8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT TO 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): July 16, 2004

NOVAVAX, INC.

(Exact name of registrant as specified in its charter)

Delaware	0-26770	22-2816046
(State or other jurisdiction of incorporation or organization)	(Commission File No.)	(I.R.S. Employer Identification No.)

8320 Guilford Road, Columbia, MD	21046
(Address of principal executive offices)	(Zip code)

(301) 854-3900

Registrant’s telephone number, including area code

Not applicable

(Former name or former address, if changed since last report)

NOVAVAX, INC.
ITEMS TO BE INCLUDED IN THIS REPORT

ITEM 5. OTHER EVENTS.

     On July 16, 2004, Novavax, Inc. (“Novavax” or the “Company”) entered into agreements with respect to two financing transactions, one of which closed on July 16, 2004 and the other of which is expected to close on July 19, 2004. In addition, the Company entered into an Exchange Agreement and Termination Agreement with King Pharmaceuticals, Inc. and its subsidiary.

     A copy of the Press Release describing the transactions is attached hereto as Exhibit 99.1 and is incorporated herein by reference. Copies of the definitive agreements are attached hereto as Exhibits 99.2 through 99.6 and are incorporated herein by reference.

ITEM 7. EXHIBITS.

99.1	Press Release dated July 19, 2004.
99.2	Common Stock Purchase Agreement, dated July 16, 2004 between Novavax, Inc. and Joseph R. Gregory.
99.3	Securities Purchase Agreement, dated July 16, 2004 between Novavax, Inc. and Smithfield Fiduciary LLC, SF Capital Partners LTD, Portside Growth and Opportunity Fund, Winchester Global Trust Company Limited as Trustee for Caduceus Capital Trust, Caduceus Capital II, L.P., UBS Eucalyptus Fund, L.L.C., PW Eucalyptus Fund, LTD., HFR SHC Aggressive Fund, Finsbury Worldwide Pharmaceutical Trust and Deutsche Bank AG London.
99.4	Form of Senior Convertible Note.
99.5	Exchange Agreement, dated July 16, 2004 between Novavax, Inc., King Pharmaceuticals, Inc. and Parkedale Pharmaceuticals, Inc.
99.6	Termination Agreement, dated July 16, 2004 between King Pharmaceuticals, Inc., Parkedale Pharmaceuticals, Inc. and Novavax, Inc.

SIGNATURE

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

		NOVAVAX, INC.
Date: July 19, 2004	By:	/s/ Nelson M. Sims
		Nelson M. Sims
		President and Chief Executive Officer

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

NOVAVAX TO REACQUIRE ALL RIGHTS TO ESTRASORB^® FROM KING PHARMACEUTICALS

King to Participate in ESTRASORB Potential Through Increased Equity Stake in Novavax

Novavax Executes $40 Million Financing in Conjunction with Transaction

COLUMBIA, MD and BRISTOL, TN, JULY 19, 2004, — NOVAVAX, INC. (NASDAQ: NVAX) and KING PHARMACEUTICALS, INC. (NYSE: KG) today announced that in conjunction with King Pharmaceuticals’ previously announced strategy to divest many of its women’s health products, Novavax and King have mutually agreed to end their co-promotion agreement for ESTRASORB® (estradiol topical emulsion) enabling Novavax to reacquire all rights worldwide for this product, as well as all rights to other women’s health products that Novavax may successfully develop utilizing its micellar nanoparticle (MNP) technology. As part of the transaction, Novavax will issue common shares to King and will repurchase all of the Novavax convertible notes held by King. The cash portion of the transaction to be paid to King will be funded with part of the proceeds from the $40 million financing that Novavax completed in conjunction with the transaction. The transaction will increase King’s ownership interest in Novavax to over 10%, providing it with the continuing opportunity to participate in the future potential of ESTRASORB.

“This is a positive and transformational event for Novavax,” said Nelson M. Sims, Novavax’s President and CEO. “ESTRASORB has significant market potential both in the U.S. and abroad. With King exiting women’s health, we have the opportunity to reacquire all ESTRASORB rights on terms that are accretive to earnings over the life of the product. We also will reacquire full participation in the international rights for ESTRASORB and our other women’s health products planned or under development that utilize our proprietary MNP technology. In addition, after accounting for this transaction, the financing will add over $23 million to our balance sheet to support ESTRASORB as well as our other strategic initiatives.”

Brian A. Markison, President and Chief Executive Officer of King, commented, “We believe ESTRASORB® has the potential to be very successful and King will have the continuing opportunity to participate in such success through our equity investment in Novavax. This transaction is a further extension of our previously announced intent and strategic decision to divest many, if not all, of our women’s health products. Such divestitures should enable our Company to focus more intently on in-licensing, development, acquisition, and promotion of branded prescription pharmaceutical products in other key therapeutic areas that we believe are strategically important to the future success and growth of our Company.”

The Transaction

Pursuant to the terms of the transaction, Novavax will reacquire all of King’s rights in ESTRASORB and other women’s health products Novavax may successfully develop and will repurchase all

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Novavax convertible notes held by King. Additionally, Novavax will acquire a portion of King’s women’s health sales force to provide competitive sales force coverage. Novavax will also receive from King approximately $8 million in cash to provide additional support for marketing and promoting ESTRASORB. In return, Novavax will pay King $22 million in cash and issue to King 3,775,610 shares of Novavax common stock.

With the completion of the transaction, King will hold approximately 4.1 million shares of Novavax common stock, or approximately 10.4% of the total 39.6 million shares of Novavax common stock outstanding. The closing of the transaction is contingent on funding, which is scheduled to occur later today.

Novavax Financing

In conjunction with the transaction, Novavax also announced that it has entered into definitive agreements for the private placement of $35 million principal amount of senior convertible notes to a group of institutional investors and 952,381 shares of Novavax common stock at $5.25 per share to an additional investor for aggregate gross proceeds to Novavax of $40 million. The notes carry a 4.75% coupon, payable semi-annually, and are convertible into shares of Novavax Common Stock at $6.15 per share. The transaction and related financing will add over $23 million to Novavax’s balance sheet, reduce Novavax’s debt by $5 million, extend Novavax’s debt terms, and allow Novavax to reacquire the worldwide rights to ESTRASORB. Novavax anticipates the receipt of funding from the financing later today.

Marketing and Sales Competitively Positioned

Ford R. Lynch, Senior Vice President of Sales and Marketing added, “With Novavax’s existing sales organization plus the anticipated addition of approximately 50 sales representatives from King, we believe we can competitively position ESTRASORB® in the marketplace. This dedicated women’s health sales force is exceptionally well trained and equipped to actively promote ESTRASORB.”

Novavax Investor Conference Call and Webcast

Novavax will discuss the transaction in a conference call and webcast on Monday, July 19, 2004 at 10:45 a.m. ET. Interested parties are invited to listen to the call live and view the accompanying slides over the Internet at www.companyboardroom.com or by dialing 800-240-5318. International callers should dial (303) 262-2130. For interested individuals unable to join the call, a replay will be available until July 26, 2004, by dialing 800-405-2236 or 303-590-3000, passcode 11003107.

About King

King, headquartered in Bristol, Tennessee, is a vertically integrated pharmaceutical company that develops, manufactures, markets, and sells branded prescription pharmaceutical products. King, an S&P 500 Index company, seeks to capitalize on opportunities in the pharmaceutical industry through the development, including through in-licensing arrangements and acquisitions, of novel branded prescription pharmaceutical products in attractive markets and the strategic acquisition of branded products that can benefit from focused promotion and marketing and product life-cycle management.

About Novavax

Novavax, Inc. is a specialty biopharmaceutical company engaged in the research, development and commercialization of proprietary products focused on drug delivery and vaccine development. Novavax sells, markets, and distributes a line of women’s health prescription pharmaceuticals through its specialty sales force calling on obstetricians and gynecologists throughout the United States. Products in addition to ESTRASORB® include Nestabs®, NovaNatal®

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and NovaStart®, a line of prescription prenatal vitamins, Gynodiol® (estradiol tablets, USP), AVC™ Cream (sulfanilamide vaginal cream) for vaginal infections and Analpram HC®, a prescription corticosteroid and antipruritic product for hemorrhoids. Novavax’s micellar nanoparticle technology involves the use of patented oil and water emulsions that it believes can be used as vehicles for the topical delivery of a wide variety of drugs and other therapeutic products, including hormones. In addition to ESTRASORB®, Novavax has several product candidates utilizing this technology in human clinical trials or in pre-clinical development, including ANDROSORB™, a topical testosterone emulsion that has completed two Phase I clinical trials. Novavax has other drug delivery technologies, such as its Novasome® and Sterisome® technologies, that are being utilized to develop other products. Novasomes are used as adjuvants to enhance vaccine effectiveness and Sterisomes are used for the delivery of long acting drugs in subcutaneous injections. In addition, Novavax conducts research and development on preventative and therapeutic vaccines and proteins for a variety of infectious diseases, including smallpox, HIV, SARS, papilloma, influenza, and E-selectin tolerogen for the prevention of stroke.

Forward-Looking Statements

Statements made in this press release that state intentions, hopes, beliefs, expectations, or predictions of the management of Novavax and/or King are forward-looking statements. Forward-looking statements contained in this release include, but are not limited to, statements regarding the potential of ESTRASORB as a marketable product, statements regarding Novavax’s future product development, statements regarding Novavax’s plan to increase the size of its sales force, statements regarding Novavax’s ability to competitively position ESTRASORB in the marketplace, statements regarding King’s opportunity to benefit from its equity investment in Novavax, statements regarding King’s intent to divest many of its women’s health products, statements regarding the future success and growth of King, and statements regarding the funding of the Novavax financing and the anticipated closing of the transaction later today. These forward-looking statements involve certain significant risks and uncertainties, and actual results may differ materially from the forward-looking statements. Some important factors which may cause results to differ include, among other things, the following: dependence on the ability of Novavax to manufacture ESTRASORB in sufficient quantities; dependence on the ability of Novavax to carry out their responsibilities regarding the promotion for ESTRASORB; dependence on the ability of the dedicated field sales force of Novavax to successfully market ESTRASORB; dependence on the availability and cost of raw materials; dependence on the potential effect on sales of ESTRASORB as a result of the potential development and approval of a generic substitute for such product or other new competitive products; dependence of the extent to which King’s women’s health sales representatives accept employment with Novavax; dependence on an increase in the value of Novavax common stock; dependence on King’s ability to achieve success and growth through licensing, development, acquisition, and promotion of branded pharmaceutical products; dependence on King’s ability to continue to acquire branded products, including products in development; dependence on King’s ability to continue to successfully execute the Company’s proven growth strategies and to continue to capitalize on strategic opportunities in the future for sustained long-term growth; dependence on King’s ability to divest its women’s health products; dependence on the high cost and uncertainty of research, clinical trials, and other development activities involving pharmaceutical products, including, but not limited to, King Pharmaceuticals Research and Development’s pre-clinical and clinical pharmaceutical product development projects, including binodenoson, T-62, and MRE0094; dependence on the U.S. Food and Drug Administration’s (“FDA”) approval of King’s supplemental New Drug Application (“sNDA”) for Intal® HFA (cromolyn sodium); dependence on King’s and Elan’s ability to successfully develop new formulations of Sonata®; dependence on the unpredictability of the duration and results of the FDA’s review of Investigational New Drug Applications (“IND”), New Drug Applications (“NDA”), sNDAs, and

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Abbreviated New Drug Applications (“ANDA”) and/or the review of other regulatory agencies worldwide; dependence on the funding of the Novavax financing and closing of the transaction as anticipated; dependence on compliance with FDA and other government regulations that relate to Novavax’s and King’s business; and dependence on changes in general economic and business conditions; changes in current pricing levels; changes in federal and state laws and regulations; changes in competition; unexpected changes in technologies and technological advances; results of clinical studies; the results of research and development activities; Novavax’s ability to obtain adequate financing in the future; and manufacturing capacity constraints. Other important factors that may cause actual results to differ materially from the forward-looking statements are discussed in Novavax’s Form 10-K for the year ended December 31, 2003 and Form 10Q for the quarter ended March 31, 2004, and in the “Risk Factors” section and other sections of King’s Form 10-K for the year ended December 31, 2003 and Form 10-Q for the first quarter ended March 31, 2004, which are on file with the U.S. Securities and Exchange Commission (“SEC”). Copies of Novavax’s filings may be obtained by contacting Novavax at 8320 Guilford Road, Columbia, MD, 21046, Tel 301-854-3900 or the SEC. Copies of King’s filings may be obtained by Contacting King at 501 Fifth Street, Bristol, TN, 37620, Tel 423-989-8711 or the SEC. Novavax and King do not undertake to publicly update or revise any of their forward-looking statements even if experience or future changes show that the indicated results or events will not be realized.

Contacts:

Novavax:

Company Contacts:
Nelson M. Sims
President & CEO
301-854-3900

Communications Contacts:
Alison Ziegler - General
Julie Tu – Investors
212-445-8300

Cynthia Martin – Media
312-640-6741
Financial Relations Board

King:

Company Contact:
James E. Green
Executive Vice President, Corporate Affairs
423-989-8125

EXECUTIVE OFFICES

NOVAVAX, INC.
8320 GUILFORD ROAD, SUITE C, COLUMBIA, MARYLAND 21046

KING PHARMACEUTICALS
501 FIFTH STREET, BRISTOL, TENNESSEE 37620

# # #

EX-99.2

Exhibit 99.2

NOVAVAX, INC.
COMMON STOCK PURCHASE AGREEMENT

     THIS COMMON STOCK PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of July 16, 2004, by and between Novavax, Inc., a Delaware corporation (the “Company”), and Joseph R. Gregory, an individual resident of the State of Tennessee (such investor, or his nominee, the “Investor”).

     1. AGREEMENT TO PURCHASE AND SELL STOCK.

          1.1 Authorization. As of the Closing (as defined below), the Company will have authorized the issuance, pursuant to the terms and conditions of this Agreement, 952,381 shares of the Company’s Common Stock, $.01 par value (the “Common Stock”).

          1.2 Agreement to Purchase and Sell. At the Closing, the Company agrees to sell to the Investor, and the Investor agrees to purchase from the Company, 952,381 shares of Common Stock at a price of $5.25 per share. The shares of Common Stock purchased and sold pursuant to this Agreement will be hereinafter referred to as the “Purchased Shares.”

     2. CLOSING.

          2.1 The Closing. The purchase and sale of the Purchased Shares will take place simultaneously with the execution hereof at the offices of White White & Van Etten LLP, 55 Cambridge Parkway, Suite 101, Cambridge, Massachusetts, at 9:00 a.m., Eastern Standard Time, or at such other time and place as the Company and the Investor mutually agree (which time and place are referred to in this Agreement as the “Closing”). At the Closing, the Investor will purchase the Purchased Shares against delivery to the Investor (or the Investor’s designated custodian) by the Company of a certificate representing such Purchased Shares and/or a copy of the Company’s irrevocable instructions to its transfer agent to prepare and issue such certificate, with delivery of such certificate to occur within three (3) business days thereafter. The full purchase price for such Purchased Shares shall be paid at Closing by wire transfer of funds to the Company.

     3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to the Investor that, except as set forth in the Disclosure Schedule and Schedule of Exceptions (the “Disclosure Schedule”) separately delivered by the Company to the Investor, the statements in the following paragraphs of this Section 3 are all true and correct:

          3.1 Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite corporate power and authority to conduct its business as currently conducted and to execute, deliver and perform all of its obligations under this Agreement and to consummate the transactions contemplated hereby. The Company is qualified to do business as a foreign corporation in each jurisdiction where failure to be so qualified could, individually or in the aggregate, reasonably be expected to have a material adverse effect on the business, assets,

financial condition, or results of operations of the Company, taken as a whole (the “Business”) (such effect referred to as a “Material Adverse Effect”). For purposes of this Agreement, “Material Adverse Effect” shall not include any effect attributable to changes in the trading prices for the Company’s Common Stock.

          3.2 Capitalization. Immediately before the Closing, the capitalization of the Company will consist of the following:

               (a) Preferred Stock. A total of 2,000,000 authorized shares of Preferred Stock, $.01 par value per share (the “Preferred Stock”), none of which are issued and outstanding.

               (b) Common Stock. A total of 100,000,000 authorized shares of Common Stock, of which 35,079,733 shares were issued and 34,825,885 shares were outstanding as of June 30, 2004.

               (c) Options, Warrants, Reserved Shares. Except for: (i) the approximately 4,909,618 shares of Common Stock issuable upon exercise of options outstanding under the Company’s 1995 Stock Option Plan and 270,000 shares of Common Stock issuable upon exercise of options outstanding under the 1995 Director Stock Option Plan, each as of June 30, 2004, (ii) approximately 1,105,299 additional shares of Common Stock reserved for issuance under the Company’s 1995 Stock Option Plan, (iii) approximately 5,188,147 additional shares of Common Stock reserved for issuance upon the conversion of convertible notes issued to King Pharmaceuticals, Inc., and (iv) warrants to purchase an aggregate of approximately 70,000 shares of Common Stock, there are not outstanding any options, warrants, rights or agreements for the purchase or acquisition from the Company of any shares of its capital stock or any securities convertible into or ultimately exchangeable or exercisable for any shares of the Company’s capital stock. All of such outstanding shares of capital stock have been duly authorized and validly issued and are fully paid and nonassessable and all of such options, warrants and other rights to acquire Common Stock have been duly authorized by the Company. None of the outstanding shares of capital stock and options, warrants and other rights to acquire Common Stock has been issued in violation of the preemptive rights of any security holder of the Company.

          3.3 Subsidiaries. Except for Fielding Pharmaceutical Company, the Company does not presently own or control, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, association, or other entity. All of the outstanding shares of capital stock of, or other equity interests in, Fielding Pharmaceutical Company have been validly issued and are fully paid and nonassessable and are owned directly or indirectly by the Company free and clear of all pledges, claims, liens, charges, encumbrances or security interests of any kind or nature whatsoever, and free of any restriction on the right to vote, sell or otherwise dispose of such capital stock or other equity interests.

          3.4 Due Authorization; No Violation. All corporate action on the part of the Company and its officers, directors and stockholders necessary for the authorization, execution and delivery of, and the performance of all obligations of the Company under, this Agreement and the transactions contemplated hereby, and the authorization, issuance, reservation for

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issuance and delivery of all of the Purchased Shares being sold under this Agreement, has been taken, and this Agreement constitutes a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforceability may be limited by (a) applicable bankruptcy, insolvency, moratorium, reorganization or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and (b) the effect of rules of law governing the availability of equitable remedies. Neither the execution, delivery or performance by the Company of this Agreement nor the consummation by the Company of the transactions contemplated hereby will (i) conflict with or result in a breach of any provision of the Amended and Restated Certificate of Incorporation of the Company, as amended to date (the “Charter”) or the Company’s Bylaws, (ii) conflict with, result in a violation or breach of, or cause a default (or give rise to any right of termination, cancellation or acceleration), or result in the creation or imposition of any lien, security interest, charge or encumbrance upon any of the properties or assets of the Company, under any of the terms, conditions or provisions of any agreement, instrument or obligation to which the Company is a party, which default could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or (iii) violate any law, statute, rule or regulation or judgment, order, writ, injunction or decree of any governmental authority, in each case under this clause (iii) applicable to the Company or any of its properties or assets and which, individually or in the aggregate, could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The business and operations of the Company have been conducted in accordance with all applicable laws, rules and regulations of all governmental authorities, except for such violations that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

          3.5 Valid Issuance of Stock. The Purchased Shares, when issued, sold and delivered in accordance with the terms of this Agreement for the consideration provided for herein, will be duly and validly issued, fully paid and nonassessable and free and clear of all pledges, liens, encumbrances and restrictions (other than those arising under federal or state securities laws as a result of the private placement of the Purchased Shares to the Investor) and are not subject to preemptive or other similar rights of any stockholder of the Company.

          3.6 Governmental Consents. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of the Company is required in connection with the valid execution and delivery of this Agreement, the offer, sale and issuance of the Purchased Shares, or the consummation of the transactions contemplated by this Agreement, except for qualifications or filings under the Securities Act of 1933, as amended (the “Act”) and the applicable rules and regulations (the “Rules and Regulations”) of the Securities and Exchange Commission (the “Commission”) under the Act, and all other applicable securities laws as may be required in connection with the transactions contemplated by this Agreement.

          3.7 Absence of Changes. After the respective dates as of which information is given in the Company’s Proxy Statement for the annual meeting of stockholders held on May 5, 2004, the Company’s Annual Report on Form 10-K for the year ended December 31, 2003, and the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, respectively (such documents, together with the Disclosure Schedule, referred to collectively as the “Disclosure Documents”), there has not been (i) any Material Adverse Effect on the

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Business, (ii) any transaction that is material to the Company, (iii) any obligation, direct or contingent, that is material to the Company incurred by the Company, (iv) any change in the outstanding indebtedness of the Company that is material, (v) any dividend declared, paid or made on the capital stock of the Company, (vi) any loss or damage (whether or not insured) to the property of the Company which has been sustained which could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or (vii) any other event which could reasonably be expected to adversely affect the validity or enforceability of, or the authority or the ability of the Company to perform its obligations under, this Agreement.

          3.8 Litigation. There is no action, suit, proceeding, claim, arbitration or investigation (“Action”) pending (or, to the Company’s knowledge, currently threatened) against the Company, or its activities, properties or assets, which (i) is reasonably likely to prevent the consummation of the transactions contemplated hereby or (ii) if adversely resolved against the Company could adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, this Agreement, or could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

          3.9 NASDAQ Listing. The Company’s Common Stock is registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and is listed on The Nasdaq Stock Market, Inc. National Market (the “Nasdaq National Market”). The Company will use its best efforts to comply with all requirements of the National Association of Securities Dealers, Inc. with respect to the issuance of the Purchased Shares and the listing thereof on the Nasdaq National Market; provided, however, that the Company makes no representations that it will continue to meet all of the requirements for listing of the Common Stock on the Nasdaq National Market. The Company shall use its best efforts to take such actions as may be necessary, and as soon as practicable and in no event later than 30 days after the Closing Date, to file with Nasdaq any necessary application or other document required by Nasdaq in order to list the Purchased Shares on the market on which they are traded and to pay any required listing fees within the required time.

          3.10 Commission Filings. The Company has filed in a timely manner all reports and other information required to be filed (“Filings”) with the Commission pursuant to the Exchange Act during the preceding 12 calendar months. On their respective dates of filing, to the Company’s knowledge the Filings complied in all material respects with the requirements of the Exchange Act, and the published rules and regulations of the Commission promulgated thereunder. To the Company’s knowledge, on their respective dates of filing, the Filings did not include any untrue statement of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, and all financial statements contained in the Filings fairly present, in all material respects, the financial position of the Company on the dates of such statements and the results of operations for the periods covered thereby in accordance with generally accepted accounting principles (“GAAP”) consistently applied throughout the periods involved and prior periods, except as otherwise indicated in the notes to such financial statements, subject in the case of unaudited financial statements, to normal year-end audit adjustments.

          3.11 Disclosure. To the Company’s knowledge, the representations and warranties made by the Company in this Agreement (including the Disclosure Schedule) and the

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Filings when read together do not contain any untrue statement of a material fact and do not omit to state a material fact necessary to make the statements herein as a whole not misleading.

          3.12 Governmental Permits, Etc. The Company possesses all licenses, franchises, governmental approvals, permits or other governmental authorizations (collectively, “Authorizations”) relating to the operation of the Business, except for those Authorizations the failure of which to possess could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company is in compliance with the terms of all Authorizations and all laws, ordinances, regulations and decrees which are applicable to the Business, except for such non-compliance which could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

          3.13 Insurance. The Company is covered by, and will continue to be covered by, insurance with companies the Company believes to be responsible and in such amounts and covering such risks as it believes to be adequate for the conduct of the Business and the value of the Company’s properties and as is customary for companies engaged in similar businesses in similar industries, all of which insurance is in full force and effect. The Company has no knowledge that any such carrier has grounds or intends to cancel or fail to renew such policies on terms acceptable to the Company.

          3.14 Intellectual Property. The Company owns or possesses the patents, patent rights, licenses, inventions, copyrights, trademarks, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) and other rights or interests in items of intellectual property that are material to the Business as operated by the Company, and as expected to be operated by the Company in the next 12 months (collectively, the “Patent and Proprietary Rights”); the Company has not received notice of any asserted infringement of or material conflict with the rights of others with respect to any of the Patent and Proprietary Rights. To the Company’s knowledge, the Company does not infringe upon the proprietary rights of others in any material respect.

          3.15 Financial Statements. The financial statements of the Company and the related notes thereto included in the Disclosure Documents present fairly, in all material respects and in accordance with GAAP, the financial position of the Company as of the dates indicated, and the results of its operations and cash flows for the periods therein specified (except that the unaudited financial statements do not contain all notes required by GAAP and are subject to normal year-end audit adjustments). Such financial statements (including the related notes) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods therein specified, subject in the case of unaudited financial statements, to normal year-end audit adjustments. Except as set forth in the financial statements included in the Disclosure Documents, the Company does not have any material liabilities of any nature (whether accrued, absolute, contingent or otherwise) that are required by GAAP to be included in such financial statements other than liabilities arising after the date of the most recent balance sheet included in such financial statements which were incurred in the ordinary course of business consistent with past practice.

          3.16 Disclosure Controls and Procedures. The Company’s Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the

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Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act. Based on that review and evaluation, which included inquiries made to certain other employees of the Company, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s current disclosure controls and procedures, as designed and implemented, are reasonably adequate to ensure that such officers are provided in a timely manner with material information relating to the Company required to be disclosed in the reports the Company files or submits under the Exchange Act.

          3.17 Title. The Company has good and marketable title in fee simple to all real property and personal property owned by it which is material to the business of the Company, in each case free and clear of all liens and encumbrances, except for liens that do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company or for equipment leases or operating leases entered into in the ordinary course of the Company’s business. Any real property and facilities held under lease by the Company are held by it under valid, subsisting and enforceable leases, with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and facilities by the Company.

          3.18. Form S-3. The Company meets the requirements for the use of Form S-3 for the registration of the resale of the Purchased Shares and will use its commercially reasonable efforts to maintain S-3 status with the Commission during the Registration Period (as defined in Section 7.2(a)). The Company does not know of any current facts or circumstances 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 Section 7.1(d)).

          3.19. Tax Matters. The Company has filed all federal, state and local income and franchise and other tax returns required to be filed and have paid all taxes due, and no tax deficiency has been determined adversely to the Company which, individually or in the aggregate, has had (nor does the Company have any knowledge of any tax deficiency which, if determined adversely to the Company, could, individually or in the aggregate, reasonably be expected to have) a Material Adverse Effect.

          3.20. Investment Company. The Company is not an “investment company” within the meaning of such term under the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder.

          3.21. No General Solicitation; No Integration. No form of general solicitation or general advertising was used by the Company or, to its knowledge, any other person acting on behalf of the Company, in respect of the Purchased Shares or in connection with the offer and sale of the Purchased Shares. The Company has not sold, offered to sell, solicited offers to buy or otherwise negotiated in respect of any “security” (as defined in the Act) that is or could be integrated with the sale of the Purchased Shares in a manner that would require the registration of the Purchased Shares under the Act.

          3.22. No Registration. Assuming the accuracy of the representations and warranties made by, and compliance with the covenants of, the Investor in Section 4 hereof, no

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registration of the Purchased Shares under the Act is required in connection with the sale of the Purchased Shares to the Investor as contemplated by this Agreement.

          3.23. FDA Matters and Clinical Trials.

               (a) The Company has not received any notices or correspondence from any federal, state, local or foreign regulatory body that regulates the types of matters subject to the jurisdiction of the U.S. Food and Drug Administration (“Health Authorities”) which have not been resolved requiring or threatening the termination, suspension or modification of any animal studies, preclinical tests or clinical trials conducted by or on behalf of the Company or in which the Company has participated that are described in the Disclosure Documents or the results of which are referred to in the Disclosure Documents. To the knowledge of the Company, the currently pending clinical trials, studies and other preclinical tests conducted by or on behalf of the Company and that are described in the Disclosure Documents or the results of which are referred to in the Disclosure Documents, are being conducted in accordance with experimental protocols, procedures and controls generally used by qualified experts in the preclinical or clinical study of new drugs.

               (b) The Company has no knowledge of any adverse event that has resulted from any of such studies, tests or trials that was not disclosed as required to any Health Authority.

          3.24. Material Contracts. All material contracts of the Company that are required by applicable rules and regulations of the Commission to be filed as exhibits to the Filings (“Material Contracts”) have been so filed and, except for the Material Contracts that have been terminated or are no longer in effect in accordance with their terms, are valid, subsisting, in full force and effect and binding upon the Company and, to the Company’s knowledge, the other parties thereto (subject to the exceptions set forth in the first sentence of Section 3.4 above), and the Company has paid in full or accrued all amounts due thereunder and have satisfied in full or provided for all of its liabilities and obligations thereunder in all material respects. The Company has not received notice of a default and is not in default under, or with respect to, any Material Contract. To the knowledge of the Company, no other party to any Material Contract is in default thereunder, nor does any condition exist that with notice or lapse of time or both would constitute a default by such other party thereunder.

     4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE INVESTOR. The Investor hereby represents and warrants to, and agrees with, the Company, that:

          4.1 Authorization. All action (corporate or otherwise) on the part of the Investor necessary for the authorization, execution and delivery of, and the performance of all obligations of the Investor under, this Agreement has been taken or will be taken prior to the Closing, and this Agreement constitutes a valid and legally binding obligation of the Investor, enforceable against the Investor in accordance with its terms, except as enforceability may be limited by (i) applicable bankruptcy, insolvency, moratorium, reorganization or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and (ii) the effect of rules of law governing the availability of equitable remedies.

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          4.2 Purchase for Own Account. The Purchased Shares to be purchased by the Investor hereunder will be acquired for investment for the Investor’s own account, not as a nominee or agent, and not with a view to the public resale or distribution thereof within the meaning of the Act, and the Investor has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the Act.

          4.3 Disclosure of Information. The Investor has received and/or had full access to a copy of the Disclosure Documents and has received or has had full access to all the information the Investor considers necessary or appropriate to make an informed investment decision with respect to the Purchased Shares. The Investor further has had an opportunity to ask questions of and receive answers from the Company regarding the terms and conditions of the offering of the Purchased Shares and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to the Investor or to which the Investor had access. The foregoing, however, does not in any way limit or modify the representations and warranties made by the Company in Section 3. In connection with the Investor’s decision to purchase the Purchased Shares, the Investor has relied solely on the Disclosure Documents, the representations, warranties and agreements of the Company set forth in this Agreement, as well as any investigation of the Company completed by the Investor or the Investor’s advisors, and the Investor has not relied on any oral statement made by the Company.

          4.4 Investment Experience. The Investor understands that the purchase of the Purchased Shares involves substantial risk. The Investor: (i) has experience as an investor in securities of companies in the development stage and acknowledges that the Investor is able to fend for himself, can bear the economic risk of the Investor’s investment in the Purchased Shares, and has such knowledge and experience in financial or business matters that the Investor is capable of evaluating the merits and risks of this investment in the Purchased Shares and protecting his own interests in connection with this investment, and/or (ii) has a preexisting personal or business relationship with the Company or one or more of its officers or directors.

          4.5 Accredited Investor Status. The Investor is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

          4.6 Restricted Securities. The Investor understands that the Purchased Shares are characterized as “restricted securities” under the Act inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under the Act and the Rules and Regulations such securities may be resold without registration under the Act only in certain limited circumstances. In connection therewith, the Investor represents that he is familiar with Rule 144 as promulgated by the Commission, understands the resale limitations imposed thereby and by the Act, and understands that the Shelf Registration Statement (as defined in Section 7.2(a)) and any other registration statement contemplated by this Agreement to effect the registration of the Purchased Shares for purposes of resale thereunder may never become effective under the Act.

          4.7 Further Limitations on Disposition. Without in any way limiting the representations set forth above, the Investor further agrees not to make any disposition of all or any portion of the Purchased Shares unless and until:

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               (a) there is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with such registration statement and the provisions of Section 7 of this Agreement; or

               (b) (i) the Investor shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the proposed disposition, and (ii) the Investor shall have furnished the Company, at the expense of the Investor or his transferee, with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such securities under the Act.

