Manufacturing Services Agreement

MANUFACTURING SERVICES AGREEMENT


This Manufacturing Services Agreement (this "AGREEMENT") is effective as of the 13th day of April, 2000 (the "EFFECTIVE DATE"), by and between Chiron Corporation ("CHIRON"), 4560 Horton Street, Emeryville, California 94608, and EntreMed Inc. ("CUSTOMER"), 9640 Medical Center Drive, Rockville, Maryland 20850, as follows:


WHEREAS, Customer desires to engage Chiron to perform contract manufacturing services on behalf of Customer, and Chiron desires to accept such engagement, all on the terms and subject to the conditions set forth in this Agreement and the Exhibit A hereto, which Exhibit is expressly incorporated by reference herein.


NOW, THEREFORE, Chiron and Customer agree as follows:


1. PURCHASE AND SALE OF SERVICES.


(a) BULK PRODUCT AND SERVICES. During the term of this
Agreement, Chiron agrees to provide to Customer, and Customer agrees to
purchase from Chiron, the manufacturing service(s) specified on Exhibit A
hereto (collectively, the "SERVICES") and for the production of the
product specified on Exhibit A ("Bulk Product"). Services shall be
performed at the Chiron manufacturing facilities specified on Exhibit A,
Section 1 (the "FACILITIES").


(b) CHANGED SERVICES. Services may be changed, additional
services may be provided and clarifications to the Services may be made
by either party under this Agreement according to the following
procedures. If material reductions in or additions to Services are
required or if any other changes in or clarifications to Services are
made ("Changed Services"), to the extent practicable, Chiron shall
prepare a written statement describing the proposed Changed Services and
the reasonable change in costs resulting therefrom. To the extent
practicable, Chiron shall not commence performance of such Changed
Services until it receives prior written, email or fax, approval from
Customer. Written approval shall constitute acceptance and the written
statement shall then be subject to all of the provisions of this
Agreement, except those which it specifically supersedes.


2. RAW MATERIALS.


(a) CUSTOMER MATERIALS. Customer will provide to Chiron, at
Customer's expense, the raw materials and documentation specified on
Exhibit A (collectively, the "CUSTOMER MATERIALS") as required by Chiron
to perform the Services. Customer shall deliver all Customer Materials to
the Facilities in a timely manner, and shall be responsible for all
freight, insurance and other costs of transport. Title and risk of loss
or damage to all Customer Materials will remain with Customer until
delivered to the Facilities.


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(b) OWNERSHIP AND USE OF CUSTOMER MATERIALS. Customer shall
retain sole ownership of all Customer Materials. Chiron may use Customer
Materials only for purposes of exercising its rights and performing its
obligations under this Agreement. Following termination of this
Agreement, Chiron will, if requested by Customer, return any unconsumed
Customer Materials to Customer, provided that Chiron shall be entitled to
retain one copy of all written Customer Materials for archival purposes.


(c) OTHER MATERIALS. All other raw materials required by Chiron
to perform the Services (collectively, the "OTHER MATERIALS" and,
together with the Customer Materials, the "MATERIALS") will be obtained
by Chiron from sources chosen by Chiron and charged back to Customer at
the cost thereof, including any applicable sales and use taxes, plus the
markup, if any, as set forth on Exhibit A, Section 16. These charge backs
shall be in addition to the compensation set forth on Exhibit A, Section
16.


(d) LIMITATION OF LIABILITY. Except in the limited
circumstances provided in Section 12 and the provisions for insurance in
Section 16, Chiron shall have no liability to Customer for loss of, or
damage to, any Materials.


3. EQUIPMENT.


(a) PURCHASE OF EQUIPMENT. In the event that it is necessary or
desirable to purchase capital equipment for use in performing the
Services, Chiron shall be entitled to purchase such equipment (the
"Equipment") upon prior written approval of Customer and charge back to
Customer the cost thereof, including any applicable sales and use taxes,
plus the markup, if any, as set forth on Exhibit A, Section 16. These
charge backs shall be in addition to the compensation set forth on
Exhibit A, Section 16.


