, the Purchaser does not agree
to hold the Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with or pursuant
to a registration statement or an exemption from registration under the
Securities Act and any applicable state securities laws.

         b.      Information.  The Purchaser has been furnished all materials
relating to the business, finances and operations of the Company and its
subsidiaries and materials relating to the offer and sale of the Securities
which have been requested by the Purchaser.  The Purchaser has been afforded
the opportunity to ask questions of the Company and has received what the
Purchaser believes to be satisfactory answers to any such inquiries.  The
Purchaser understands that its investment in the Securities involves a high
degree of risk.  Neither such inquiries nor any other due diligence
investigation conducted by the Purchaser or its counsel or any of its
representatives shall modify, amend or affect the Purchaser's right to rely on
the Company's representations and warranties contained in Section 4 below.

         c.      Governmental Review.  The Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.

         d.      Authorization; Enforcement.  The Purchaser has the requisite
power and authority to enter into and perform its obligations under this
Agreement and to purchase the Shares and the Warrants in accordance with the
terms hereof.  This Agreement has been duly and validly authorized, executed
and delivered on behalf of the Purchaser and is a valid and binding agreement
of the Purchaser enforceable against the Purchaser in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other laws affecting creditors' rights and
remedies generally and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).

         e.      Transfer or Resale.  The Purchaser understands that (i) except
as provided in the Registration Rights Agreement, the Securities have not been
and are not being registered under the Securities Act or any state securities
laws, and may not be transferred unless (a) subsequently registered thereunder,
or (b) the Purchaser shall have delivered to the Company an opinion of counsel
reasonably acceptable to the Company (which opinion shall be in form, substance
and scope customary for opinions of counsel in comparable transactions) to the
effect that the Securities to be sold or transferred may be sold or transferred
under an exemption from such registration, or (c) sold under Rule 144
promulgated under the Securities Act (or a successor rule), or (d) sold or
transferred to an affiliate of the Purchaser pursuant to an exemption under the
Securities Act; and (ii) neither the Company nor any other person is under any
obligation to register such Securities under the Securities Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder, in each case, other than pursuant to the Registration Rights
Agreement.

         f.      Legends.  The Purchaser understands that the Shares and the
Warrants and, until such time as the Shares and Warrant Shares have been
registered under the Securities Act as contemplated by the Registration Rights
Agreement or otherwise may be sold by the Purchaser under Rule 144, the
certificates for the Shares and Warrant Shares may bear a restrictive legend in
substantially the following form:





                                       4
<PAGE>   5
                 The securities represented by this certificate have not been
                 registered under the Securities Act of 1933, as amended, or
                 the securities laws of any state of the United States.  The
                 securities represented hereby may not be offered or sold in
                 the absence of an effective registration statement for the
                 securities under applicable securities laws unless offered,
                 sold or transferred under an available exemption from the
                 registration requirements of those laws.

         The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of any Security upon
which it is stamped, if (a) the sale of such Security is registered under the
Securities Act  or (b) in connection with the resale of such Security, such
holder provides the Company with an opinion of counsel, in form, substance and
scope customary for opinions of counsel in comparable transactions, to the
effect that a public sale or transfer of such Security may be made without
registration under the Securities Act or (c) such holder provides the Company
with reasonable assurances that such Security can be sold under Rule 144(k).
The Purchaser agrees to sell all Securities, including those represented by a
certificate(s) from which the legend has been removed, pursuant to an effective
registration statement or under an exemption from the registration requirements
of the Securities Act. The legend shall be removed when such Security is sold
pursuant to an effective registration statement or may be sold by a Purchaser
who is not an "affiliate" of the Company under Rule 144(k).

         g.      Accredited Investor Status.  The Purchaser is an "ACCREDITED
INVESTOR" as that term is defined in Rule 501(a) of Regulation D.  Neither the
Purchaser nor any of its affiliates is registered as a broker or dealer under
Section 15(a) of the Securities Exchange Act of 1934, as amended, or a member
of the NASD (as defined below).

4.       REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

         The Company represents and warrants to each Purchaser as follows:

         a.      Organization and Qualification.  The Company is a corporation
duly organized and existing under the laws of the jurisdiction in which it is
incorporated, and has the requisite corporate power to own its properties and
to carry on its business as now being conducted.  The Company is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it makes such
qualification necessary and where the failure so to qualify would have a
Material Adverse Effect. Schedule 4(a) sets forth the Company's jurisdiction of
incorporation and the name of each of the Company's subsidiaries and its
jurisdiction of incorporation.  The Company does not have any subsidiaries
whose operations are material to the Company on a consolidated basis.

         b.      Authorization; Enforcement.  (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Warrants and the Registration Rights Agreement, to issue
and sell the Shares and the Warrants in accordance with the terms hereof and to
issue the Warrant Shares upon exercise of the Warrants in





                                       5
<PAGE>   6
accordance with the terms of the Warrants; (ii) the execution, delivery and
performance of this Agreement, the Warrants and the Registration Rights
Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including, without limitation, the reservation
for issuance and issuance of the Shares and the issuance of the Warrants and
the reservation for issuance and issuance of the Warrant Shares) have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors or, except as set forth in
Schedule 4(b), its shareholders is required; (iii) this Agreement has been duly
executed and delivered by the Company; and (iv) this Agreement constitutes,
and, upon execution and delivery by the Company and the other parties thereto
to the extent required of the Registration Rights Agreement and the Warrants,
such agreements will constitute, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other laws affecting creditors' rights and remedies
generally and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).

         c.      Capitalization.  The capitalization of the Company and each of
its subsidiaries as of the date hereof is set forth on Schedule 4(c), including
the authorized capital stock, the number of shares issued and outstanding, the
number of shares issuable and reserved for issuance pursuant to the Company's
stock option plans, the number of shares issuable and reserved for issuance
pursuant to securities exercisable for, or convertible into or exchangeable for
any shares of capital stock.  All of such outstanding shares of the Company's
capital stock have been, or upon issuance will be, validly issued, fully paid
and nonassessable.  Except as set forth on Schedule 4(c), no shares of capital
stock of the Company (including the Shares and the Warrant Shares) or any of
the subsidiaries are subject to preemptive rights or any other similar rights
of the shareholders of the Company or any liens or encumbrances.  Except for
the Securities and as disclosed in Schedule 4(c), as of the date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever to which the
Company or any of the subsidiaries is a party relating to the issuance by the
Company or any of its subsidiaries of securities or rights convertible into or
exercisable or exchangeable for, any shares of capital stock of the Company or
any of its subsidiaries, or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or such subsidiaries, and (ii) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated to
register the sale of any of its or their securities under the Securities Act
(except the Registration Rights Agreement).  The Company has made available to
each Purchaser true and correct copies of the Company's Certificate of
Incorporation as in effect on the date hereof ("CERTIFICATE OF INCORPORATION"),
the Company's By-laws as in effect on the date hereof (the "BY-LAWS") and all
other instruments and agreements governing securities convertible into or
exercisable or exchangeable for capital stock of the Company, except for stock
options granted under any employee benefit plan or director stock option plan
of the Company.

         d.      Issuance of Shares.  The Shares are duly authorized and when
issued and paid for in accordance with the terms hereof, will be validly
issued, fully paid and non-assessable, and free from all taxes, liens, claims
and encumbrances (other than those imposed through acts or omissions of the
Purchaser thereof), and will not be subject to preemptive rights or other
similar rights of shareholders of the Company and will not impose personal
liability upon the holder





                                       6
<PAGE>   7
thereof.  The Warrant Shares are duly authorized and reserved for issuance,
and, upon exercise of the Warrants in accordance with the terms thereof, will
be validly issued, fully paid and non-assessable and free from all taxes and
liens, claims and encumbrances (other than those imposed through acts or
omissions of the Purchaser thereof), and will not be subject to preemptive
rights or other similar rights of shareholders of the Company and will not
impose personal liability upon the holder thereof.