          Notwithstanding the provisions of paragraphs (a) and (b) above, no such registration statement or opinion of counsel shall be required: (x) for any routine transfer of any Purchased Shares in compliance with Rule 144 or Rule 144A (except that an opinion of counsel may be required for other than routine Rule 144 transactions), or (y) for the transfer by gift, will or intestate succession by the Investor to his spouse or lineal descendants or ancestors or any trust for any of the foregoing; provided, that in each of the foregoing cases the transferee agrees in writing to be subject to the terms of this Agreement to the same extent as if the transferee were the original Investor hereunder.

          4.8 Legends. It is understood that the certificates evidencing the Purchased Shares will bear the legends set forth below:

               (a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

               (b) THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF, AND MAY HAVE CERTAIN REGISTRATION RIGHTS PURSUANT TO, THE PROVISIONS OF A COMMON STOCK PURCHASE AGREEMENT BETWEEN THE COMPANY AND THE HOLDER, WHICH MAY RESTRICT THE TRANSFER OF SUCH SHARES IN CERTAIN CIRCUMSTANCES. A COPY OF SUCH AGREEMENT MAY BE OBTAINED, WITHOUT CHARGE, AT THE COMPANY’S PRINCIPAL OFFICE.

     The legends set forth in (a) and (b) above shall, upon the request of the Investor, be promptly removed by the Company’s transfer agent upon the direction of the Company from any certificate evidencing Purchased Shares upon delivery to the Company of an opinion of counsel

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to the Investor, reasonably satisfactory to the Company, that the legended security can be freely transferred in a public sale without a registration statement being in effect under the Act and in compliance with exemption requirements under applicable state securities laws and that such transfer will not jeopardize the exemption or exemptions from registration pursuant to which the Company issued the Purchased Shares; provided, however, that no such opinion shall be required in connection with routine sales of Purchased Shares pursuant to the Shelf Registration Statement (as defined below) or routine requests for legend removal where the Purchased Shares can be sold by an Investor pursuant to the provisions of Rule 144 (provided that customary forms of brokers’ and sellers’ representation letters are provided in connection with such sales). In connection with any such opinion, the Investor shall provide such certifications as may be reasonably be deemed necessary for the delivery of such opinion.

          4.9 Resale Restrictions. Except as provided in Section 4.7, the Investor will not, prior to the effectiveness of the Shelf Registration Statement (as defined below), directly or indirectly offer, sell, contract or grant an option to sell, pledge, encumber, or otherwise dispose of or otherwise transfer, or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of (whether any such transaction described above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise) (a “Disposition”), any Purchased Shares (other than to donees, stockholders or partners of the Investor who agree to be similarly bound), and after the effective date of the Shelf Registration Statement the Investor will not make any Disposition of Purchased Shares in violation of the Act.

     5. CONDITIONS TO INVESTOR’S OBLIGATIONS AT CLOSING.

          5.1 Closing. The obligations of the Investor under Section 2 of this Agreement to purchase the Purchased Shares at the Closing are subject to the fulfillment or waiver, on or before the Closing, of each of the following conditions, and the Company shall use its best efforts to cause such conditions to be satisfied on or before the Closing:

               5.1.1 Performance. The Company shall have performed and complied in all material respects with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein.

               5.1.2 Registration; Securities Exemptions. The offer and sale of the Purchased Shares to the Investor pursuant to this Agreement shall be exempt from the registration requirements under the Act and applicable state securities laws, and the rules thereunder (the “Law”).

               5.1.3 Opinion of Counsel. The Investor shall have received an opinion of counsel to the Company substantially in the form of Exhibit A attached hereto.

     6. CONDITIONS TO THE COMPANY’S OBLIGATIONS AT CLOSING.

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          6.1. Closing. The obligations of the Company under this Agreement to sell the Purchased Shares to the Investor at the Closing are subject to the fulfillment or waiver, on or before the Closing, of the following conditions, and the Investor shall use his best efforts to cause such conditions to be satisfied on or before the Closing:

               6.1.1 Performance. The Investor shall have performed and complied in all material respects with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by him on or before the Closing and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein.

               6.1.2 Payment of Purchase Price. The Investor shall have delivered to the Company the purchase price for the Purchased Shares in accordance with the provisions of Section 2, subject to the Company’s delivery of certificates for such shares.

     7. REGISTRATION RIGHTS.

          7.1 Definitions. For purposes of this Agreement:

               (a) Form S-3. The term “Form S-3” means such form under the Act as is in effect on the date hereof or any successor registration form under the Act subsequently adopted by the Commission that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the Commission.

               (b) Holder. The term “Holder” shall mean the Investor or such other holder(s) of Registrable Securities that have registration rights pursuant to this Agreement.

               (c) Registration. The terms “register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Act, and the declaration or ordering of effectiveness of such registration statement.

               (d) Registrable Securities. The term “Registrable Securities” means: (i) all of the Purchased Shares, and (ii) any shares of Common Stock of the Company issued or issuable, from time to time, upon any reclassification, share combination, share subdivision, stock split, share dividend, or similar transaction or event, or otherwise as a distribution on, in exchange for or with respect to any of the foregoing; provided, however, that the term “Registrable Securities” shall exclude in all events (and such securities shall not constitute “Registrable Securities”) (A) any Registrable Securities sold or transferred by a person in a transaction in which the registration rights granted under this Agreement are not assigned in accordance with the provisions of this Agreement, (B) any Registrable Securities sold in a public offering pursuant to a registration statement filed with the Commission or sold pursuant to Rule 144 promulgated under the Act (“Rule 144”) or (C) as to any Holder, any Registrable Securities held by such Holder if all of such Registrable Securities can be publicly sold without restriction (including, without limitation, as to volume, but by complying with the manner of sale and Form 144 filing requirements, if applicable) within a three-month period pursuant to Rule 144.

               (e) Prospectus: The term “Prospectus” shall mean the prospectus included in any Shelf Registration Statement (including, without limitation, a prospectus that

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discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Act), as amended or supplemented by any prospectus supplement (including, without limitation, any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by such Shelf Registration Statement), and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

               (f) Shelf Registration Statement. See Section 7.2(a).

          7.2 Form S-3 Shelf Registration.

               (a) Registration. The Company shall prepare and file with the Commission within 30 days following the Closing and use its best efforts (i) to have declared effective as soon as practicable thereafter, a registration statement on Form S-3 (or, if the Company is not then eligible to use Form S-3, then another appropriate form) providing for the resale of all of the Registrable Securities (the “Shelf Registration Statement”), and (ii) to provide a transfer agent and registrar for all securities registered pursuant to the Shelf Registration Statement. The Shelf Registration Statement may include securities other than those held by the Holders. The Company shall use its best efforts to keep the Shelf Registration Statement continuously effective, pursuant to the Act and the Rules and Regulations promulgated thereunder, until the earliest to occur of (i) the second anniversary of the Closing Date, (ii) as to a particular Holder, the date on which the Holder may sell all Registrable Securities then held by such Holder without restriction (including, without limitation, as to volume, but by complying with the manner of sale and Form 144 filing requirements, if applicable) within a three-month period pursuant to Rule 144 and (iii) as to a particular Holder, such time as all Registrable Securities held by such Holder have been sold (A) pursuant to the Shelf Registration Statement, (B) to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, and/or (C) in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect thereto, if any, are removed upon the consummation of such sale (such period, the “Registration Period”). In the event that the Shelf Registration Statement shall cease to be effective during the Registration Period, the Company shall promptly prepare and file a new registration statement covering all Registrable Securities and shall use its commercially reasonable efforts to have such registration statement declared effective as soon as practicable. Any such registration statement shall be considered a “Shelf Registration Statement” hereunder.

               (b) Permitted Window.

                    (i) The Holders agree that they will sell the Registrable Securities pursuant to such registration only during a “Permitted Window” (as defined below). For the purposes of this Agreement, a “Permitted Window” with respect to a Holder is a period of 30 consecutive calendar days commencing upon delivery to the Holder of the Company’s written notification to the Holder in response to a Notice of Resale that the Prospectus contained in the Shelf Registration Statement is available for resale. In order to cause a Permitted Window to commence, the Holder must first give written notice to the Company of such Holder’s bona fide present intention to sell part or all of the Registrable Securities pursuant to such registration

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(a “Notice of Resale”). Upon delivery of such Notice of Resale, the Company will give written notice to the Holders as soon as practicable, but in no event not more than two (2) business days after such delivery, that (A) the Permitted Window will commence on the date such notice is delivered to the Holder, (B) the Company believes it is appropriate for the Company to supplement the Prospectus or make an appropriate filing under the Exchange Act so as to cause the Prospectus to become current (unless a certificate of the President or Chief Executive Officer is delivered as provided in subparagraph (ii) below), or (C) the Company believes it is required under the Act and the Rules and Regulations thereunder to amend the Shelf Registration Statement in order to cause the Prospectus to be current (unless a certificate of the President or Chief Executive Officer is delivered as provided in subparagraph (ii) below). If the Company determines that a supplement to the Prospectus, the filing of a report pursuant to the Exchange Act or an amendment to the Shelf Registration Statement required under the Act, as provided above, is necessary, it will take such actions as soon as reasonably practicable (subject to subparagraph (ii) below and paragraph (c) below), and the Company will notify the Holder of the filing of such supplement, report or amendment, and, in the case of an amendment, the effectiveness thereof, and the Permitted Window will then commence.

                    (ii) If the Company furnishes to the Holders a certificate signed by the President or Chief Executive Officer of the Company stating that, in the good faith judgment of the Company, it would be seriously detrimental to the Company and its stockholders for sales to be made from such Shelf Registration Statement at such time (or, in the case a Notice of Resale has been given, that would be seriously detrimental to the Company and its stockholders for the Permitted Window to commence at such time), or that there exists (A) a material development or potential material development involving the Company which the Company would be obligated to disclose in the Prospectus contained in the Shelf Registration Statement, which disclosure would, in the good faith judgment of the President or Chief Executive Officer or the Board of Directors of the Company, be premature or otherwise inadvisable at such time or (B) a concurrent public filing by the Company with the Commission of a registration statement (other than on Form S-8) registering the offer and sale of shares by the Company, then the Company will have the right (the “Deferral Right”) to defer the commencement of a Permitted Window for a period of not more than 60 days after the date of delivery of the Notice of Resale; provided, however, that the Company will not utilize the Deferral Right more than four (4) times in any 12 month period, that the total number of days covered by exercise of the Deferral Rights in any 12 month period shall not exceed 180 days, and that the Company will exercise all good faith efforts to minimize the period of such delays, consistent with the Company’s good faith business judgment, including without limitation concerning premature public disclosure of confidential or sensitive information; and provided further, however, that the Company may defer the commencement of the Permitted Window for up to 60 days if so requested by an underwriter in connection with an underwritten offering of the Company’s securities so long as any selling stockholders in such underwritten offering are subject to a lock-up agreement of the same duration (other than with respect to the Company securities to be sold by such selling stockholders in such underwritten offering). In connection with any such underwritten offering described in the preceding sentence where commencement of a Permitted Window is deferred, the Holders shall be given the opportunity to participate in the first three (3) such offerings that may occur after the Closing Date by including all or any of their Registrable Securities for sale in any such offering, provided that the right to include any

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Registrable Securities in any such offering shall be subject to (x) the rights of other stockholders of the Company who also have rights to include shares in such offering, (y) the ability of the underwriter for such offering to exclude some or all of the shares requested to be registered on the basis of a good faith determination that inclusion of such securities might adversely affect the success of the offering or otherwise adversely affect the Company (with any such exclusion to be pro rata among all Holders who are requesting to sell Registrable Securities in such registration), and (z) the execution by the Holders of the underwriting agreement and other customary documents requested by the managing underwriter that are executed by other holders selling securities in such offering, and the furnishing of such information and documents as the Company or the managing underwriter may reasonably request in connection with such offering.

               (c) Closing of Permitted Window. During a Permitted Window and in the event (i) of the happening of any event of the kind described in Section 7.2(b)(ii) hereof or (ii) that, in the judgment of the President, Chief Executive Officer or the Company’s Board of Directors, it is advisable to suspend use of the Prospectus for a discrete period of time due to undisclosed pending corporate developments or pending public filings with the Commission (which need not be described in detail), the Company shall deliver a certificate in writing to the Holders to the effect of the foregoing and, upon delivery of such certificate, the Permitted Window shall terminate. The Permitted Window shall resume upon a Holder’s receipt of copies of the supplemented or amended Prospectus, or at such time as the Holder is advised in writing by the Company that the Prospectus may be used, and at such time as the Holder has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such Prospectus and which are required to be delivered as part of the Prospectus. In any event, the Permitted Window shall resume no later than 60 days after it has been terminated pursuant to this Section. If the Company has previously terminated a Permitted Window pursuant to this subsection within 90 days of the date that it delivers another notice pursuant this subsection terminating another Permitted Window, then the time period set forth in the preceding sentence shall be shortened so that the Permitted Window shall resume no later than 30 days after it has been terminated pursuant to such second notice.

               (d) Expenses. The registration fees and expenses incurred by the Company in connection with the Shelf Registration Statement, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, and the expense of any special audits incident to or required by any such registration, shall be borne by the Company. Each Holder shall be responsible for any fees and expenses of its counsel or other advisers. Each Holder shall be responsible for its pro rata share of underwriters’ and brokers’ discounts and commissions relating to any Registrable Securities included in such registration.

               (e) Effect of Failure to Obtain Effectiveness of Shelf Registration Statement. If the Shelf Registration Statement required to be filed by the Company pursuant to this Section 7.2 is not declared effective by the Securities and Exchange Commission on or before the 75^th day following the date of execution hereof, then, as partial relief for the damages to the Holders by reason of any such delay in the Holders’ ability to sell Registrable Securities (which remedy shall not be exclusive of any other remedies available at law or in equity), the Company shall be obligated to pay to the Holders of Registrable Securities an aggregate amount in cash equal to (i) $50,000 as of the 75^th day following the execution hereof, and (ii) $50,000 as

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of every 30^th day thereafter until such failure to obtain effectiveness is cured by the Company. A payment to which the Holders shall be entitled pursuant to this Section 7.2(e) is referred to herein as a “Registration Delay Payment.” A Registration Delay Payment shall be paid on the last day of the calendar month during which such Registration Delay Payment is incurred.

          7.3 Obligations of the Company. The Company shall furnish to the Holder such number of copies of a Prospectus, including a preliminary Prospectus, in conformity with the requirements of the Act, and such other documents (including supplements or prospectus amendments) as the Holder may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities owned by it that are included in such registration. In addition, whenever required to effect the registration of any Registrable Securities under this Agreement, the Company shall, as expeditiously as reasonably possible:

               (a) Use commercially reasonable efforts to (i) register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such states as shall be reasonably requested by the Holder, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions and (ii) to keep such registration or qualification in effect for so long as the Shelf Registration Statement remains in effect, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction where it is not so qualified, or to subject itself to taxation in any such jurisdiction, or to execute a general consent to service of process in effecting such registration, qualification or compliance, unless the Company is already subject to service in such jurisdiction and except as may be required by the Act or applicable rules or regulations thereunder.

               (b) Notify the Holders promptly (and in any event within one (1) business day, by email, fax or other type of communication) (i) of any request by the Commission or any other federal or state governmental authority during the period of effectiveness of a registration statement for amendments or supplements to such registration statement or related prospectus or for additional information, (ii) of the issuance by the Commission or any other federal or state governmental authority of any stop order or similar action suspending the effectiveness of a registration statement or the initiation of any proceedings for that purpose and (iii) of the receipt by the Company from the Commission or any other federal or state governmental authority of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose.

               (c) Use commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of the Shelf Registration Statement as soon as practicable.

               (d) Subject to the limitations described in the second sentence of Section 3.9, use all its commercially reasonable efforts to cause all Registrable Securities to be listed continuously throughout the Registration Period on each securities exchange or market, if any, on which equity securities issued by the company are then listed.

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               (e) Promptly file such amendments to the Shelf Registration Statement and the Prospectus, file such documents as may be required to be incorporated by reference in any of such documents, and take all other actions as may be necessary to ensure to the holders of Registrable Securities the ability to effect the public resale of their Registrable Securities (including, without limitation, taking any actions necessary to ensure the availability of a Prospectus meeting the requirements of Section 10(a) of the Act) continuously throughout the Registration Period; and provide each holder of Registrable Securities copies of any documents prepared pursuant to the foregoing promptly after such preparation.

          7.4 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 7.2 or Section 7.3 that the Holders shall furnish to the Company such information regarding it, the Registrable Securities held by each such Holder, and the intended method of disposition of such securities (and, when necessary, furnish updated information) as shall be required to timely effect (and maintain the effectiveness of) the registration of its Registrable Securities.

          7.5 Indemnification. For the purposes of this Section 7.5, the term “registration statement” shall include any final Prospectus, exhibit, supplement, amendment or other document included in, filed as part of, deemed to be a part of, incorporated by reference in, or otherwise relating to the Shelf Registration Statement referred to in this Section 7.

               (a) By the Company. To the extent permitted by law, the Company will defend, indemnify and hold harmless the Investor, each other Holder, their respective officers and directors, and each person, if any, who controls any Holder (such persons and entities collectively referred to as “Holder Indemnified Parties”), against any losses, expenses (including, without limitation, reasonable legal fees and expenses), damages or liabilities (including in settlement of any claim) to which they may become subject under the Act, the Exchange Act or other federal or state law (a “Loss”), insofar as such Losses (or actions in respect thereof) arise out of any claim, action or proceeding brought by a third party arising out of or based upon any of the following (collectively, a “Violation”):

          (i) any untrue statement or alleged untrue statement of a material fact contained in a registration statement filed pursuant to this Section 7;

          (ii) the omission or alleged omission to state in a registration statement filed pursuant to this Section 7 a material fact required to be stated therein, or necessary to make the statements therein not misleading;

          (iii) any violation or alleged violation by the Company of the Act, the Exchange Act, any federal or state securities law or any rule or regulation promulgated under the Act, the Exchange Act or any federal or state securities law, in each case in connection with the offering covered by such registration statement; or

          (iv) any failure by the Company to fulfill any undertaking included in a registration statement;

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and, if the Company elects not to assume the defense as permitted by Section 7.5(c), the Company will reimburse each Holder Indemnified Party for any legal or other expenses reasonably incurred by them, as incurred, in connection with investigating or defending or settling, compromising or paying an award granted in any proceeding relating to any such Violation; provided,however, that the indemnity agreement contained in this subsection shall not apply to amounts paid in settlement of any such Loss, if such settlement is effected without the prior written consent of the Company, nor shall the Company be liable in any such case for any such Loss to the extent that it arises out of or is based upon a Violation caused by reliance upon and in conformity with written information furnished expressly for use in connection with such registration statement by the Holder Indemnified Party; and provided further, that the Company will not be liable for the reasonable legal fees and expenses of more than one counsel to all Holder Indemnified Parties.

               (b) By the Holders. To the extent permitted by law, each Holder (severally and not jointly with any other Holder) will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the Shelf Registration Statement, and each person, if any, who controls the Company within the meaning of the Act (such persons and entities collectively referred to as “Company Indemnified Parties”) against any Losses to which such Company Indemnified Parties may become subject under the Act, the Exchange Act or other federal or state law, insofar as such Losses (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation is caused by reliance upon and in conformity with written information furnished by the Holder expressly for use in connection with such registration statement; and the Holder will reimburse any legal or other expenses reasonably incurred by such Company Indemnified Parties in connection with investigating or defending any such Violation; provided, however, that the indemnity agreement contained in this subsection shall not apply to amounts paid in settlement of any such Loss if such settlement is effected without the consent of the Holder; provided further, that the Holder shall not be liable for the reasonable legal fees and expenses of more than one counsel to the Company Indemnified Parties.

               (c) Notice. Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim for indemnification in respect thereof is to be made against any indemnifying party under this Section, deliver to the indemnifying party a written notice of the commencement of such an action and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel selected by the indemnifying party and reasonably acceptable to a majority in interest of the indemnified parties; provided, however, that an 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 the indemnified party has been advised in writing by counsel that representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual conflict of interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of liability to the indemnified party under this Section to the extent, and only to the extent that, such delay caused material prejudice to the indemnified or indemnifying party, but the omission so to deliver

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written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section.

               (d) Defect Eliminated in Final Prospectus. The foregoing indemnity agreements of the Company and the Holder are subject to the condition that, insofar as they relate to any Violation made in a preliminary prospectus but eliminated or remedied in the amended Prospectus on file with the Commission at the time the registration statement in question becomes effective or in the amended Prospectus filed with the Commission pursuant to Rule 424(b) of the Commission (the “Final Prospectus”), such indemnity agreements shall not inure to the benefit of any person if a copy of the Final Prospectus was furnished in a timely manner to the indemnified party and was not furnished to the person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Act.

               (e) Contribution. If the indemnification provided for in this Section 7.5 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages, liabilities or expenses (or actions or proceedings in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Holder on the other in connection with the statements or omissions or other matters which resulted in such losses, claims, damages, liabilities or expenses (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, in the case of an untrue statement, whether the untrue statement relates to information supplied by the Company on the one hand or a Holder on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement. The Company and the Investor agree that it would not be just and equitable if contribution pursuant to this subsection (e) were determined by pro rata allocation (even if all Holders were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to above in this subsection (e). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (e), no Holder shall be required to contribute any amount in excess of the net amount of proceeds (i.e., proceeds net of underwriting discounts, fees and commissions payable by such Holder) received by the Holder from the sale of the Registrable Securities. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Contribution (together with any indemnification or other obligations under this Agreement) by any Holder (including any Indemnified Person associated with such Holder) shall be limited in amount to the net amount of proceeds (i.e., proceeds net of underwriting discounts, fees and commissions payable by such Holder) received by such Holder from the sale of the Registrable Securities

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               (f) Survival. The obligations of the Company and the Holder under this Section shall survive the completion of any offering of Registrable Securities in a registration statement, and otherwise.

          7.6 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission, which may at any time permit the sale of the Registrable Securities to the public without registration, the Company agrees to:

               (a) Make and keep adequate, current public information available, as those terms are understood and defined in Rule 144 under the Act, at all times;

               (b) File with the Commission in a timely manner all reports and other documents required of the Company under the Exchange Act; and

               (c) So long as a Holder owns any Registrable Securities, to furnish to the Holder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company as the Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration.

          7.7 Termination of Company’s Obligations. The Company shall have no obligation to register, or maintain, a registration statement governing Registrable Securities, and the restrictive legend described in Section 4.8 will be removed from any certificate representing the Purchased Shares, (i) if all Registrable Securities have been registered and sold pursuant to registrations effected pursuant to this Agreement, or (ii) with respect to any particular Holder, at such time as all Registrable Securities held by such Holder may be sold without restriction (including, without limitation, as to volume, but by complying with the manner of sale and Form 144 filing requirements, if applicable) within a three-month period pursuant to Rule 144, as it may be amended from time to time, including but not limited to amendments that reduce that period of time that securities must be held before such securities may be sold pursuant to such rule.

     8. ASSIGNMENT. Notwithstanding anything herein to the contrary, the registration rights of the Investor under Section 7 hereof shall be automatically assigned by the Investor to any transferee of all or any portion of the Investor’s Registrable Securities who is a Permitted Transferee (as defined below); provided, however, that (a) no party may be assigned any of the foregoing rights until the Company is given written notice by the assigning party at the time of such assignment stating the name and address of the assignee and identifying the securities of the Company as to which the rights in question are being assigned; (b) that any such assignee shall receive such assigned rights subject to all the terms and conditions of this Agreement; and (c) no such assignment or assignments shall increase the obligations of the Company hereunder. For purposes of this Agreement, a “Permitted Transferee” shall mean any person who (x) is (i) an “accredited investor” as that term is defined in Rule 501(a) of Regulation D under the Act; (ii) a partner of such Holder, an affiliate of such Holder or a partner of an affiliate or any corporation, partnership, limited liability company or other entity or person controlling, controlled by, or under common control with, such Holder; or (iii) any other direct

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transferee from such Holder of at least 25% of the Registrable Securities held by such Holder and (y) is a transferee of the Registrable Securities as permitted under the securities laws of the United States.

     9. MISCELLANEOUS.

          9.1 Survival of Warranties. The representations, warranties and covenants of the Company and the Investor contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of the Investor, his counsel or the Company, as the case may be.

          9.2 Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties.

          9.3 Governing Law; Consent to Jurisdiction. This Agreement shall be governed by and construed under the internal laws of the State of Delaware as applied to agreements among Delaware residents entered into and to be performed entirely within Delaware, without reference to principles of conflict of laws or choice of laws.

          9.4 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

          9.5 Headings. The headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs, exhibits, and schedules shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits and schedules attached hereto, all of which exhibits and schedules are incorporated herein by this reference.

          9.6 Notices. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified, by telecopier or facsimile, or upon deposit with the United States Post Office, by registered or certified mail, postage prepaid and addressed to the party to be notified in the case of the Company, at 8320 Guilford Road, Columbia, Maryland 21046, Attention: President, with a copy to David A. White, Esq., White White & Van Etten LLP, 55 Cambridge Parkway, Suite 101, Cambridge, Massachusetts 02142, facsimile (617) 225-0205, or in the case of the Investor, at the record address for the Investor as reflected on the books of the Company, with copies to Michael S. McKinney, Esq., Gregory Management Co., LLC, 620 Shelby Street, Bristol, Tennessee 37620 facsimile (423) 793-0129, or at such other address as any party may designate by giving 10 days advance written notice to the other party. Notices shall be deemed delivered upon delivery if personally delivered, one (1) business day after transmission with confirmation of receipt if sent by telecopier or facsimile, or three (3) days after deposit in the mails if mailed.

          9.7 No Finder’s Fees. Each party represents that it neither is nor will be obligated for any finder’s or broker’s fee or commission in connection with this transaction. The Investor agrees to indemnify and to hold harmless the Company from any liability for any

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commission or compensation in the nature of a finder’s or broker’s fee (and any asserted liability) for which the Investor or any of his partners, employees, or representatives is responsible, and the Company agrees to indemnify and to hold harmless the Investor from any liability for any commission or compensation in the nature of a finder’s or broker’s fee (and any asserted liability) for which the Company or any of its officers, employees or representatives is responsible.

          9.8 Costs, Expenses. Each party’s costs in connection with the preparation, execution delivery and performance of this Agreement (including without limitation legal fees) shall be borne by that party.

          9.9 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Investor.

          9.10 Severability. If one or more provisions of this Agreement are held to be invalid, illegal or unenforceable under applicable law, such provision(s) shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms.

          9.11 Entire Agreement. This Agreement, together with any exhibits or schedules hereto, constitutes the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes any and all prior negotiations, correspondence, agreements, understandings, duties or obligations between the parties with respect to the subject matter hereof.

          9.12 Further Assurances. From and after the date of this Agreement, upon the request of the Investor or the Company, the Company or the Investor, as applicable, shall execute and deliver such instruments, documents or other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.

          9.13 Termination.

               (a) By the Investor: The Investor may terminate this Agreement immediately if, at any time prior to the Closing, (i) the Company shall cease conducting business in the normal course; becomes insolvent or unable to meet its obligations as they become due; makes a general assignment for the benefit of creditors; petitions, applies for, suffers or permits with or without its consent the appointment of a custodian, receiver, trustee in bankruptcy or similar officer for all or any substantial part of its business or assets; avails itself or becomes subject to any proceeding under the Federal Bankruptcy Code or any similar state, federal or foreign statute relating to bankruptcy, insolvency, reorganization, receivership, arrangement, adjustment of debts, dissolutions or liquidation or (ii) the Company shall have breached or failed to perform any of its representations, warranties, covenants or agreements set forth in this Agreement, which breach or failure to perform (A) would give rise to the failure of a condition set forth in Section 5.1.2 and (B) is incapable of being cured or has not been cured by the

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Company within ten (10) calendar days following receipt of written notice of such breach or failure to perform from the Investor.

               (b) By the Company or the Investor: The Company or the Investor may terminate this Agreement at any time after July 23, 2004 if the Closing has not occurred prior to such date, or such later date as the Company and the Investor shall have agreed to extend the offering.

               (c) By the Company: The Company may terminate this Agreement if the Investor shall have breached or failed to perform any of his representations, warranties, covenants or agreements set forth in this Agreement, which breach or failure to perform (i) would give rise to the failure of a condition set forth in Section 6.1.1 and (ii) is incapable of being cured or has not been cured by the Investor within ten (10) calendar days following receipt of written notice of such breach or failure to perform from the Company.

          9.14. Public Announcements. The parties agree that the initial press release to be issued with respect to the transactions contemplated by this Agreement shall be in the form heretofore agreed to by the parties. The Investor and the Company shall consult with each other before issuing, and give each other the opportunity to review and comment upon, any subsequent press release primarily relating to the transactions contemplated by this Agreement, and shall not issue any such press release prior to such consultation, except as may be required by applicable law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system.

          9.15. Standstill. Without the prior written consent of the Company, during the period commencing on the date of this Agreement and ending 12 months following the Closing Date, neither the Investor nor any of his affiliates, agents or representatives, will (i) acquire or offer, seek, propose or agree to acquire, by purchase or otherwise, any voting securities or assets or direct or indirect rights or options to acquire any voting securities, or securities or instruments convertible into voting securities, or assets of the Company (other than acquisition of securities which, together with all of the Investor’s other securities in the Company, do not exceed ten percent (10%) of the number of outstanding shares of Common Stock of the Company), (ii) form, join or in any way participate, directly or indirectly, in a “group” within the meaning of Section 13(d)(3) of the Exchange Act, as amended, with respect to any voting securities of the Company, (iii) propose or seek a merger, consolidation or recapitalization involving the Company or propose or seek the disposition of substantially all of the assets of the Company or any similar transaction, (iv) seek to effect a change in control of the Company or its Board of Directors, (v) nominate any person as a director of the Company who is not nominated by the then incumbent directors of the Company, or propose any matter to be voted on by the stockholders of the Company, (vi) publicly announce or disclose any intention, plan or arrangement inconsistent with the foregoing clauses (i) through (v), or (vii) take any action that would require the Company to make a public announcement regarding any of the matters prohibited by the foregoing clauses.

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     IN WITNESS WHEREOF, the parties hereto have executed this Common Stock Purchase Agreement as of the date first above written.

THE COMPANY:	INVESTOR:
Novavax, Inc.,	Joseph R. Gregory
a Delaware corporation
By: /s/ Nelson M. Sims	/s/ Joseph R. Gregory
Title: President/Chief Executive Officer

[COUNTERPART SIGNATURE PAGE
COMMON STOCK PURCHASE AGREEMENT]

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EX-99.3

Exhibit 99.3

SECURITIES PURCHASE AGREEMENT

          SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of July 16, 2004 by and among Novavax, Inc., a Delaware corporation, with headquarters located at 8320 Guilford Road, Suite C, Columbia, Maryland 21046 (the “Company”), and the investors listed on the Schedule of Buyers attached hereto (individually, a “Buyer” and collectively, the “Buyers”).

          WHEREAS:

     A. The Company and each Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Rule 144A (“Rule 144A”) of the Securities Act of 1933, as amended (the “1933 Act”), by Section 4(2) of the 1933 Act and Rule 506 of Regulation D (“Regulation D”), all as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the 1933 Act.

     B. The Company has authorized a new series of senior convertible notes of the Company in the form attached hereto as Exhibit A (together with any senior convertible notes issued in replacement thereof in accordance with the terms thereof, the “Notes”), which Notes shall be convertible into or redeemable for shares of the Company’s common stock, par value $.01 per share (the “Common Stock”) (as converted or so redeemed, the “Conversion Shares”), in each case, in accordance with and subject to the terms of the Notes.

     C. Each Buyer wishes to purchase, severally but not jointly, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, that aggregate principal amount of Notes set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers (which aggregate principal amount for all Buyers shall be $35,000,000.

     D. Contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement, substantially in the form attached hereto as Exhibit B (the “Registration Rights Agreement”), pursuant to which the Company has agreed to provide certain registration rights with respect to the Conversion Shares under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws.

     E. The Notes and the Conversion Shares collectively are referred to herein as the “Securities”.

          NOW, THEREFORE, the Company and each Buyer hereby agree as follows:

     1. PURCHASE AND SALE OF NOTES.

          (a) Purchase of Notes.

               (i) Notes. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall issue and sell to each Buyer, and each Buyer

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severally, but not jointly, agrees to purchase from the Company on the Closing Date (as defined below), a principal amount of Notes as is set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers.

               (ii) Closing. The closing of the purchase of the Notes (the “Closing”) shall occur on the Closing Date at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022.