(b) TITLE TO EQUIPMENT. Title to such Equipment shall be vested
in Chiron; provided, however, that Chiron shall transfer such Equipment
and title thereto to Customer following expiration or termination of this
Agreement if (a) Customer requests such transfer and (b) the Equipment
can be physically removed from the Facilities without significant damage
or disruption to the Facilities. Customer shall be solely responsible for
arranging all freight and insurance to remove such Equipment from the
Facilities, and for paying for all freight, insurance and other costs,
expenses, fees, duties and charges of whatever kind (including taxes)
arising from and after such time as title to the Equipment passes to
Customer.


(c) LIMITATION OF LIABILITY. Except in the limited
circumstances provided in Section 12 and the provisions for insurance in
Section 16, Chiron shall have no liability to Customer for loss of, or
damage to, any Equipment.


4. DELIVERABLES. All deliverables to be furnished by Chiron to Customer in connection with the Services specified in Exhibit A (collectively, "DELIVERABLES") will be made available for delivery to Customer or its agent at the Facilities. Chiron will manufacture and package the Deliverables in accordance with the procedures set forth on Exhibit A hereto (the " PROCEDURES"). Title to, and the risk of loss and damage of, any shipment of Deliverables shall pass immediately to Customer upon delivery to Customer at the Facilities. Customer shall be


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solely responsible for arranging for all freight and insurance from the Facilities, and for paying for all freight, insurance and other costs, expenses, fees, duties and charges of whatever kind arising from and after such time as title to Deliverables passes to Customer.


5. COMPENSATION.


(a) PAYMENTS. As compensation for the Services, Customer will
pay to Chiron the amounts set forth on Exhibit A, Section 16 hereto, at
the times specified on Exhibit A, Section 16. All payments shall be made
in United States Dollars by wire transfer of immediately available funds
to an account specified by Chiron in writing from time to time. If any
payment due hereunder is not paid in full on the due date, interest at
the ". . .", or the maximum permitted by law, whichever is lower, shall
accrue and become payable upon any unpaid balance from the date such
payment was due until it is made in paid in full.


(b) FIXED PRICE STRUCTURE: This Section has been intentionally
left blank.


6. FORECASTS; PURCHASE ORDERS. This Section has been intentionally left blank.


7. REGULATORY MATTERS. Responsibility for regulatory matters, and associated costs, related to the performance of the Services under this Agreement, shall be as set forth on Exhibit A, Sections 10 & 16.


8. TECHNOLOGY TRANSFER. In the event that the use of any technology or know-how of Customer, patented or unpatented, patentable or unpatentable (collectively, "CUSTOMER TECHNOLOGY"), is necessary or desirable in connection with providing the Services, Customer shall transfer all such Customer Technology to Chiron for the sole purpose of enabling Chiron to perform the Services. Without limiting the generality of the foregoing, (a) Customer hereby grants Chiron a non-exclusive, royalty-free license under all Customer Technology for the sole purpose of performing the Services on behalf of Customer, and (b) Customer will provide to Chiron without charge, such written materials and assistance of Customer personnel as may be reasonably requested by Chiron to assist with the transfer and use of the Customer Technology in performing the Services. All information provided to Chiron under this Section 8 will be subject to the confidentiality provisions of Section 18.


9. INTELLECTUAL PROPERTY. In the event that, during performance of the Services, Chiron solely or jointly develops new intellectual property ("New IP"), whether or not patentable, the following shall apply:


(a) NOT UNIQUE IP. For New IP that is useful in manufacturing
protein or other biological materials generally or relates to
manufacturing technology not unique to the Bulk Product, Chiron shall
hold all right, title and interest in such New IP subject to Customer's
fully paid up license with rights to sublicense.


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(b) UNIQUE IP. For New IP that is not generally useful other
than in the manufacture of Bulk Product, Customer shall
hold all right, title and interest in such New IP subject
to a license to Chiron solely for the purposes of
manufacturing Bulk Product.


(c) The parties shall do all acts necessary and shall cooperate
as required to execute all documents required to perfect
the interests described in (a) and (b) above.