         e.      No Conflicts.  The execution, delivery and performance of this
Agreement, the Registration Rights Agreement and the Warrants by the Company,
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the reservation for issuance and
issuance of the Shares and the Warrant Shares and the issuance of the Warrants)
will not (i) conflict with or result in a violation of the Certificate of
Incorporation or By-laws or (ii) conflict with, or constitute a default (or an
event which, with notice or lapse of time or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including (assuming the accuracy of the
representations and warranties of the Purchasers) the United States federal and
state securities laws and regulations) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of its
subsidiaries is bound or affected (except, with respect to clause (ii), for
such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect).  Neither the Company nor any of its
subsidiaries is in violation of its Certificate of Incorporation, By-laws and
other organizational documents and neither the Company nor any of its
subsidiaries is in default (and no event has occurred which, with notice or
lapse of time or both, would put the Company or any of its subsidiaries in
default) under, nor has there occurred any event giving others (with notice or
lapse of time or both) any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, except for actual or possible violations,
defaults or rights as would not, individually or in the aggregate, have a
Material Adverse Effect.  The businesses of the Company and its subsidiaries
are not being conducted in violation of any law, ordinance or regulation of any
governmental entity, except for actual or possible violations, if any, the
sanctions for which either singly or in the aggregate would not have a Material
Adverse Effect.  Except as specifically contemplated by this Agreement and as
required under the Securities Act and any applicable state securities laws, the
Company is not required to obtain any consent, approval, authorization or order
of, or make any filing or registration with, any court or governmental agency
or any regulatory or self regulatory agency in order for it to execute, deliver
or perform any of its obligations under this Agreement including without
limitation the issuance and sale of the Shares and Warrants as provided
hereby), the Warrants (including without limitation the issuance of the Warrant
Shares) or the Registration Rights Agreement, in each case in accordance with
the terms hereof or thereof.   The Company is not in violation of the listing
requirements of the Nasdaq National Market ("NASDAQ") and does not reasonably
anticipate that the Common Stock will be delisted by NASDAQ in the foreseeable
future based on its rules (and interpretations thereof) as currently in effect.

         f.      SEC Documents; Financial Statements.  Since January 1, 1999,
the Company has timely filed all reports, schedules, forms, statements and
other documents required to be filed by





                                       7
<PAGE>   8
it with the SEC pursuant to the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), and has filed all registration statements and other
documents required to be filed by it with the SEC pursuant to the Securities
Act (all of the foregoing filed prior to the date hereof, and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein, being hereinafter referred to herein as the
"SEC DOCUMENTS").  The Company has made available to each Purchaser true and
complete copies of the SEC Documents, except for the exhibits and schedules
thereto and the documents incorporated therein.  As of their respective dates,
the SEC Documents complied in all material respects with the requirements of
the Exchange Act or the Securities Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
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.  Any statements made in any such SEC Documents that are or were
required to be updated or amended under applicable law have been so updated or
amended.  As of their respective dates, the financial statements of the Company
included in the SEC Documents complied in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
applicable with respect thereto.  Such financial statements have been prepared
in accordance with United States generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company and its
subsidiaries as of the dates thereof and the results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal and recurring year-end audit adjustments).  Except as set
forth in the SEC Documents, the Company has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to the date of such SEC Documents and (ii) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
such SEC Documents, which liabilities and obligations referred to in clauses
(i) and (ii), individually or in the aggregate, would not have a Material
Adverse Effect.

         g.      Absence of Certain Changes.  Except as disclosed in the SEC
Documents, since December 31, 1998, there has been no change or development
which individually or in the aggregate has had or could have a Material Adverse
Effect.

         h.      Absence of Litigation.  Except as disclosed in the SEC
Documents, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company, or any of its subsidiaries, or any of their
directors or officers in their capacities as such which would have a Material
Adverse Effect.

         i.      Intellectual Property.  The Company and each of its
subsidiaries owns or is licensed to use all patents, patent applications,
trademarks, trademark applications, trade names, service marks, copyrights,
copyright applications, licenses, permits, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems





                                       8
<PAGE>   9
or procedures) and other similar rights and proprietary knowledge
(collectively, "INTANGIBLES") necessary for the conduct of its business as now
being conducted and as proposed to be conducted.  Neither the Company nor any
of its subsidiaries has  received written notice that it is infringing upon
third party Intangibles.  Neither the Company nor any of its subsidiaries has
entered into any consent, indemnification, forbearance to sue or settlement
agreements with respect to the validity of the Company's or such subsidiary's
ownership or right to use its Intangibles.  The Intangibles are valid and
enforceable in all material respects, and no material registration relating
thereto has lapsed, expired or been abandoned or canceled or is the subject of
cancellation or other adversarial proceedings, and all material applications
therefor are pending and in good standing.  The Company has complied, in all
material respects, with its contractual obligations relating to the protection
of the Intangibles used pursuant to licenses.  To the Company's knowledge, no
person is infringing on or violating the Intangibles owned or used by the
Company, which infringement or violation, individually or in the aggregate,
would have a Material Adverse Effect.

         j.      Environment.  Except as disclosed in the SEC Documents (i)
there is no environmental liability, nor factors likely to give rise to any
environmental liability, affecting any of the properties of the Company or any
of its subsidiaries that, individually or in the aggregate, would have a
Material Adverse Effect and (ii) neither the Company nor any of the
subsidiaries has violated any environmental law applicable to it now or
previously in effect, other than such violations or infringements that,
individually or in the aggregate, have not had and will not have a Material
Adverse Effect.

         k.      Title.  The Company and each of its subsidiaries has good
title in fee simple to all real property and good title to all personal
property (other than Intangibles, which are addressed in Section 4(i) above)
owned by it which is material to its business, free and clear of all liens,
encumbrances and defects except for such defects in title that, individually or
in the aggregate, could not have a Material Adverse Effect.  Any real property
and facilities held under lease by the Company or any of its subsidiaries are
held by the Company or such subsidiary under valid, subsisting and enforceable
leases with such exceptions which have not had and will not have a Material
Adverse Effect.

         l.      Insurance.  The Company and its subsidiaries maintain such
insurance relating to their business, operations, assets, key-employees and
officers and directors as is appropriate to their business, assets and
operations, in such amounts and against such risks as are customarily carried
and insured against by owners of comparable businesses, assets and operations,
and such insurance coverages will be continued in full force and effect to and
including the Closing Date other than those insurance coverages in respect of
which the failure to continue in full force and effect could not reasonably be
expected to have a Material Adverse Effect.

         m.      Acknowledgment Regarding the Purchasers' Purchase of the
Securities.  The Company acknowledges and agrees that no Purchaser is acting as
a financial advisor or, other than Wendell M. Starke, is acting as a fiduciary
of the Company (or in any similar capacity) with respect to this Agreement or
the transactions contemplated hereby, and the relationship between the Company
and the Purchasers is "arms length" and that any statement made by any
Purchaser or any of its representatives or agents in connection with this
Agreement and the transactions contemplated hereby is not advice or a
recommendation and is merely incidental to such





                                       9
<PAGE>   10
Purchaser's purchase of Securities and has not been relied upon by the Company,
its officers or directors in any way.  The Company further represents to the
Purchaser that the Company's decision to enter into this Agreement has been
based solely on an independent evaluation by the Company and its
representatives.

         n.      No Brokers.  The Company has not engaged any person to which
or to whom brokerage commissions, finder's fees, financial advisory fees or
similar payments are or will become due in connection with this Agreement or
the transactions contemplated hereby except for FSVK, DM Management, LLC and
Scott Koppelman, whose commissions and fees will be paid by the Company.


         o.      Tax Status.  The Company and each of its subsidiaries has made
or filed all material federal, state and local income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject (unless and only to the extent that the Company or the applicable
subsidiary has set aside on its books provisions adequate for the payment of
all unpaid and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material  in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and has set aside on its books provisions adequate for the payment
of all taxes for periods subsequent to the periods to which such returns,
reports or declarations apply.  There are no material unpaid taxes claimed to
be due by the taxing authority of any jurisdiction.  The Company has not
executed a waiver with respect to any statute of limitations relating to the
assessment or collection of any federal, state or local tax.

         p.      No General Solicitation.  Neither the Company nor any person
participating on the Company's behalf in the transactions contemplated hereby
has conducted any "general solicitation" or "general advertising"  as such
terms are used in Regulation D, with respect to any of the Securities being
offered hereby.

         q.      Non-Public Information.  Certain Purchasers have executed a
Confidential Non-Disclosure Agreement (the "NDA") with the Company, which
prohibits such Purchasers from trading in the securities of the Company if they
are in possession of material, non-public information regarding the Company.
The Company hereby acknowledges that pursuant to the Registration Rights
Agreement it is obligated to file a registration statement under which such
Purchasers could sell the Securities purchased hereunder and the Company hereby
agrees that such Purchasers shall not be in violation of, or have liability
under, the NDA in connection with sales under such registration statement made
in accordance with the Registration Rights Agreement.

         r.      No Integrated Offering.  Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would require registration of the
Securities being offered hereby under the Securities Act or cause this offering
of Securities to be integrated with any prior offering of securities of the
Company for purposes of the Securities Act or any applicable stockholder
approval provisions, including, without limitation, Rule 4460(i) of the
National Association of Securities Dealers ("NASD") or any similar rule.