               (iii) Purchase Price. The purchase price for each Buyer (the “Purchase Price”) of the Notes to be purchased by each such Buyer at the Closing shall be equal to the amount set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers.

          (b) Closing Date. The date and time of the Closing (the “Closing Date”) shall be 10:00 a.m., New York City Time, on July 19, 2004, subject to notification of satisfaction (or waiver) of the conditions to the Closing set forth in Sections 6 and 7 below (or such other time or date as is mutually agreed to by the Company and each Buyer).

          (c) Form of Payment. On the Closing Date, (i) each Buyer shall pay its Purchase Price to the Company for the Notes to be issued and sold to such Buyer at Closing, by wire transfer of immediately available funds in accordance with the Company’s written wire instructions, and (ii) the Company shall deliver to each Buyer the Notes (in the principal amounts as such Buyer shall request) which such Buyer is then purchasing, duly executed on behalf of the Company and registered in the name of such Buyer or its designee.

     2. BUYER’S REPRESENTATIONS AND WARRANTIES.

          Each Buyer represents and warrants with respect to only itself that:

          (a) No Public Sale or Distribution. Such Buyer is (i) acquiring the Notes, and (ii) upon conversion of the Notes will acquire the Conversion Shares, for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the 1933 Act; provided, however, that by making the representations herein, such Buyer does not agree to hold any of 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 under the 1933 Act. Such Buyer is acquiring the Securities hereunder in the ordinary course of its business. Such Buyer presently does not have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Securities.

          (b) Qualified Institutional Buyer; Accredited Investor Status. Such Buyer is a “qualified institutional buyer” as defined in Rule 144A (a “QIB”) and an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.

          (c) Reliance on Exemptions. Such Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and such Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Buyer set forth herein in order to

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determine the availability of such exemptions and the eligibility of such Buyer to acquire the Securities.

          (d) Information. Such Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by such Buyer. Such Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if any, or its representatives shall modify, amend or affect such Buyer’s right to rely on the Company’s representations and warranties contained herein. Such Buyer understands that its investment in the Securities involves a high degree of risk. Such Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities.

          (e) No Governmental Review. Such Buyer understands that no Governmental Authority (as defined in Section 3(n)) has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

          (f) Transfer or Resale. Such Buyer understands that except as provided in the Registration Rights Agreement: (i) the Securities have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have delivered to the Company an opinion of counsel reasonably acceptable to the Company, in a form reasonably acceptable to the Company, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, (C) transferred to an Affiliate (as defined in Rule 144, an “Affiliate”) of such Buyer or (D) such Buyer provides the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act, as amended (or a successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the Person (as defined in Section 3(e)) through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other Person is under any obligation to register the Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.

          (g) Legends. Such Buyer understands that the certificates or other instruments representing the Notes and, until such time as the resale of the Conversion Shares have been registered under the 1933 Act as contemplated by the Registration Rights Agreement, the stock certificates representing the Conversion Shares, except as set forth below, shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such certificates or other instruments):

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[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN] [THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO NOVAVAX, INC., THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Securities upon which it is stamped, if, unless otherwise required by state securities laws, (i) such Securities are registered for resale under the 1933 Act, (ii) in connection with a sale, assignment or other transfer, such holder provides the Company with an opinion of counsel, in a form reasonably acceptable to the Company, to the effect that such legend is not required under the applicable requirements of the 1933 Act, or (iii) such holder provides the Company with reasonable assurance that the Securities can be sold, assigned or transferred pursuant to Rule 144.

          (h) Validity; Enforcement. This Agreement and the Registration Rights Agreement have been duly and validly authorized, executed and delivered on behalf of such Buyer and shall constitute the legal, valid and binding obligations of such Buyer, enforceable against such Buyer in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

          (i) No Conflicts. The execution, delivery and performance by such Buyer of this Agreement and the Registration Rights Agreement and the consummation by such Buyer of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of such Buyer 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 such Buyer is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to such Buyer, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which could not, individually or in the aggregate, reasonably be expected to adversely effect the legality, validity or enforceability of, or the ability of such Buyer to perform its obligations under any of the Transaction Documents (as defined in Section 3(b)).

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          (j) Residency; Organization; Good Standing and Qualification. Such Buyer is a resident of that jurisdiction specified below its address on the Schedule of Buyers. Such Buyer is a partnership, limited partnership or limited liability company duly organized, validly existing and, to the extent applicable, in good standing under the laws of its jurisdiction of formation or organization (as set forth on the Schedule of Buyers) and has all necessary power and authority to carry on its business as now conducted.

          (k) Trading in Common Stock. Since the date such Buyer has entered into a confidentiality agreement with the Company (which for purposes of the application of this Section 2(k) to Deutsche Bank AG London (“Deutsche Bank”) shall mean the confidentiality agreement entered into between the Company and National Hall Capital, LLC, as agent for Deutsche Bank), such Buyer (which for purposes of the application of this Section 2(k) to Deutsche Bank shall mean only those employees of Deutsche Bank with knowledge of the transaction contemplated by this Agreement) has not entered into, and shall not enter into prior to the 8-K Filing (as defined in Section 4(i)), any purchase or sale of the Common Stock or executed any Short Sales. For purposes of this Section, “Short Sales” means all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, short sales, swaps (including on a total return basis), and sales and any other similar transactions whether or not having the effect of hedging any position in the Common Stock..

     Each Buyer acknowledges and agrees that the Company does not make and has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in the Transaction Documents.

     3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

          The Company hereby represents and warrants to each of the Buyers as follows (which representations and warranties shall be deemed to apply, where appropriate, to each Subsidiary of the Company), subject to the disclosures contained in the Company Disclosure Letter attached hereto (the “Company Disclosure Letter”):

          (a) Subsidiaries. The Company has no direct or indirect Subsidiaries other than those listed on Schedule 3(a) in the Company Disclosure Letter. Except as disclosed on Schedule 3(a) in the Company Disclosure Letter, the Company owns, directly or indirectly, the capital stock or comparable equity interests of each Subsidiary free and clear of any Lien (as defined in Section 3(f) below) and all the issued and outstanding shares of capital stock or comparable equity interest of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights. For purposes of this Agreement, “Subsidiary” means any entity in which the Company, directly or indirectly, owns or holds any capital stock or equity or similar interest.

          (b) Organization and Qualification. Each of the Company and the Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational

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or charter documents. Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not, individually or in the aggregate, (i) adversely affect the legality, validity or enforceability of any Transaction Document, (ii) reasonably be expected to have or result in a material adverse effect on the results of operations, assets, properties, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole on a consolidated basis, or (iii) adversely impair the Company’s ability to perform its obligations under any of the Transaction Documents (any of (i), (ii) or (iii), a “Material Adverse Effect”). For purposes of this Agreement, “Transaction Documents” means, collectively, this Agreement, the Notes, the Registration Rights Agreement and the Irrevocable Transfer Agent Instructions (as defined in Section 5(b)) and each of the Exhibits to this Agreement.

          (c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions under each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents and the consummation by it of the transactions hereunder and thereunder, including, without limitation, the issuance of the Notes and the reservation for issuance of the Conversion Shares issuable upon conversion, redemption or other payment thereof, have been duly authorized by all necessary action on the part of the Company and no further consent or action is required by the Company, its Board of Directors or its stockholders. Each of the Transaction Documents has been (or, if executed after the date hereof, upon delivery will be) duly executed by the Company and is, or when delivered in accordance with the terms hereof, will constitute, the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by general principles of equity or by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

          (d) No Conflicts. Except as disclosed on Schedule 3(d) in the Company Disclosure Letter, the execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Notes and the reservation for issuance of the Conversion Shares issuable upon conversion, redemption or other payment thereof, do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that 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 (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a debt of the Company or a Subsidiary or otherwise) to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, except to the extent that such conflict, default or, amendment, acceleration or cancellation right could not reasonably be expected to have a Material Adverse Effect, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or Governmental Authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations

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and the rules and regulations of the Nasdaq National Market (the “Principal Market”) or any other self-regulatory organization to which the Company or its securities are subject), or by which any property or asset of the Company or a Subsidiary is bound or affected, except to the extent that such violations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

          (e) Consents. Except as disclosed on Schedule 3(e) in the Company Disclosure Letter, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, Governmental Authority or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its obligations under the Transaction Documents, in each case in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the Closing Date. The Company and its Subsidiaries have no knowledge of any facts or circumstances which could reasonably be expected to prevent the Company from obtaining or effecting any of the foregoing. For purposes of this Agreement, “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

          (f) Issuance of the Securities. Except as disclosed on Schedule 3(f) in the Company Disclosure Letter, the Securities are duly authorized and, when issued and paid for in accordance with the Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all liens, charges, claims, security interests, encumbrances, rights of first refusal or other restrictions (“Liens”) and shall not be subject to preemptive rights or similar rights of stockholders. As of the Closing, the Company shall have reserved from its duly authorized capital stock not less than the maximum number of shares of Common Stock issuable upon conversion of the Notes (without regard to any limitations on the conversion of the Notes set forth in the Notes).

          (g) Dilutive Effect. The Company understands and acknowledges that the number of Conversion Shares issuable upon conversion or redemption of the Notes will increase in certain circumstances. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion or redemption of the Notes in accordance with this Agreement and the Notes is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company.

          (h) Capitalization. As of the date hereof, the authorized capital stock of the Company consists of 102,000,000 shares, 100,000,000 shares of which are Common Stock, and 2,000,000 shares of which are preferred stock, $.01 par value per share. As of the date hereof, there are 34,825,885 issued and outstanding shares of Common Stock. There are no shares of preferred stock outstanding on the date hereof. All outstanding shares of capital stock are duly authorized, validly issued, fully paid and nonassessable and have been issued in compliance with all applicable securities laws. Except as disclosed on Schedule 3(h) in the Company Disclosure Letter, (i) no shares of the Company’s capital stock are subject to preemptive rights or any other similar rights or any Liens suffered or permitted by the Company, (ii) there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for,

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or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock and (iii) there are no securities or instruments containing anti-dilution, pre-emptive or similar provisions that will be triggered by the issuance of the Securities. The issue and sale of the Securities (including the Conversion Shares) will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Buyers) and will not result in a right of any holder of securities of the Company to adjust the exercise, conversion, exchange or reset price under such securities. Except as disclosed on Schedule 3(h) in the Company Disclosure Schedule, to the knowledge of the Company, no Person or group of related Persons beneficially owns (as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “1934 Act”)), or has the right to acquire, by agreement with or by obligation binding upon the Company, beneficial ownership of in excess of 5% of the outstanding Common Stock.

          (i) SEC Reports; Financial Statements. The Company has filed all reports required to be filed by it under the 1934 Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof, (the foregoing materials (together with any materials filed by the Company under the 1934 Act, whether or not required) being collectively referred to herein as the “SEC Reports” and, together with this Agreement and the Schedules to this Agreement, the “Disclosure Materials”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the 1933 Act and the 1934 Act and the rules and regulations of the SEC promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. All material agreements to which the Company or any Subsidiary is a party or to which the property or assets of the Company or any Subsidiary are subject are included as part of or specifically identified in the SEC Reports to the extent required by the rules and regulations of the SEC as in effect at the time of filing.

          (j) Material Changes. Since the date of the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003, except as disclosed on Schedule 3(j) in the Company Disclosure Letter (i) there has been no event, occurrence or development that, individually or in the aggregate, has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses

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incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the SEC, (iii) the Company has not altered its method of accounting or the identity of its auditors, except as disclosed in its SEC Reports, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, (v) the Company has not declared or paid any dividends, (vi) the Company has not sold any assets, individually or in the aggregate, in excess of $250,000 outside of the ordinary course of business and (vii) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock-based plans.

          (k) Indebtedness. Except as disclosed on Schedule 3(k) in the Company Disclosure Letter neither the Company nor any of its Subsidiaries has any outstanding Indebtedness (as defined below). Schedule 3(k) in the Company Disclosure Letter provides a description of the material terms of any such outstanding Indebtedness. Except as disclosed on Schedule 3(k) in the Company Disclosure Letter, no Indebtedness of the Company is senior to or ranks pari passu with the Notes in right of payment, whether with respect of payment of redemptions, interest, damages or upon liquidation or dissolution or otherwise. For purposes of this Agreement: (i) “Indebtedness” of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (other than trade payables entered into in the ordinary course of business), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in accordance with GAAP, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above; and (ii) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

          (l) Absence of Litigation. Except as disclosed on Schedule 3(l) in the Company Disclosure Letter, there is no action, suit, claim, proceeding, inquiry or investigation before or by the Principal Market, any court, public board, Governmental Authority, self-regulatory

9

organization or body pending and of which the Company has received notice or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries that could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

          (m) Compliance. Except as disclosed on Schedule 3(m) in the Company Disclosure Letter, neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received written notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties or assets is bound or affected (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or Governmental Authority, or (iii) is or has been in the two years prior to the date hereof in violation of any statute, rule or regulation of any Governmental Authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect.

          (n) Title. The Company and its Subsidiaries have good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all Liens except (i) immaterial Liens for taxes not yet delinquent, (ii) immaterial mechanics’ and materialmen’s Liens (and other similar Liens), and immaterial Liens under operating and similar agreements, to the extent the same relate to expenses incurred in the ordinary course of business and that are not yet due, (iii) that are routine Governmental Approvals, or (iv) such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and any of its Subsidiaries (collectively, “Permitted Liens”). Neither the Company nor any of its Subsidiaries owns any real property. Any real property and facilities held under lease by the Company and any of its Subsidiaries are held by them under leases that are valid, subsisting and enforceable against the Company and any such Subsidiaries, with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries. For purposes of this Agreement: (a) “Governmental Approval” means any authorization, approval, consent, franchise, license, covenant, order, ruling, permit, certification, exemption, notice, declaration or similar right, undertaking or other action of, to or by, or any filing, qualification or registration with, any Governmental Authority; and (b) “Governmental Authority” means any nation or government, any state, province, city, municipal entity or other political subdivision thereof, and any governmental, executive, legislative, judicial, administrative or regulatory agency, department, authority, instrumentality, commission, board or similar body, whether federal, state, provincial, territorial, local or foreign.

          (o) Certain Fees. Other than fees payable to Banc of America Securities LLC as placement agent (the “Agent”), no brokerage or finder’s fees or commissions or any other payment, whether in the form of cash, securities or other consideration, or any combination of the foregoing, are or will be payable, directly or indirectly, by the Company, any Subsidiary or

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any Affiliate thereof to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person directly or indirectly with respect to the transactions contemplated by this Agreement or any of the other Transaction Documents, and the Company has not taken any action that would cause any Buyer to be liable for any such fees or commissions pursuant to any agreement or arrangement to which the Company is a party. The Company shall pay, and hold each Buyer harmless against, any liability, loss or expense (including, without limitation, attorney’s fees and out-of-pocket expenses) arising in connection with any claim against any Buyer relating thereto.

          (p) Private Placement. Neither the Company nor any Person acting on the Company’s behalf has sold or offered to sell or solicited any offer to buy the Securities by means of any form of general solicitation or advertising. Neither the Company nor any of its Affiliates nor any person acting on the Company’s behalf has, directly or indirectly, at any time within the past six months, made any offer or sale of any security or solicitation of any offer to buy any security under circumstances that would (i) eliminate the availability of the exemption from registration under Regulation D in connection with the offer and sale by the Company of the Securities as contemplated hereby or (ii) cause the offering of the Securities pursuant to the Transaction Documents to be integrated with prior offerings by the Company for purposes of any applicable law, regulation or stockholder approval provisions, including, without limitation, under the rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or designated. The Company is not, and is not an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company is not a United States real property holding corporation within the meaning of the Foreign Investment in Real Property Tax Act of 1980.

          (q) Form S-3 Eligibility. The Company is eligible to register the Conversion Shares for resale by the Buyers using Form S-3 promulgated under the 1933 Act.

          (r) Listing and Maintenance Requirements. During the twelve (12) months prior to the date hereof, the Company has been in compliance with all listing and maintenance requirements for the Principal Market except, in each case, as could not reasonably be expected to result in a Material Adverse Effect. The Company has no knowledge of any facts or circumstances which would reasonably be expected to lead to delisting or suspension of the Common Stock by the Principal Market in the foreseeable future. During the twelve (12) months prior to the date hereof, the Company has not received any communication, written or oral, from the SEC or the Principal Market regarding the suspension or delisting of the Common Stock from the Principal Market.

          (s) Registration Rights. Except as disclosed on Schedule 3(s) in the Company Disclosure Letter, the Company has not granted or agreed to grant to any Person any rights (including “piggy-back” registration rights) to have any securities of the Company registered with the SEC or any other Governmental Authority that have not been satisfied.

          (t) Application of Takeover Protections. There is no control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s charter documents or the laws of its state of incorporation that is or could become applicable to any of the Buyers solely as a result of the

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Buyers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including, without limitation, as a result of the Company’s issuance of the Securities and the Buyers’ ownership of the Securities.

          (u) Disclosure. The Company confirms that neither it nor any other Person acting on its behalf has provided any of the Buyers or their agents or counsel with any information that constitutes or could reasonably be expected to constitute material, nonpublic information other than as set forth on Schedule 3(u) in the Company Disclosure Letter. The Company understands and confirms that each of the Buyers will rely on the foregoing representations in effecting transactions in securities of the Company. All disclosure provided to the Buyers regarding the Company, its business and the transactions contemplated hereby, including the Schedules to this Agreement, furnished by or on behalf of the Company taken as a whole is true and correct and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. Each press release issued by the Company during the twelve (12) months preceding the date of this Agreement did not at the time of release contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. No event or circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed.

          (v) Acknowledgment Regarding Buyers’ Purchase of Company Securities. The Company acknowledges and agrees that each of the Buyers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that no Buyer is acting as a financial advisor or fiduciary of the Company or any other Buyer (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby and any advice given by any Buyer or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Buyers’ purchase of the Securities. The Company further represents to each Buyer that the Company’s decision to enter into the Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby and thereby by the Company and its representatives.

          (w) Patents and Trademarks. Except as disclosed on Schedule 3(w) in the Company Disclosure Letter, to the knowledge of the Company, the Company and the Subsidiaries own all material Intellectual Property Rights (as defined hereafter) or have rights to use all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and other similar rights that are necessary or material for use in connection with their respective businesses as currently conducted and which the failure to so have could reasonably be expected to have a Material Adverse Effect (collectively, “Intellectual Property Rights”). Neither the Company nor any Subsidiary has received a written notice that the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person except as could not reasonably be expected to result in a Material

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Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights, except as could not reasonably be expected to result in a Material Adverse Effect.

          (x) Regulatory Permits. The Company and the Subsidiaries possess all Governmental Approvals issued by the appropriate Governmental Authorities necessary to conduct their respective businesses as currently conducted, except where the failure to possess such Governmental Approvals could not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect (“Material Permits"), and neither the Company nor any Subsidiary has received any written notice of proceedings relating to the revocation or modification of any Material Permit except as described in the SEC Reports or as could not reasonably be expected to result in a Material Adverse Effect.

          (y) Transactions With Affiliates and Employees. Except as set forth in the SEC Reports, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors) exceeding $60,000, including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a material interest or is an officer, director, trustee or partner.

          (z) Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged. Neither the Company nor any Subsidiary has any knowledge that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business.

          (aa) Solvency. Based on the financial condition of the Company as of the Closing Date, both prior to and immediately after giving effect to the transactions described in this Agreement and in the agreements set forth on Schedule 3(u) to the Company Disclosure Letter to occur on the Closing Date, (i) the Company’s fair saleable value of its assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature; (ii) the Company’s assets do not constitute unreasonably small capital to carry any business or transaction in which the Company is, or is about to be, engaged and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all reasonably anticipated uses of the cash, will be sufficient to pay all amounts on or in respect of its debt when such amounts become due. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt).

          (bb) Internal Accounting Controls. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that

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(i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountablility, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

          (cc) Tax Status. The Company and each of the Subsidiaries (i) has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all such 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 (iii) has set aside on its books provision reasonably adequate for the payment of all such taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid federal or state income taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.

          (dd) Employee Relations. Neither the Company nor any of the Subsidiaries is a party to any collective bargaining agreement or employs any member of a union. To the knowledge of the Company, the Company’s and each Subsidiary’s relations with their employees are good, except where the failure of such relationships to be good could be, individually or in the aggregate, reasonably expected to have a Material Adverse Effect. No executive officer of the Company (as defined in Rule 501(f) of the 1933 Act) has notified the Company that such officer intends to leave the Company or otherwise terminate such officer’s employment with the Company. No executive officer of the Company, to the knowledge of the Company, is in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant.

          (ee) Foreign Corrupt Practices Act. Neither the Company, nor any Subsidiaries, nor any director, officer, agent, employee or other Person acting on behalf of the Company or any Subsidiaries has, in the course of its actions for, or on behalf of, the Company (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

          (ff) Sarbanes-Oxley Act. The Company is in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 and any and all applicable rules and regulations promulgated by the SEC thereunder, except where such noncompliance would not have, individually or in the aggregate, a Material Adverse Effect.

          (gg) Manipulation of Price. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to

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result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) other than the Agent, sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) other than the Agent, paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Company.

          (hh) FDA Matters. As to each product subject to the jurisdiction of the U.S. Food and Drug Administration (“FDA”) under the Federal Food, Drug and Cosmetic Act, as amended, and the regulations thereunder (“FDCA”) that is manufactured, packaged, labeled, tested, distributed, sold, and/or marketed by the Company or any of its Subsidiaries (each such product, a “Pharmaceutical Product”), to the knowledge of the Company, such Pharmaceutical Product is being manufactured, packaged, labeled, tested, distributed, sold and/or marketed by the Company in compliance with all applicable requirements under FDCA and similar laws, rules and regulations relating to registration, investigational use, premarket clearance, licensure, or application approval, good manufacturing practices, good laboratory practices, good clinical practices, product listing, quotas, labeling, advertising, record keeping and filing of reports except where the failure to be in compliance would not have a Material Adverse Effect. There is no pending, completed or, to the Company’s knowledge, threatened action (including any lawsuit, arbitration, or legal or administrative or regulatory proceeding, charge, complaint, or investigation) against the Company or any of its subsidiaries, and none of the Company or any of its subsidiaries has received any notice, warning letter or other communication from the FDA or any other governmental entity, which (i) contests the premarket clearance, licensure, registration, or approval of, the uses of, the distribution of, the manufacturing or packaging of, the testing of, the sale of, or the labeling and promotion of any Pharmaceutical Product, (ii) withdraws its approval of, requests the recall, suspension, or seizure of, or withdraws or orders the withdrawal of advertising or sales promotional materials relating to, any Pharmaceutical Product, (iii) imposes a clinical hold on any clinical investigation by the Company or any of its subsidiaries, (iv) enjoins production at any facility of the Company or any of its subsidiaries, (v) enters or proposes to enter into a consent decree of permanent injunction with the Company or any of its subsidiaries, or (vi) otherwise alleges any violation of any laws, rules or regulations by the Company or any of its subsidiaries, and which, either individually or in the aggregate, would have a Material Adverse Effect.

     The Company acknowledges and agrees that no Buyer makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in the Transaction Documents.

     4. COVENANTS.

          (a) Reasonable Best Efforts; Good Faith. Each party shall (i) use its reasonable best efforts timely to satisfy each of the conditions to be satisfied by it as provided in Sections 6 and 7 of this Agreement and (ii) shall exercise its rights and perform its obligations under the Transaction Documents in good faith.

          (b) Form D and Blue Sky. The Company agrees to file a Form D with respect to the Securities to the extent required under Regulation D and to provide a copy thereof to each Buyer promptly after any such filing. The Company shall, on or before the Closing Date, take

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such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Securities for sale to the Buyers at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyers on or prior to the Closing Date. The Company shall make all filings and reports relating to the offer and sale of the Securities required under applicable securities or “Blue Sky” laws of the states of the United States following the Closing Date.

          (c) Reporting Status. Except in accordance with the applicable provisions of the Notes, until 180 days after the date on which the Notes are no longer outstanding (the “Reporting Period”), the Company shall file all reports required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would otherwise permit such termination.

          (d) Use of Proceeds. The Company will use the proceeds from the sale of the Notes as disclosed on Schedule 4(d) in the Company Disclosure Letter.

          (e) Financial Information. The Company agrees to send during the Reporting Period the following to each Buyer who purchased on the Closing Date at least $10 million principal amount of Notes (i) unless the following are filed with the SEC through EDGAR and are available to the public through the EDGAR system, within three (3) Business Days after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any registration statements (other than on Form S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day as the public release thereof, facsimile copies of all press releases issued by the Company or any of its Subsidiaries, and (iii) copies of any notices and other information made available or given to the stockholders of the Company generally, contemporaneously with the making available or giving thereof to the stockholders. As used herein, “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

          (f) Listing. The Company shall promptly secure the listing of all of the Registrable Securities (as defined in the Registration Rights Agreement) upon each national securities exchange and automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Registrable Securities from time to time issuable under the terms of the Transaction Documents. The Company shall use reasonable best efforts to maintain the Common Stock’s authorization for quotation on the Principal Market. Other than in accordance with the provisions of the Notes and until 180 days after the date on which the Notes are no longer outstanding, neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the Common Stock on the Principal Market. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 4(f).

          (g) Fees. Subject to Section 8 below, at the Closing, the Company shall pay an expense allowance of up to $50,000 (in addition to any amounts previously paid) to Smithfield

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Fiduciary LLC (a Buyer) or its designee(s) for reimbursement of documented, reasonable legal and due diligence expenses incurred in connection with the transactions contemplated by the Transaction Documents, which additional amount shall be withheld by such Buyer from its Purchase Price at the Closing. To the extent that such expenses incurred are in excess of $25,000 and up to $50,000 (“Additional Expenses”), the Company shall be entitled to deduct the amount of such Additional Expenses from the fees and commissions payable to the Agent. The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or broker’s commissions relating to or arising out of the transactions contemplated hereby, including, without limitation, any fees or commissions payable to the Agent. The Company shall pay, and hold each Buyer harmless against, any liability, loss or expense (including, without limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in connection with any claim relating to any such payment. Except as otherwise set forth in the Transaction Documents, each party to this Agreement shall bear its own expenses in connection with the sale of the Securities to the Buyers.

          (h) Pledge of Securities. The Company acknowledges and agrees that the Securities may be pledged by an Investor in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Investor effecting a pledge of Securities shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document, including, without limitation, Section 2(f) of this Agreement; provided that an Investor and its pledgee shall be required to comply with the provisions of Section 2(f) hereof in order to effect a sale, transfer or assignment of Securities to such pledgee. Until 180 days after the date on which the Notes are no longer outstanding, the Company hereby agrees to execute and deliver such documentation as a pledgee of the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by an Investor.

          (i) Disclosure of Transactions and Other Material Information. On or before 8:30 a.m., New York City Time, on or before the first Business Day following the date of this Agreement, the Company shall file a Current Report on Form 8-K describing the terms of the transactions contemplated by the Transaction Documents and the transactions set forth in Schedule 3(u) of the Company Disclosure Letter, in form and in substance required by the 1934 Act, and attaching the material Transaction Documents (including, without limitation, this Agreement (and all schedules to this Agreement), the form of the Notes and the Registration Rights Agreement) as exhibits to such Form 8-K (including all attachments, the “8-K Filing”). As of the 8-K Filing with the SEC, no Buyer shall be in possession of any material, nonpublic information received from the Company, any of its Subsidiaries or any of its or their respective officers, directors, employees or agents, that is not disclosed in the 8-K Filing. The Company acknowledges its obligation to conform to the requirements of Regulation FD in its dealings with each Buyer. Neither the Company nor any Buyer shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of any Buyer, to make any press release or other public disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and substantially contemporaneously therewith and (ii) as is required by applicable law and regulations (provided that in the case of clause (i) each Buyer shall be

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consulted by the Company in connection with any such press release or other public disclosure prior to its release if the Notes or such Buyer is referred to therein).

          (j) Additional Notes; Additional Registration Statements. For so long as any Buyer owns any Notes, the Company will not issue any additional Notes and the Company shall not issue any other securities that would cause a breach or default under the Notes. Except pursuant to any Approved Stock Plan (as defined in the Notes) or as contemplated by the documents listed on Schedule 4(j) in the Company Disclosure Letter until such time as the Registration Statement (as defined in the Registration Rights Agreement) is declared effective by the SEC, the Company will not include in the Registration Statement or file a registration statement under the 1933 Act relating to securities that are not the Securities.

          (k) Private Placement. Other than as contemplated by the Transaction Documents, none of the Company, its Subsidiaries, their respective Affiliates or any Person acting on their behalf will take any action or steps that would require the registration of any of the Securities under the 1933 Act or cause the offering to be integrated with the other offerings for purposes of any applicable law, regulation or stockholder approval provisions.

          (l) Variable Securities; Dilutive Issuances. For so long as any Notes remain outstanding, the Company shall not, in any manner, issue or sell any rights, warrants or options to subscribe for or its purchase Common Stock or directly or indirectly convertible into or exchangeable or exercisable for Common Stock at a price which varies or may vary with the market price of the Common Stock, including by way of one or more reset(s) to any fixed price unless the conversion, exchange or exercise price of any such security cannot be less than the then applicable Conversion Price (as defined in the Notes) with respect to the Common Stock under any Note. For so long as any Notes remain outstanding, the Company shall not, in any manner, enter into or effect any Dilutive Issuance (as defined in the Notes) if the effect of such Dilutive Issuance is reasonably expected to cause the Company to be required to issue upon conversion of any Note (without regard to any limitations on the conversion of the Notes set forth in the Notes) any shares of Common Stock in excess of that number of Common Stock which the Company may issue upon conversion of the Notes without breaching the Company’s obligations under the rules or regulations of the Principal Market.

          (m) Corporate Existence. So long as any Buyer beneficially owns any Securities, the Company shall not be party to any Fundamental Transaction (as defined in the Notes) unless the Company is in compliance with the applicable provisions governing Fundamental Transactions set forth in the Notes.

          (n) Incurrence of Liens. Except as permitted under the Notes, so long as any Notes are outstanding, the Company shall not, directly or indirectly, allow or suffer to exist any Lien upon any property or assets (including accounts and contract rights) owned by the Company.

          (o) Reservation of Shares. So long as any Buyer owns any Notes, the Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance, no less than the number of shares of Common Stock issuable upon

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conversion of the Notes (without regard to any limitations on the conversion of the Notes set forth in the Notes).

          (p) Additional Issuances of Securities.

               (i) For purposes of this Section 4(p), the following definitions shall apply.

(1) “Common Stock Equivalents” means, collectively, Options and Convertible Securities.

(2) “Convertible Securities” means any stock or securities (other than Options) convertible into or exercisable or exchangeable for Common Stock.

(3) “Options” means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.

               (ii) From the date hereof until fifteen (15) Business Days after the Effective Date (as defined in the Registration Rights Agreement), the Company will not, directly or indirectly, offer, sell, grant any option to purchase, or otherwise dispose of (or announce any offer, sale, grant or any option to purchase or other disposition of) any of its or the Subsidiaries’ equity or equity equivalent securities, including without limitation any debt, preferred stock or other instrument or security that is, at any time during its life and under any circumstances, convertible into or exchangeable or exercisable for Common Stock or Common Stock Equivalents (any such offer, sale, grant, disposition or announcement being referred to as a “Subsequent Placement”).

               (iii) From the Effective Date until March 31, 2005, the Company will not, directly or indirectly, effect any Subsequent Placement unless the Company shall have first complied with this Section 4(p)(iii).

                    (1) The Company shall deliver to each Buyer who purchased on the Closing Date at least $10 million in aggregate principal amount of Notes a written notice (the “Offer”) at least five (5) Business Days prior to the closing of such Subsequent Placement of any proposed or intended issuance or sale or exchange of the securities being offered (the “Offered Securities”) in a Subsequent Placement, which Offer shall (w) identify and describe the Offered Securities, (x) describe the price and other material terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities to be issued, sold or exchanged, (y) identify the persons or entities (if known) to which or with which the Offered Securities are to be offered, issued, sold or exchanged and (z) offer to issue and sell to or exchange with such Buyers a pro rata portion of the lesser of (A) thirty percent (30%) of the Offered Securities or (B) $10,000,000, in each case allocated among such Buyers (a) based on such Buyer’s pro rata portion of the aggregate principal amount of the Notes purchased hereunder by such Buyers (the “Basic Amount”), and (b) with respect to each such Buyer that elects to purchase its Basic Amount, any additional portion of the Offered Securities attributable to the Basic Amounts of other Buyers as such Buyer shall indicate it will purchase or acquire should the other Buyers subscribe for less than their Basic Amounts (the “Undersubscription Amount”).