10. TAXES. Chiron's prices and fees do not include any national, state or local sales, use, value-added or other taxes, customs duties, or similar tariffs or fees which Chiron may be required to pay or collect upon the acquisition of Materials and Equipment, the delivery of Deliverables hereunder or upon collection of the prices and fees or otherwise. Should any tax or levy be made (other than any such tax based on the income of Chiron), Customer agrees to pay such tax or levy and indemnify Chiron for any claim for such tax or levy demanded, including applicable penalties and interest, other than to the extent (if any) due to Chiron's failure to comply with its obligations to collect or remit such tax. Customer agrees to provide Chiron with appropriate resale certificate numbers and other documentation satisfactory to the applicable taxing authorities to substantiate any claim of exemption from any such taxes or fees.


11. THIRD PARTY ROYALTIES. The parties acknowledge that successful completion of the Services may require third party technology. In the event either party is put on notice by a third party, of alleged infringement by Chiron in the manufacture of Bulk Product, the party shall promptly inform the other party of notification. Customer shall promptly resolve any matter relating to alleged infringement and shall timely pay all amounts due resulting from or relating to the manufacture of Bulk Product and the commercial sale of any product incorporating Bulk Product. These payments shall be in addition to the compensation for the Services set forth on Exhibit A, Section 16.


12. PERFORMANCE STANDARDS;


(a) CONFORMITY TO PROCEDURES. Except for the development runs
(defined in Exhibit A hereto) for which there is no guarantee whatsoever,
Chiron warrants that it will use commercially reasonable efforts to
ensure that the Bulk Product and Deliverables will be manufactured,
stored and delivered in accordance with approved written procedures
specified in Exhibit A, Sections 5 & 14, current Good Manufacturing
Practices and all material applicable laws, ("Conforming Product".)
". . ."


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(b) PRODUCT INSPECTION. Upon completion of manufacture of a lot of
Bulk Product, Chiron shall make available to Customer's designated
shipper lot samples of the Bulk Product.


(i) Thereafter, Customer shall have thirty (30) business
days from the date of receipt of lot samples and batch release
documents to determine, at Customer's option, whether or not the
Bulk Product were manufactured in conformance with the Procedures.
Customer shall promptly give Chiron written notice of any aspect
in which Bulk Product was not so manufactured. Such notice should
include the detailed reasons describing the alleged
non-conformance. If Customer notifies Chiron of any such
non-conformance, the matter of the invoice payment for the
non-conforming batch shall be held in abeyance until the dispute
is resolved. The parties shall in good faith attempt to resolve
such dispute within thirty (30) days and if unable to do so, shall
refer such outstanding dispute to the Dispute Resolution provision
of this Agreement.


(ii) If the lot samples of the Bulk Product and and batch
release documents are not rejected by Customer within the thirty
(30) day period, Chiron shall have the authority to make the Bulk
Product available to Customer's designated shipper.


(c) EXCLUSIVE REMEDY. In the event the Deliverables are not Conforming Product, Customer's sole remedy, and Chiron's sole liability, will be, for Chiron to replace the Deliverables which are the subject of the non-conformity. In the event that any Service needs to be repeated, or if any Materials, Bulk Product or Deliverables need to be replaced, for any reason other than the breach of a Chiron warranty as set forth in this Section 12, the cost to manufacture replacement Deliverables will be borne by the parties in accordance with the following provisions.


(i) In the event that the Product or Deliverables are
non-conforming due to a equipment failure, Chiron operator error,
or Chiron does not meet the Conforming Assay specifications for
the cGMP lots specified in Exhibit A, Table 3, Chiron will repeat
the lot at no cost to the Customer and pay for the cost of raw
materials and supplies (excluding any reusable raw materials and
supplies such as the resin and Q membranes) for the replacement
lot(s).


(ii) In the event that the Product or Deliverables are
non-conforming due to incorrect specifications or incorrect
Customer specified control parameters, the Customer shall be
responsible for paying for the Facility Use Fee(s) specified in
Exhibit A, Section 16 and raw material and supplies for the
non-conforming lot(s).


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(iii) In the event that the Product or Deliverables are
non-conforming but the responsibility can't be allocated between
the two parties, the Facility Use Fee(s) specified in Exhibit A,
Section 16 for the non-conforming Product lot(s) will be shared
equally by the parties.