                                       10
<PAGE>   11
         s.      Year 2000.  To the Company's knowledge and except for matters
that will not have a Material Adverse Effect:  (i) all hardware and software
products used by the Company and its subsidiaries in the administration and the
business operations of the Company and such subsidiaries will be able to
process date data (including, but not limited to, calculating, comparing and
sequencing) in a consistent manner from, into and between the twentieth century
(through 1999), the year 2000 and the twenty-first century, including leap year
calculations, when used in accordance with the product documentation
accompanying such hardware and software products; (ii) all software developed
and sold by the Company and any of its subsidiaries (other than third party
software) will be able to process date data (including, but not limited to,
calculating, comparing and sequencing) in a consistent manner from, into and
between the twentieth century (through 1999), the year 2000 and the
twenty-first century, including leap year calculations, when used in accordance
with the product documentation accompanying such software.

         t.      Form S-3 Eligibility.  The Company is currently eligible to
register the resale of its Common Stock on a registration statement on Form S-3
under the Securities Act.  There exist no facts or circumstances (including
without limitation any required approvals or waivers of any circumstances that
may delay or prevent the obtaining of accountant's consents) that would
prohibit or delay the preparation and filing of a registration statement on
Form S-3 with respect to the Registrable Securities (as defined in the
Registration Rights Agreement).

         u.      No Misrepresentations.  No representation, warranty,
acknowledgement or certification of the Company contained in this Agreement,
any schedule, annex or exhibit hereto or any certificate furnished by the
Company to the Purchasers pursuant to this Agreement, contains any 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.

5.       COVENANTS.

         a.      Satisfaction of Conditions.  The parties shall use reasonable
best efforts to satisfy in a timely manner each of the conditions set forth in
Section 6 and Section 7 of this Agreement.

         b.      Form D; Blue Sky Laws.  The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each  Purchaser promptly after such filing. The Company shall,
on or before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Purchasers
pursuant to this Agreement under applicable securities or "blue sky" laws of
the states of the United States or obtain exemption therefrom, and shall
provide evidence of any such action so taken to each Purchaser on or prior to
the Closing Date.

         c.      Reporting Status.  So long as a  Purchaser beneficially owns
any Securities or has the right to acquire any Securities pursuant to this
Agreement, the Company shall timely file all reports required to be filed with
the SEC pursuant to the Exchange Act, and shall not terminate its status as an
issuer required to file reports under the Exchange Act even if the Exchange Act
or the rules and regulations thereunder would permit such termination.





                                       11
<PAGE>   12
         d.      Use of Proceeds.  The Company shall use the net proceeds from
the sale of the Shares and the Warrants for the purposes set forth on Schedule
5(d), but in no event shall the Company use such net proceeds to repurchase any
outstanding securities of the Company.

         e.      Expenses.   At the Closing, the Company shall reimburse FSVK
for the out-of-pocket expenses reasonably incurred by FSVK and its affiliates
and advisors in connection with the negotiation, preparation, execution and
delivery of this Agreement, the Registration Rights Agreement, the Warrants and
the other agreements to be executed in connection herewith, including, without
limitation, in conducting FSVK's and its affiliates' and advisors' reasonable
due diligence and FSVK's and its affiliates' reasonable attorneys' fees and
expenses (the "EXPENSES"). Notwithstanding the foregoing, the Company shall not
be obligated to reimburse FSVK for more than $40,000.00 of Expenses pursuant to
this Section 5(e).

         f.      Financial Information.  For a period of two (2) years
following the Closing, the Company agrees to send to each Purchaser within ten
days after the filing with the SEC, to the extent not available through the
SEC's EDGAR system, a copy of its Annual Report on Form 10-K, its Quarterly
Reports on Form 10-Q, its proxy and information statements and any Current
Reports on Form 8-K.

         g.      Reservation of Shares.  The Company has and shall at all times
have authorized and reserved for the purpose of issuance a sufficient number of
shares of Common Stock to provide for the issuance of the Shares as provided in
Section 2 hereof, and the full exercise of the Warrants and the issuance of the
Warrant Shares in connection therewith and as otherwise required hereby and by
the Warrants.  The Company shall not reduce the number of shares of Common
Stock reserved for issuance under this Agreement (except as a result of the
issuance of the Shares hereunder), the Warrants (except as a result of the
issuance of the Warrant Shares upon the exercise of the Warrants) or the
Registration Rights Agreement, without the consent of the Purchasers, such
consent not to be unreasonably withheld, conditioned or delayed.

         h.      Listing.  On the Closing Date, the Company shall have applied
for the listing of the Shares and Warrant Shares, in each case, upon each
national securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed or quoted and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all Shares
from time to time issuable hereunder and all Warrant Shares from time to time
issuable upon exercise of the Warrants.  The Company shall use all commercially
reasonable efforts to continue the listing and trading of its Common Stock on
NASDAQ, the New York Stock Exchange ("NYSE") or the American Stock Exchange
("AMEX") and will comply in all respects with the Company's reporting, filing
and other obligations under the bylaws or rules of NASDAQ and the NASD or any
other exchanges, as applicable.

         i.      Additional Equity Capital.   The Company agrees that during
the period beginning on the date hereof and ending on the date which is 90 days
following the Closing Date (the "LOCK-UP PERIOD"), the Company will not,
without the prior written consent of the Purchasers or their designees, such
consent not to be unreasonably withheld, conditioned or delayed, contract with
any party to obtain additional financing in which any equity or equity-linked
securities are issued (including any debt financing with an equity component)
(an "EQUITY FINANCING") pursuant to any offering exempt from the registration
requirements of the Securities





                                       12
<PAGE>   13
Act which grants any registration rights exercisable within six months of the
Closing Date; provided, it being understood that any additional Securities sold
to any subsequent purchaser pursuant to Section 2(b)(iii) hereof shall not be
deemed to be a violation of this Section 5(i).  The limitations referred to in
this Section 5(i) shall not apply to (i) any transaction involving issuances of
securities as consideration in a merger, consolidation or acquisition of
assets, or in connection with any strategic partnership, collaboration or joint
venture (the primary purpose of which is not to raise equity capital), or as
consideration for the acquisition of a business, product or license by the
Company, (ii) the issuance of securities pursuant to an underwritten public
offering, (iii) the issuance of securities upon exercise or conversion of the
Company's options, warrants or other convertible securities outstanding as of
the date hereof as set forth in Schedule 4(c) or (iv) the grant of additional
options or warrants, or the issuance of additional securities, under any duly
authorized Company stock option, stock purchase or restricted stock plan for
the benefit of the Company's employees, consultants or directors.

         j.      No Integrated Offerings.  The Company shall not make any
offers or sales of any security (other than the Securities) under circumstances
that would require registration of the Securities being offered or sold
hereunder under the Securities Act or cause this offering of Securities to be
integrated with any other offering of securities by the Company for any
purposes, including for purposes of any stockholder approval provision
applicable to the Company or its securities.

         k.      Certain Trading Restrictions.  So long as the Company is in
compliance in all material respects with its obligations to the Purchasers
pursuant to this Agreement, the Registration Rights Agreement and the Warrants,
each Purchaser agrees that it and its affiliates shall: (i) limit its trading
in Common Stock on any Business Day to the greater of fifteen percent (15%) of
(a) the average trading volume of Common Stock on the principal United States
securities exchange or trading market on which such security is listed or
traded, as reported by NTMS for the twenty (20) consecutive Trading Days ending
on the Trading Day immediately preceding the Business Day for which the
determination is being made or (b) the actual trading volume of Common Stock on
the principal United States securities exchange or trading market on which such
security is listed or traded as reported by NTMS on the Business Day for which
such determination is being made; and (ii) not engage in any trading of Common
Stock during the twenty (20) minutes preceding the normal daytime closing time
of the principal United States securities exchange or trading market on which
the Common Stock is listed or traded.  During the period beginning thirty (30)
days prior to the date of this Agreement and ending on the Closing Date, each
Purchaser agrees that it and its affiliates has not engaged and shall not
engage, directly or indirectly, in any trading of Common Stock, including but
not limited to short sales or hedging of any kind in anticipation of this
Agreement or the Closing of the transactions contemplated hereby.