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                    (2) To accept an Offer, in whole or in part, such Buyer must deliver a written notice to the Company no later than the later of (i) two (2) Business Days after receipt of the Offer and (ii) two (2) Business Days prior to the closing of the Subsequent Placement (the “Offer Period”), setting forth the portion of the Buyer’s Basic Amount that such Buyer elects to purchase and, if such Buyer shall elect to purchase all of its Basic Amount, the Undersubscription Amount, if any, that such Buyer elects to purchase (in either case, the “Notice of Acceptance”). If the Basic Amounts subscribed for by all eligible Buyers are less than the total of all of the Basic Amounts, then each Buyer who has set forth an Undersubscription Amount in its Notice of Acceptance shall be entitled to purchase, in addition to the Basic Amounts subscribed for, the Undersubscription Amount it has subscribed for; provided, however, that if the Undersubscription Amounts subscribed for exceed the difference between the total of all the Basic Amounts and the Basic Amounts subscribed for (the “Available Undersubscription Amount”), each Buyer who has subscribed for any Undersubscription Amount shall be entitled to purchase only that portion of the Available Undersubscription Amount as the Basic Amount of such Buyer bears to the total Basic Amounts of all eligible Buyers that have subscribed for Undersubscription Amounts, subject to rounding by the Board of Directors to the extent its deems reasonably necessary.

                    (3) The Company shall have ten (10) Business Days from the expiration of the Offer Period above to offer, issue, sell or exchange all or any part of such Offered Securities as to which a Notice of Acceptance has not been given by the eligible Buyers (the “Refused Securities”), but only to the offerees described in the Offer (if so described therein) and only upon terms and conditions (including, without limitation, unit prices and interest rates) that are not more favorable to the acquiring person or persons or less favorable to the Company than those set forth in the Offer.

                    (4) In the event the Company shall propose to sell less than all the Refused Securities (any such sale to be in the manner and on the terms specified in Section 4(p)(iii)(3) above), then each Buyer may, at its sole option and in its sole discretion, reduce the number or amount of the Offered Securities specified in its Notice of Acceptance to an amount that shall be not less than the number or amount of the Offered Securities that such Buyer elected to purchase pursuant to Section 4(p)(iii)(2) above multiplied by a fraction, (i) the numerator of which shall be the number or amount of Offered Securities the Company actually proposes to issue, sell or exchange (including Offered Securities to be issued or sold to Buyers pursuant to Section 4(p)(iii)(3) above prior to such reduction) and (ii) the denominator of which shall be the original amount of the Offered Securities. In the event that any Buyer so elects to reduce the number or amount of Offered Securities specified in its Notice of Acceptance, the Company may not issue, sell or exchange more than the reduced number or amount of the Offered Securities unless and until such securities have again been offered to the Buyers in accordance with Section 4(p)(iii)(1) above.

                    (5) Upon the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, the Buyers shall acquire from the Company, and the Company shall issue to the Buyers, the number or amount of Offered Securities specified in the Notices of Acceptance, as reduced pursuant to Section 4(p)(iii)(3) above if the Buyers have so elected, upon the terms and conditions specified in the Offer. The purchase by the Buyers of any Offered Securities is subject in all cases to the preparation, execution and delivery by the Company and

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the Buyers of a purchase agreement relating to such Offered Securities reasonably satisfactory in form and substance to the Buyers and their respective counsel.

                    (6) Any Offered Securities not acquired by the Buyers or other persons in accordance with Section 4(p)(iii)(3) above may not be issued, sold or exchanged until they are again offered to the eligible Buyers under the procedures specified in this Agreement.

               (iv) Subsections (ii) and (iii) of this Section 4(p) shall not apply to (I) any Approved Stock Plan (as defined in the Notes); (II) a bona fide firm commitment underwritten public offering with a nationally recognized underwriter which generates gross proceeds to the Company in excess of $25,000,000 (other than an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended and “equity lines”); or (III) a bona fide firm commitment private placement pursuant to Rule 144A with a nationally recognized placement agent which generates gross proceeds to the Company in excess of $50,000,000.

          (q) Stockholder Approval. The Company shall provide each stockholder entitled to vote at the next meeting of the stockholders of the Company a proxy statement, which has been previously reviewed by the Buyers and a counsel of their choice, soliciting each such stockholder’s affirmative vote at such stockholder meeting for approval of the Company’s issuance of all of the Securities as described in the Transaction Documents in accordance with applicable law and the rules and regulations of the Principal Market (such affirmative approval being referred to herein as the “Stockholder Approval”), and the Company shall use its reasonable best efforts to solicit its stockholders’ approval of such issuance of the Securities and to cause the Board of Directors of the Company to recommend to the stockholders that they approve such proposal.

     5. REGISTER; TRANSFER AGENT INSTRUCTIONS.

          (a) 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 each holder of Notes), a register for the Notes, in which the Company shall record the name and address of the Person in whose name the Notes have been issued (including the name and address of each transferee), the principal amount of Notes held by such Person. The Company shall keep the register open and available at all times during business hours for inspection by any Buyer or its legal representatives to the extent permitted by applicable law.

          (b) Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent, and any subsequent transfer agent, to issue certificates or credit shares to the applicable balance accounts at The Depository Trust Company (“DTC”), registered in the name of each Buyer or its respective nominee(s), for the Conversion Shares in such amounts as specified from time to time by each Buyer to the Company upon conversion of the Notes substantially in the form of Exhibit C attached hereto (the “Irrevocable Transfer Agent Instructions”). The Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5(b), and stop transfer instructions to give effect to Section 2(g) hereof, will be given by the Company to its transfer agent, and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the

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extent provided in this Agreement and the other Transaction Documents. If a Buyer effects a sale, assignment or transfer of the Securities in accordance with Section 2(f), the Company shall permit the transfer and shall promptly instruct its transfer agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and in such denominations as specified by such Buyer to effect such sale, transfer or assignment. In the event that such sale, assignment or transfer involves Conversion Shares sold, assigned or transferred pursuant to an effective registration statement or pursuant to Rule 144, the transfer agent shall issue such Securities to the assignee or transferee, as the case may be, without any restrictive legend. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to a Buyer. Accordingly, the Company 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 the Company of the provisions hereof, that a Buyer shall be entitled, in addition to all other available remedies, to an order and/or 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.

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

          Closing Date. The obligation of the Company hereunder to issue and sell the Notes to each Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion by providing each Buyer with prior written notice thereof:

          (a) Such Buyer shall have executed each of the Transaction Documents to which it is a party and delivered the same to the Company.

          (b) Such Buyer shall have delivered to the Company the Purchase Price (less, in the case of Smithfield Fiduciary LLC, the amounts to the extent withheld pursuant to Section 4(g)) for the Notes being purchased by such Buyer at the Closing by wire transfer of immediately available funds pursuant to the wire instructions provided by the Company.

          (c) The representations and warranties of such Buyer shall be true and correct in all material respects 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), and such Buyer 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 such Buyer at or prior to the Closing Date.

     7. CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.

          Closing Date. The obligation of each Buyer hereunder to purchase the Notes at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for each Buyer’s sole benefit and may be waived by such Buyer at any time in its sole discretion by providing the Company with prior written notice thereof:

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          (a) The Company shall have executed and delivered to such Buyer (i) each of the Transaction Documents and (ii) the Notes (in such principal amounts as such Buyer shall request) being purchased by such Buyer at the Closing pursuant to this Agreement.

          (b) Such Buyer shall have received the opinions of Ropes & Gray LLP and White & White & Van Etten LLP, the Company’s counsels, dated as of the Closing Date, in form, scope and substance reasonably satisfactory to such Buyer and in substantially the form of Exhibits D-1 and D-2 attached hereto.

          (c) The Company shall have delivered to such Buyer a copy of the Irrevocable Transfer Agent Instructions, substantially the form of Exhibit C attached hereto, which instructions shall have been delivered to and acknowledged in writing by the Company’s transfer agent.

          (d) The Company shall have delivered to such Buyer a certificate evidencing the incorporation and good standing of the Company in its state of incorporation issued by the Secretary of State of such state of incorporation as of a date within 10 days of the Closing Date.

          (e) The Company shall have delivered to such Buyer a certificate evidencing the Company’s qualification as a foreign corporation and good standing issued by the Secretary of State of the State of Maryland and the Commonwealth of Pennsylvania as of a date within 10 days of the Closing Date.

          (f) The Company shall have delivered to such Buyer a certified copy of the Certificate of Incorporation as certified by the Secretary of State of the State of Delaware within ten (10) days of the Closing Date.

          (g) The Company shall have delivered to such Buyer a certificate, executed by the Secretary of the Company and dated as of the Closing Date, as to (i) the resolutions consistent with Section 3(c) as adopted by the Company’s Board of Directors in a form reasonably acceptable to such Buyer, (ii) the Certificate of Incorporation and (iii) the Bylaws, each as in effect at the Closing, in the form attached hereto as Exhibit E.

          (h) The representations and warranties of the Company shall be true and correct in all material respects 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) and the Company shall have performed, satisfied and complied in all respects with the covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Closing Date. Such Buyer shall have received a certificate, executed by the Chief Executive Officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by such Buyer in the form attached hereto as Exhibit F.

          (i) The Company shall have delivered to such Buyer a letter from the Company’s transfer agent certifying the number of shares of Common Stock outstanding as of a date within five days of the Closing Date.

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          (j) The Common Stock (I) shall be designated for quotation or listed on the Principal Market and (II) shall not have been suspended by the SEC, as of the Closing Date, or the Principal Market from trading on the Principal Market nor shall suspension by the SEC or the Principal Market have been threatened, as of the Closing Date, either (A) in writing by the SEC or the Principal Market or (B) by falling below the minimum listing maintenance requirements of the Principal Market.

          (k) The Company shall have obtained all Governmental Approvals and third party consents and approvals, if any, necessary for the sale of the Notes.

          (l) The Company shall have prior to or currently with the Closing issued 952,381 shares of Common Stock at a purchase price of $5.25 per share to Joseph R. Gregory.

          (m) The Company shall have delivered to such Buyer such other documents relating to the transactions contemplated by this Agreement as such Buyer or its counsel may reasonably request.

     8. TERMINATION. In the event that the Closing shall not have occurred with respect to a Buyer on or before the third Business Day after the date hereof, due to the Company’s or such Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7 above (and the nonbreaching party’s failure to waive such unsatisfied condition(s)), the nonbreaching party shall have the option to terminate this Agreement with respect to such breaching party at the close of business on such date without liability of any party to any other party; provided, however, that if this Agreement is terminated by a Buyer pursuant to this Section 8, the Company shall remain obligated to reimburse such non-breaching Buyer for the incurred expenses described in Section 4(g) above.

     9. MISCELLANEOUS.

          (a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE

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ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

          (b) Counterparts. This Agreement may be executed in two or more identical 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; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile signature.

          (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 in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.

          (e) Entire Agreement; Amendments. This Agreement supersedes all other prior oral or written agreements between the Buyers, the Company, their Affiliates and Persons acting on their behalf with respect to the matters discussed herein, and 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 any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the holders of Notes representing at least a majority of the aggregate principal amount of the Notes, or, if prior to the Closing Date, the Company and the Buyers listed on the Schedule of Buyers as being obligated to purchase at least a majority of the aggregate principal amount of the Notes. No provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought. No such amendment shall be effective to the extent that it applies to less than all of the holders of the Notes then outstanding. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration also is offered pro rata to all of the parties to the Transaction Documents and holders of Notes. The Company has not, directly or indirectly, made any agreements with any Buyers relating to the terms or conditions of the transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents. Without limiting the foregoing, the Company confirms that, except as set forth in this Agreement, no Buyer has made any commitment or promise or has any other obligation to provide any financing to the Company or otherwise.

          (f) Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one Business Day after deposit with an overnight

25

courier service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:

     If to the Company:

Novavax, Inc.
8320 Guilford Road, Suite C
Columbia, Maryland 21046
Telephone:	(301) 854-3900
Facsimile:	(301) 854-3901
Attention:	Chief Executive Officer

     with a copy to:

Ropes & Gray LLP
45 Rockefeller Plaza
New York, New York 10111
Telephone:	(212) 841-5764
Facsimile:	(212) 841-5725
Attention:	Sanford B. Kaynor, Jr., Esq.

     If to the Transfer Agent:

Equiserve Trust Company, N.A.
250 Royall Street
Canton, MA 02021
Telephone:	(877) 282-1169
Facsimile:	(781) 575-2149
Attention:	Carole McHugh

If to a Buyer, to its address and facsimile number set forth on the Schedule of Buyers, with copies to such Buyer’s representatives as set forth on the Schedule of Buyers,

     with a copy (for informational purposes only) to:

Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Telephone:	(212) 756-2000
Facsimile:	(212) 593-5955
Attention:	Eleazer N. Klein, Esq.

or to such other address and/or facsimile number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number

26

and an image of the first page of such transmission or (C) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively.

          (g) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including any permitted purchasers of the Notes. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the holders of Notes representing at least a majority of the aggregate principal amount of the Notes then outstanding; provided, however, that this Section 9(g) shall not be construed to prohibit the Company from entering into a Fundamental Transaction (subject to the Company’s compliance with the terms and conditions of the Notes relating to a Fundamental Transaction). A Buyer may assign its rights and obligations hereunder to a purchaser of the Notes or Conversion Shares without the consent of the Company, in which event such assignee shall be deemed to be a Buyer hereunder for all purposes.

          (h) No 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. Unless this Agreement is terminated under Section 8, the representations and warranties of the Company and the Buyers contained in Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5 and 9 shall survive the Closing. Each Buyer shall be responsible only for its own representations, warranties, agreements and covenants hereunder.

          (j) 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 any 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.

          (k) Indemnification. In consideration of each Buyer’s execution and delivery of the Transaction Documents and acquiring the Securities hereunder and thereunder and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless each Buyer and each other holder of the Securities and all of their stockholders, partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing Persons’ agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents, (b) any breach of any covenant, agreement or obligation of the Company contained in the Transaction Documents or (c) any cause of action,

27

suit or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company) and arising out of or resulting from (i) other than those arising from or resulting from a misrepresentation or breach of any representation or warranty made by such Indemnitee contained in the Transaction Documents or a breach of any covenant, agreement or obligation by such Indemnitee contained in the Transaction Documents or from the gross negligence, willful misconduct or bad faith of such Indemnitee, the execution, delivery, performance or enforcement of the Transaction Documents, (ii) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, including, but not limited to the items set forth on Schedule 3(u) in the Company Disclosure Letter, or (iii) other than those arising from or resulting from a misrepresentation or breach of any representation or warranty made by such Indemnitee contained in the Transaction Documents or a breach of any covenant, agreement or obligation by such Indemnitee contained in the Transaction Documents or from the gross negligence, willful misconduct or bad faith of such Indemnitee, the status of such Buyer or holder of the Securities as an investor in the Company. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. Except as otherwise set forth herein, the mechanics and procedures with respect to the rights and obligations under this Section 9(k) shall be the same as those set forth in Section 6 of the Registration Rights Agreement.

          (l) Remedies. Each Buyer and each holder of the Securities shall have all rights and remedies set forth in the Transaction Documents and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. Any Person having any rights under any provision of any of the Transaction Documents shall be entitled to enforce such rights specifically (without posting a bond or other security) to recover damages by reason of any breach of any provision of any of the Transaction Documents and to exercise all other rights granted by law. Furthermore, the Company recognizes that in the event that it fails to perform, observe, or discharge any or all of its obligations under any of the Transaction Documents, any remedy at law may prove to be inadequate relief to the Buyers. The parties therefore agree that each party shall be entitled to seek temporary and permanent injunctive relief in any such case without the necessity of proving actual damages and without posting a bond or other security.

          (m) Payment Set Aside. To the extent that the Company makes a payment or payments to the Buyers hereunder or pursuant to any of the other Transaction Documents or the Buyers enforce or exercise their rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

28

          (n) Independent Nature of Buyers’ Obligations and Rights. The obligations of each Buyer under any Transaction Document are several and not joint with the obligations of any other Buyer, and no Buyer shall be responsible in any way for the performance of the obligations of any other Buyer under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Buyer pursuant hereto or thereto, shall be deemed to constitute the Buyers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Buyers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Buyer confirms that it has independently participated in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. Each Buyer shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other Transaction Documents, and it shall not be necessary for any other Buyer to be joined as an additional party in any proceeding for such purpose.

          (o) Construction. The parties acknowledge that the parties have reviewed and revised this Agreement with their respective counsel and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. Unless the context of this Agreement otherwise requires: (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; (iii) the terms “hereof”, “herein”, “hereby” and derivative or similar words refer to this entire Agreement; (iv) all references herein to “Exhibits”, “Articles” or “Sections” are to Exhibits, Articles or Sections of this Agreement; (v) the term “or” has, except as otherwise indicated, the inclusive meaning represented by the phrase “and/or”; (vi) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation” and (vii) “parties” or “parties” means the signatories to this Agreement. The term “knowledge,” when used with respect to the Company or any Subsidiary, means the actual knowledge after reasonable investigation, of the current executive officers (as defined in Rule 501(f) of the 1933 Act) of such Person.

[Signature Pages Follow]

29

     IN WITNESS WHEREOF, each Buyer and the Company has caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.

COMPANY:
NOVAVAX, INC.
By:	/s/ Nelson M. Sims
	Name: Nelson M. Sims
	Title: President and Chief Executive Officer

     IN WITNESS WHEREOF, each Buyer and the Company has caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.

BUYERS:
SMITHFIELD FIDUCIARY LLC
By:	/s/ Adam J. Chill
	Name: Adam J. Chill
	Title: Authorized Signatory

     IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.

SF CAPITAL PARTNERS LTD.
By:	/s/ Brian H. Davidson
	Name: Brain H. Davidson
	Title: Authorized signatory

     IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.

PORTSIDE GROWTH AND OPPORTUNITY FUND
By:	/s/ Jeffrey Smith
	Name: Jeffrey Smith
	Title: Authorized Signatory

     IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.

WINCHESTER GLOBAL TRUST COMPANY LIMITED AS TRUSTEE FOR CADUCEUS CAPITAL TRUST
By:	/s/ Samuel D. Isaly
Name: Samuel D. Isaly
Title: Investment Advisor

     IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.

CADUCEUS CAPITAL II, L.P.
By:	/s/ Samuel D. Isaly
	Name: Samuel D. Isaly
	Title: General Partner

     IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.

UBS EUCALYPTUS FUND, L.L.C.
By:	/s/ Samuel D. Isaly
	Name: Samuel D. Isaly
	Title: JV Partner

     IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.

PW EUCALYPTUS FUND, LTD.
By:	/s/ Samuel D. Isaly
	Name: Samuel D. Isaly
	Title: JV Partner

     IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.

HFR SHC AGGRESSIVE FUND
By:	/s/ Dora Hines
	Name: Dora Hines
	Title: For and on behalf of HFR Asset Management as Attorney-in-Fact

     IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.

FINSBURY WORLDWIDE PHARMACEUTICAL TRUST
By:	/s/ Samuel D. Isaly
	Name: Samuel D. Isaly
	Title: Director

     IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.

DEUTSCHE BANK AG LONDON
By:	DB ADVISORS, L. L.C.
By:	/s/ Paul Bigler
	Name: Paul Bigler
	Title: Managing Director
By:	/s/ Shams Butt
	Name: Shams Butt
	Title: Director

SCHEDULE OF BUYERS

(1)	(2)	(3)		(4)
		Aggregate Principal		Legal Representative’s
Buyer	Address and Facsimile Number	Amount of Notes		Address and Facsimile Number
Smithfield Fiduciary LLC	c/o Highbridge Capital Management, LLC 9 West 57th Street, 27th Floor New York, New York 10019 Attention: Ari J. Storch Adam J. Chill Facsimile: (212) 751-0755 Telephone: (212) 287-4720 Residence: Cayman Islands	$	12,000,000	Schulte Roth & Zabel LLP 919 Third Avenue New York, New York 10022 Attention: Eleazer Klein, Esq. Facsimile: (212) 593-5955 Telephone: (212) 756-2376
SF Capital Partners Ltd.	3600 South Lake Drive St. Francis, Wisconsin 53235 Attention: Brian Davidson Facsimile: (414) 294-7\4416 Telephone: (414) 294-7016 Residence: British Virgin Islands	$	5,000,000
Portside Growth and Opportunity Fund	c/o Ramius Capital Group, L.L.C. 666 Third Avenue, 26th Floor New York, New York 10017 Attention: Jeffrey Smith Roger Anscher Facsimile: (212) 845-7999 Telephone: (212) 845-7955 Residence: Cayman Islands	$	5,000,000
Winchester Global Trust Company Limited as Trustee for Caduceus Capital Trust	c/o OrbiMed Advisors LLC 767 Third Avenue, 30th Floor New York, New York 10017 Attention: Andrew Kanarek Facsimile: (212) 739-6446 Telephone: (212) 739-6406 Residence: Bermuda	$	1,500,000
Caduceus Capital II, L.P.	c/o OrbiMed Advisors LLC 767 Third Avenue, 30th Floor New York, New York 10017 Attention: Andrew Kanarek Facsimile: (212) 739-6446 Telephone: (212) 739-6406 Residence: Delaware	$	750,000

(1)	(2)	(3)		(4)
		Aggregate Principal		Legal Representative’s
Buyer	Address and Facsimile Number	Amount of Notes		Address and Facsimile Number
UBS Eucalyptus Fund, L.L.C.	c/o OrbiMed Advisors LLC 767 Third Avenue, 30th Floor New York, New York 10017 Attention: Andrew Kanarek Facsimile: (212) 739-6446 Telephone: (212) 739-6406 Residence: Delaware	$	1,350,000
PW Eucalyptus Fund, Ltd.	c/o OrbiMed Advisors LLC 767 Third Avenue, 30th Floor New York, New York 10017 Attention: Andrew Kanarek Facsimile: (212) 739-6446 Telephone: (212) 739-6406 Residence: Cayman Islands	$	150,000
HFR SHC Aggressive Fund	c/o OrbiMed Advisors LLC 767 Third Avenue, 30th Floor New York, New York 10017 Attention: Andrew Kanarek Facsimile: (212) 739-6446 Telephone: (212) 739-6406 Residence: Bermuda	$	250,000
Finsbury Worldwide Pharmaceutical Trust	c/o OrbiMed Advisors LLC 767 Third Avenue, 30th Floor New York, New York 10017 Attention: Andrew Kanarek Facsimile: (212) 739-6446 Telephone: (212) 739-6406 Residence: United Kingdom	$	2,000,000
Deutsche Bank AG London	c/o DB Advisors L.L.C. 280 Park Avenue New York, New York 10017 Attention: Paul Bigler Facsimile: (212) 454-0968 Telephone: (212) 454-1221 Residence:	$	7,000,000

EXHIBITS

Exhibit A	Form of Notes
Exhibit B	Form of Registration Rights Agreement
Exhibit C	Form of Irrevocable Transfer Agent Instructions
Exhibit D-1	Form of Ropes & Gray LLP Opinion
Exhibit D-2	Form of White & White & Van Etten LLP Opinion
Exhibit E	Form of Secretary’s Certificate
Exhibit F	Form of Officer’s Certificate

SCHEDULES

Schedule 3(a)	Subsidiaries
Schedule 3(d)	No Conflicts
Schedule 3(e)	Consents
Schedule 3(f)	Issuance of Securities
Schedule 3(h)	Capitalization
Schedule 3(j)	Material Changes
Schedule 3(k)	Indebtedness
Schedule 3(l)	Litigation
Schedule 3(m)	Compliance
Schedule 3(s)	Registration Rights
Schedule 3(u)	Disclosure
Schedule 3(w)	Patents and Trademarks
Schedule 4(d)	Use of Proceeds
Schedule 4(j)	Additional Registration Statements

EX-99.4

Exhibit 99.4

[FORM OF SENIOR CONVERTIBLE NOTE]

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO NOVAVAX, INC., THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 19(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.

NOVAVAX, INC.

Senior Convertible Note

Issuance Date: July      , 2004 Principal: U.S. $                   

          FOR VALUE RECEIVED, NOVAVAX, INC., a Delaware corporation (the “Company”), hereby promises to pay to the order of [SMITHFIELD FIDUCIARY LLC][OTHER BUYERS] or registered assigns (“Holder”) the amount set out above as the Principal (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “Principal”) when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest (“Interest”) on any outstanding Principal at a rate per annum equal to the Interest Rate (as defined below), from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable, whether upon an Interest Date (as defined below), the Maturity Date, acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof). This Senior Convertible Note (including all Senior Convertible Notes issued in exchange, transfer or replacement hereof, this “Note”) is one of an issue of Senior Convertible Notes (collectively, the “Notes” and such other Senior Convertible Notes, the “Other Notes”) issued on the Issuance Date pursuant to the Securities Purchase Agreement (as defined below). Certain capitalized terms are defined in Section 29.

          (1) MATURITY. On the Maturity Date, the Company shall pay to the Holder (the “Maturity Date Payment”) an amount in cash or, at the option of the Company, in a combination of cash and shares of Common Stock (“Repayment Shares”), representing all outstanding Principal, accrued and unpaid Interest and accrued and unpaid Late Charges, if any; provided that (x) only up to half of the Maturity Date Payment may be made in Repayment Shares and (y) any portion of the Maturity Date Payment may be payable in Repayment Shares only if (i) the Company delivers written notice of such election (“Maturity Date Payment Election Notice”) to each holder of the Notes at least thirty (30) Trading Days prior to the Maturity Date (a “Maturity Payment Election Date”) indicating the amount of the Maturity Date Payment to be made in Repayment Shares and (ii) the Equity Conditions are satisfied (or waived by the Holder) from and including the Maturity Payment Election Date through and including the Maturity Date. The Company shall be required to make Maturity Date Payments in the same proportion with respect to the Other Notes as designated in any Maturity Date Payment Election Share Notice delivered under this Note. The "Maturity Date” shall be July 15, 2009, as may be extended at the option of the Holder (i) in the event that, and for so long as, an Event of Default (as defined in Section 4(a)) shall have occurred and be continuing and (ii) through the date that is ten (10) days after the consummation of a Change of Control in the event that a Change of Control is publicly announced or a Change of Control Notice (as defined in Section 5) is delivered prior to the Maturity Date. The portion, if any, of the Maturity Date Payment to be made on the Maturity Date in Repayment Shares shall be paid in a number of fully paid and nonassessable shares (rounded to the nearest whole share in accordance with Section 3(a)) of Common Stock equal to the quotient of (a) the amount of the Maturity Date Payment to be made on the Maturity Date in Repayment Shares and (b) the Redemption Conversion Price on the Maturity Date. If any Repayment Shares are to be paid on the Maturity Date, then the Company shall (X) provided that the Company’s transfer agent (the “Transfer Agent”) is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, credit such aggregate number of Repayment Shares to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver on the Maturity Date, to such address of the Holder as is set forth in the Securities Purchase Agreement or such other address as specified by the Holder in writing to the Company on or prior to the Maturity Date, a certificate, registered in the name of the Holder or its designee, for the number of Repayment Shares to which the Holder shall be entitled. The Company shall pay any and all taxes that may be payable with respect to the issuance and delivery of Repayment Shares.

          (2) INTEREST; INTEREST RATE. Interest on this Note shall commence accruing on the Issuance Date and shall be computed on the basis of a 365-day year and actual days elapsed and shall be payable in arrears on each January 15 and July 15 during the period beginning on the Issuance Date and ending on, and including, the Maturity Date and on the Maturity Date (each, an “Interest Date”) with the first Interest Date being January 15, 2005. Interest shall be payable on each Interest Date in cash. Prior to the payment of Interest on an Interest Date, Interest on this Note shall accrue at the Interest Rate and be payable by way of inclusion of the Interest in the Conversion Amount in accordance with Section 3(b)(i). From and after the occurrence of an Event of Default, the Interest Rate shall be increased to fifteen percent (15%). In the event that such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure; provided that the

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Interest as calculated at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of cure of such Event of Default.

          (3) CONVERSION OF NOTES. This Note shall be convertible into shares of Common Stock of the Company, par value $.01 per share (the “Common Stock”), on the terms and conditions set forth in this Section 3.

               (a) Conversion Right. Subject to the provisions of Section 3(d), at any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all taxes that may be payable with respect to the issuance and delivery of shares of Common Stock upon conversion of any Conversion Amount.

               (b) Conversion Rate. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “Conversion Rate”).

                    (i) "Conversion Amount” means the sum of (A) the portion of the Principal to be converted, redeemed or otherwise with respect to which this determination is being made, (B) accrued and unpaid Interest with respect to such Principal and (C) accrued and unpaid Late Charges with respect to such amount being converted.

                    (ii) "Conversion Price” means, as of any Conversion Date (as defined below) or other date of determination, and subject to adjustment as provided herein, U.S.$       ¹.

               (c) Mechanics of Conversion.

                    (i) Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a “Conversion Date”), the Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York Time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to the Company and (B) if required by Section 3(c)(iii), surrender this Note to a common carrier for delivery to the Company as soon as practicable on or following such date (or an indemnification undertaking with respect to this Note in a form reasonably acceptable to the Company in the case of its loss, theft or destruction). On or before the first Business Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile a confirmation of receipt of such Conversion Notice to the Holder and the Transfer Agent. On or before the third Business Day following the date of receipt of a Conversion Notice

¹     Insert amount equal to the greater of (x) $6.15 and (y) 110% of the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the Issuance Date.

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(the “Share Delivery Date”), the Company shall (X) provided the Transfer Agent is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to such address of the Holder as is set forth in the Securities Purchase Agreement or such other address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled. If this Note is physically surrendered for conversion as required by Section 3(c)(iii) and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than three Business Days after receipt of this Note and at its own expense, issue and deliver to the holder a new Note (in accordance with Section 19(d)) representing the outstanding Principal not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.

                    (ii) Company’s Failure to Timely Convert or Redeem. If the Company shall fail to issue a certificate to the Holder or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon conversion or redemption of any Conversion Amount on or prior to the date which is five (5) Business Days after the Conversion Date or other applicable date of determination (a “Conversion Failure”), then (A) the Company shall pay damages to the Holder for each date of such Conversion Failure in an amount equal to 0.5% of the product of (I) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date or other applicable date of determination and to which the Holder is entitled, and (II) the Closing Sale Price of the shares of Common Stock on the Share Delivery Date or other applicable date of determination and (B) the Holder, upon written notice to the Company, may void its Conversion Notice or right to receive shares upon a redemption hereunder with respect to, and retain or have returned, as the case may be, any portion of this Note that has not been converted or redeemed pursuant to such Conversion Notice or other applicable redemption notice; provided that the voiding of a Conversion Notice or other applicable redemption notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice pursuant to this Section 3(c)(ii) or otherwise. In addition to the foregoing, if within three (3) Trading Days after the Company’s receipt of the facsimile copy of a Conversion Notice or any other applicable date on which the Company is required to deliver shares of Common Stock hereunder the Company shall fail to issue and deliver a certificate to the Holder or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon such holder’s conversion or the Company’s redemption of any Conversion Amount, and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of Common Stock issuable upon such conversion or redemption that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within three Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s

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obligation to deliver such certificate (and to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such shares of Common Stock and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the Closing Bid Price on the Conversion Date or other applicable date on which the Company was required to deliver shares of Common Stock.

                    (iii) Book-Entry. Notwithstanding anything to the contrary set forth herein, upon conversion or redemption of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or redeemed or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting physical surrender and reissue of this Note. The Holder and the Company shall maintain records showing the Principal, Interest and Late Charges converted and the dates of such conversions and redemption or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion or redemption.

                    (iv) Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder of Notes for the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes submitted for conversion, the Company, subject to Section 3(d), shall convert from each holder of Notes electing to have Notes converted on such date a pro rata amount of such holder’s portion of its Notes submitted for conversion based on the principal amount of Notes submitted for conversion on such date by such holder relative to the aggregate principal amount of all Notes submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 24.

               (d) Limitations.