(iv) In the event that the manufacture of a portion of a
Product lot fails to conform to the Procedures resulting from
Chiron's negligence or misconduct, the Customer shall only pay
Chiron a prorated fee only for the conforming portion of the lot.
Chiron shall credit the Customer for the prorated cost of the
non-conforming portion of the Other Materials.


(v) The party that pays for the cost of the replacement
bulk product defined in sections (i) through (iv) above shall also
pay for the cost of disposal of the rejected Product.


(d) REPLACEMENT PRODUCT. In the event that Chiron must, for
whatever reason, manufacture replacement Bulk Product, it shall do so as
promptly as is reasonably and commercially practicable without incurring
any additional penalty for failure to comply with the terms of this
Agreement. In the event that any Service needs to be repeated, or if any
Materials, Bulk Product or Deliverables need to be replaced, for any
reason other than the breach of a Chiron warranty as set forth in this
Section 12, the cost to manufacture replacement Deliverables will be
borne by the parties in accordance with the provisions of Exhibit A,
Section 16.


13. COMPLAINTS.


(a) RESPONSIBILITY. Subject to Section 19, Customer will be
responsible for handling all complaints regarding a product that
incorporates Bulk Product ("Complaint"). Chiron will promptly forward any
Complaints received by Chiron to Customer and will provide, at Customer's
expense, such assistance in investigating such Complaints as Customer may
reasonably request. The parties shall in good-faith freely exchange
information which will enable them to determine the nature and cause of
the Complaint. Customer shall have the authority to resolve any
outstanding Complaints provide that it gives Chiron adequate notice of
any resolution which affects Chiron's interest in the Bulk Product.


(b) RECALL. Recalls and withdrawals of products incorporating
Bulk Product shall be within the sole discretion of Customer. Chiron will
cooperate fully with Customer in the event of any recall or withdrawal
and will provide at Customer's expense, such assistance in connection
therewith as Customer may reasonably request.


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14. RIGHT TO REVIEW PROCESSES. Chiron shall maintain all quality assurance manufacturing records, batch production records and other records directly related to the performance of the Services, as required by FDA or other applicable regulations. Customer's personnel shall have the right to review such records at Chiron's facilities during regular business hours and upon thirty day (30) day advance written notice to Chiron Compliance for the sole purpose of auditing compliance with the obligations set forth in Section 12; provided, however, that Chiron may delay such inspection for a period of up to thirty (30) days if, in its good faith judgment, such delay is necessary to avoid a significant disruption to Chiron's business; and provided further, that Customer shall be entitled to no more than two such inspections per year during the term of this Agreement and one such inspection during the year following the expiration or termination of this Agreement. All information obtained by Customer pursuant to this Section 14 shall be subject to the confidentiality provisions of Section 18.


15. SAFETY AND WASTE HANDLING PROCEDURES. Customer shall supply Chiron, where applicable, with a Material Safety Data Sheet for the Bulk Product, each cell bank and other materials supplied by Customer. Chiron shall be responsible for maintaining safety procedures for the handling and manufacture of the Bulk Product and waste handling procedures for the generation, treatment, storage, and/or disposal of wastes relating thereto, that comply with all material federal and state environmental and occupational safety and health requirements.


16. INSURANCE: LIABILITY.


(a) During the Term of this Agreement, Chiron shall procure and
maintain in full force and effect, at its own cost and expense, insurance
against the risks specified in this Agreement in amounts not less than
the amounts specified in subsection (b) below.


(b) Chiron shall maintain the following minimum coverage with
respect to the matters covered by this Agreement.


(i) Worker's compensation insurance in compliance with the
worker's compensation laws of the state or states in which Chiron
has employees performing work under this Agreement, and employer's
liability insurance with respect to such employees, with a minimum
limit of One Million Dollars ($1,000,000) each occurrence;


(ii) Motor vehicle insurance for vehicles owned, leased, or
operated by Chiron or its employees or agents performing work
under this Agreement, with the minimum limits of One Million
Dollars ($1,000,000) liability coverage per occurrence combined
single limit.


(iii) "All Risk" Property Insurance for property utilized
in the manufacture of Bulk Product (e.g. Bulk Product, Equipment,
raw materials, etc.)