6.       CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

         The obligation of the Company hereunder to issue and sell Shares and
Warrants to a  Purchaser at the Closing hereunder is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions thereto; provided, however, that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion.



                                       13
<PAGE>   14
         a.      The applicable Purchaser shall have executed the signature
page to this Agreement and the Registration Rights Agreement, and delivered the
same to the Company.

         b.      The applicable Purchaser shall have delivered such Purchaser's
Investment Amount in accordance with Section 2(b) above.

         c.      The representations and warranties of the applicable Purchaser
shall be true and correct as of the date when made and as of the Closing Date
as though made at that time (except for representations and warranties that
speak as of a specific date, which representations and warranties shall be true
and correct as of such date), and the applicable Purchaser shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the applicable Purchaser at or prior to the Closing Date.

         d.      No statute, rule, regulation, executive order, decree, ruling,
injunction, action, proceeding or interpretation shall have been enacted,
entered, promulgated, endorsed or adopted by any court or governmental
authority of competent jurisdiction or any self-regulatory organization, or the
staff of any thereof, having authority over the matters contemplated hereby
which questions the validity of, or challenges or prohibits the consummation
of, any of the transactions contemplated by this Agreement.

         e.      The aggregate Investment  Amounts of the Purchasers hereunder
shall equal or exceed twenty million dollars ($20,000,000.00).

7.       CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE SHARES AND
         WARRANTS.

         The obligation of each Purchaser hereunder to purchase Shares and
Warrants to be purchased by it hereunder is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for such Purchaser's sole benefit and may be waived by
such Purchaser at any time in such Purchaser's sole discretion:

         a.      The Company shall have executed the signature pages to this
Agreement and the Registration Rights Agreement, and delivered the same to the
Purchaser.

         b.      The Company shall have delivered to the Purchaser duly
executed certificates representing the number of Shares and duly executed
Warrants as provided in Section 2(b) above.

         c.      The Shares shall be authorized for quotation on NASDAQ and
trading in the Common Stock (or on NASDAQ generally) shall not have been
suspended or be under threat of suspension by the SEC or NASDAQ.

         d.      The representations and warranties of the Company shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
specific date, which representations and warranties shall be true and correct
as of such date) and the Company shall have performed,





                                       14
<PAGE>   15
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date.  The Purchaser shall have
received a certificate, executed on behalf of the Company by its Chief Financial
Officer, dated as of the Closing Date, to the foregoing effect and attaching
true and correct copies of the resolutions adopted by the Company's Board of
Directors authorizing the execution, delivery and performance by the Company of
its obligations under this Agreement, the Warrants and the Registration Rights
Agreement.

         e.      No statute, rule, regulation, executive order, decree, ruling,
injunction, action, proceeding or interpretation shall have been enacted,
entered, promulgated, endorsed or adopted by any court or governmental
authority of competent jurisdiction or any self-regulatory organization, or the
staff of any thereof, having authority over the matters contemplated hereby
which questions the validity of, or challenges or prohibits the consummation
of, any of the transactions contemplated by this Agreement.

         f.      The Purchaser shall have received an opinion of the Company's
counsel, dated as of the Closing Date, relating to the matters set forth in
Exhibit D attached hereto.

         g.      From the date of this Agreement through the Closing Date,
there shall not have occurred any Material Adverse Effect.

         h.      The Company shall have provided advance notice to the NASD of
the issuance of the Shares.

         i.      The Company shall have updated Schedule 4(c) to set forth the
number of Shares to be issued pursuant to the terms hereof and the number of
Warrant Shares to be issued upon the exercise of the Warrants.

         j.      The aggregate Investment Amounts of the Purchasers hereunder
shall equal or exceed fifteen million dollars ($15,000,000.00).

8.       GOVERNING LAW; MISCELLANEOUS.

         a.      Governing Law; Jurisdiction.  This Agreement shall be governed
by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed in the State of New York.
Each of the parties irrevocably consents to the jurisdiction of the United
States federal courts and the state courts located in the State of New York in
any suit or proceeding based on or arising under this Agreement and irrevocably
agrees that all claims in respect of such suit or proceeding may be determined
in such courts.  Each of the parties,  irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding.  Each of the
parties further agrees that service of process upon such party mailed by first
class mail to the address set forth in Section 8(f) shall be deemed in every
respect effective service of process upon such party in any such suit or
proceeding.  Nothing herein shall affect the right of any Purchaser to serve
process in any other manner permitted by law.  Each of the parties, agrees that
a final non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on such judgment
or in any other lawful manner.





                                       15
<PAGE>   16
         b.      Counterparts.  This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party.  This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed Execution
Page(s) hereof to be physically delivered to the other party within five (5)
days of the execution hereof.

         c.      Headings.  The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.

         d.      Severability.  If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.

         e.      Entire Agreement; Amendments; Waiver.  This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the
Purchasers make any representation, warranty, covenant or undertaking with
respect to such matters.  No provision of this Agreement may be waived or
amended other than by an instrument in writing signed by the Company and, by
the Purchasers as provided in Section 8(n) hereof.  Any waiver by the
Purchasers, on the one hand, or the Company, on the other hand, of a breach of
any provision of this Agreement shall not operate as or be construed to be a
waiver of any other breach of such provision of or any breach of any other
provision of this Agreement.  The failure of the Purchasers, on the one hand,
or the Company, on the other hand to insist upon strict adherence to any term
of this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.

         f.      Notices.  Any notices required or permitted to be given under
the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier or by
confirmed telecopy, and shall be effective five days after being placed in the
mail, if mailed, or upon receipt or refusal of receipt, if delivered personally
or by courier or confirmed telecopy, in each case addressed to a party.  The
addresses for such communications shall be:

                 If to the Company:

                          EntreMed, Inc.
                          9640 Medical Center Drive
                          Rockville, MD 20850
                          Telephone No.:   (301) 217-9858
                          Facsimile No.:   (301) 217-9594
                          Attention:       John W. Holaday, PhD.





                                       16
<PAGE>   17
                                Chairman, President and Chief Executive Officer


                 With a copy to:

                          Arnold & Porter
                          555 Twelfth Street, N.W.
                          Washington, D.C. 20004
                          Telephone No.:           (202) 942-5000
                          Facsimile No.:           (202) 942-5999
                          Attention:               Robert B. Ott, Esq.

If to the Purchaser, to the address set forth under the Purchaser's name on the
Execution Page hereto executed by such Purchaser, with a copy to:

                          First Security Van Kasper
                          600 California Street, Suite 1700
                          San Francisco, CA 94108
                          Telephone No.:   (415) 675-2490
                          Facsimile No.:   (415) 954-8309
                          Attention:  Ronald F. Richards
                                      Senior Vice President

         Each party hereto may from time to time change its address or
facsimile number for notices under this Section 8 by giving at least ten (10)
days' prior written notice of such changed address or facsimile number, in the
case of the Purchasers to the Company, and in the case of the Company to all of
the Purchasers.

         g.      Successors and Assigns.  This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns.  The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the  Purchasers, such consent not to be
unreasonably withheld, conditioned or delayed.  No Purchaser shall assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Company, such consent not to be unreasonably withheld,
conditioned or delayed, except to an affiliate of such Purchaser, and provided
further, that any such assignee shall agree in writing with the Company to be
bound by the terms and conditions hereof and of the Registration Rights
Agreement.

         h.      Third Party Beneficiaries.  This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be
enforced by any other person.

         i.      Survival.  The representations and warranties of the Company
and the agreements and covenants set forth in Sections 4, 5 and 8 shall survive
for three (3) years following the Closing Date, notwithstanding any due
diligence investigation conducted by or on behalf of the Purchasers.  Moreover,
none of the representations and warranties made by the Company herein shall act
as a waiver of any rights or remedies a Purchaser may have under applicable
federal or state securities laws.  The Company agrees to indemnify and hold
harmless each Purchaser and





                                       17
<PAGE>   18
each of such Purchaser's officers, directors, employees, partners, members,
agents and affiliates for loss or damage relating to the Securities purchased
hereunder arising as a result of or related to any breach by the Company of any
of its representations or covenants set forth herein, including advancement of
expenses as they are incurred.

         j.      Publicity.  The Company shall have the right to approve the
issuance of any press releases or any other public statements with respect to
the transactions contemplated hereby.  Within five days after the Closing Date,
the Company shall file a Current Report on Form 8-K or other appropriate form
with the SEC disclosing the transactions contemplated hereby.  Nothing
contained in this Section 8(j) shall prevent the Company from satisfying its
disclosure obligations under the federal or state securities laws or pursuant
to any rule of any trading market that is a principal trading market for any of
the Company's securities.