                    (i) Beneficial Ownership. The Company shall not effect any conversion or redemption of this Note or otherwise issue shares of Common Stock pursuant hereto, and the Holder of this Note shall not have the right to convert or redeem any portion of this Note or otherwise receive any shares of Common Stock pursuant hereto, to the extent that after giving effect to such conversion or redemption or issuance or receipt of shares of Common Stock pursuant hereto, the Holder (together with the Holder’s affiliates) would beneficially own in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion or redemption or other receipt of shares of Common Stock pursuant hereto. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion or redemption of this Note or other issuance shares of Common Stock pursuant hereto with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion or redemption or other issuance with respect to the remaining portion of this Note beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion

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of or other issuance with respect to the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any Other Notes or warrants) subject to a limitation on conversion or exercise or other issuance analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this Section 3(d)(i), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s then most recently filed Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as applicable, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion, redemption, exercise or other issuance of securities of the Company, including this Note, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported.

                    (ii) Principal Market Regulation. The Company shall not be obligated to issue any shares of Common Stock upon conversion or redemption of or otherwise with respect to this Note if the issuance of such shares of Common Stock would exceed that number of shares of Common Stock which the Company may issue upon conversion or redemption of or other issuance with respect to the Notes without breaching the Company’s obligations under the rules or regulations of the Principal Market (the “Exchange Cap”), except that such limitation shall not apply in the event that the Company obtains the approval of its stockholders as required by the applicable rules of the Principal Market for issuances of shares of Common Stock in excess of such amount. Until such approval is obtained, no purchaser of the Notes pursuant to the Securities Purchase Agreement (the “Purchasers”) shall be issued, upon conversion or redemption of or other issuance with respect to any Notes, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the Principal amount of Notes issued to such Purchaser pursuant to the Securities Purchase Agreement on the Issuance Date and the denominator of which is the aggregate Principal amount of Notes issued to all Purchasers pursuant to the Securities Purchase Agreement on the Issuance Date (with respect to each Purchaser, the “Exchange Cap Allocation”). In the event that any Purchaser shall sell or otherwise transfer any of such Purchaser’s Notes, the transferee shall be allocated a pro rata portion of such Purchaser’s Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee. In the event that any holder of Notes shall convert all of such holder’s Notes into a number of shares of Common Stock which, in the aggregate, is less than such holder’s Exchange Cap Allocation, then the difference between such holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of Notes on a pro rata basis in proportion to the aggregate principal amount of the Notes then held by each such holder.

          (4) RIGHTS UPON EVENT OF DEFAULT.

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               (a) Event of Default. Each of the following events shall constitute an “Event of Default”:

                    (i) the failure of the applicable Registration Statement required to be filed pursuant to the Registration Rights Agreement to be declared effective by the SEC on or prior to the date that is 60 days after the applicable Effectiveness Deadline (as defined in the Registration Rights Agreement), or, while the applicable Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of the applicable Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to any holder of the Notes for sale of all of such holder’s Registrable Securities (as defined in the Registration Rights Agreement) in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of 10 consecutive days or for more than an aggregate of 30 days in any 365-day period (other than days during an Allowable Grace Period (as defined in the Registration Rights Agreement));

                    (ii) the suspension from trading or failure of the shares of Common Stock to be listed on an Eligible Market for a period of five consecutive days or for more than an aggregate of 10 days in any 365-day period;

                    (iii) the Company’s (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock within ten (10) Business Days after the applicable Conversion Date or (B) notice, written or oral, to any holder of the Notes, including by way of public announcement or through any of its agents, at any time, of its intention not to comply with a request for conversion of any Notes into shares of Common Stock that is tendered in accordance with the provisions of the Notes;

                    (iv) upon the Company’s receipt of a Conversion Notice, the Company is not obligated to issue shares of Common Stock upon such conversion due to the provisions of Section 3(d)(ii);

                    (v) at any time following the tenth consecutive Business Day that the Holder’s Authorized Share Allocation is less than the number of shares of Common Stock that the Holder would be entitled to receive upon a conversion of the full Conversion Amount of this Note (without regard to any limitations on conversion set forth in Section 3(d) or otherwise);

                    (vi) the Company’s failure to pay to the Holder any amount of Principal, Interest, Late Charges or other amounts when and as due under this Note or any other Transaction Document (as defined in the Securities Purchase Agreement), except, in the case of a failure to pay Interest and Late Charges when and as due, in which case only if such failure continues for a period of at least three (3) Business Days;

                    (vii) any default under, redemption of or acceleration (subject to applicable cure periods) prior to maturity of any material Indebtedness (as defined in Section 3(s) of the Securities Purchase Agreement) of the Company or any of its Subsidiaries (as defined in Section 3(a) of the Securities Purchase Agreement) other than with respect to any Other Notes;

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                    (viii) the Company or any of its Subsidiaries, pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal, foreign, state or local law for the relief of debtors (collectively, “Bankruptcy Law”), (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a “Custodian”), (D) makes a general assignment for the benefit of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due;

                    (ix) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company or any of its Subsidiaries in an involuntary case, (B) appoints a Custodian of the Company or any of its Subsidiaries or (C) orders the liquidation of the Company or any of its Subsidiaries and such order or decree is incapable of being dismissed or, if capable of being dismissed, shall continue undismissed for a period of 30 days;

                    (x) a final, non-appealable judgment or judgments for the payment of money aggregating in excess of $2,000,000 are rendered against the Company or any of its Subsidiaries and which judgments are not, within 60 days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay; provided, however, that any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $2,000,000 amount set forth above so long as the Company provides the Holder as promptly as practicable with a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company will receive the proceeds of such insurance or indemnity in the time frame provided under the applicable insurance policy;

                    (xi) the Company breaches any representation, warranty, covenant or other term or condition of any of the Transaction Documents in a manner that could result in a Material Adverse Effect (as defined in the Securities Purchase Agreement), except, in the case of a breach of a covenant which is curable, only if such breach continues for a period of at least fifteen (15) consecutive Business Days;

                    (xii) any breach or failure in any respect to comply with Section 15 of this Note; or

                    (xiii) any Event of Default (as defined in the Other Notes) occurs with respect to any Other Notes.

               (b) Redemption Right. Promptly after the occurrence of an Event of Default with respect to this Note or any Other Note, the Company shall deliver written notice thereof via facsimile and overnight courier (an “Event of Default Notice”) to the Holder. At any time after the earlier of the Holder’s receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof (the “Event of Default Redemption Notice”) to the Company, which Event of Default Redemption Notice shall indicate the portion of this Note the Holder is electing to redeem. Each portion of this Note subject to redemption by

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the Company pursuant to this Section 4(b) shall be redeemed by the Company at a price equal to the greater of (i) the product of (x) the Conversion Amount to be redeemed and (y) the Redemption Premium and (ii) the product of (A) the Conversion Rate with respect to such Conversion Amount in effect at such time as the Holder delivers an Event of Default Redemption Notice and (B) the Closing Sale Price of the shares of Common Stock on the date immediately preceding such Event of Default (the “Event of Default Redemption Price”). Redemptions required by this Section 4(b) shall be made in accordance with the provisions of Section 12.

          (5) RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

               (a) Assumption. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing all of the obligations of the Company under this Note and the other Transaction Documents in accordance with the provisions of this Section 5(a) pursuant to written agreements in form and substance satisfactory to the Required Holders and approved by the Required Holders prior to such Fundamental Transaction, including agreements to deliver to each holder of Notes in exchange for such Notes a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Notes, including, without limitation, having a principal amount and interest rate equal to the principal amounts and the interest rates of the Notes held by such holder and having similar ranking to the Notes, and satisfactory to the Required Holders and (ii) other than in connection with a Cash Transaction, the Successor Entity (including its Parent Entity) is a publicly traded corporation whose common stock is quoted on or listed for trading on an Eligible Market. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note with the same effect as if such Successor Entity had been named as the Company herein. Upon consummation of the Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon conversion or redemption of this Note at any time after the consummation of the Fundamental Transaction, in lieu of the shares of the Company’s Common Stock (or other securities, cash, assets or other property) purchasable upon the conversion or redemption of the Notes prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Note been converted immediately prior to such Fundamental Transaction, as adjusted in accordance with the provisions of this Note. The provisions of this Section shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion or redemption of this Note.

               (b) Redemption Right of the Holder Upon a Change of Control. No sooner than 15 days nor later than 7 days prior to the consummation of a Change of Control, but not prior to the Company’s public announcement of such Change of Control, the Company shall deliver written notice thereof via facsimile and overnight courier to the Holder (a “Change of Control Notice”). At any time during the period beginning after the Holder’s receipt of a

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Change of Control Notice and ending on the date of the consummation of such Change of Control (or, in the event a Change of Control Notice is not delivered at least 7 days prior to a Change of Control, at any time beginning after the Holder’s receipt of a Change of Control Notice and ending 10 days after the consummation of such Change of Control), the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof (“Change of Control Redemption Notice”) to the Company, which Change of Control Redemption Notice shall indicate the Conversion Amount the Holder is electing to redeem. The portion of this Note subject to redemption pursuant to this Section 5 shall be redeemed by the Company at a price equal to the greater of (i) the product of (x) the Conversion Amount being redeemed and (y) the quotient determined by dividing (A) the Closing Sale Price of the shares of Common Stock immediately following the public announcement of such proposed Change of Control by (B) the Conversion Price and (ii) the product of (x) the Change of Control Redemption Premium and (y) the Conversion Amount being redeemed (the “Change of Control Redemption Price”). Notwithstanding anything to the contrary in this Section 5(b), but subject to Section 3(d), until the Change of Control Redemption Price is paid in full, the Conversion Amount submitted for redemption under this Section 5(b) may be converted, in whole or in part, by the Holder into Common Stock pursuant to Section 3. Redemptions required by this Section 5(b) shall be made in accordance with the provisions of Section 12 and shall have priority to payments to stockholders in connection with a Change of Control.

               (c) Redemption at the Company’s Election Upon Cash Transaction. On the date a pending, proposed or intended Cash Transaction is publicly disclosed, the Company shall have the right, in its sole discretion, to require that all, but not less than all, of the outstanding Notes be redeemed (a “Cash Transaction Redemption Election”) at a price equal to the Change of Control Redemption Price (such price in connection with a Cash Transaction Redemption Election, the “Cash Transaction Redemption Price”). The Company shall exercise its right to make a Cash Transaction Redemption Election by providing each holder of Notes written notice (the “Cash Transaction Redemption Notice”) by facsimile and overnight courier, concurrently with the public disclosure of a proposed, pending or intended Cash Transaction and at least ten (10) Trading Days prior to the date of consummation of the Cash Transaction (the “Cash Transaction Election Redemption Date”), which Cash Transaction Election Redemption Date shall be the date of the consummation of the Cash Transaction. The Cash Transaction Redemption Notice shall indicate the anticipated Cash Transaction Election Redemption Date. If the Company has exercised its right of Cash Transaction Redemption Election then all Notes outstanding at the time of the consummation of the Cash Transaction shall be redeemed on the Cash Transaction Election Redemption Date by payment by or on behalf of the Company to each holder of Notes of the Cash Transaction Redemption Price for such Notes concurrent with the closing of the Cash Transaction. If the Company fails to pay the full Cash Transaction Redemption Price with respect to any Notes concurrently with the closing of the Cash Transaction, then the Cash Transaction Redemption Election shall be null and void with respect to such Notes and the holder of such Notes shall be entitled to all the rights of a holder of outstanding Notes set forth herein. Notwithstanding anything to the contrary in this Section 5(c), but subject to Section 3(d), until the Cash Transaction Redemption Price is paid in full, the Conversion Amount subject to redemption hereunder may be converted, in whole or in part, by the Holder into Common Stock pursuant to Section 3. Redemptions required by this Section 5(c) shall be made in accordance with the provisions of Section 12 and shall have priority to payments to stockholders in connection with a Cash Transaction.

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          (6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.

               (a) Purchase Rights. If at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the shares of Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or restrictions on the convertibility of this Note) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

               (b) Other Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Note, (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Note) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Required Holders. The provisions of this Section shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion or redemption of this Note.

          (7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

               (a) Adjustment of Conversion Price upon Issuance of shares of Common Stock. If and whenever during the period beginning on after the Subscription Date and ending on the second anniversary of the Subscription Date, the Company issues or sells, or in accordance with this Section 7(a) is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding shares of Common Stock deemed to have been issued or sold by the Company in connection with any Excluded Security) for a consideration per share less than a price (the “Applicable Price”) equal to the Conversion Price in effect immediately prior to such issue or sale (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the Conversion Price then in effect shall be reduced to an amount equal to the product of (A) the Applicable Price and (B) the quotient determined by dividing (1) the sum of (I) the

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product derived by multiplying the Applicable Price and the number of shares of Common Stock Deemed Outstanding immediately prior to such Dilutive Issuance plus (II) the consideration, if any, received by the Company upon such Dilutive Issuance, by (2) the product derived by multiplying (I) the Applicable Price by (II) the number of shares of Common Stock Deemed Outstanding immediately after such Dilutive Issuance. For purposes of determining the adjusted Conversion Price under this Section 7(a), the following shall be applicable:

                    (i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion or exchange or exercise of any Convertible Securities issuable upon exercise of such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 7(a)(i), the “lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion or exchange or exercise of any Convertible Securities issuable upon exercise of such Option” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon granting or sale of the Option, upon exercise of the Option and upon conversion or exchange or exercise of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Conversion Price shall be made upon the actual issuance of such share of Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such share of Common Stock upon conversion or exchange or exercise of such Convertible Securities.

                    (ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon such conversion or exchange or exercise thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance of sale of such Convertible Securities for such price per share. For the purposes of this Section 7(a)(ii), the “price per share for which one shares of Common Stock is issuable upon such conversion or exchange or exercise” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the issuance or sale of the Convertible Security and upon the conversion or exchange or exercise of such Convertible Security. No further adjustment of the Conversion Price shall be made upon the actual issuance of such share of Common Stock upon conversion or exchange or exercise of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price had been or are to be made pursuant to other provisions of this Section 7(a), no further adjustment of the Conversion Price shall be made by reason of such issue or sale.

                    (iii) Change in Option Price or Rate of Conversion. If the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exchange or exercise of any Convertible Securities,

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or the rate at which any Convertible Securities are convertible into or exchangeable or exercisable for shares of Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Issuance Date are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change. No adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect.

                    (iv) Calculation of Consideration Received. In case any Option or Convertible Securities are issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options or Convertible Securities by the parties thereto, the Options or Convertible Securities will be deemed to have been issued for a consideration of $.01. If any shares of Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the Closing Sale Price of such securities on the date of receipt. If any shares of Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Company and the Required Holders. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined within five (5) Business Days after the tenth day following the Valuation Event by an independent, nationally recognized appraiser jointly selected by the Company and the Required Holders. The determination of such appraiser shall be deemed binding upon all parties absent manifest error. The fees and expenses of such appraiser shall be borne by the party whose determination or fair value most differs from such appraiser’s determination.

                    (v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares of Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of

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the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

               (b) Adjustment of Conversion Price upon Subdivision or Combination of shares of Common Stock. If the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time on or after the Subscription Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased.

               (c) Other Events. If any event occurs of the type contemplated by the provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s Board of Directors will make an appropriate adjustment in the Conversion Price so as to protect the rights of the Holder under this Note; provided that no such adjustment will increase the Conversion Price as otherwise determined pursuant to this Section 7.

          (8) COMPANY’S RIGHT OF MANDATORY CONVERSION.

               (a) Mandatory Conversion. If at any time from and after the third anniversary of the Issuance Date (the “Mandatory Conversion Eligibility Date”), (i) the Weighted Average Price of the shares of Common Stock exceeds 175% of the Conversion Price as of the Issuance Date (subject to appropriate adjustments for stock splits, stock dividends, stock combinations and other similar transactions after the Issuance Date) for each of fifteen (15) Trading Days out of any thirty (30) consecutive Trading Days following the Mandatory Conversion Eligibility Date (the “Mandatory Conversion Measuring Period”) and (ii) the Equity Conditions shall have been satisfied or waived in writing by the Holder from and including the Mandatory Conversion Notice Date through and including the Mandatory Conversion Date (each, as defined below), the Company shall have the right to require the Holder to convert all or any portion of the Conversion Amount then remaining under this Note as designated in the Mandatory Conversion Notice (as defined below) into fully paid, validly issued and nonassessable shares of Common Stock in accordance with Section 3(c) hereof at the Conversion Rate as of the Mandatory Conversion Date (as defined below) (a "Mandatory Conversion”). The Company may exercise its right to require conversion under this Section 8(a) by delivering within not more than two Trading Days following the end of such Mandatory Conversion Measuring Period a written notice thereof by facsimile and overnight courier to all, but not less than all, of the holders of Notes and the Transfer Agent (the “Mandatory Conversion Notice” and the date all of the holders received such notice is referred to as the “Mandatory Conversion Notice Date”). The Company may deliver one Mandatory Conversion Notice hereunder and the Mandatory Conversion Notice shall be irrevocable.

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               (b) Pro Rata Conversion Requirement. If the Company elects to cause a conversion of all or any portion of the Conversion Amount of this Note pursuant to Section 8(a), then it must simultaneously take the same action with respect to the Other Notes. If the Company elects to cause the conversion of this Note pursuant to Section 8(a) (or similar provisions under the Other Notes) with respect to less than all of the Conversion Amounts of the Notes then outstanding, then the Company shall require conversion of a Conversion Amount from each of the holders of the Notes equal to the product of (I) the aggregate Conversion Amount of Notes which the Company has elected to cause to be converted pursuant to Section 8(a), multiplied by (II) the fraction, the numerator of which is the sum of the aggregate principal amount of the Notes purchased by such holder pursuant to the Securities Purchase Agreement and the denominator of which is the sum of the aggregate principal amount of the Notes purchased by all holders pursuant to the Securities Purchase Agreement (such fraction with respect to each holder is referred to as its “Allocation Percentage,” and such amount with respect to each holder is referred to as its "Pro Rata Conversion Amount”). In the event that the initial holder of any Notes shall sell or otherwise transfer any of such holder’s Notes, the transferee shall be allocated a pro rata portion of such holder’s Allocation Percentage. The Mandatory Conversion Notice shall state (i) the Trading Day selected for the Mandatory Conversion in accordance with Section 8(a), which Trading Day shall be at least twenty (20) Business Days but not more than sixty (60) Business Days following the Mandatory Conversion Notice Date (the "Mandatory Conversion Date”), (ii) the aggregate Conversion Amount of the Notes which the Company has elected to be subject to mandatory conversion from all of the holders of the Notes pursuant to this Section 8 (and analogous provisions under the Other Notes), (iii) each holder’s Pro Rata Conversion Amount of the Conversion Amount of the Notes the Company has elected to cause to be converted pursuant to this Section 8 (and analogous provisions under the Other Notes) and (iv) the number of shares of Common Stock to be issued to the Holder as of the Mandatory Conversion Date. All Conversion Amounts converted by the Holder after the Mandatory Conversion Notice Date shall reduce the Conversion Amount of this Note required to be converted on the Mandatory Conversion Date. If the Company has elected a Mandatory Conversion, the mechanics of conversion set forth in Section 3(c) shall apply, to the extent applicable, as if the Company and the Transfer Agent had received from the Holder on the Mandatory Conversion Date a Conversion Notice with respect to the Conversion Amount being converted pursuant to the Mandatory Conversion.

          (9) HOLDER’S RIGHT OF OPTIONAL REDEMPTION.

               (a) Holder Redemption Option. If the Weighted Average Price of the Common Stock is less than the then applicable Conversion Price on each of thirty (30) Trading Days out of the forty (40) consecutive Trading Days immediately preceding either Applicable Trigger Date, the Holder shall have the right, in its sole discretion, to require that the Company redeem all or any portion of this Note (a “Holder Optional Redemption”) by delivering written notice thereof (a “Holder Optional Redemption Notice”) to the Company at any time within fifteen (15) Business Days after the Applicable Trigger Date; provided, however, that from and after the date the Estrasorb Revenue Target (as defined in Section 9(c)) has been met, the Holder shall no longer be able to effect a Holder Optional Redemption. The Holder Optional Redemption Notice shall indicate the Conversion Amount the Holder is electing to redeem. The portion of this Note subject to redemption pursuant to this Section 9(a) shall be redeemed by the Company at a price equal to the Conversion Amount being redeemed (the “Holder Optional

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Redemption Price”). The Holder Optional Redemption Price shall be paid on the twenty-fifth (25^th) Business Day after the date of the Holder Optional Redemption Notice (the “Holder Optional Redemption Date”). Within one Business Day of receipt of a Holder Optional Redemption Notice, the Company shall inform in writing all holders of Other Notes that such a Holder Optional Redemption Notice has been received by the Company. The Company may elect, by written notice (the “Company Redemption Share Notice”) delivered to the Holder, to pay up to 50% of the Holder Optional Redemption Price in shares of Common Stock (the “Optional Redemption Shares”) by dividing the amount to be paid in shares of Common Stock set forth in the Company Redemption Share Notice by the Redemption Conversion Price as of the Holder Optional Redemption Date. The Company Redemption Share Notice must be delivered within two (2) Business Days of receipt of a Holder Optional Redemption Notice. If the Company receives Holder Optional Redemption Notices from one or more holders of Other Notes under analogous provisions of the Other Notes, the Company shall redeem the same percentage of the Holder Optional Redemption Price in Optional Redemption Shares with respect to such Other Notes as designated in any Company Redemption Share Notice delivered under this Note. If any of the Holder Optional Redemption Price is to be paid in Optional Redemption Shares, then, on the Holder Optional Redemption Date, the Company shall (X) credit such aggregate number of Optional Redemption Shares to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to such address of the Holder as is set forth in the Securities Purchase Agreement or such other address as specified by the Holder in writing to the Company at least two Business Days prior to the Holder Optional Redemption Date, a certificate, registered in the name of the Holder or its designee, for the number of Optional Redemption Shares to which the Holder shall be entitled hereunder. Notwithstanding the foregoing, the Company shall not be entitled to pay any of the Holder Optional Redemption Price in Optional Redemption Shares and shall be required to pay such Holder Optional Redemption Price entirely in cash if the Equity Conditions are not satisfied (or waived by the Holder) from and including the Applicable Trigger Date through and including the Holder Optional Redemption Date. Redemptions required by this Section 9(a) shall be made in accordance with the provisions of Section 12.

               (b) Holder CEO Redemption Option. If on or prior to the four (4) month anniversary of the Issuance Date, Nelson Sims is no longer the President and Chief Executive Officer of the Company (other than solely as a result of medical disability) (the “CEO Trigger Optional Redemption Right”), the Holder shall have the right, in its sole discretion, to require that the Company redeem any portion up to half of the Conversion Amount of this Note by delivering written notice thereof (a “CEO Trigger Optional Redemption Notice”) to the Company at any time within sixty (60) Business Days after the public announcement by the Company that Nelson Sims is no longer the President and Chief Executive Officer of the Company. The CEO Trigger Optional Redemption Notice shall indicate the Conversion Amount the Holder is electing to redeem. The portion of this Note subject to redemption pursuant to this Section 9(b) shall be redeemed by the Company at a price equal to the Conversion Amount being redeemed (the “CEO Trigger Optional Redemption Price”). The CEO Trigger Optional Redemption Price shall be paid in cash on the fifth (5^th) Business Day after the date of the CEO Trigger Optional Redemption Notice (the “CEO Trigger Optional Redemption Date”). Within one Business Day of receipt of a CEO Trigger Optional Redemption Notice, the Company shall

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inform in writing all holders of Other Notes that such a CEO Trigger Optional Redemption Notice has been received by the Company. Redemptions required by this Section 9(b) shall be made in accordance with the provisions of Section 12.

               (c) Definitions.

                    (i) “2006 Annual Report” means the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2006.

                    (ii) “Applicable Trigger Date” means either of the third anniversary of the Issuance Date and the fourth anniversary of the Issuance Date.

                    (iii) “Estrasorb Revenue Target” means the recognition by the Company of revenue, as certified by the Company pursuant to a certificate executed by the Company’s Chief Executive Officer and Chief Financial Officer and delivered to the Holder, from the sales of Estrasorb of (i) not less than $40 million for the twelve month period ending December 31, 2006, as set forth in the audited financial statements of the Company included in the 2006 Annual Report, and (ii) not less than $25 million for the six month period ending December 31, 2006, as set forth in the audited financial statements of the Company included in the 2006 Annual Report.

          (10) NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this Note.

          (11) RESERVATION OF AUTHORIZED SHARES.

               (a) Reservation. The Company initially shall reserve out of its authorized and unissued shares of Common Stock a number of shares of Common Stock for each of the Notes equal to the Conversion Rate with respect to the Conversion Amount of each such Note as of the Issuance Date. So long as any of the Notes are outstanding, the Company shall take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Notes, the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Notes then outstanding; provided that at no time shall the number of shares of Common Stock so reserved be less than the number of shares required to be reserved by the previous sentence (without regard to any limitations on conversions) (the “Required Reserve Amount”). The initial number of shares of Common Stock reserved for conversions of the Notes and each increase in the number of shares so reserved shall be allocated pro rata among the holders of the Notes based on the principal amount of the Notes held by each holder at the time of Issuance Date or increase in the number of reserved shares, as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s Notes, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share

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Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Notes shall be allocated to the remaining holders of Notes, pro rata based on the principal amount of the Notes then held by such holders.

               (b) Insufficient Authorized Shares. If at any time while any of the Notes remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes at least a number of shares of Common Stock equal to the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Notes then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than 60 days after the occurrence of such Authorized Share Failure, the Company shall take all necessary actions to obtain stockholder approval of an increase in the number of authorized shares of Common Stock. In connection with a meeting of stockholders, the Company shall provide each stockholder with a proxy statement and shall use its reasonable best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal.

          (12) HOLDER’S REDEMPTIONS.

               (a) Mechanics. The Company shall deliver the applicable Event of Default Redemption Price to the Holder within five (5) Business Days after the Company’s receipt of the Holder’s Event of Default Redemption Notice. If the Holder has submitted a Change of Control Redemption Notice in accordance with Section 5(b), the Company shall deliver the applicable Change of Control Redemption Price to the Holder concurrently with the consummation of such Change of Control if such notice is received prior to the consummation of such Change of Control and within five Business Days after the Company’s receipt of such notice otherwise. If the Company has delivered a Cash Transaction Redemption Notice in accordance with Section 5(c), the Company shall deliver the applicable Cash Transaction Redemption Price to the Holder concurrently with the consummation of such Cash Transaction. In the event of a redemption of less than all of the Conversion Amount of this Note, the Company shall promptly cause to be issued and delivered to the Holder a new Note (in accordance with Section 19(d)) representing the outstanding Principal which has not been redeemed. In the event that the Company does not pay the Redemption Price to the Holder within the time period required, at any time thereafter and until the Company pays such unpaid Redemption Price in full, the Holder shall have the option, in lieu of redemption, to require the Company to promptly return to the Holder all or any portion of this Note representing the Conversion Amount that was submitted for redemption and for which the applicable Redemption Price (together with any Late Charges thereon) has not been paid. Upon the Company’s receipt of such notice, (x) the Redemption Notice shall be null and void with respect to such Conversion Amount, (y) the Company shall immediately return this Note, or issue a new Note (in accordance with Section 19(d)) to the Holder representing such Conversion Amount and (z) the Conversion Price of this Note or such new Notes shall be adjusted to the lesser of (A) the Conversion Price as in effect on the date on which the Redemption Notice is voided and (B) the lowest Closing Bid Price during the period beginning on and including the date on which the Redemption Notice

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is delivered to the Company and ending on and including the date on which the Redemption Notice is voided. The Holder’s delivery of a notice voiding a Redemption Notice and exercise of its rights following such notice shall not affect the Company’s obligations to make any payments of Late Charges which have accrued prior to the date of such notice with respect to the Conversion Amount subject to such notice.

               (b) Redemption by Other Holders. Upon the Company’s receipt of notice from any of the holders of the Other Notes for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described in Section 4(b) or Section 5(b) (each, an “Other Redemption Notice”), the Company shall promptly forward to the Holder by facsimile a copy of such notice. If the Company receives or delivers a Redemption Notice and one or more Other Redemption Notices, during the period beginning on and including the date which is three Business Days prior to the Company’s receipt or delivery of the Holder’s Redemption Notice and ending on and including the date which is three Business Days after the Company’s receipt or delivery of the Holder’s Redemption Notice and the Company is unable to redeem all principal, interest and other amounts designated in such Redemption Notice and such Other Redemption Notices received or delivered during such seven Business Day period, then the Company shall redeem a pro rata amount from each holder of the Notes (including the Holder) based on the principal amount of the Notes submitted for redemption pursuant to such Redemption Notice and such Other Redemption Notices received or delivered by the Company during such seven Business Day period.

          (13) RESTRICTION ON REDEMPTION. Until all of the Notes have been converted, redeemed or otherwise satisfied in accordance with their terms, the Company shall not, directly or indirectly, redeem or repurchase its capital stock without the prior express written consent of the Required Holders.

          (14) VOTING RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as required by law, including but not limited to applicable laws of the State of Delaware, and as expressly provided in this Note.

          (15) RANK; ADDITIONAL INDEBTEDNESS; LIENS.

               (a) Rank. All payments due under this Note (a) shall rank pari passu with all Other Notes and (b) shall be senior to all other Indebtedness of the Company and its Subsidiaries other than Permitted Acquisition Indebtedness.

               (b) Incurrence of Indebtedness. So long as this Note is outstanding, the Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness, other than (i) the Indebtedness evidenced by this Note and the Other Notes and (ii) Permitted Indebtedness.

               (c) Existence of Liens. So long as this Note is outstanding, the Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”) other than Permitted Liens.

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               (d) Restricted Payments. The Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Permitted Indebtedness, whether by way of payment in respect of principal of (or premium, if any) or interest on, such Indebtedness if at the time such payment is due or is otherwise made or, after giving effect to such payment, an Event of Default has occurred and is continuing.

          (16) PARTICIPATION. The Holder, as the holder of this Note, shall be entitled to such dividends paid and distributions made to the holders of shares of Common Stock to the same extent as if the Holder had converted this Note into shares of Common Stock (without regard to any limitations on conversion herein or elsewhere) and had held such shares of Common Stock on the record date for such dividends and distributions. Payments under the preceding sentence shall be made concurrently with the dividend or distribution to the holders of shares of Common Stock

          (17) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative vote at a meeting duly called for such purpose or the written consent without a meeting of the Required Holders shall be required for any change or amendment to this Note or the Other Notes.

          (18) TRANSFER. This Note may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of Section 2(f) of the Securities Purchase Agreement.

          (19) REISSUANCE OF THIS NOTE.

               (a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 19(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being transferred, a new Note (in accordance with Section 19(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 3(c)(iii) and this Section 19(a), following conversion or redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face of this Note.

               (b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 19(d)) representing the outstanding Principal.

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               (c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 19(d) and in principal amounts of at least $100,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.

               (d) Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to Section 19(a) or Section 19(c), the Principal designated by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued Interest and Late Charges on the Principal and Interest of this Note, from the Issuance Date.

     (20) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

     (21) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to, attorneys’ fees and disbursements.

     (22) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the Company and all the Purchasers and shall not be construed against any person as

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the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.

          (23) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.

          (24) DISPUTE RESOLUTION. In the case of a dispute between the Company and the Holder as to the determination of the Closing Bid Price, the Closing Sale Price or the Weighted Average Price or the arithmetic calculation of the Conversion Rate or the Redemption Price, the Holder and the Company shall submit promptly via facsimile (a) the disputed determination of the Closing Bid Price, the Closing Sale Price or the Weighted Average Price to an independent, nationally recognized investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Rate or the Redemption Price to the Company’s independent, outside accountant. The Company and the Holder shall cause the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than five Business Days from the time it receives the disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error. The expenses of the investment bank or accountant shall be borne by the party whose determination or calculation most differs from such investment bank’s or accountant’s determination or calculation, as the case may be.

          (25) NOTICES; PAYMENTS.

               (a) Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least twenty (20) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any pro rata subscription offer to holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.

               (b) Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the Purchasers, shall initially be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement); provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by

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providing the Company with prior written notice setting out such request and the Holder’s wire transfer instructions. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any Interest Date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of Interest due on such date. Any amount of Principal which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of 15% per annum from the date such amount was due until the same is paid in full (“Late Charge”).

          (26) CANCELLATION. After all Principal, accrued Interest and other amounts at any time owed on this Note has been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.

          (27) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement.

          (28) GOVERNING LAW. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.

          (29) CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings:

               (a) “Approved Stock Plan” means any employee benefit plan which has been approved by the Board of Directors of the Company, pursuant to which the Company’s securities may be issued to any employee, officer, director or consultant for services provided to the Company.