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while in the care, custody and control of Chiron with a coverage
of at least the full replacement value.


(c) Chiron shall take all precautions to protect and preserve
materials, equipment and other property of Customer on site at the
Facilities that it takes with respect to its own property. Chiron shall
bear the risk of loss for any materials, equipment, or other property of
Customer which is on site at the Facilities. Customer shall bear all risk
of loss for the shipment and delivery of any such materials or equipment.
If any Materials, intermediate product, Bulk Product, Deliverables or any
Equipment purchased pursuant to Section 3 suffer loss or damage for which
Chiron is required to maintain such coverage, Chiron agrees to pay any
deductible/self retention amount and to use the insurance proceeds to
replace the lost Materials, intermediate product, Bulk Product,
Deliverables or Equipment, as applicable. Except as set forth in Sections
12, 16 and 19. Chiron shall have no liability to Customer for loss of or
damage to, any Materials or Equipment.


17. LIMITATION OF LIABILITY. EXCEPT FOR THE WARRANTIES PROVIDED IN SECTIONS 12 AND 20, CHIRON GRANTS NO OTHER WARRANTY, EXPRESS OR IMPLIED, BY STATUTE, IN ANY COMMUNICATION WITH CUSTOMER OR OTHERWISE, REGARDING THE SERVICES, THE MATERIALS, THE DELIVERABLES OR THE BULK PRODUCT, INCLUDING WITHOUT LIMITATION ANY WARRANTY REGARDING THEIR FITNESS FOR ANY PURPOSE, THEIR QUALITY, THEIR MERCHANTABILITY OR THEIR NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES. ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY ANY PERSON OR ENTITY, INCLUDING EMPLOYEES OR REPRESENTATIVES OF CHIRON THAT ARE INCONSISTENT HEREWITH, SHALL BE DISREGARDED AND SHALL NOT BE BINDING ON CHIRON. IN NO EVENT SHALL CHIRON BE LIABLE TO CUSTOMER, ITS AFFILIATES OR ANY THIRD PARTY FOR LOST PROFITS, OR FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR INDIRECT DAMAGES, ARISING FROM ANY BREACH OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION ANY BREACH OF A WARRANTY CONTAINED HEREIN OR OF ANY OBLIGATION TO PERFORM SERVICES AND/OR PROVIDE DELIVERABLES BY A SPECIFIED TIME. IN NO EVENT SHALL CUSTOMER BE LIABLE TO CHIRON FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR INDIRECT DAMAGES, ARISING FROM ANY BREACH OF THIS AGREEMENT, EXCEPT AS OTHERWISE PROVIDED IN SECTION 19 HEREOF.


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18. CONFIDENTIAL INFORMATION.


(a) PROVISION OF CONFIDENTIAL INFORMATION. During the term of
this Agreement, parties may provide to one another confidential
information, including but not limited to each party's proprietary
materials and/or technologies, economic information, business or research
strategies, trade secrets and material embodiments thereof. As used
herein, "CONFIDENTIAL INFORMATION" of a party means any such confidential
information disclosed by such party to the other party (i) in written
form marked "confidential," (ii) in oral form if summarized in a writing
marked "confidential" delivered to the receiving party within thirty (30)
days after the oral disclosure, (iii) if further disclosure of any
confidential information could reasonably be expected to result in
competitive harm to the providing party, or (iv) that consists of, or
relates to, any unpublished patent application.


(b) CONFIDENTIALITY AND NON-USE. The recipient shall maintain
the providing party's Confidential Information in confidence, except if
and to the extent that such disclosure is required by applicable law and
provided that the providing party has received written notice reasonably
far in advance of the proposed disclosure. The recipient shall use the
providing party's Confidential Information solely to exercise its rights
and perform its obligations under this Agreement, unless otherwise
mutually agreed in writing, and shall at all times protect the providing
party's Confidential Information with at least the same degree of care it
uses to protect its own Confidential Information, such care to be of the
type and degree that would be used by a reasonable and prudent business
person.


(c) EXCLUSIONS. Confidential Information shall not include
information which: (i) is shown by contemporaneous documentation of the
recipient to have been in its possession prior to receipt from the
providing party; (ii) is or becomes, ...