         k.      Further Assurances.  Each party 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 the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

         l.      Termination.  In the event that the Closing shall not have
occurred on or before July 27, 1999, or such other date as the Company and FSVK
may mutually agree, this Agreement shall terminate at the close of business on
such date.  Notwithstanding any termination of this Agreement, any party not in
breach of this Agreement shall preserve all rights and remedies it may have
against another party hereto for a breach of this Agreement prior to or
relating to the termination hereof.

         m.      Equitable Relief.  Each party acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to the other parties
by vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, each party acknowledges that the remedy at law for a breach of its
obligations hereunder will be inadequate and agrees, in the event of a breach
or threatened breach by such party of the provisions of this Agreement, that
the other parties shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and
without any bond or other security being required; provided that the Company
shall only be entitled to seek equitable relief with respect to breaches of the
Purchaser's obligations under Section 5(k) of this Agreement.

         n.      Determinations.  Except as otherwise expressly provided
herein, (i) prior to the Closing Date, for any consent, approval or waiver by a
Purchaser or other determination to be made by a Purchaser hereunder to be
binding upon such Purchaser, or any agreement by a Purchaser to amend any of
the provisions of this Agreement, such consent, approval, waiver, determination
or amendment shall have been made or agreed to by all of the Purchasers, and
(ii) after the Closing Date, for any consent, approval or waiver by a Purchaser
or other determination to be made by a Purchaser hereunder to be binding upon
such Purchaser, or any agreement by a Purchaser to amend any of the provisions
of this Agreement, such consent, approval, waiver, determination or amendment
shall have been made or agreed to by Purchasers (excluding Purchasers who are
affiliates of the Company) that have invested not less than fifty-





                                       18
<PAGE>   19
one percent (51%) of the aggregate Investment Amounts invested by all
Purchasers (excluding Purchasers who are affiliates of the Company).


                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]





                                       19
<PAGE>   20
         IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.

                           COMPANY:

                           ENTREMED, INC.


                           By:
                              --------------------------------
                           Name:   John W. Holaday, Ph.D.
                           Title:  Chairman of the Board and
                                   Chief Executive Officer


                           THE PURCHASER:
                           [                            ]
                            ----------------------------

                                    By:
                                       ----------------------------------------
                                    Name:
                                          -------------------------------------
                                    Title:
                                           ------------------------------------
                                    Investment Amount:$
                                                       ------------------------
                                    Residence:
                                              ---------------------------------

                                    -------------------------------------------

                                    -------------------------------------------

                                    Address:
                                            -----------------------------------

                                    -------------------------------------------

                                    -------------------------------------------

                                    Telephone No.:   (    )
                                                           --------------------
                                    Telecopy No.:    (    )
                                                           --------------------
                                    Attention:
                                              ---------------------------------


                                    with copies of all notices to:


                                    -------------------------------------------

                                    -------------------------------------------

                                    -------------------------------------------

                                    -------------------------------------------
                                    Telephone No.:   (    )
                                                           --------------------
                                    Telecopy No.:    (    )
                                                           --------------------
                                    Attention:
                                              ---------------------------------





                                       20

<PAGE>   1
                                                                   EXHIBIT 10.2


                         REGISTRATION RIGHTS AGREEMENT

         REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of July 27,
1999, by and among ENTREMED, INC., a corporation organized under the laws of
the State of Delaware (the "COMPANY"), and the undersigned (the "INITIAL
INVESTORS").

         WHEREAS:

         A.      The Company and the Initial Investors have entered into a
Securities Purchase Agreement dated the date hereof (the "SECURITIES PURCHASE
AGREEMENT;" capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement). In connection with the Securities Purchase Agreement, the Company
has agreed, upon the terms and subject to the conditions contained therein, to
issue and sell to the Initial Investors (i) shares of the Company's common
stock, par value $.01 per share (the "COMMON STOCK"), (ii) the Series 1
Warrants and (iii) the Series 2 Warrants (together with the Series 1 Warrants,
the "WARRANTS").  The shares of Common Stock issued on the Closing Date under
the Securities Purchase Agreement are referred to herein as the "SHARES" and
the shares of Common Stock issuable upon exercise of or otherwise pursuant to
the Warrants are referred to herein as the "WARRANT SHARES."

         B.      To induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"SECURITIES ACT"), and applicable state securities laws;

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investors, intending to be legally bound, hereby agree as follows:

         1.      DEFINITIONS.

                 As used in this Agreement, the following terms shall have the
following meanings:

                          (i)     "INVESTORS" means the Initial Investors and
any transferees or assignees who agree to become bound by the provisions of
this Agreement in accordance with Section 9 hereof, provided that neither such
person nor any affiliate of such person is registered as a broker or dealer
under Section 15(a) of the Securities Exchange Act of 1934, as amended, or a
member of the National Association of Securities Dealers, Inc. ("NASD").






<PAGE>   2





                          (ii)    "REGISTER," "REGISTERED," and "REGISTRATION"
refer to a registration effected by preparing and filing a Registration
Statement or Statements in compliance with the Securities Act and pursuant to
Rule 415 under the Securities Act or any successor rule providing for offering
securities on a continuous basis ("RULE 415"), and the declaration or ordering
of effectiveness of such Registration Statement by the United States Securities
and Exchange Commission (the "SEC").

                          (iii)   "REGISTRABLE  SECURITIES" means  (i) the
Shares, (ii) the Warrant Shares and (iii)  and any shares of capital stock
issued or issuable, from time to time (with any adjustments), as a distribution
on or in exchange for or otherwise with respect to any of the foregoing.

                          (iv)    "REGISTRATION STATEMENT" means one or more
registration statements of the Company under the Securities Act registering all
of the Registrable Securities, including the Initial Registration Statement,
any Uncovered Shares Amendments and Uncovered Shares Registration Statements
(each, as defined below).

         2.      REGISTRATION.

                 a.       Mandatory Registration.  The Company shall file with
the United States Securities and Exchange Commission ("SEC"), on the date which
is fourteen (14) calendar days after the Closing Date (the "FILING DEADLINE") a
Registration Statement on Form S-3 (or, if Form S-3 is not then available, on
such form of Registration Statement as is then available to effect a
registration of all of the Registrable Securities, subject to the consent of
the Initial Investors as to the use of such form (as determined pursuant to
Section 11(j) hereof)) covering the resale of at least 2,956,236 shares of
Common Stock, which Registration Statement, to the extent allowable under the
Securities Act and the rules promulgated thereunder shall state that such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon exercise of the Warrants to
prevent dilution resulting from stock splits, stock dividends or similar
transactions (the "INITIAL REGISTRATION STATEMENT").  The Registrable
Securities included in the Initial Registration Statement shall be registered
on behalf of the Investors as set forth in Section 11(k) hereof.  The Initial
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided to (and
subject to the review by) the Initial Investors and their counsel at least five
(5) business days prior to its filing or other submission. If for any reason
(including, but not limited to, a determination by the staff of the SEC that
all or any portion of the Warrant Shares or any other Registrable Securities
cannot be included in the Initial Registration Statement (an "SEC
DETERMINATION")) the Initial Registration Statement declared effective by the
SEC does not include all of the Registrable Securities (any such shares that
are not included being the "UNCOVERED SHARES"), the Company shall prepare and
file with the SEC, as soon as practicable, but in any event prior to the
fourteenth (14th) calendar day after becoming





                                      -2-
<PAGE>   3




aware of the existence of any Uncovered Shares (such date referred to herein as
the "UNCOVERED SHARE FILING DEADLINE"), either (a) an amendment (the "UNCOVERED
SHARES AMENDMENT") to the Initial Registration Statement effecting a
registration of the Uncovered Shares or (b) a registration statement which
registers the Uncovered Shares (the "UNCOVERED SHARES REGISTRATION STATEMENT").
The Uncovered Shares Amendment or the Uncovered Shares Registration Statement
(and each amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to the Initial Investors and their
counsel for review and comment at least three (3) business days prior to its
filing or other submission. The Company shall use all commercially reasonable
efforts to cause each of the Initial Registration Statement and the Uncovered
Shares Amendment or the Uncovered Shares Registration Statement to become
effective as soon as practicable after the filing thereof.