               (b) “Bloomberg” means Bloomberg Financial Markets.

               (c) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

               (d) “Cash Transaction” means any Change of Control with a Successor Entity that is unaffiliated with the Company at the time of the proposed Change of Control and that neither such Successor Entity nor its Parent Entity is a publicly traded entity whose common stock or equivalent equity security is quoted or listed for trading on an Eligible Market, which Cash Transaction is consummated on an arm’s length basis at a time that the Equity Conditions are satisfied and pursuant to which the holders of the Common Stock are to receive consideration consisting solely of cash.

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               (e) “Change of Control” means any Fundamental Transaction other than (A) a Fundamental Transaction pursuant to which (i) the Successor Entity or its Parent Entity is a publicly traded corporation whose common stock is quoted on or listed for trading on an Eligible Market, (ii) this Note is convertible into such publicly traded common stock, (iii) holders of the Common Stock immediately prior to the Fundamental Transaction continue after the Fundamental Transaction to hold a majority of the publicly traded securities of the Successor Entity or its Parent Entity and (iv) holders of the Common Stock immediately prior to the Fundamental Transaction continue after the Fundamental Transaction to hold, directly or indirectly, the voting power of the surviving entity or entities necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities, or (B) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company.

               (f) “Change of Control Redemption Premium” means (i) from and after the Issuance Date through the nine (9) month anniversary of the Issuance Date, 120%; (ii) after the nine (9) month anniversary of the Issuance Date through the twenty-one (21) month anniversary of the Issuance Date, 115%; (iii) after the twenty-one (21) month anniversary of the Issuance Date through the thirty-four (34) month anniversary of the Issuance Date, 110%; and (iv) after the thirty-four (34) month anniversary of the Issuance Date through the Maturity Date, 105%.

               (g) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 24. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

               (h) “Common Stock Deemed Outstanding” means, at any given time, the number of shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii)

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hereof regardless of whether the Options or Convertible Securities are actually exercisable at such time, but excluding any shares of Common Stock owned or held by or for the account of the Company or issuable upon conversion of the Notes.

               (i) “Convertible Securities” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable for shares of Common Stock.

               (j) “EBITDA” means, for any four calendar quarter period, the net income (or net loss) of such Person and its consolidated Subsidiaries, determined in accordance with GAAP, plus (i) any provision for (or less any benefit from) income taxes, (ii) any deduction for interest expense, net of interest income, and (iii) depreciation and amortization expense. All determinations of the components of EBITDA shall be derived from the Company’s then most recently filed Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as applicable.

               (k) “Eligible Market” means the Principal Market or The New York Stock Exchange, Inc.

               (l) “Equity Conditions” means: (i) on each day during the period beginning six months prior to the applicable date of determination and ending on and including the applicable date of determination (the “Equity Conditions Measuring Period”), either (x) the Registration Statement filed pursuant to the Registration Rights Agreement shall be effective and available for the resale of all remaining Registrable Securities (as defined in the Registration Rights Agreement) in accordance with the terms of the Registration Rights Agreement and there shall not have been any Grace Periods (as defined in the Registration Rights Agreement) or (y) all shares of Common Stock issuable upon conversion and redemption of the Notes shall be eligible for sale without restriction and without the need for registration under any applicable federal or state securities laws; (ii) the Company shall have no knowledge of any fact that would cause (x) the Registration Statements required pursuant to the Registration Rights Agreement not to be effective and available for the resale of all remaining Registrable Securities in accordance with the terms of the Registration Rights Agreement or (y) any shares of Common Stock issuable upon conversion and redemption of the Notes not to be eligible for sale without restriction pursuant to Rule 144(k) and any applicable state securities laws; (iii) on each day during the Equity Conditions Measuring Period, the shares of Common Stock are designated for quotation on the Principal Market and shall not have been suspended from trading on such exchange or market (other than suspensions of not more than two days and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting or suspension by such exchange or market been threatened or pending either (A) in writing by such exchange or market or (B) by falling below the minimum listing maintenance requirements of such exchange or market; (iv) during the Equity Conditions Measuring Period, the Company shall have delivered all shares of Common Stock issuable upon conversion or redemption of the Notes to the holders of the Notes on a timely basis; (v) any applicable shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating Section 3(d)(i) hereof; (vi) the Company shall have obtained the Stockholder Approval (as defined in the Securities Purchase Agreement); (vii) during the Equity Conditions Measuring Period, there shall not have occurred either (A) other than in connection with a Cash Transaction, the public announcement of a pending, proposed or intended Fundamental Transaction which has

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not been abandoned, terminated or consummated or (B) an Event of Default or an event that with the passage of time or giving of notice would constitute an Event of Default; (viii) the Company otherwise shall have been in material compliance with and shall not have materially breached any provision, covenant, representation or warranty of any Transaction Document and (ix) other than in connection with a Mandatory Conversion or a Cash Transaction, the Weighted Average Price of the Common Stock on each day of the applicable Measuring Period shall be in excess of the Required Price; provided, however, that in the event that the Weighted Average Price of the Common Stock falls below the Required Price on any Trading Day during the applicable Measuring Period (a “Failure Day”), this condition shall be deemed satisfied and the Company shall be entitled to deliver any applicable Repayment Shares or Optional Redemption Shares, as the case may be, so long as the number of shares of Common Stock so delivered does not exceed the number of shares otherwise deliverable reduced by the product of (I) 0.05 and (II) the number of Failure Days in such Measuring Period (with the applicable cash portion of the Maturity Date Payment or Optional Redemption Price, as the case may be, deliverable on the applicable Maturity Date or Optional Redemption Date, as the case may be, being correspondingly increased by the resulting reduction in the number of Repayment Shares or Optional Redemption Shares, as the case may be).

               (m) “Excluded Securities” means any shares of Common Stock (or Options or Convertible Securities) issued or issuable: (i) in connection with any Approved Stock Plan; (ii) upon conversion or redemption of the Notes; (iii) in connection with the transactions set forth on Schedule 3(u) in the Company Disclosure Letter; (iv) pursuant to a bona fide firm commitment underwritten public offering with a nationally recognized underwriter which generates gross proceeds to the Company in excess of $25,000,000 (other than an “at-the-market offering” as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended, and “equity lines”); (v) in connection with any bona fide, good faith strategic partnership or joint venture (including, without limitation, technology licensing or development arrangements, distribution, supply or manufacturing arrangements, and commercial credit arrangements, equipment financings, commercial property lease transactions and similar arrangements and transactions) with a Person who is not engaged in the business of investing in companies and the primary purpose of which is not to raise capital for the Company or any Subsidiary; (vi) in connection with a bona fide, good-faith acquisition by the Company not constituting a Change of Control of all or substantially all the assets or a majority of the voting power of an unaffiliated business or business segment not for capital raising purposes; and (vii) upon conversion of any Options or Convertible Securities which are outstanding on the day immediately preceding the Subscription Date, provided that the economic terms of such Options or Convertible Securities are not amended, modified or changed on or after the Subscription Date.

               (n) “Fundamental Transaction” means that the Company shall, directly or indirectly, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, or (iii) allow another Person to make a purchase, tender or exchange offer that is accepted by the holders of more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (iv) consummate a stock purchase agreement or other business combination (including,

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without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock purchase agreement or other business combination), or (v) reorganize, recapitalize or reclassify its Common Stock.

               (o) “GAAP” means United States generally accepted accounting principles, consistently applied.

               (p) “Interest Rate” means 4.75%, subject to adjustment pursuant to Section 2.

               (q) “Measuring Period” means the twenty (20) consecutive Trading Days ending on and including the second (2nd) Trading Day immediately preceding the Maturity Date or the Holder Optional Redemption Date, as the case may be.

               (r) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

               (s) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

               (t) “Permitted Acquisition Indebtedness” means the incurrence by the Company of Indebtedness in an amount not to exceed at any one time in the aggregate the Permitted Acquisition Indebtedness Threshold; provided that such Permitted Acquisition Indebtedness is (i) received from a national banking association as part of an asset back commercial revolving or term credit facility, (ii) incurred in connection with the bona fide purchase or sale of a product, product line, business or assets not for purposes of incurrence of Indebtedness, (iii) not incurred prior to the first anniversary of the Issuance Date and (iv) not incurred at any time that revenues for the Company as set forth in the financial statements contained in the Company’s then most recently filed Annual Report on Form 10-K, Quarterly Report on Form 10-Q or report on Form 8-K, as applicable, are less than $30 million for the twelve month period prior to the period covered by such Annual Report on Form 10-K, Quarterly Report on Form 10-Q or report on Form 8-K, as applicable.

               (u) “Permitted Acquisition Indebtedness Threshold” means an amount equal to (i) the greater of (x) $25,000,000 and (y) 300% of EBITDA (the “Initial Acquisition Indebtedness Threshold”) and (ii) after the third anniversary of the Issuance Date, the sum of (x) the Initial Acquisition Indebtedness Threshold and (y) the principal amount of Notes converted or redeemed.

               (v) “Permitted Construction Indebtedness” means the incurrence by the Company of Indebtedness in an amount not to exceed at any one time $25,000,000 in the aggregate; provided that such Permitted Construction Indebtedness is (i) incurred in connection

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with the bona fide building or acquisition of a new, material manufacturing or laboratory facility of the Company that is unsecured or only secured by, and with recourse solely to, such manufacturing or laboratory facility, (ii) incurred in connection with the lease of a manufacturing or laboratory facility where such lease is considered Indebtedness hereunder solely by virtue of the application of clause (F) of the definition of Indebtedness and (iii) evidenced solely by a mortgage on, and with recourse solely to, such manufacturing or laboratory facility or by an Industrial Revenue Bond (or similar financing) solely for the benefit of, and with recourse solely to, such manufacturing or laboratory facility.

               (w) “Permitted Indebtedness” means Permitted Acquisition Indebtedness, Permitted Construction Indebtedness and Indebtedness set forth on Schedule 29(w) hereto.

               (x) “Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent, and (iv) any Lien created in connection with the incurrence of Permitted Indebtedness.

               (y) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

               (z) “Principal Market” means the Nasdaq National Market.

               (aa) “Redemption Conversion Price” means that price which shall be computed as 95% of the arithmetic average of the Weighted Average Price of the Common Stock on each of the Trading Days during the Measuring Period. All such determinations to be appropriately adjusted for any stock split, stock dividend, stock combination or other similar transaction during such period.

               (bb) “Redemption Notice” means any of an Event of Default Redemption Notice, a Change of Control Redemption Notice, a Cash Transaction Redemption Notice, a Holder Optional Redemption Notice or a CEO Trigger Optional Redemption Notice.

               (cc) “Redemption Premium” means (i) in the case of the Events of Default described in Section 4(a)(i) - (vii) and (x) - (xiv), the Redemption Premium Percentage or (ii) in the case of the Events of Default described in Section 4(a)(viii) - (ix), 100%.

               (dd) “Redemption Premium Percentage” means (i) from and after the Issuance Date through the first anniversary of the Issuance Date, 125%; (ii) after the first anniversary of the Issuance Date through the second anniversary of the Issuance Date, 120%; (iii) after the second anniversary of the Issuance Date through the third anniversary of the Issuance Date, 115%; (iv) after the third anniversary of the Issuance Date through the fourth

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anniversary of the Issuance Date, 110%; and (v) after the fourth anniversary of the Issuance Date through the Maturity Date, 105%.

               (ee) “Redemption Price” means any of the Event of Default Redemption Price, the Change of Control Redemption Price, the Cash Transaction Redemption Price, the Holder Optional Redemption Price or the CEO Trigger Optional Redemption Price.

               (ff) “Registration Rights Agreement” means that certain registration rights agreement dated the Subscription Date by and among the Company and the initial holders of the Notes relating to, among other things, the registration of the resale of the shares of Common Stock issuable upon conversion or redemption of the Notes.

               (gg) “Required Holders” means the holders of Notes representing at least a majority of the aggregate principal amount of the Notes then outstanding.

               (hh) “Required Price” means $2.00, subject to appropriate adjustments for stock splits, stock dividends, stock combinations, reclassifications, reorganizations and other similar transactions after the Issuance Date.

               (ii) “SEC” means the United States Securities and Exchange Commission.

               (jj) “Securities Purchase Agreement” means that certain securities purchase agreement dated the Subscription Date by and among the Company and the initial holders of the Notes pursuant to which the Company issued the Notes.

               (kk) “Subscription Date” means July 16, 2004.

               (ll) “Successor Entity” means the Person, which may be the Company, formed by, resulting from or surviving any Fundamental Transaction or the Person with which such Fundamental Transaction shall have been made, provided that if such Person is not a publicly traded entity whose common stock or equivalent equity security is quoted or listed for trading on an Eligible Market, Successor Entity shall mean such Person’s Parent Entity.

               (mm) “Trading Day” means any day on which the shares of Common Stock are traded on the Principal Market, or, if the Principal Market is not the principal trading market for the shares of Common Stock, then on the principal securities exchange or securities market on which the shares of Common Stock are then traded; provided that “Trading Day” shall not include any day on which the shares of Common Stock are scheduled to trade on such exchange or market for less than 4.5 hours or any day that the shares of Common Stock are suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York Time).

               (nn) “Weighted Average Price” means, for any security as of any date of determination, the dollar volume-weighted average price for such security on the Principal Market during the period beginning at 9:30:01 a.m., New York Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York Time (or such other time as the Principal Market publicly announces is the official

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close of trading) as reported by Bloomberg through its “Volume at Price” functions, or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York Time (or such other time as such market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York Time (or such other time as such market publicly announces is the official close of trading) as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Weighted Average Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder in good faith. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 24. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

[Signature Page Follows]

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          IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Issuance Date set out above.

NOVAVAX, INC.
By:	/s/ Nelson M. Sims
	Name:	Nelson M. Sims
	Title:	President and Chief Executive Officer

EXHIBIT I

NOVAVAX, INC.
CONVERSION NOTICE

Reference is made to the Senior Convertible Note (the “Note”) issued to the undersigned by Novavax, Inc. (the “Company”). In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as defined in the Note) of the Note indicated below into shares of Common Stock of the Company, par value $.01 per share (the “Common Stock”), as of the date specified below.

Date of Conversion:

Aggregate Conversion Amount to be converted:

The undersigned hereby certifies to the Company that the conversion of the amount set forth above in accordance with the Note will not directly result in the undersigned (together with the undersigned’s affiliates) beneficially owning in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion, calculated in accordance with Section 3(d)(i) of the Note.

Please confirm the following information:

Conversion Price:

Number of shares of Common Stock to be issued:

Please issue the shares of Common Stock into which the Note is being converted in the following name and to the following address:

Issue to:

Facsimile Number:

Authorization:

By:
	Title:

Dated:

Account Number:

(if electronic book entry transfer)

Transaction Code Number:

(if electronic book entry transfer)

ACKNOWLEDGMENT

          The Company hereby acknowledges this Conversion Notice and hereby directs Equiserve Trust Company, N.A. to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated July     , 2004 from the Company and acknowledged and agreed to by Equiserve Trust Company, N.A.

NOVAVAX, INC.
By:
	Name:
	Title:

EX-99.5

Exhibit 99.5

EXCHANGE AGREEMENT

          THIS EXCHANGE AGREEMENT (this “Agreement”) is entered into as of July 16, 2004, by and among NOVAVAX, INC., a Delaware corporation (the “Company”), KING PHARMACEUTICALS, INC., a Tennessee corporation (“King”), and PARKEDALE PHARMACEUTICALS, INC., a Michigan corporation (“Parkedale”).

          WHEREAS, pursuant to that certain December 2000 Note Purchase Agreement dated as of December 19, 2000 (the “December 2000 Note Purchase Agreement”), between the Company and King, King made loans to the Company in the aggregate principal amount of $25,000,000, and the Company issued to King (a) a 4% Convertible Senior Note of the Company dated December 19, 2000, in the aggregate principal amount of $20,000,000 (together with the allonge dated September 7, 2001, the “First December 2000 Note”) and (b) a 4% Convertible Senior Note of the Company dated September 7, 2001, in the aggregate principal amount of $5,000,000 (the “Second December 2000 Note”);

          WHEREAS, pursuant to that certain September 2001 Note Purchase Agreement dated as of September 7, 2001 (the “September 2001 Note Purchase Agreement”), between the Company and King, King made a loan to the Company in the aggregate principal amount of $5,000,000, and the Company issued to King a 4% Convertible Senior Note of the Company dated September 7, 2001, in the aggregate principal amount of $5,000,000 (the “September 2001 Note”);

          WHEREAS, pursuant to that certain June 2002 Note Purchase Agreement dated as of June 26, 2002 (the “June 2002 Note Purchase Agreement”), between the Company and King, King made a loan to the Company in the aggregate principal amount of $10,000,000, and the Company issued to King a 4% Convertible Senior Note of the Company dated June 26, 2002, in the aggregate principal amount of $10,000,000 (the “June 2002 Note”; together with the First December 2000 Note, the Second December 2000 Note and the September 2001 Note, the “Notes”);

          WHEREAS, in connection with the December 2000 Note Purchase Agreement, the Company and King entered into that certain Investor Rights Agreement dated as of December 19, 2000 (as amended by the First Amendment to Investor Rights Agreement dated as of September 7, 2001, the “Original Investor Rights Agreement”);

          WHEREAS, in connection with the June 2002 Note Purchase Agreement, the Company and King entered into that certain Amended and Restated Investor Rights Agreement dated as of June 26, 2002 (the “Amended and Restated Investor Rights Agreement”), which amended and restated the Original Investor Rights Agreement;

          WHEREAS, in connection with the December 2000 Note Purchase Agreement, the Company and King entered into that certain Registration Rights Agreement dated as of December 19, 2000 (as amended and restated on September 7, 2001, the “Original Registration Rights Agreement”);

          WHEREAS, in connection with the June 2002 Note Purchase Agreement, the Company and King entered into that certain Second Amended and Restated Registration Rights Agreement dated as of June 26, 2002 (the “Second Amended and Restated Registration Rights Agreement”), which amended and restated the Original Registration Rights Agreement;

          WHEREAS, King and the Company are parties to that certain License Agreement dated as of December 19, 2000 (the “HPV License Agreement”);

          WHEREAS, the Company and Parkedale are parties to that certain Pharmaceutical Quality Agreement dated June 1, 2001 (the “Pharmaceutical Quality Agreement”) regarding, among other things, manufacturing and quality control matters under the HPV License Agreement;

          WHEREAS, Parkedale and the Company are parties to that certain Supply Agreement dated as of October 21, 1999 (the “Supply Agreement”) and that certain License and Supply Agreement dated as of October 21, 1999 (the “License and Supply Agreement”; together with the Supply Agreement, the “Adjuvant License and Supply Agreements”) regarding the licensing and supply of proprietary adjuvants, including a Novasome® delivery system;

          WHEREAS, King and the Company are parties to that certain Copromotion Agreement dated as of January 8, 2001 (the “Original Copromotion Agreement”), as amended by that certain First Amendment to the Copromotion Agreement dated as of June 29, 2001, as further amended by that certain Second Amendment to the Copromotion Agreement dated as of June 29, 2001, as further amended by that certain Third Amendment to the Copromotion Agreement dated as of June 26, 2002 (the Original Copromotion Agreement, as amended, the “Copromotion Agreement”);

          WHEREAS, King and the Company are parties to that certain Agreement for Purchase and Sale of Assets Relating to AVC™ Products dated as of January 8, 2001 (the “Original AVC Purchase Agreement”), as amended by that certain First Amendment to AVC Purchase Agreement dated as of June 26, 2002 (the Original AVC Purchase Agreement, as amended, the “AVC Purchase Agreement”);

          WHEREAS, King and the Company are parties to that certain Supply Agreement dated as of January 8, 2001 (the “Original AVC Supply Agreement”), as

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amended by that certain First Addendum to the AVC™ Cream Supply Agreement dated as of February 25, 2003 (the Original AVC Supply Agreement, as amended, the “AVC Supply Agreement”; together with the AVC Purchase Agreement, the “AVC Agreements”);

          WHEREAS, King and the Company are parties to that certain Exclusive License and Distribution Agreement dated as of January 8, 2001 (the “Original Exclusive License and Distribution Agreement”), as amended by that certain First Amendment to the Exclusive License and Distribution Agreement dated as of June 29, 2001, as further amended by that certain Second Amendment to the Exclusive License and Distribution Agreement dated as of June 29, 2001 (the Original Exclusive License and Distribution Agreement, as amended, the “Exclusive License and Distribution Agreement”; together with the December 2000 Note Purchase Agreement, the September 2001 Note Purchase Agreement, the June 2002 Note Purchase Agreement, the Original Investor Rights Agreement, the Amended and Restated Investor Rights Agreement, the Original Registration Rights Agreement, the Second Amended and Restated Registration Rights Agreement, the HPV License Agreement, the Pharmaceutical Quality Agreement, the Adjuvant License and Supply Agreements, the Copromotion Agreement, and all other contracts and agreements (oral or written) to which King or any of its subsidiaries, on the one hand, and the Company or any of its subsidiaries, on the other hand, are parties prior to the date hereof (other than the AVC Agreements), the “Collaboration Agreements”);

          WHEREAS, the parties desire that the Company redeem the Notes from King for the consideration and upon the terms and conditions set forth in this Agreement;

          WHEREAS, the Company desires to terminate the Collaboration Agreements, and King is willing to agree to terminate, or cause to be terminated, the Collaboration Agreements in consideration for the Company’s issuance to King of shares of Common Stock of the Company, all subject to and in accordance with the terms and conditions set forth in this Agreement;

          WHEREAS, the Company desires to make offers of employment to certain employees of King, and King is willing to permit the Company to make such offers, all subject to and in accordance with the terms and conditions set forth in this Agreement; and

          WHEREAS, capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in Annex I attached hereto.

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

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SECTION 1. EXCHANGE TRANSACTIONS; CLOSING

     1.1 Redemption of Notes.

          At the Closing (as defined below), (a) King shall deliver the original Notes to the Company, free and clear of all liens, claims and encumbrances, and (b) in consideration for all right, title and interest in the Notes, the Company shall pay to King the sum of Twenty-Two Million Dollars ($22,000,000) in cash by wire transfer of immediately available funds to an account or accounts specified by King in writing (the “Redemption Payment”). For the avoidance of doubt, the parties agree and acknowledge that the Redemption Payment constitutes payment in full of all of the Company’s obligations under the Notes, including interest that was otherwise due and payable under the Notes on June 30, 2004.

     1.2 Issuance of Shares; Termination of Agreements.

          At the Closing, (a) the Company shall issue and deliver to King three million two hundred fifty-two thousand thirty-three (3,252,033) shares of Common Stock (as defined below) of the Company (the “Exchange Shares”), free and clear of all liens, claims and encumbrances, and (b) in consideration for the Exchange Shares, King, Parkedale and the Company shall execute and deliver the Termination Agreement in the form attached as Exhibit A hereto (the “Termination Agreement”) providing for, among other things, the release by the Company, King and Parkedale of all of their rights under the Collaboration Agreements, all as more specifically set forth therein.

     1.3 Transfer of Employees.

          (a) Schedule 1.3 attached hereto sets forth a list of sales representatives employed as of the date hereof by King or any affiliate of King in the women’s health division of King or such affiliates (collectively, the “Subject Employees”), including the annual salary or wage rate (as applicable) of each such Subject Employee. For a period of seven (7) business days after the Closing Date, the Company shall have the right to make offers of employment to some or all of the Subject Employees at their then-current salary or wage rate (as applicable). Any Subject Employee who accepts employment with the Company will, as of the date of hire, be included in the Company’s employee benefit plans and bonus programs, subject to the terms of such plans and programs, and will be subject to the Company’s employment policies, all as generally applicable to the Company’s employees who are similarly situated. For the avoidance of doubt, the employment of any Subject Employee by the Company shall be contingent upon the consummation of the Closing hereunder. The Company agrees that all such Subject Employees who are employed by the Company shall be credited under the

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Company’s current 401(k) plan with their service with King and its subsidiaries for purposes of determining any period of eligibility to participate or to vest in the benefits thereunder (and for no other plan or purpose, including Company equity and bonus plans, vacation, sick leave or otherwise).

          (b) On the seventh (7^th) business day after the Closing Date, the Company shall deliver to King a certificate (the “Transferred Employee Certificate”), duly executed by an executive officer of the Company, certifying to a list of the names of the Subject Employees who have accepted employment with, and who have been hired by, the Company (such Subject Employees, the “Transferred Employees”). Notwithstanding anything to the contrary set forth in this Agreement, the Company shall not assume or otherwise be responsible for any obligations and liabilities of King or any of King’s subsidiaries to any Transferred Employee (or otherwise relating to the employment or termination of the employment of any Transferred Employee by or with King or any of King’s subsidiaries).

          (c) At the Closing, in consideration for the covenants and agreements of the Company set forth in this Section 1.3, King shall pay to the Company the sum of Three Million Two Hundred Twenty Thousand Dollars ($3,220,000) (the “Employee Payment”) by wire transfer of immediately available funds to an account specified in writing by the Company.

          (d) At the Closing, in consideration for King allowing the Company to make offers of employment to the Subject Employees, the Company shall issue and deliver to King five hundred twenty-three thousand five hundred seventy-seven (523,577) shares of Common Stock of the Company (the “Sales Force Shares”), free and clear of all liens, claims and encumbrances.

     1.4 Payment of Marketing Expenses.

          At the Closing, King shall pay to the Company, in cash by wire transfer of immediately available funds to an account specified by the Company in writing, the sum of Four Million Seven Hundred Eighty-One Thousand Sixty-Four Dollars ($4,781,064) (the “Marketing Expense Payment”), representing King’s share of budgeted marketing expenses under the Copromotion Agreement and the Exclusive License and Distribution Agreement for the 2004 calendar year.

     1.5 Certain Adjustments.

          If between the date of this Agreement and the date that all of the Exchange Shares and the Sales Force Shares have been duly and validly issued to King pursuant to this Section 1, the outstanding shares of Common Stock shall be changed into a different number of shares by reason of any reclassification, recapitalization, split-up, combination or exchange of shares, or any dividend

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payable in stock or other securities or other property shall be declared thereon with a record date within such period, then the number of the Exchange Shares and the Sales Force Shares issuable to King pursuant to this Section 1 shall be adjusted accordingly to provide the same economic effect as contemplated by this Agreement prior to such reclassification, recapitalization, split-up, combination, exchange or dividend.

     1.6 Return of Property.

          At the Closing or, to the extent impracticable to effect at the Closing, within thirty (30) days after the Closing, (a) the Company shall return to King and, if necessary, reassign to King pursuant to a bill of sale or other assignment instrument reasonably acceptable to King, all property and proprietary rights of King currently held by the Company, including the King HPV Confidential Information; and (b) King and Parkedale shall, and shall cause their affiliates to, return to the Company and, if necessary, reassign to the Company pursuant to a bill of sale or other assignment instrument reasonably acceptable to the Company, all property and proprietary rights of the Company currently held by King, Parkedale or any of their respective affiliates, including the Novavax HPV Confidential Information.

     1.7 Closing; Order of Closing.

          (a) Subject to the satisfaction or waiver of the conditions set forth in Section 5 hereof (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions), the closing of the transactions contemplated in this Agreement (the “Closing”) shall take place at the offices of Ropes & Gray LLP, 45 Rockefeller Center, New York, New York 10111, on July 19, 2004, or on such other date, and at such other place, as the parties mutually agree in writing. The date on which the Closing shall occur shall be referred to as the “Closing Date”.

          (b) At the Closing, the consummation of the transactions contemplated by this Agreement shall occur in the following order:

               (i) first, King shall relinquish King’s rights set forth in Section 7 of the Amended and Restated Investor Rights Agreement; and

               (ii) second, the consummation of the transactions contemplated by Section 1.1 and all other transactions contemplated to occur at the Closing pursuant to this Agreement (collectively, the “Transactions”) shall take place.

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     1.8 Closing Deliveries.

          (a) By King and Parkedale. At the Closing, King and Parkedale, as applicable, shall deliver to the Company the following:

               (i) the original Notes;

               (ii) the Termination Agreement duly executed by King and Parkedale;

               (iii) the Anaconda Release described in Section 4.2(c) duly executed by King and Parkedale;

               (iv) the Registration Rights Agreement in the form attached as Exhibit B hereto (the “Registration Rights Agreement”; together with the Termination Agreement, the “Related Agreements”), duly executed by King;

               (v) the assignment instruments, if any, contemplated by Section 1.6(b) duly executed by King and Parkedale;

               (vi) the Employee Payment;

               (vii) the Marketing Expense Payment; and

               (viii) the certificate described in Section 5.2(c).

          (b) By the Company. At the Closing, the Company shall deliver to King the following:

               (i) the Redemption Payment;

               (ii) the Termination Agreement duly executed by the Company;

               (iii) the Anaconda Release described in Section 4.2(c) duly executed by Anaconda Opportunity Fund, L.P. (“Anaconda”);

               (iv) stock certificate(s) representing the Exchange Shares duly endorsed by the Company;

               (v) stock certificate(s) representing the Sales Force Shares duly endorsed by the Company;

               (vi) the Registration Rights Agreement duly executed by the Company;

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               (vii) the assignment instruments, if any, contemplated by Section 1.6(a) duly executed by the Company; and

               (viii) the certificates and other deliveries described in Section 5.1(c).

SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

          Except for the matters disclosed in the Company’s Disclosure Letter attached hereto, the Company hereby represents and warrants to King as of the date hereof and as of the Closing Date as follows:

     2.1 Organization, Good Standing and Qualification.

          The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on the business, operations, properties, assets or condition (financial or otherwise) of the Company and its subsidiaries taken as a whole (a “Material Adverse Effect”).

     2.2 Authorization.

          The Company has all requisite corporate power and authority (a) to execute, deliver and perform the Company’s obligations under this Agreement and the Related Agreements, (b) to issue the Exchange Shares and the Sales Force Shares to King, and (c) to execute, deliver and perform the Company’s obligations under all other agreements, instruments and certificates to be executed and delivered by the Company pursuant to or in connection with this Agreement and the Related Agreements. All corporate action on the part of the Company, its officers, directors and stockholders for the authorization, execution and delivery of this Agreement and the Related Agreements, and the performance of all obligations of the Company hereunder and the authorization, issuance and delivery of the Exchange Shares and the Sales Force Shares has been taken.

     2.3 Enforceability.

          This Agreement constitutes, and the Related Agreements when executed by the Company will constitute, valid and legally binding obligations of

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the Company, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally and (b) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

     2.4 Valid Issuance of Exchange Shares and Sales Force Shares.

          The Exchange Shares and the Sales Force Shares will be duly and validly issued, fully paid and nonassessable and not subject to preemptive or similar rights, and the Exchange Shares and the Sales Force Shares will be issued in compliance with all applicable federal and state securities laws, when issued and delivered in accordance with the terms of this Agreement, for the consideration expressed herein. No approval of the stockholders of the Company is required to issue the Exchange Shares or the Sales Force Shares.

     2.5 Capitalization; Indebtedness.

          (a) The authorized capital stock of the Company consists of one hundred million (100,000,000) shares of common stock, $0.01 par value per share (the “Common Stock”) and two million (2,000,000) shares of preferred stock, $.01 par value per share (the “Preferred Stock”). As of June 30, 2004: (i) thirty-four million eight hundred twenty-five thousand eight hundred eighty-five (34,825,885) shares of Common Stock were issued and outstanding; (ii) four million nine hundred nine thousand six hundred eighteen (4,909,618) shares of Common Stock were reserved for issuance upon the exercise of outstanding stock options or other rights to purchase or receive the Common Stock granted under the Company’s 1995 Stock Option Plan; (iii) two hundred seventy thousand (270,000) shares of Common Stock were reserved for issuance upon the exercise of outstanding stock options or other rights to receive the Common Stock granted under the Company’s Director Stock Option Plan; (iv) five million one hundred eighty-eight thousand one hundred forty-seven (5,188,147) shares of Common Stock were reserved for issuance upon the conversion of the Notes; (v) two hundred fifty-three thousand eight hundred forty-eight (253,848) shares of Common Stock were held by the Company in the Company’s treasury; (vi) no shares of Preferred Stock were issued or outstanding; and (vii) warrants to purchase seventy thousand (70,000) shares of Common Stock were issued and outstanding.

          (b) All outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive or similar rights. Except as set forth in this Section 2.5, except as provided in the Collaboration Agreements (including the Notes) and except for changes resulting from the issuance of shares of Common Stock pursuant to the Company stock option plans and warrants, or as expressly permitted by this

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Agreement, (i) there are not issued, reserved for issuance or outstanding (A) any shares of capital stock or other voting securities of the Company, (B) any securities of the Company or any Company subsidiary convertible into or exchangeable or exercisable for shares of capital stock or voting securities of or ownership interests in the Company or any Company subsidiary, or (C) any warrants, calls, options or other rights to acquire from the Company or any Company subsidiary, or any obligation of the Company or any Company subsidiary to issue, any capital stock, voting securities or other ownership interests in, or securities convertible into or exchangeable or exercisable for capital stock or voting securities of or other ownership interests in, the Company or any Company subsidiary; (ii) there are no outstanding obligations of the Company or any Company subsidiary to repurchase, redeem or otherwise acquire any such securities or to issue, deliver or sell, or cause to be issued, delivered or sold, any such securities; and (iii) except as described in this Agreement or the Related Agreements, the Company is not presently under any obligation, has not agreed or committed, and has not granted rights, to register under the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise file any registration statement under the Securities Act or the Exchange Act covering, any of its currently outstanding capital stock or other securities or any of its capital stock or other securities that may be subsequently issued.

          (c) Except as provided in the Collaboration Agreements (including the Notes), neither the Company nor any Company subsidiary is a party to any agreement granting any preemptive or antidilutive rights with respect to any securities of the Company or any Company subsidiary that are outstanding as of the date hereof, or with respect to any securities of the Company or any Company subsidiary that may be subsequently issued upon the conversion or exercise of any instrument outstanding as of the date hereof. The execution, delivery and performance of this Agreement and the Related Agreements and the issuance of the Exchange Shares and the Sales Force Shares will not trigger any preemptive, antidilutive or similar rights under any agreement to which the Company or any Company subsidiary is a party, except as provided in the Collaboration Agreements (including the Notes). Other than Fielding Pharmaceutical Company, a Delaware corporation (“Fielding”), the Company does not directly or indirectly beneficially own any securities or other beneficial ownership interests in any other person.

     2.6 SEC Reports and Absence of Changes.

          (a) The Company has heretofore filed with the United States Securities and Exchange Commission (the “SEC”) all forms, statements, reports and documents (together with all exhibits, amendments and supplements thereto, the “SEC Filings”) required to be filed by the Company under each of the Securities Act and the Exchange Act and the SEC rules and regulations thereunder, including an Annual Report on Form 10-K for the year ended December 31, 2003 (the

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“2003 10-K”). As of their respective filing dates, none of the SEC Filings, at the time they were filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.

          (b) Except as disclosed in the SEC Filings, since December 31, 2003, the Company has conducted its businesses only in the ordinary course of business consistent with past practice, and there has not been (i) any Material Adverse Effect on the Company, (ii) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any of the Company’s capital stock, (iii) any split, combination or reclassification of any of the Company’s capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, (iv) (A) any granting by the Company or Fielding to any current or former director, officer or employee of the Company or Fielding of any increase in compensation, bonus or other benefits, except for normal increases in compensation, bonuses or other benefits in the ordinary course of business consistent with past practice, (B) any granting by the Company or Fielding to any such current or former director, officer or employee of any increase in severance or termination pay, except for the granting of any increase in severance or termination pay to employees in the ordinary course of business consistent with past practice, (C) any entry by the Company or Fielding into, or any material amendment of, any material employment, deferred compensation, consulting, severance, termination or indemnification agreement with any such current or former director, officer or employee or (D) any material amendment to, or material modification of, any option outstanding under the Company stock option plans, (v) any damage, destruction or loss, whether or not covered by insurance, that would be reasonably likely to have a Material Adverse Effect, or (vi) any change in accounting methods, principles or practices by the Company materially affecting its assets, liabilities or businesses, except insofar as may have been required by a change in generally accepted accounting principles.

     2.7 Financial Statements.

          The audited consolidated financial statements of the Company included or incorporated by reference in the 2003 10-K have been prepared in accordance with the published rules and regulations of the SEC and with U.S. generally accepted accounting principles applied on a consistent basis throughout the periods indicated therein and with each other, except as may be indicated therein or in the notes thereto, and fairly present in all material respects the financial condition of the Company and its subsidiaries as of the respective dates thereof and the results of their operations and statements of cash flows for the respective periods then ended. Except as reflected in such financial statements, the Company and its subsidiaries have no material liabilities, absolute or contingent,

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other than ordinary course liabilities incurred since the date of the last such financial statements in connection with the conduct of the business of the Company and its subsidiaries.

     2.8 Governmental Consents.

          Except for (a) any notification, if any, required to be filed or supplied pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder (the “HSR Act”), in connection with the transactions contemplated by this Agreement, (b) registration of the Exchange Shares and the Sales Force Shares under the Securities Act pursuant to the Registration Rights Agreement, (c) listing of the Exchange Shares and the Sales Force Shares on the Exchange, and (d) any filings required under federal and state securities laws in connection with the issuance of the Exchange Shares or the Sales Force Shares, no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the part of the Company in connection with the Company’s valid execution, delivery and performance of this Agreement or any of the Related Agreements. The filings under federal and state securities laws, if any, will be effected by the Company at its cost within the applicable stipulated statutory period.

     2.9 Litigation.

          There is no action, suit, proceeding or investigation pending or, to the knowledge of the Company, currently threatened against the Company or any of its subsidiaries which questions the validity of this Agreement or the Related Agreements, or the right of the Company to enter into such agreements and instruments or to consummate the transactions contemplated hereby or thereby. Except as disclosed in SEC Filings, there is no action, suit, proceeding or investigation pending or, to the knowledge of the Company, currently threatened against the Company, which singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have or would reasonably be expected to have a Material Adverse Effect.

     2.10 No Brokers.

          There are no claims, agreements, or commitments for brokerage commissions or finder’s fees or similar compensation in connection with the transactions contemplated by this Agreement or otherwise, based on any arrangement made by or on behalf of the Company or any of its subsidiaries, and the Company agrees to indemnify and hold King harmless against any damages incurred as a result of any such claim, agreement, or commitment.

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     2.11 No Conflicts.

          The execution and delivery of this Agreement and the Related Agreements by the Company do not, and the performance by the Company of its obligations under this Agreement and the Related Agreements will not, (i) conflict with or violate the certificate or articles of incorporation or bylaws of the Company or any of its subsidiaries, or conflict with or violate any law, statute, ordinance, rule, regulation, order, judgment or decree applicable to the Company or any of its subsidiaries or by which any of their respective properties or assets is bound or affected, or (ii) result in any breach of or constitute a default (or an event which with or without 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, or result in the creation of any lien, claim or encumbrance on any of the properties or assets of the Company or any of its subsidiaries pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any of its subsidiaries is a party or by which the Company, any of its subsidiaries or any of their respective properties or assets is bound or affected, except, in the case of clause (ii) above, for any such breaches, defaults or other alterations or occurrences that (A) would not prevent or delay consummation of the transactions contemplated in this Agreement and the Related Agreements in any material respect or otherwise prevent the Company from performing its obligations under this Agreement and the Related Agreements in any material respect, and (B) have not had and would not be reasonably likely to have a Material Adverse Effect.

     2.12 FDA Matters.

          As to each product subject to the jurisdiction of the U.S. Food and Drug Administration (“FDA”) under the Federal Food, Drug and Cosmetic Act, as amended, and the regulations thereunder (“FDCA”) that is manufactured, packaged, labeled, tested, distributed, sold, and/or marketed by the Company or any of its subsidiaries (each such product, a “Pharmaceutical Product”), to the knowledge of the Company, such Pharmaceutical Product is being manufactured, packaged, labeled, tested, distributed, sold and/or marketed by the Company in compliance with all applicable requirements under FDCA and similar laws, rules and regulations relating to registration, investigational use, premarket clearance, licensure, or application approval, good manufacturing practices, good laboratory practices, good clinical practices, product listing, quotas, labeling, advertising, record keeping and filing of reports except where the failure to be in compliance would not have a Material Adverse Effect. There is no pending, completed or, to the Company’s knowledge, threatened action (including any lawsuit, arbitration, or legal or administrative or regulatory proceeding, charge, complaint, or investigation) against the Company or any of its subsidiaries, and none of the Company or any of its subsidiaries has received any notice, warning letter or other communication from the FDA or any other governmental entity, which (i) contests

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the premarket clearance, licensure, registration, or approval of, the uses of, the distribution of, the manufacturing or packaging of, the testing of, the sale of, or the labeling and promotion of any Pharmaceutical Product, (ii) withdraws its approval of, requests the recall, suspension, or seizure of, or withdraws or orders the withdrawal of advertising or sales promotional materials relating to, any Pharmaceutical Product, (iii) imposes a clinical hold on any clinical investigation by the Company or any of its subsidiaries, (iv) enjoins production at any facility of the Company or any of its subsidiaries, (v) enters or proposes to enter into a consent decree of permanent injunction with the Company or any of its subsidiaries, or (vi) otherwise alleges any violation of any laws, rules or regulations by the Company or any of its subsidiaries, and which, either individually or in the aggregate, would have a Material Adverse Effect.

     2.13 Absence of Claims.

          The Company has no knowledge of any claims against King or any of its affiliates with respect to any of the AVC Agreements.

     2.14 Solvency.

          The Company is not now and has not ever been subject to any voluntary or involuntary petition in bankruptcy or any voluntary or involuntary proceeding relating to insolvency, receivership, liquidation, composition or assignment for the benefit of creditors and, to the Company’s knowledge, no involuntary proceeding or petition is or has been threatened against the Company. The Company is solvent and will be solvent at the Closing, and the Transactions will not render the Company insolvent. The Company owns property whose fair saleable value is greater than the amount required to pay all of its debts (including contingent debts). The Company is able to pay and, to the Company’s knowledge, will be able to pay for the first twelve (12) months after Closing, the Company’s debts as they mature.

     2.15 Fair Consideration.

          The Transactions are for fair consideration and are the product of arm’s length negotiations. The Company is receiving reasonably equivalent value in exchange for the consideration being provided to King in connection with the Transactions, including the Redemption Payment, the Exchange Shares and the Sales Force Shares.

     2.16 Good Faith.

          The Company has entered into the Transactions in good faith and without the intent to hinder, delay or defraud any creditor.

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     2.17 Adequate Capital.

          Immediately upon the consummation of the Transactions, the Company shall have adequate capital in light of the Company’s currently intended business operations to meet the Company’s obligations.

SECTION 3. REPRESENTATIONS AND WARRANTIES OF KING

          King and Parkedale hereby, jointly and severally, represent and warrant to the Company on the date hereof and as of the Closing Date as follows:

     3.1 Organization, Good Standing and Qualification.

          Each of King and Parkedale is a corporation duly organized, validly existing and in good standing under the laws of the State of Tennessee and State of Michigan, respectively, and has all requisite corporate power and authority to carry on its respective business as now conducted and as proposed to be conducted.

     3.2 Authorization.

     Each of King and Parkedale has all requisite corporate power and authority to execute, deliver and perform its respective obligations under this Agreement, the Related Agreements and all other agreements, instruments and certificates to be executed and delivered by King or Parkedale pursuant to or in connection with this Agreement and the Related Agreements. All corporate action on the part of King and Parkedale, their respective officers, directors and stockholders for the authorization, execution and delivery of this Agreement and the Related Agreements and the performance of all obligations of King and Parkedale hereunder has been taken.

     3.3 Enforceability.

          This Agreement constitutes, and the Related Agreements when executed by King and Parkedale will constitute, valid and legally binding obligations of King and Parkedale, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and (b) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

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     3.4 Governmental Consents.

          Except for (a) any notification, if any, required to be filed or supplied pursuant to the HSR Act in connection with the transactions contemplated by this Agreement, and (b) any filings required to be made or supplied pursuant to Section 13 or 16 of the Exchange Act, no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the part of King or Parkedale in connection with King’s and Parkedale’s valid execution, delivery and performance of this Agreement or any of the Related Agreements.

     3.5 Litigation.

          There is no action, suit, proceeding or investigation pending or, to the knowledge of King or Parkedale, currently threatened against King or any of its subsidiaries which questions the validity of this Agreement or any of the Related Agreements, or the right of King or Parkedale to enter into such agreements and instruments or to consummate the transactions contemplated hereby or thereby.

     3.6 No Conflicts.

          Except as set forth on Schedule 3.6, the execution and delivery of this Agreement and the Related Agreements by King and Parkedale do not, and the performance by King and Parkedale of their respective obligations under this Agreement and the Related Agreements will not, (i) conflict with or violate the certificate or articles of incorporation or bylaws of King or any of its subsidiaries, or conflict with or violate any law, statute, ordinance, rule, regulation, order, judgment or decree applicable to King or any of its subsidiaries or by which any of their respective properties or assets is bound or affected, or (ii) result in any breach of or constitute a default (or an event which with or without notice or lapse of time or both would become a default) under any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which King or any of its subsidiaries is a party or by which King, any of its subsidiaries or any of their respective properties or assets is bound or affected, except, in the case of clause (ii) above, for any such breaches, defaults or other occurrences that would not prevent or delay consummation of any of the transactions contemplated in this Agreement and the Related Agreements in any material respect or otherwise prevent King or Parkedale from performing its obligations under this Agreement or any of the Related Agreements in any material respect.

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     3.7 Absence of Claims.

          Neither King nor Parkedale has any knowledge of any claims against the Company or any of its subsidiaries with respect to any of the AVC Agreements.

     3.8 Accredited Investor.

          King is an “accredited investor” as such term is defined in Rule 501(a) of the Securities Act and is receiving the Exchange Shares and the Sales Force Shares for its own account for investment purposes and not with a view to, or for sale in connection with, any distribution thereof in violation of the Securities Act or any applicable state securities law, nor with any present intention of distributing or selling the same in violation of the Securities Act or any applicable state securities law. King has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Exchange Shares and the Sales Force Shares and is capable of bearing the economic risks of such investment.

     3.9 No Brokers.

          Except with respect to amounts payable to UBS Securities LLC, there are no claims, agreements, or commitments for brokerage commissions or finder’s fees or similar compensation in connection with the transactions contemplated by this Agreement or otherwise based on any arrangement made by or on behalf of King or any of its subsidiaries or affiliates, and King agrees to indemnify and hold the Company harmless against any damages incurred as a result of any such claim, agreement, or commitment.

SECTION 4. COVENANTS OF THE PARTIES; HPV MATTERS

     4.1 Mutual Covenants.

          (a) The Company and King shall promptly complete any filing that may be required pursuant to the HSR Act (each an “HSR Filing”), or shall mutually agree that no such filing is required. If any HSR Filing shall be required in connection with the transactions contemplated by this Agreement, then the Company and King shall diligently take, or fully cooperate in the taking of, all necessary and proper steps, and provide any additional information reasonably requested in order to comply with, the requirements of the HSR Act. Each party shall pay its own expenses in connection with the HSR Filings and the Company shall pay any filing fees associated with the HSR Filings.

          (b) The Company, King and Parkedale, as promptly as practicable, (i) will make, or cause to be made, all such filings and submissions under laws,

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rules and regulations applicable to them as may be required for them to consummate the transactions contemplated hereby in accordance with the terms of this Agreement and the Related Agreements, and (ii) will use commercially reasonable efforts to obtain, or cause to be obtained, all authorizations, approvals, consents and waivers from all governmental authorities necessary to be obtained by them in order for them to consummate such transactions.

          (c) Except as otherwise required by law (including their respective filing and disclosure obligations under the Securities Act, the Exchange Act and the rules and regulations promulgated thereunder), Nasdaq National Market (“Nasdaq”) and applicable stock exchange requirements, from the date of this Agreement until thirty (30) days after the Closing Date, neither the Company, King nor any of King’s subsidiaries shall, and each of them shall cause their respective affiliates, officers, directors, representatives and agents not to, issue or cause the publication of any press release or public announcement with respect to the transactions contemplated by this Agreement, except for the issuance of the press release attached hereto at Exhibit C or as otherwise mutually agreed by the parties in writing.

          (d) The Company, King and each of their respective subsidiaries shall, from the date of this Agreement and at all times thereafter, maintain strict confidentiality with respect to all confidential or proprietary documents and information furnished to such party by or on behalf of the other party. Nothing shall be deemed to be confidential information that (it being understood that the receiving party shall bear the burden of proof with respect to the following): (i) was known to the receiving party at the time of its disclosure by or on behalf of the disclosing party; (ii) becomes publicly known or available other than through disclosure by the receiving party; (iii) is received by the receiving party from a third party not actually known by the receiving party (after due inquiry) to be bound by a confidentiality agreement with or obligation to the other party; or (iv) is independently developed by the receiving party without reference to or use of such confidential information. Notwithstanding the foregoing provisions of this Section 4.1(d), each of the Company, King and King’s subsidiaries may disclose such confidential information (A) to the extent required or deemed advisable on the advice of counsel to comply with applicable laws (including the Securities Act, the Exchange Act, and the rules and regulations under the Securities Act or the Exchange Act), and applicable Nasdaq and stock exchange requirements, (B) to its officers, directors, employees, representatives, financial advisors, attorneys, accountants, agents, underwriters, lenders, investors and any other potential sources of financing (provided that each of the Company, King and their respective subsidiaries shall be responsible for any violation of the restrictions hereunder by its respective representatives), (C) to any governmental authority in connection with, and to the extent required to effect, the Transactions, and (D) in the event it is required in response to a valid order by a governmental, quasi-governmental, judicial or quasi-judicial entity to disclose any such confidential information.

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Notwithstanding anything to the contrary contained herein, the terms and conditions of this Section 4.1(d) shall not apply to King HPV Confidential Information or Novavax HPV Confidential Information.

          (e) Neither party shall make, and each party shall ensure that none of such party’s directors or officers shall disparage the other party or any of the other party’s officers, directors, employees, stockholders or affiliates, or the pharmaceutical products to which any of the Collaboration Agreements relate, including the pharmaceutical product marketed under the name ESTRASORB (“Estrasorb” and, together with such other pharmaceutical products, the “Collaborative Pharmaceutical Products”).

          (f) Each party shall cooperate with the other party, and exchange such information as is reasonably requested by the other party, and otherwise facilitate an orderly transition, and effect the transfer of all Collaborative Pharmaceutical Products (other than the pharmaceutical product marketed under the name NORDETTE) and related assets from King and its subsidiaries to the Company as contemplated by Section 1.6(b).

     4.2 Additional Covenants of the Company.

          (a) For a period of sixty (60) days after the Closing Date, the Company shall not enter into any agreement with any other party, including Organon International, Inc. (“Organon”) or any of its affiliates, pertaining to the sale, licensing or copromotion of Estrasorb. As used in this Section 4.2(a), the term “affiliates” means any person or entity controlled by, controlling or under common control with Organon and the term “control” has the meaning ascribed to such term in Rule 12b-2 promulgated under the Exchange Act.

          (b) The Company shall use reasonable best efforts to cause Anaconda to execute and deliver to King at Closing the Anaconda Release in the form attached hereto at Exhibit D.

          (c) The Company shall use commercially reasonable efforts to cause the Exchange Shares and the Sales Force Shares to be approved for listing on the principal U.S. national securities exchange on which the Common Stock is listed or, if the Common Stock is listed on Nasdaq, then the Exchange Shares and the Sales Force Shares will be listed on Nasdaq (such place of listing of the Exchange Shares and the Sales Force Shares, the “Exchange”), subject only to official notice of issuance.

          (d) From the date hereof until the Closing Date, the Company shall operate its business in the ordinary course consistent with past practice, except for such activities specifically contemplated by this Agreement, including related financing activities.

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     4.3 Certain HPV Matters.

          (a) From and after the Closing Date, the Company shall not, and shall cause the Novavax Parties not to, use or disclose King HPV Confidential Information, whether or not embodied in writing or other tangible form, for any purpose whatsoever without the prior written consent of King, which consent may be withheld in King’s sole and absolute discretion. The Company, on behalf of itself and each other Novavax Party, further acknowledges that all originals and copies of any King HPV Confidential Information, however and whenever produced, are the sole property of King, Parkedale and/or their respective affiliates, as applicable. From and after the Closing Date, the Company shall, and shall cause the Novavax Parties to, cease any further disclosure of King HPV Confidential Information to or by any other Novavax Party, and further agrees to require any other Novavax Party who has access to any King HPV Confidential Information to comply with the obligations hereunder, and shall exercise reasonable diligence to obtain their compliance with such obligations. From and after the Closing Date, each Novavax Party shall promptly surrender to King, Parkedale and/or their respective affiliates all King HPV Confidential Information that is in tangible form, including King HPV Confidential Information that has been reduced to or placed on one or more writings, drawings, schematics, tapes, disks, or other forms of documentation, together with any materials, things, prototypes, samples and equipment belonging to any King Party, and the Company shall not, and shall cause the Novavax Parties not to, thereafter retain or deliver to any other person, third party or entity any of the foregoing or any summary thereof. The Company hereby agrees that it shall be responsible for the obligations of the other Novavax Parties hereunder and executes this Agreement on behalf of itself and the other Novavax Parties. From and after the Closing Date, the Company shall, and shall cause the Novavax Parties to, use at least the same degree of care (which at a minimum shall be reasonable) to avoid unauthorized dissemination of King HPV Confidential Information as the Company employs for its own information of a similar nature that the Company does not want to have disseminated. In the event any Novavax Party is required in response to a valid order by a governmental, quasi-governmental, judicial or quasi-judicial entity to disclose King HPV Confidential Information, it shall not be a violation of this Agreement to comply; provided, however, that in the event the Company receives such an order from or after the Closing Date, the Company shall notify King and Parkedale of such request or requirement, promptly upon receipt of the same and give King or Parkedale a reasonable opportunity to quash such order and to obtain a protective order requiring that such King HPV Confidential Information and documents that are the subject of such order be held in confidence by such governmental, quasi-governmental, judicial or quasi-judicial entity or, if disclosed, be used only for purposes for which the order was issued; and provided, further, that if a disclosure order is not quashed or a protective order is not obtained, the King HPV Confidential Information disclosed in response to such order will be

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limited to that information which is legally required to be in the response to such disclosure order.

          (b) From and after the Closing Date, King and Parkedale shall not, and shall cause the King Parties not to, use or disclose Novavax HPV Confidential Information, whether or not embodied in writing or other tangible form for any purpose whatsoever without the prior written consent of the Company, which consent may be withheld in the Company’s sole and absolute discretion. Each of King and Parkedale, on behalf of itself and each other King Party, acknowledges that all originals and copies of any Novavax HPV Confidential Information, however and whenever produced, are the sole property of the Company and/or its affiliates, as applicable. From and after the Closing Date, King and Parkedale shall, and shall cause the King Parties to, cease any further disclosure of Novavax HPV Confidential Information to or by any other King Party, and further agree to require any other King Party who has access to any Novavax HPV Confidential Information to comply with the obligations hereunder, and shall exercise reasonable diligence to obtain their compliance with such obligations. From and after the Closing Date, each King Party shall promptly surrender to the Company all Novavax HPV Confidential Information that is in tangible form, including Novavax HPV Confidential Information that has been reduced to or placed on one or more writings, drawings, schematics, tapes, disks, or other forms of documentation, together with any materials, things, prototypes, samples and equipment belonging to any Novavax Party, and King and Parkedale shall not, and shall cause the King Parties not to, thereafter retain or deliver to any other person, third party or entity any of the foregoing or any summary thereof. Each of King and Parkedale hereby agrees that it shall be responsible for the obligations of the other King Parties hereunder and executes this Agreement on behalf of itself and the other King Parties. From and after the Closing Date, each of King and Parkedale shall, and shall cause the King Parties to, use at least the same degree of care (which at a minimum shall be reasonable) to avoid unauthorized dissemination of Novavax HPV Confidential Information as each of King and Parkedale employs for its own information of a similar nature that King or Parkedale does not want to have disseminated. In the event any King Party is required in response to a valid order by a governmental, quasi-governmental, judicial or quasi-judicial entity to disclose Novavax HPV Confidential Information, it shall not be a violation of this Agreement to comply; provided, however, that in the event King or Parkedale receives such an order from or after the Closing Date, King or Parkedale shall notify the Company of such request or requirement, promptly upon receipt of the same and give the Company a reasonable opportunity to quash such order and to obtain a protective order requiring that such Novavax HPV Confidential Information and documents that are the subject of such order be held in confidence by such governmental, quasi-governmental, judicial or quasi-judicial entity or, if disclosed, be used only for purposes for which the order was issued; and provided, further, that if a disclosure order is not quashed or a protective order is not obtained, the Novavax HPV

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Confidential Information disclosed in response to such order will be limited to that information which is legally required to be in the response to such disclosure order.

          (c) Each party will retain ownership of all information, data, HPV Know-How, inventions, discoveries, programs, copyrights, improvements, devices, designs, apparatus, patents, patent applications, practices, processes, methods, products, techniques, trade secrets, ideas, or other intellectual property relating to the subject matter of the HPV License Agreement which was owned by it at the commencement of the HPV License Agreement. The parties agree that the Company will own and/or have sole rights in and to the Novavax HPV Confidential Information and will have an undivided joint interest in the HPV Joint Improvements and the HPV Products (with King) and that King will solely own the King HPV Confidential Information and will have an undivided joint interest in the HPV Joint Improvements and the HPV Products (with the Company). Nothing in this Agreement shall (i) grant the Company any rights to the King HPV Confidential Information or any other technology that King may acquire or license or (ii) grant King or Parkedale any rights to the Novavax HPV Confidential Information or any other technology that the Company may acquire or license. From and after the Closing Date, each of King, Parkedale, and the Company shall have the right to use, disclose or commercially exploit any HPV Joint Improvement or HPV Product without the consent of, and without any obligation to, any other party hereto. Each party agrees that, from and after the Closing Date, each Novavax Party shall promptly provide to King and each King Party shall promptly provide to the Company, a copy of any and all HPV Joint Improvements or HPV Products in the possession of such party that are in tangible or other recorded form.

          (d) Each party represents, as of the date of this Agreement and as of the Closing Date, that it has not disclosed any King HPV Confidential Information or Novavax HPV Confidential Information to any person, third party or entity, other than the King Parties or the Novavax Parties.

     4.4 Certain Adjuvant Matters.

          (a) Each party will retain ownership of all information, data, Adjuvant Know-How, inventions, discoveries, programs, copyrights, improvements, devices, designs, apparatus, patents, patent applications, practices, processes, methods, products, techniques, trade secrets, ideas, or other intellectual property or confidential information owned by it at the commencement of the License and Supply Agreement. The Company shall solely own the Novavax Adjuvant IP and shall own an undivided joint interest in the Adjuvant Joint Improvements (with Parkedale). Parkedale shall solely own the Parkedale Products, the Influenza Products (to the extent such products do not constitute Novavax Adjuvant IP) and the Adjuvant Know-How of Parkedale and shall own an undivided joint interest in the Adjuvant Joint Improvements (with the Company).

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          (b) From and after the Closing Date, each of King, Parkedale and the Company shall have the right to use, disclose or commercially exploit any Adjuvant Joint Improvement without the consent of, and without any obligation to, any other party hereto. Each party agrees that, from and after the Closing Date, (i) each Novavax Party shall promptly provide to Parkedale and each King Party shall promptly provide to the Company, a copy of any and all Adjuvant Joint Improvements in the possession of such party that are in tangible or other recorded form and (ii) the King Parties shall promptly provide to the Company copies of any and all data in their possession resulting from experiments with the Novavax Adjuvant IP; provided, however, that such data shall constitute the confidential information of King and Parkedale under Section 4.1(d); and provided, further, that the King Parties’ provision of such data to the Company shall not affect such data’s status as Adjuvant Know-How of Parkedale.

     4.5. Advertising and Promotional Materials.

          (a) The parties acknowledge that as of the date of this Agreement, the Company has in its possession certain advertising and promotional materials relating exclusively to Estrasorb which bear the names, logos, trademarks or trade names of King and/or its affiliates (the “Advertising and Promotional Materials”). The Company may distribute the Advertising and Promotional Materials in connection with the Company’s marketing, promotion and sale of Estrasorb until the earlier of (i) the date such Advertising and Promotional Materials have been distributed or (ii) the date that is one hundred eighty (180) days after the Closing Date; provided, however, that the Company shall use commercially reasonable efforts to remove, mask or otherwise cover, or cause to be removed, masked or otherwise covered, the names, logos, trademarks and trade names of King and/or its affiliates as they appear on such Advertising and Promotional Materials (other than on the Advertising and Promotional Materials designed as inserts for newspapers and other periodicals). The Company shall not, and shall have no right to, use or distribute such Advertising and Promotional Materials for any other purpose. The Company acquires no right, title, or interest in or to any of King’s and/or its affiliates’ names, logos, trademarks, trade names or other proprietary rights. The Company further agrees that the Company shall not deface nor alter such Advertising and Promotional Materials, except to remove, mask or otherwise cover the names, logos, trademarks and trade names of King and/or its affiliates. Upon King’s reasonable request, the Company shall permit King to inspect the Advertising and Promotional Materials to ensure that they are, and are being used in, compliance with this Section 4.5(a).

          (b) The Company shall indemnify, defend and hold harmless the King Parties from and against any and all claims, actions, causes of action, assessments, judgments, deficiencies, damage, loss, liability, and expense of any nature whatsoever (including attorneys’ fees and expenses) solely arising out of the use or distribution of the Advertising and Promotional Materials.

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SECTION 5. CONDITIONS PRECEDENT TO CLOSING

     5.1 Conditions to Obligations of King and Parkedale.

          The obligations of King to consummate the Closing under this Agreement are subject to the fulfillment on or before the Closing Date of the following conditions, the waiver of which shall not be effective without the written consent of King thereto:

          (a) Representations and Warranties. The representations and warranties of the Company contained in Section 2 shall be true and correct on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date.

          (b) Performance. The Company shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by the Company on or before the Closing.

          (c) Compliance Certificate. An authorized executive officer of the Company shall have delivered to King a certificate certifying that the conditions specified in Section 5.1(a) and Section 5.1(b) have been fulfilled.

          (d) No Order. No stop order or other order enjoining the issuance of the Exchange Shares or the Sales Force Shares at the Closing shall have been issued, and no proceedings for such purpose shall be pending or threatened by the SEC or any commissioner of corporations or similar officer of any state having jurisdiction over the transactions contemplated by this Agreement or any of the Related Agreements, and no preliminary or permanent injunction or other order, consent, integrity agreement, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission nor any statute, rule, regulation or executive order promulgated or enacted by any governmental authority shall be in effect that would restrain or otherwise prevent the consummation of any of the transactions contemplated by this Agreement or any of the Related Agreements.

          (e) Certificate. At the Closing, the Company shall have furnished to King a certificate, signed by an authorized executive officer of the Company, certifying as to the representations and warranties set forth in Section 2.14, Section 2.15 and Section 2.17.

          (f) Opinion of Counsel. At the Closing, the Company shall have furnished to King an opinion of Ropes & Gray LLP in a form reasonably acceptable

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to King, and an opinion of White White & Van Etten LLP in a form reasonably acceptable to King.

          (g) Listing. The Exchange Shares and the Sales Force Shares shall have been validly approved by the Exchange and any other applicable regulatory authorities for listing on the Exchange, and no further action shall be required in connection therewith.

          (h) HSR Act. If an HSR Filing is required, then any waiting periods with any extensions thereof under the HSR Act shall have expired or been terminated.

          (i) Closing Deliveries. The Company shall have delivered or caused to be delivered to King each of the documents specified in Section 1.8(b).

     5.2 Conditions to Obligations of the Company.

          The obligations of the Company to consummate the Closing under this Agreement are subject to the fulfillment on or before the Closing of the following conditions, the waiver of which shall not be effective without the consent of the Company thereto:

          (a) Representations and Warranties. The representations and warranties of King and Parkedale contained in Section 3 shall be true and correct on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date.

          (b) Performance. King and Parkedale shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by King on or before the Closing.

          (c) Compliance Certificate. An officer of King and Parkedale shall have delivered to the Company a certificate certifying that the conditions specified in Section 5.2(a) and Section 5.2(b) have been fulfilled.

          (d) No Order. No stop order or other order enjoining the issuance of the Exchange Shares or the Sales Force Shares at the Closing shall have been issued, and no proceedings for such purpose shall be pending or threatened by the SEC or any commissioner of corporations or similar officer of any state having jurisdiction over the transactions contemplated by this Agreement or any of the Related Agreements, and no preliminary or permanent injunction or other order, consent, integrity agreement, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission nor any statute, rule, regulation or executive order promulgated or

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enacted by any governmental authority shall be in effect that would restrain or otherwise prevent the consummation of any of the transactions contemplated by this Agreement or any of the Related Agreements.