                 b.       Underwritten Offering. The Investors may offer and
sell the Registrable Securities pursuant to a Registration Statement filed in
accordance with Section 2(a) in an underwritten offering.  In any such
underwritten offering, the Investors who hold a majority in interest of the
Registrable Securities subject to such underwritten offering, shall have the
right to select one legal counsel to represent the Investors and an investment
banker or bankers and manager or managers to administer the offering, which
investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Company.  In the event that any Investors elect not to
participate in such underwritten offering, the Registration Statement covering
all of the Registrable Securities shall contain appropriate plans of
distribution reasonably satisfactory to the Investors participating in such
underwritten offering and the Investors electing not to participate in such
underwritten offering (including, without limitation, the ability of
nonparticipating Investors to sell from time to time and at any time during the
effectiveness of such Registration Statement).

                 c.       Effectiveness of Registration Statement.  The Company
shall use reasonable best efforts to cause each Registration Statement required
to be filed pursuant to Section 2(a) hereof to become effective as soon as
practicable, but, as to the Initial Registration Statement filed pursuant to
Section 2(a), in no event later than the ninetieth (90th) day after the Filing
Deadline (the "REGISTRATION DEADLINE"), and as to any Uncovered Shares
Amendment or Uncovered Shares Registration Statement, in no event later than
sixty (60) days after the Uncovered Share Filing Deadline (the "UNCOVERED SHARE
REGISTRATION DEADLINE").

                 d.       Eligibility for Form S-3.  The Company represents and
warrants that it is eligible to register the resale of Registrable Securities
on a registration statement on Form S-3 under the Securities Act, and that
there exist no facts or circumstances (including without limitation any
required approvals or waivers or any circumstances that may delay or prevent
the obtaining of accountant's consents) that would prohibit or delay the
preparation and filing of a registration statement on Form S-3 with respect to
the Registrable Securities.  The Company shall file all reports required to be
filed by the Company with the SEC in a timely manner so as to maintain or, if
applicable, regain  its eligibility for the use of Form S-3.





                                      -3-
<PAGE>   4





         3.      OBLIGATIONS OF THE COMPANY.

         In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:

                 a.       The Company shall prepare and file with the SEC, on
or before the Filing Deadline or the Uncovered Share Filing Deadline, as
applicable, the applicable Registration Statement required by Section 2(a) and
shall use reasonable best efforts to cause such Registration Statement to
become effective as soon as practicable after such filing (but in no event
later than the Registration Deadline or the Uncovered Share Registration
Deadline, as applicable).  The Company shall keep such Registration Statement
effective pursuant to Rule 415 at all times until the date on which all of the
Registrable Securities may (in the reasonable opinion of one counsel identified
by the Initial Investors) be immediately sold to the public without
registration or restriction pursuant to Rule 144(k) under the Securities Act
(the "REGISTRATION PERIOD").  In the event that the sale of Registrable
Securities by one or more Investors is determined by the SEC to constitute a
primary offering, upon the written request from time to time of any such
Investor, the Company shall as promptly as practicable:  cause a Registration
Statement to be amended and/or one or more additional Registration Statements
(which may be requested on a sequential basis) to be filed (as specified by the
applicable Investors) and to be declared effective; and take all other actions
reasonably requested by such Investors to effectuate the offering of
Registrable Securities.  If the Initial Registration Statement is not filed on
Form S-3, the Company shall, as soon as it is eligible to do so, file a
post-effective amendment on Form S-3 to the Initial Registration Statement to
the extent permitted by the SEC or, if not so permitted, file a new
Registration Statement on Form S-3 to permit sales of the Registrable
Securities pursuant to Rule 429 under the Securities Act; and the Company shall
use all commercially reasonable efforts to cause such post-effective amendment
or Registration Statement to become effective as soon as possible.  Each
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein and all documents incorporated by reference
therein) filed pursuant to this Agreement (i) shall comply in all material
respects with the requirements of the Securities Act and the rules and
regulations of the SEC promulgated thereunder and (ii) shall not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein, or necessary to make the statements therein not
misleading.  The financial statements of the Company included in the
Registration Statement or incorporated by reference therein will comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC applicable with respect thereto.
Such financial statements shall be prepared in accordance with U.S. generally
accepted accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may not include footnotes or may be condensed or  summary
statements) and shall fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of





                                      -4-
<PAGE>   5




their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to immaterial year-end adjustments).

                 b.       The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof as set forth in the Registration Statement.
Notwithstanding the foregoing, the Company's obligations hereunder to file a
Registration Statement and to keep a registration statement continuously in
effect under the Securities Act shall be suspended if the fulfillment of such
obligations would require the Company to make a disclosure that would, in the
reasonable judgment of the Company's Board of Directors, have a Material
Adverse Effect (as such term is defined in the Securities Purchase Agreement)
on the Company or a material adverse effect on the future prospects of the
Company or its stockholders; provided, that the Registration Statement shall be
suspended for a total of no more than ninety (90) days during any twelve (12)
month period.

                 c.       The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement and its legal
counsel (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one copy of the Registration
Statement and any amendment thereto, each preliminary prospectus and prospectus
and each amendment or supplement thereto.  In the case of the Registration
Statement referred to in Section 2(a), the Company shall furnish to each
Investor a copy of each letter written by or on behalf of the Company to the
SEC or the staff of the SEC (including, without limitation, any request to
accelerate the effectiveness of any Registration Statement or amendment
thereto), and each item of correspondence from the SEC or the staff of the SEC,
in each case relating to such Registration Statement (other than any portion,
if any, thereof which contains information for which the Company has sought
confidential treatment), (ii) on the date of effectiveness of the Registration
Statement or any amendment thereto, a notice stating that the Registration
Statement or amendment has been declared effective, and (iii) such number of
copies of a prospectus, including a preliminary prospectus, and all amendments
and supplements thereto and such other documents as such Investor may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor.

                 d.       The Company shall use all commercially reasonable
efforts to (i) register and qualify the Registrable Securities covered by the
Registration Statement under such other securities or "blue sky" laws of such
jurisdictions in the United States as each Investor who holds Registrable
Securities being offered reasonably requests, (ii) prepare and file in those
jurisdictions such





                                      -5-
<PAGE>   6




amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications
in effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not
be required in connection therewith or as a condition thereto to (a) qualify to
do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (b) subject itself to general taxation in
any such jurisdiction, (c) file a general consent to service of process in any
such jurisdiction, (d) provide any undertakings that cause the Company undue
expense or burden, or (e) make any change in its certificate of incorporation
or bylaws, which in each case the Board of Directors of the Company determines
to be contrary to the best interests of the Company and its stockholders.

                 e.       In the event the Investors who hold a majority in
interest of the Registrable Securities being offered in an offering select
underwriters for the offering, the Company shall enter into and perform its
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the underwriters of such offering.

                 f.       As promptly as practicable after becoming aware of
such event, the Company shall notify each Investor by telephone or facsimile of
the happening of any event, of which the Company has knowledge, as a result of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and use reasonable best efforts promptly to prepare a
supplement or amendment to the Registration Statement to correct such untrue
statement or omission and deliver such number of copies of such supplement or
amendment to each Investor as such Investor may reasonably request.

                 g.       The Company shall use reasonable best efforts to
prevent the issuance of any stop order or other suspension of effectiveness of
a Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest practicable date (including in each
case by amending or supplementing such Registration Statement) and to notify
each Investor who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing underwriters) of the issuance of such
order and the resolution thereof (and if such Registration Statement is
supplemented or amended, deliver such number of copies of such supplement or
amendment to each Investor as such Investor may reasonably request).

                 h.       The Company shall permit a single firm of counsel
designated by the Initial Investors to review the Registration Statement and
all amendments and supplements thereto a reasonable period of time prior to
their filing with the SEC.




                                      -6-
<PAGE>   7

                 i.       At the request of the Initial Investors whose
Registrable Securities are included in a Registration Statement, the Company
shall furnish, on the date of effectiveness of the Registration Statement, a
letter, dated as of such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering, addressed to the Initial Investors and the underwriters, if any.  In
addition, at the request of the Initial Investors whose Registrable Securities
are included in the Registration Statement, the Company shall furnish on the
date of effectiveness of such registration statement an opinion, dated as of
such date, from counsel representing the Company to the Initial Investors to
the effect that such Registration Statement and the related prospectus comply
as to form in all material respects with the requirements of the Securities Act
and the applicable rules and regulations thereunder (except that no opinion
need be expressed with respect to the financial statements, including the notes
and schedules thereto, or any other financial, statistical or accounting
information, or information relating to the Investors or any underwriters or
the method of distribution of the Registrable Securities by the Investors and
any underwriters included therein).

                 j.       The Company shall make available for inspection by
(i) any Investor whose Registrable Securities are included in a Registration
Statement, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "INSPECTORS") all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the "RECORDS"), as shall be reasonably
deemed necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence.

                 k.       The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement, or (v) such Investor
consents to the form and content of any such disclosure. The Company agrees
that it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.

                 l.       The Company shall use reasonable best efforts to
promptly either (i) secure





                                      -7-
<PAGE>   8




the designation and quotation, of all the Registrable Securities covered by the
Registration Statement on the Nasdaq National Market, or (ii) cause all the
Registrable Securities covered by the Registration Statement to be listed on
the NYSE or the AMEX or another national securities exchange and on each
additional national securities exchange on which securities of the same class
or series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange.

                 m.       The Company shall provide a transfer agent and
registrar, which may be a single entity, for the Registrable Securities not
later than the effective date of the Registration Statement.

                 n.       The Company shall cooperate with the Investors who
hold Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and
shall cause legal counsel selected by the Company to deliver, to the transfer
agent for the Registrable Securities (with copies to the Investors whose
Registrable Securities are included in such Registration Statement) an opinion
of such counsel in a form customary for such transactions.

                 o.       At the request of an Initial Investor or Investors
who holds a majority-in-interest of the Registrable Securities, the Company
shall prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to a Registration Statement and the prospectus used
in connection with the Registration Statement as may be necessary in order to
change the plan of distribution set forth in such Registration Statement.

                 p.       The Company shall comply with applicable federal
securities laws and regulations related to a Registration Statement and
offering and sale of securities.

                 q.       The Company shall take all such other actions as any
Investor or the underwriters, if any, reasonably request in order to expedite
or facilitate the disposition of such Registrable Securities.

                 r.       From and after the date of this Agreement, the
Company shall not, and shall not agree to, allow the holders of any securities
of the Company (except to the extent existing agreements may otherwise provide)
to include any of their securities in any Registration Statement under Section
2(a) hereof or any amendment or supplement thereto under Section 3(b) hereof





                                      -8-
<PAGE>   9




without the consent of the holders of a majority in interest of the Registrable
Securities.

         4.      OBLIGATIONS OF THE INVESTORS.

         In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:

                 a.       It shall be a condition precedent to the obligations
of the Company to complete the registration pursuant to this Agreement with
respect to the Registrable Securities of a particular Investor that such
Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request.  At
least five (5) business days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Investor of any
information the Company requires from each such Investor.

                 b.       Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.

                 c.       In the event Investors holding a majority in interest
of the Registrable Securities being offered determine to engage the services of
an underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the underwriter(s) of such offering and the Company and take
such other actions as are reasonably required in order to expedite or
facilitate the disposition of the Registrable Securities, unless such Investor
has notified the Company in writing of such Investor's election not to
participate in such underwritten distribution.

                 d.       No Investor may participate in any underwritten
distribution hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements
in usual and customary form entered into by the Company, (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and any expenses in excess of those
payable by the Company pursuant to Section 5 below.  Notwithstanding anything
in this Section 4(d) to the contrary, this Section 4(d) is not intended to
limit an Investor's rights under Section 2(a) or 3(b) hereof.





                                      -9-
<PAGE>   10





         5.      EXPENSES OF REGISTRATION.

         All reasonable expenses incurred by the Company or the Investors in
connection with registrations, filings or qualifications pursuant to Sections 2
and 3 above (excluding brokers' fees, underwriting discounts and commissions,
and similar selling expenses), including, without limitation, all registration,
listing and qualifications fees, printers and accounting fees and the fees and
disbursements of counsel for the Company, shall be borne by the Company.  In
addition, the Company shall pay all of the Investors' costs and expenses
(including reasonable legal fees) incurred in connection with the enforcement
of the rights of the Investors hereunder.

         6.      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, hold harmless and defend (i) each Investor who holds such
Registrable Securities, and (ii) the directors, officers, partners, members,
employees and agents of such Investor and each person who controls any Investor
within the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), if any (each,
an "INDEMNIFIED PERSON"), against any joint or several losses, claims, damages,
liabilities or expenses  (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "CLAIMS") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective
date of such Registration Statement, or contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to state
therein any material fact necessary to make the statements made therein, in
light of the circumstances under which the statements therein were made, 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 thereunder relating to the offer or sale of the Registrable
Securities (the matters in the foregoing clauses (i) through (iii) being,
collectively, "VIOLATIONS").  Subject to the restrictions set forth in Section
6(c) with respect to the number of legal counsel, the Company shall reimburse
the Investors and each other Indemnified Person, promptly as such expenses are
incurred and are due and payable, for any reasonable legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim.  Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim





                                      -10-
<PAGE>   11




arising out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company by such
Indemnified Person expressly for use in the Registration Statement or any such
amendment thereof or supplement thereto; (ii) shall not apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld; and (iii) with respect to any prospectus, shall not inure to the
benefit of any Indemnified Person if the untrue statement or omission of
material fact contained in such prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented, if such corrected prospectus
was timely made available by the Company pursuant to Section 3(c) hereof, and
the Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a Violation and such Indemnified
Person, notwithstanding such advice, used it.  Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.

                 b.       In connection with any Registration Statement in
which an Investor is participating, each such Investor agrees severally and not
jointly to indemnify, hold harmless and defend, to the same extent and in the
same manner set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement, its employees, agents and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act
(collectively and together with an Indemnified Person, an "INDEMNIFIED PARTY"),
against any Claim to which any of them may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is
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 to the Company by such Investor expressly for use in
connection with such Registration Statement; and subject to Section 6(c) such
Investor will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the
prior written consent of such Investor; provided, further, however, that the
Investor shall be liable under this Agreement (including this Section 6(b) and
Section 7) for only that amount as does not exceed the net proceeds actually
received by such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement.  Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9.  Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of
material fact by the Investor contained in the preliminary prospectus was
corrected on a timely basis in the





                                      -11-
<PAGE>   12




prospectus, as then amended or supplemented, and the Indemnified Party failed
to utilize such corrected prospectus.

                 c.       Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to assume control of the defense thereof with counsel mutually
satisfactory to the indemnifying party and the Indemnified Person or the
Indemnified Party, as the case may be; provided, however, that such
indemnifying party shall not be entitled to assume such defense and an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the reasonable fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential conflicts of interest between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding or the actual or potential defendants in, or targets of, any such
action include both the Indemnified Person or the Indemnified Party and the
indemnifying party and any such Indemnified Person or Indemnified Party
reasonably determines that there may be legal defenses available to such
Indemnified Person or Indemnified Party which are in conflict with those
available to such indemnifying party.  The indemnifying party shall pay for
only one separate legal counsel for the Indemnified Persons or the Indemnified
Parties, as applicable, and such legal counsel shall be selected by Investors
holding a majority-in-interest of the Registrable Securities included in the
Registration Statement to which the Claim relates (with the approval of the
Initial Investors if any of them holds Registrable Securities included in such
Registration Statement), if the Investors are entitled to indemnification
hereunder, or by the Company, if the Company is entitled to indemnification
hereunder, as applicable.  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 Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.

         7.      CONTRIBUTION.

         To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no person guilty





                                      -12-
<PAGE>   13




of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of such fraudulent misrepresentation,
and (iii) contribution (together with any indemnification or other obligations
under this Agreement) by any seller of Registrable Securities shall be limited
in amount to the net amount of proceeds received by such seller from the sale
of such Registrable Securities.

         8.      REPORTS UNDER THE EXCHANGE ACT.

         With a view to making available to the Investors the benefits of Rule
144 promulgated under the Securities Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("RULE 144"), the
Company agrees to:

                 a.       file with the SEC in a timely manner and make and
keep available all reports and other documents required of the Company under
the Securities Act and the Exchange Act so long as the Company remains subject
to such requirements (it being understood that nothing herein shall limit the
Company's obligations under Section 5(c) of the Securities Purchase Agreement)
and the filing and availability of such reports and other documents as is
required for the applicable provisions of Rule 144; and

                 b.       furnish to each Investor so long as such Investor
owns Registrable Securities, promptly upon request, (i) a written statement by
the Company that it has complied with the reporting requirements of Rule 144,
the Securities Act and the Exchange Act, (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 to permit the Investors to sell such securities pursuant to Rule 144
without registration.

         9.      ASSIGNMENT OF REGISTRATION RIGHTS.

         The rights of the Investors hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
assignable, with the consent of the Company (which consent shall not be
unreasonably withheld), by each Investor to any transferee of all or any
portion of the Registrable Securities if: (i) the Investor agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company after such assignment, (ii) the Company
is furnished with written notice of (a) the name and address of such transferee
or assignee and (b) the securities with respect to which such registration
rights are being transferred or assigned, (iii) following such transfer or
assignment, the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws, (iv) the transferee or assignee





                                      -13-
<PAGE>   14




agrees in writing with the Company to be bound by all of the provisions
contained herein, and (v) such transfer shall have been made in accordance with
the applicable requirements of the Securities Purchase Agreement, and the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained therein.  In addition, and notwithstanding anything to
the contrary contained in this Agreement, the Securities Purchase Agreement or
the Warrants, the Securities (as defined in the Securities Purchase Agreement)
may be pledged, and all rights of the Investors under this Agreement or any
other agreement or document related to the transaction contemplated hereby may
be assigned, without further consent of the Company, to a bona fide pledgee in
connection with an Investor's margin or brokerage accounts.

         10.     AMENDMENT OF REGISTRATION RIGHTS.

         Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), and Investors (excluding Investors who are
affiliates of the Company) who hold a majority (51%) in interest of the
Registrable Securities (excluding Registrable Securities held by affiliates of
the Company) or, in the case of a waiver, with the written consent of the party
charged with the enforcement of any such provision.  Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.

         11.     MISCELLANEOUS.

                 a.       A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities.  If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.

                 b.       Any notices required or permitted to be given under
the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier or by
confirmed telecopy, and shall be effective five (5) days after being placed in
the mail, if mailed, or upon receipt or refusal of receipt, if delivered
personally or by courier or confirmed telecopy, in each case addressed to a
party.  The addresses for such communications shall be:

                 If to the Company:

                          EntreMed, Inc.
                          9640 Medical Center Drive
                          Rockville, MD 20850
                          Telephone No.:  (301) 217-9858
                          Facsimile No.:  (301) 217-9594
                          Attention:  John W. Holaday, Ph.D.





                                      -14-
<PAGE>   15





                                Chairman, President and Chief Executive Officer

                 with a copy to:

                          Arnold & Porter
                          555 Twelfth Street, N.W.
                          Washington, DC  20004
                          Telephone No.:  (202) 942-5000
                          Facsimile No.:  (202) 942-5999
                          Attention:   Robert B. Ott, Esq.

         If to an Investor, at such address as such Investor shall have
provided in writing to the Company or such other address as such Investor
furnishes by notice given in accordance with this Section 11(b), with a copy
to:

                          First Security Van Kasper
                          600 California Street, Suite 1700
                          San Francisco, CA 94108
                          Telephone No.:  (415) 675-2490
                          Facsimile No.:  (415) 954-8309
                          Attention:  Ronald F. Richards
                                      Senior Vice President

                 c.       Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.

                 d.       This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed in the State of New York.  The Company irrevocably consents
to the jurisdiction of the United States federal courts and state courts
located in the State of New York in any suit or proceeding based on or arising
under this Agreement and irrevocably agrees that all claims in respect of such
suit or proceeding may be determined in such courts.  The Company irrevocably
waives the defense of an inconvenient forum to the maintenance of such suit or
proceeding.  The Company further agrees that service of process upon the
Company mailed by first class mail to the address set forth in Section 11(b)
shall be deemed in every respect effective service of process upon the Company
in any such suit or proceeding.  Nothing herein shall affect an Investor's
right to serve process in any other manner permitted by law.  The Company
agrees that a final non-appealable judgment in any such suit or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on such
judgment or in any other lawful manner.





                                      -15-
<PAGE>   16


                 e.       This Agreement, the Securities Purchase Agreement and
the Warrants (including all schedules and exhibits thereto) constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof.  There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein.
This Agreement, the Securities Purchase Agreement and the Warrants supersede
all prior agreements and understandings among the parties hereto and thereto
with respect to the subject matter hereof and thereof.

                 f.       Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.

                 g.       The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

                 h.       This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement.  This Agreement, once executed by a
party, may be delivered to the other party hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.

                 i.       Each party 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 the
other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

                 j.       All consents, approvals and other determinations to
be made by the Investors pursuant to this Agreement shall be made by the
Investors holding a majority in interest of the Registrable Securities
(determined as if all Warrants then outstanding had been exercised by the
payment of cash) then held by all Investors.

                 k.       The initial number of Registrable Securities included
on any Registration Statement and each increase to the number of Registrable
Securities included thereon shall be registered on behalf of each Investor pro
rata based on the number of Registrable Securities held by each Investor at the
time of such establishment or increase, as the case may be.  In the event an
Investor shall sell or otherwise transfer any of such holder's Registrable
Securities, each transferee shall be deemed to have registered on its behalf a
pro rata portion of the number of Registrable Securities included on a
Registration Statement for such transferor.  Any shares of Common Stock
included on a Registration Statement on behalf of any person or entity which
does not hold any Registrable Securities shall be deemed registered on behalf
of the remaining Investors, pro rata based on the number of shares of
Registrable Securities then held by such Investors.  For the avoidance of





                                      -16-
<PAGE>   17

doubt, (A) the number of Registrable Securities held by an Investor shall be
determined as if all Warrants then outstanding and held by an Investor were
exercised by the payment of cash and (B) no provision of this subsection shall
operate to reduce the number of Registrable Securities registered on behalf of
any Investor pursuant to the first sentence of this subsection.

                 l.       For purposes of this Agreement, the term "business
day" means any day other than a Saturday or Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law,
regulation or executive order to close.


                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]





                                     -17-
<PAGE>   18




         IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.


ENTREMED, INC.


By:___________________________________
Name:    John W. Holaday, Ph.D.
Title: Chairman of the Board and Chief Executive Officer


INITIAL INVESTORS:

[Name of Purchasers]

By:_________________________
Name:_______________________
Title:______________________





                                      -18-

<PAGE>   1
                                                                    EXHIBIT 99.1


                    Contact:
                    Mary P. Sundeen, Sr. Director
                    Corp. Communications
                    301-738-2490



FOR IMMEDIATE RELEASE
JULY 28, 1999

              ENTREMED, INC. COMPLETES PRIVATE PLACEMENT TO SUPPORT
                CLINICAL DEVELOPMENT OF ANGIOGENESIS INHIBITORS

       Rockville, MD, July 28, 1999...EntreMed, Inc. (NASDAQ:ENMD) today
reported completion of a private placement of equity securities that raised more
than $25 million. The proceeds from the placement will be used to support the
Company's clinical development of angiogenesis inhibitors. First Security Van
Kasper acted as placement agent, and the investor group included prominent
institutional investors and existing shareholders who had indicated a desire to
further their position through participation in such a transaction.

       Dr. John W. Holaday, EntreMed Chairman, President and Chief Executive
Officer commented on the private placement: "Yesterday, we announced that the
Food and Drug Administration granted permission for the initiation of Phase I
human clinical trials of Endostatin(TM) protein in cancer patients. By the end
of this year, EntreMed plans to submit 2-methoxyestradiol. Completion of this
transaction will reinforce EntreMed's financial strength as we move three lead
product candidates into the clinic." Wendell M. Starke, EntreMed's Vice
Chairman, and recently retired Chairman of INVESCO also commented: "EntreMed's
Board of Directors are pleased that this new financial commitment will enable
the scientific team to continue its rapid development of the Company's portfolio
of angiogenesis inhibitors. The Board also noted that the progression of
Endostatin(TM) protein from discovery to human clinical trials is expected to be
accomplished in near record time."

       In the private placement, the Company issued shares of common stock and
two series of warrants. The Company issued shares of common stock at a 7.5%
discount to a five-day averaged market price. The two series of warrants have an
exercise price at a significant premium to the present market price and may be
called by the Company if the market price for the common stock reaches certain
levels.

       Rockville, Md.-based EntreMed, Inc., The Angiogenesis Company, is a
leader in the field of antiangiogenesis research, which involves the inhibition
of abnormal blood vessel growth recently associated with a broad range of
diseases such as cancer and atherosclerosis. The Company's strategy is to
accelerate development of its core technologies through collaborations and
sponsored research programs with university medical departments, research
companies and government laboratories.

         For further information, please visit the EntreMed web site at
www.entremed.com.


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