          (e) HSR Act. If an HSR Filing is required, then any waiting periods with any extensions thereof under the HSR Act shall have expired or been terminated.

          (f) Closing Deliveries. King and Parkedale shall have delivered or caused to be delivered to the Company each of the documents specified in Section 1.8(a).

SECTION 6. TERMINATION.

     6.1 Termination.

          (a) This Agreement may be terminated at any time prior to the Closing as follows:

               (i) by mutual written consent of King and the Company;

               (ii) by King or Parkedale, upon breach of any representation, warranty, covenant or agreement of the Company set forth in this Agreement, in any case, such that the conditions set forth in Section 5.1(a) or Section 5.1(b) would not be satisfied as a result of such breach; provided, that such breach has not been cured by the Company within thirty (30) days after the Company receives written notice of such breach from King; and

               (iii) by the Company, upon a breach of any representation, warranty, covenant or agreement of King set forth in this Agreement, in any case, such that the conditions set forth in Section 5.2(a) or Section 5.2(b) would not be satisfied as a result of such breach; provided, that such breach has not been cured by King within thirty (30) days after King receives written notice of such breach from the Company.

          (b) Unless otherwise extended pursuant to a written agreement of the parties, this Agreement shall automatically terminate without further action if the Closing shall not have occurred prior to 4:00 p.m. eastern standard time on July 19, 2004.

6.2 Effect of Termination.

          If this Agreement is terminated pursuant to Section 6.1, this Agreement shall become null and void and of no further force and effect, except for

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the provisions of (a) Section 4.1(d) relating to confidential information, (b) Section 6.1 and this Section 6.2, (c) Section 7.3 relating to governing law and consent to jurisdiction and (d) Section 7.7 relating to certain expenses. Nothing in this Section 6.2 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or to impair the right of a party to compel specific performance by the other parties of its obligations under this Agreement.

     6.3 Specific Performance.

          The parties acknowledge that the transactions contemplated hereby are unique and specifically identifiable. Accordingly, the parties further agree and stipulate that, if the Closing does not occur because of the willful failure of King or Parkedale, on the one hand, or the Company, on the other hand, to perform their respective obligations hereunder, then (a) monetary damages and any other remedy at law shall not be adequate, (b) the non-defaulting party shall be entitled to specific performance as the remedy for such breach, (c) each party agrees to waive any objection to the remedy of specific performance, (d) each party agrees that the granting of specific performance by any court shall not be deemed, construed or interpreted to be harsh or oppressive to the party who is ordered specifically to perform its obligations under this Agreement and (e) in connection with any action for specific performance, the prevailing party shall be entitled to reasonable attorneys’ fees and other costs of prosecuting or defending such action. The right to seek specific performance hereunder shall not preclude any party to seek any other remedy at law or in equity.

SECTION 7. MISCELLANEOUS.

     7.1 Survival.

          (a) All representations, warranties and covenants contained herein or made in writing by or on behalf of the Company in connection herewith shall survive the execution and delivery of this Agreement and the Closing; provided, however, that, (i) except for the representations and warranties of the Company in Sections 2.1, 2.2, 2.3, 2.4 and 2.10, the representations and warranties of the Company in Section 2 shall survive for a period of twelve (12) months after the Closing Date, and (ii) the representations and warranties of the Company in Sections 2.1, 2.2, 2.3, 2.4 and 2.10 shall survive for the duration of the applicable statute of limitations. All representations, warranties and covenants contained herein or made in writing by or on behalf of the Company in connection herewith may be relied upon by only King and Parkedale and their successors and permitted assigns regardless of any investigation made at any time by or on behalf of King or Parkedale or any such successor or permitted assign.

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          (b) All representations, warranties and covenants contained herein or made in writing by or on behalf of King or Parkedale in connection herewith shall survive the execution and delivery of this Agreement and the Closing; provided, however, that (i) except for the representations and warranties of King and Parkedale in Sections 3.1, 3.2, 3.3 and 3.9, the representations and warranties of King and Parkedale in Section 3 shall survive for a period of twelve (12) months after the Closing Date, and (ii) the representations and warranties of the Company in Sections 3.1, 3.2, 3.3 and 3.9 shall survive for the duration of the applicable statute of limitations. All representations, warranties and covenants contained herein or made in writing by or on behalf of King and Parkedale in connection herewith may be relied upon by only the Company and its successors and permitted assigns regardless of any investigation made at any time by or on behalf of the Company or any such successor or permitted assign.

          (c) Notwithstanding anything to the contrary in this Agreement, any representation, warranty or covenant which is the subject of a claim which is asserted in writing within the survival periods specified in this Section 7.1 shall survive with respect to such claim or dispute until final resolution thereof.

     7.2 Assignment; Successors and Assigns.

          Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by the Company without the prior written consent of King or by King or Parkedale without the prior written consent of the Company. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

     7.3 Governing Law; Consent to Jurisdiction.

          (a) This Agreement, the rights of the parties and all claims, actions, causes of action or suits, litigation, controversies, investigations, hearings, charge, complaints, demands, notices or proceedings arising in whole or in part under or in connection herewith, shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.

          (b) The parties irrevocably submit to the exclusive jurisdiction of any court located in the City of Wilmington, Delaware or the United States Federal

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Court sitting in the District of Delaware over any suit, action or proceeding arising out of or relating to this Agreement. Each of the parties consents to process being served in any such suit, action or proceeding by serving a copy thereof upon the agent for service of process; provided, that to the extent lawful and possible, written notice of such service will also be mailed to such party, as the case may be. Each of the parties agrees that such service will be deemed in every respect effective service of process upon such party in any such suit, action or proceeding and will be taken and held to be valid personal service upon such party. Nothing in this subsection will affect or limit any right to serve process in any manner permitted by law, or to enforce in any lawful manner a judgment obtained in a court described in this Section 7.3 in any other jurisdiction. Each of the parties waives any right it may have to assert the doctrine of forum non conveniens or to object to venue to the extent any proceeding is brought in a court located in the City of Wilmington, Delaware or the United States Federal Court sitting in the District of Delaware.

     7.4 Counterparts.

          This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

     7.5 Titles and Subtitles.

          The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

     7.6 Notices.

          All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given (a) when delivered personally to the recipient, (b) when telecopied to the recipient (with hard copy sent to the recipient by reputable overnight courier service (charges prepaid) that same day) if telecopied before 5:00 p.m. Eastern time on a business day, and otherwise on the next business day, or (c) one (1) business day after being sent to the recipient by reputable overnight courier service (charges prepaid). Such notices, demands and other communications shall be sent to the following persons at the following addresses:

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To the Company:

Novavax, Inc.
8320 Guilford Road
Columbia, Maryland 21046
Attn: Chief Executive Officer
Telecopy: (301) 854-3902

With a copy to

Ropes & Gray LLP
45 Rockefeller Center
New York, New York 10111
Attention: Sanford B. Kaynor, Jr. Esq.
Telecopy: (212) 841-5725

To King:

King Pharmaceuticals, Inc.
501 Fifth Street
Bristol, Tennessee 37620
Attn: Executive Vice President of Legal Affairs
          and General Counsel
Telecopy: (423) 989-6282

or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.

     7.7 Expenses.

          Irrespective of whether the Closing is effected, each party shall pay all costs and expenses (including the fees and expenses of its lawyers and other advisors) that it incurs with respect to the negotiation, execution, delivery and performance of this Agreement. Notwithstanding the foregoing, the Company shall pay any and all stamp, transfer and other similar taxes payable or determined to be payable in connection with the execution and delivery of this Agreement or any securities issued by the Company hereunder, and shall save and hold King harmless from and against any and all liabilities with respect to or resulting from any delay in paying, or omission to pay, such taxes.

     7.8 Amendments and Waivers.

          Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance

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and either retroactively or prospectively), only with the written consent of the Company, King and Parkedale.

     7.9 Severability.

          If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

     7.10 Entire Agreement.

          This Agreement and the Related Agreements constitute the entire agreement among the parties with respect to the subject matter hereof and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except as specifically set forth herein or therein with respect to such subject matter.

     7.11 Construction.

          (a) The parties acknowledge that the parties have reviewed and revised this Agreement with their respective counsel and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.

          (b) Unless the context of this Agreement otherwise requires: (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; (iii) the terms “hereof”, “herein”, “hereby” and derivative or similar words refer to this entire Agreement; (iv) all references herein to “Articles” or “Sections” are to Articles or Sections of this Agreement; (v) the term “or” has, except as otherwise indicated, the inclusive meaning represented by the phrase “and/or”; (vi) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation” and “parties” or “Parties” means the signatories to this Agreement.

          (c) The term, “knowledge,” when used with respect to any person or entity, means the actual knowledge after reasonable investigation, of the current officers, other employees, directors and other representatives of such person or entity, including the chairman of the board of directors of each such person or entity, in each case who could reasonably be expected to have knowledge of the matter in question.

[The remainder of this page intentionally left blank.]

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          IN WITNESS WHEREOF, the parties have executed this Exchange Agreement as of the date first above written.

NOVAVAX, INC.
By:	/s/ Nelson M. Sims
Name:	Nelson M. Sims
Title:	President and Chief Executive Officer
KING PHARMACEUTICALS, INC.
By:	/s/ Brian A. Markison
Name:	Brian A. Markison
Title:	President and Chief Executive Officer
PARKEDALE PHARMACEUTICALS, INC.
By:	/s/ Brian A. Markison
Name:	Brian A. Markison
Title:	President and Chief Executive Officer

ANNEX I
DEFINITIONS

          “Adjuvant(s)” shall mean any and all agents which enhance a product or method involved in or concerned with the treatment or prevention or infection of influenza virus, e.g., an immune response of an influenza virus vaccine, which are owned, controlled, and/or developed by the Company and/or its affiliates, or which the Company and/or its affiliates has a license or right to use, such as the Novasome delivery system(s).

          “Adjuvant Field” shall mean the use of Novavax Adjuvant IP in any manner whatsoever to develop, create, invent, manufacture, promote, market, offer-for-sale, sell, import and/or export an Influenza Product involved in or concerned with the treatment or prevention of influenza virus or any other purpose for which an Influenza Product may be indicated.

          “Adjuvant Joint Improvement(s)” shall mean any and all ideas, conceptions, reductions to practice, modifications, changes, alterations, adaptations, revisions, or improvements relating to and/or derivatives of any intellectual property or product that accrued or resulted from the joint activities of the Company and/or its affiliates with Parkedale and/or its affiliates outside of the Adjuvant Field during the term of the License and Supply Agreement.

          “Adjuvant Know-How” shall mean all tangible and intangible technical and other information including, but not limited to ideas, conceptions, reductions-to-practice, discoveries, data, designs, chemical structures, formulae, materials, intermediates, inventions (whether patentable or not), methods, models, prototypes, samples, influenza technology, works (whether copyrightable or not), assays, research plans, procedures, designs, experiments, tests, results of experimentation and testing (including results of research or development), processes (including manufacturing processes, uses, specifications and techniques), laboratory records, note books, chemical, pharmacological, toxicological, clinical, analytical and quality control data, trial data, case report forms, data analyses, reports, manufacturing data, summaries and information contained in submissions to and from ethical committees and regulatory authorities, which relates to or concerns an Adjuvant, a Parkedale Product, Adjuvant Patent Rights, a Novasome delivery system, a Novavax Adjuvant Improvement, a Parkedale Improvement and/or an Influenza Product. Adjuvant Know-How includes all documents and copies thereof (whether in written, machine-readable, physical or graphic form) and other things (such as prototypes, materials, samples, models, etc.) which contain, embody or refer to the Adjuvant Know-How. Such information, documents or things will not be excluded from being Adjuvant Know-How hereunder by reason of the fact that they become available to the public only through a wrongful act or omission to act of a party hereto or a sublicense or distributor of a party hereto. The fact that an item is known to the public shall not be taken to exclude the possibility that a compilation

including the item, and/or a development relating to the item, is (and remains) not known to the public. Adjuvant Know-How includes, but is not limited to, any and all rights that protect the Adjuvant Know-How, such as copyrights/software, rights, trade secret rights, database rights and/or design rights.

          “Adjuvant Patent Right(s)” shall mean: (a) any and all United States and foreign (i) pending and abandoned patent applications, (ii) patents issuing from such patent applications, and (iii) issued patents, together with any and all divisions, reissues, reexaminations, continuations, continuations-in part, extensions and additions thereof, which describe, relate to and/or claim an Adjuvant (including, but not limited to, an Adjuvant either alone or in combination, use of an Adjuvant, and manufacture of an Adjuvant or an intermediate therefore) as of the date of the License and Supply Agreement; (b) any and all inventions which describe, relate to or concern a Novavax Adjuvant Improvement; (c) any and all United States and foreign (i) pending and abandoned patent applications, and (ii) patents issuing from such patent applications, together with any and all divisions, reissues, reexaminations, continuations, continuations-in part, extensions and additions thereof, which describe, relate to and/or claim a Novavax Adjuvant Improvement, now or in the future; and (d) any and all other United States and foreign pending and abandoned patent applications and issued patents necessary or useful in the Adjuvant Field.

          “HPV” shall mean human papillomavirus.

          “HPV Confidential Information” shall mean and include any and all confidential and proprietary information and HPV Know-How which is not in the public domain, whether in oral, written, machine-readable or graphic form, which is furnished by one party or its affiliate (the “Disclosing Party”), either directly or indirectly, pursuant to and under the HPV License Agreement or the Pharmaceutical Quality Agreement, to the other party or its affiliate (the “Receiving Party”), and which the Receiving Party has a reasonable basis to believe is confidential to the Disclosing Party or is treated by the Disclosing Party as confidential, unless such information: (a) was known to the Receiving Party prior to receipt from the Disclosing Party, as documented in written records or publications that lawfully are in the possession of the Receiving Party; (b) was lawfully available to the trade or to the public prior to receipt from the Disclosing Party; (c) becomes lawfully available to the trade or to the public after receipt from the Disclosing Party through no act on the part of the Receiving Party; (d) is in the general public domain other than as a result of a breach of this confidential relationship; (e) is embodied in an agreement entered into by the parties hereto in writing which releases such information from the terms of this confidentiality obligation; (f) at any time is received in good faith by the Receiving Party from a third party, which information was lawfully in possession of the third party, and which the third party had the right to disclose and did not receive from one of the parties to the HPV License Agreement or the Pharmaceutical Quality Agreement; or (g) is

independently developed by an employee or agent of the Receiving Party without access to the confidential and proprietary information or HPV Know-How, prior to receipt of such confidential and proprietary information or HPV Know-How from the Disclosing Party, as demonstrated by contemporaneous written records.

          “HPV Field” shall mean (a) the use of Novavax HPV Trade Secret Information and Novavax HPV Field Know-How in any manner whatsoever to develop, create, invent, manufacture, promote, market, offer-for-sale, sell, import and/or export an HPV Product involved in or concerned with the treatment or prevention of HPV or any other purpose for which an HPV Product may be indicated, including the treatment of cervical cancer, and (b) the subsequent exploitation of an HPV Product.

          “HPV Joint Improvement(s)” shall mean the ideas, conceptions, reductions to practice, modifications, changes, alterations, adaptations, revisions, or improvements identified on Annex I-A.

          “HPV Know-How” shall mean all tangible and intangible technical and other information including ideas, conceptions, reductions-to-practice, discoveries, data, designs, chemical structures, formulae, materials, intermediates, inventions (whether patentable or not), methods, models, prototypes, samples, HPV technology, works (whether copyrightable or not), assays, research plans, procedures, designs, experiments, tests, results of experimentation and testing (including results of research or development), processes (including manufacturing processes, uses, specifications and techniques), laboratory records, notebooks, chemical, pharmacological, toxicological, clinical, analytical and quality control data, trial data, case report forms, data analyses, reports, manufacturing data, summaries and information contained in submissions to and from ethical committees and regulatory authorities, which relates to the HPV Field. HPV Know-How includes all documents and copies thereof (whether in written, machine-readable, physical or graphic form) and other things (such as prototypes, materials, samples, models, etc.) which contain, embody or refer to the HPV Know-How. Such information, documents or things will not be excluded from being HPV Know-How hereunder by reason of the fact that they become available to the public only through a wrongful act or omission to act of a party hereto or a sublicensee or distributor of a party hereto. The fact that an item is known to the public shall not be taken to exclude the possibility that a compilation including the item, and/or a development relating to the item, is (and remains) not known to the public. HPV Know-How includes any and all rights that protect the HPV Know-How, such as copyrights, software rights, trade secret rights, database rights and/or design rights.

          “HPV Product(s)” shall mean any pharmaceutical product which is developed, created, invented or manufactured with at least some portion or aspect of the Novavax HPV IP, which is used to treat HPV or cervical cancer, and which is

a product resulting from King’s use of Novavax HPV IP, but shall exclude any improvement by King or the Company based upon an HPV Product.

          “Influenza Product(s)” shall mean any Parkedale Product together with at least some portion or aspect of the Novavax Adjuvant IP, such as an Adjuvant and especially a Novasome delivery system which is used to treat influenza.

          “King HPV Confidential Information” shall mean any King Improvement, any King HPV Know-How and all other HPV Confidential Information of any King Party, including the information identified on Annex I-B.

          “King HPV Know-How” shall mean all HPV Know-How that accrues or results from the activities of King, Parkedale or their respective affiliates or which is owned by, licensed to or assignable to King, Parkedale or their respective affiliates, and shall not include any HPV Joint Improvements.

          “King Improvement(s)” shall mean any and all ideas, conceptions, reductions to practice, modifications, changes, alterations, adaptations, revisions, or improvements relating to and/or derivatives of Novavax HPV IP, an HPV Product and/or King HPV Know-How, that accrue or result from the activities of King, Parkedale and/or their respective affiliates or which are assignable to King, Parkedale and their respective affiliates, but shall not include any HPV Joint Improvements.

          “King Party” shall mean any of King, Parkedale, their respective affiliates and the respective shareholders, officers, directors, agents, trustees, beneficiaries, employees, successors and assigns of King, Parkedale and their respective affiliates.

          “Novavax Adjuvant IP” shall mean the Adjuvants, Novasome delivery system, Adjuvant Patent Rights, Novavax Adjuvant Improvements, and Adjuvant Know-How of the Company, which is useful in the Adjuvant Field.

          “Novavax Adjuvant Improvement(s)” shall mean any and all ideas, conceptions, reductions to practice, modifications, changes, alterations, adaptations, revisions, or improvements relating to and/or derivatives of an Adjuvant, a Novasome delivery system, Adjuvant Patent Rights, and/or Adjuvant Know-How of the Company that accrue or result from the activities of the Company and/or the Company’s affiliates or which are assignable to the Company and/or the Company’s affiliates.

          “Novavax General Know-How” has the meaning set forth in subsection (e) of the definition of Novavax HPV IP.

          “Novavax HPV Confidential Information” shall mean any Novavax HPV Improvement, any Novavax HPV Know-How, any Novavax HPV Trade Secret

Information, and all other Novavax HPV IP or other HPV Confidential Information of any Novavax Party, including the information listed on Annex I-C.

          “Novavax HPV Field Know-How” has the meaning set forth in subsection (d) of the definition of Novavax HPV IP.

          “Novavax HPV Improvement(s)” shall mean any and all ideas, conceptions, reductions to practice, modifications, changes, alterations, adaptations, revisions, or improvements relating to and/or derivatives of Novavax HPV IP that accrue or result from the activities of the Company and/or its affiliates or which are assignable to the Company and/or its affiliates, but shall not include any HPV Joint Improvements.

          “Novavax HPV IP” shall mean the following:

               (a) Texas A&M University System License: any license between the Company and the Texas A&M University System related to US Pat. No. 4,745,051 and No. 4,879,236, as amended or modified.

               (b) US Government License: any non-exclusive license to the Company from the United States of America as represented by the Department of Health under US Pat. No. 5,437,951, No. 5,7709,996, No. 5,716,620, No. 5,744,142, No. 5,756,284, No. 5,871,998 and No. 5,985,610, as amended or modified.

               (c) Novavax HPV Trade Secret Information: The Company has developed improved methods for the purification of recombinant virus-like particles from baculovirus-infected insect cell including chromatographic steps to capture and resolve purified intact VLPs that are stable for usage as vaccines and/or diagnostic reagents. The method has been demonstrated for VLPs of human papillomavirus (HPV) capsid proteins. For purposes of clarification, “Novavax HPV Trade Secret Information” shall not include any HPV Joint Improvements.

               (d) Novavax HPV Field Know-How: this includes any and all trade secret information and technical HPV Know-How owned, licensed or controlled by the Company relating only to the HPV Field, but shall not include any HPV Joint Improvements.

               (e) Novavax General Know-How: this includes any and all intellectual property owned or controlled by the Company, not mentioned above, which is useful in the HPV Field, but shall not include any HPV Joint Improvements.

               (f) Novavax Inventions and Patent Applications: this includes inventions related to novel insect cell lines capable of expressing secreted VLPs, HPV L1 VLPs comprised of optimized HPV L1 genes and L1 gene expression, HPV chimeric VLPs comprised of optimized HPV L1 and L2 fusion genes including

E2, E6, and E7 wt and modified genes and L2 fusion gene expression, and HPV VLP purification as described in USPTO and PCT patent applications, but shall not include any HPV Joint Improvements.

          “Novavax HPV Know-How” shall mean all HPV Know-How that accrues or results from the activities of the Company or its affiliates or which is owned by, licensed to or assignable to the Company or its affiliates, including the Novavax HPV Field Know-How and the Novavax General Know-How, and shall not include any HPV Joint Improvements.

          “Novavax HPV Trade Secret Information” has the meaning set forth in subsection (c) of the definition of Novavax HPV IP.

          “Novavax Party” shall mean any of the Company, its affiliates, and the respective shareholders, officers, directors, agents, trustees, beneficiaries, employees, successors and assigns of the Company and its affiliates.

          “Parkedale Improvement(s)”shall mean any and all ideas, conceptions, reductions to practice, modifications, changes, alterations, adaptations, revisions, or improvements relating to and/or derivatives of a Parkedale Product, Adjuvant Know-How of Parkedale, and/or an Influenza Product that accrue or result from the activities of Parkedale and/or Parkedale’s affiliates or which are assignable to Parkedale and/or Parkedale’s affiliates.

          “Parkedale Product(s)” shall mean any preparations, product, or pharmaceutical which is free of Novavax Adjuvant IP involved in or concerned with the treatment or prevention of an influenza virus, such as Fluogen, or any other purpose for which a Parkedale Product may be indicated.

EX-99.6

Exhibit 99.6

TERMINATION AGREEMENT

     THIS TERMINATION AGREEMENT (this “Agreement”) is made as of July 19, 2004, by and among KING PHARMACEUTICALS, INC., a Tennessee corporation (“King”), PARKEDALE PHARMACEUTICALS, INC., a Michigan corporation (“Parkedale”), and NOVAVAX, INC., a Delaware corporation (“Novavax”).

     WHEREAS, pursuant to that certain December 2000 Note Purchase Agreement dated as of December 19, 2000 (the “December 2000 Note Purchase Agreement”), between Novavax and King, King made loans to Novavax in the aggregate principal amount of $25,000,000, and Novavax issued to King (a) a 4% Convertible Senior Note of Novavax dated December 19, 2000, in the aggregate principal amount of $20,000,000, as amended by that certain allonge dated September 7, 2001, and (b) a 4% Convertible Senior Note of Novavax dated September 7, 2001, in the aggregate principal amount of $5,000,000;

     WHEREAS, pursuant to that certain September 2001 Note Purchase Agreement dated as of September 7, 2001 (the “September 2001 Note Purchase Agreement”), between Novavax and King, King made a loan to Novavax in the aggregate principal amount of $5,000,000, and Novavax issued to King a 4% Convertible Senior Note of Novavax dated September 7, 2001, in the aggregate principal amount of $5,000,000;

     WHEREAS, pursuant to that certain June 2002 Note Purchase Agreement dated as of June 26, 2002 (the “June 2002 Note Purchase Agreement”), between Novavax and King, King made a loan to Novavax in the aggregate principal amount of $10,000,000, and Novavax issued to King a 4% Convertible Senior Note of Novavax dated June 26, 2002, in the aggregate principal amount of $10,000,000;

     WHEREAS, in connection with the December 2000 Note Purchase Agreement, Novavax and King entered into that certain Investor Rights Agreement dated as of December 19, 2000 (as amended by that certain First Amendment to Investor Rights Agreement dated as of September 7, 2001, the “Original Investor Rights Agreement”);

     WHEREAS, in connection with the June 2002 Note Purchase Agreement, Novavax and King entered into that certain Amended and Restated Investor Rights Agreement dated as of June 26, 2002 (the “Amended and Restated Investor Rights Agreement”), which amended and restated the Original Investor Rights Agreement;

     WHEREAS, in connection with the December 2000 Note Purchase Agreement, Novavax and King entered into that certain Registration Rights

Agreement dated as of December 19, 2000 (as amended and restated on September 7, 2001, the “Original Registration Rights Agreement”);

     WHEREAS, in connection with the June 2002 Note Purchase Agreement, Novavax and King entered into that certain Second Amended and Restated Registration Rights Agreement dated as of June 26, 2002 (the “Second Amended and Restated Registration Rights Agreement”), which amended and restated the Original Registration Rights Agreement;

     WHEREAS, King and Novavax are parties to that certain License Agreement dated as of December 19, 2000 (the “HPV License Agreement”);

     WHEREAS, Novavax and Parkedale are parties to that certain Pharmaceutical Quality Agreement dated June 1, 2001 (the “Pharmaceutical Quality Agreement” and, together with the HPV License Agreement, the “HPV Agreements”);

     WHEREAS, Novavax and Parkedale are parties to that certain Supply Agreement dated as of October 21, 1999 (the “Supply Agreement”) and that certain License and Supply Agreement, dated as of October 21, 1999 (the “License and Supply Agreement”; together with the Supply Agreement, the “Adjuvant License and Supply Agreements”) regarding the licensing and supply of proprietary adjuvants, including a Novosome® delivery system;

     WHEREAS, King and Novavax are parties to that certain Agreement for Purchase and Sale of Assets Relating to AVC™ Products dated as of January 8, 2001 (the “Original AVC Purchase Agreement”), as amended by that certain First Amendment to the AVC™ Asset Purchase Agreement (the Original AVC Purchase Agreement, as amended, the “AVC Asset Purchase Agreement”);

     WHEREAS, in connection with the AVC Asset Purchase Agreement, King and Novavax entered into that certain Supply Agreement, dated as of January 8, 2001 (the “Original AVC Supply Agreement”), as amended by that certain First Addendum to the AVC™ Cream Supply Agreement dated as of February 25, 2003 (the Original AVC Supply Agreement, as amended, the “AVC Supply Agreement”; together with the AVC Asset Purchase Agreement, the “AVC Agreements”);

     WHEREAS, King and Novavax are parties to that certain Copromotion Agreement dated as of January 8, 2001 (the “Original Copromotion Agreement”), as amended by that certain First Amendment to the Copromotion Agreement dated as of June 29, 2001, as further amended by that certain Second Amendment to the Copromotion Agreement dated as of June 29, 2001, as further amended by that certain Third Amendment to the Copromotion Agreement dated as of June 26, 2002 (the Original Copromotion Agreement, as amended, the “Copromotion Agreement”);

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     WHEREAS, King and Novavax are parties to that certain Exclusive License and Distribution Agreement dated as of January 8, 2001 (the “Original Exclusive License and Distribution Agreement”), as amended by that certain First Amendment to the Exclusive License and Distribution Agreement dated as of June 29, 2001, as further amended by that certain Second Amendment to the Exclusive License and Distribution Agreement dated as of June 29, 2001 (the Original Exclusive License and Distribution Agreement, as amended, the “Exclusive License and Distribution Agreement”; together with the December 2000 Note Purchase Agreement, the September 2001 Note Purchase Agreement, the June 2002 Note Purchase Agreement, the Original Investor Rights Agreement, the Amended and Restated Investor Rights Agreement, the Original Registration Rights Agreement, the Second Amended and Restated Registration Rights Agreement, the HPV Agreements, the Adjuvant License and Supply Agreements, the Copromotion Agreement and all other contracts and agreements (oral or written) to which King or any of its subsidiaries, on the one hand, and Novavax or any of its subsidiaries, on the other hand, are parties prior to the date hereof (other than the AVC Agreements and the Exchange Agreement (as defined below)), the “Collaboration Agreements”);

     WHEREAS, King, Parkedale and Novavax have entered into an Exchange Agreement dated as of July 16, 2004 (the “Exchange Agreement”), pursuant to which, among other things, Novavax shall issue and deliver the Exchange Shares (as defined in the Exchange Agreement) as consideration for King and Parkedale entering into this Agreement;

     WHEREAS, King and Novavax have entered into a Registration Rights Agreement dated as of the date hereof (the “Registration Rights Agreement”);

     WHEREAS, the execution and delivery of this Agreement is a condition to the closing of the Exchange Agreement; and

     WHEREAS, by entering into this Agreement, the parties intend to settle and resolve fully and finally all matters between them and to release one another generally and finally from any and all claims (except as set forth in Section 5 or as provided under the Exchange Agreement or the Registration Rights Agreement).

     NOW, THEREFORE, in consideration of the foregoing, the mutual promises set forth in this Agreement and in the Exchange Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:

     1. Termination. Subject to the terms of this Agreement, King, Parkedale and Novavax hereby terminate and cancel the Collaboration Agreements

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effective as of June 4, 2004 (the “Termination Effective Date”). Notwithstanding anything in the Collaboration Agreements to the contrary, from and after the Termination Effective Date, none of King, Parkedale or Novavax shall have any further rights, privileges, or obligations to any party under or in connection with any of the Collaboration Agreements.

     2. Release by Novavax. Except as set forth in Section 5, Novavax, on behalf of itself, its affiliates, subsidiaries, predecessors, successors and assigns and, in their capacity as such, the officers, directors, agents, employees, trustees, beneficiaries, administrators, executors, attorneys and insurers of Novavax and Novavax’s affiliates, subsidiaries, predecessors, successors and assigns (each individually, a “Novavax Party” and collectively, the “Novavax Parties”), hereby releases and forever discharges King, Parkedale, King’s and Parkedale’s respective affiliates, subsidiaries, predecessors, successors and assigns and, in their capacity as such, the respective officers, directors, agents, employees, trustees, beneficiaries, administrators, executors, attorneys and insurers of King, Parkedale and King’s and Parkedale’s respective affiliates, subsidiaries, predecessors, successors and assigns (each individually, a “King Party” and collectively, the “King Parties”) of and from any and all manners of action, causes of action, claims, counterclaims, accounts, demands, suits, damages, costs, losses, interest, liabilities, or expenses of any kind and nature whatsoever, whether legal, equitable, statutory, liquidated or unliquidated, fixed or contingent, known or unknown, suspected or unsuspected (the “Released Claims”) which any Novavax Party ever had, now has or which any Novavax Party hereafter can, shall or may have by reason of anything done, omitted or suffered to be done or omitted by any King Party by reason of any cause, matter, thing or event whatsoever, from the beginning of time to and including the date this Agreement is executed. Novavax, on behalf of the Novavax Parties, further agrees not to sue, or otherwise institute or cause to be instituted, or in any way voluntarily participate in or assist in the prosecution of any Released Claims against any of the King Parties in any federal, state, local, or other court, or any other forum concerning any claims released herein.

     3. Release by King/Parkedale. Except as set forth in Section 5, each of King and Parkedale, on behalf of the King Parties, hereby releases and forever discharges the Novavax Parties of and from any and all Released Claims which any King Party ever had, now has or which any King Party hereafter can, shall or may have by reason of anything done, omitted or suffered to be done or omitted by any Novavax Party by reason of any cause, matter, thing or event whatsoever, from the beginning of time to and including the date this Agreement is executed. Each of King and Parkedale, on behalf of the King Parties, further agrees not to sue, or otherwise institute or cause to be instituted, or in any way voluntarily participate in or assist in the prosecution of any Released Claims against any of the Novavax Parties in any federal, state, local, or other court, or any other forum concerning any claims released herein.

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     4. Unknown Claims. Except as set forth in Section 5, the releases contained in Section 2 and Section 3 (the “Releases”) are intended as complete and general releases, without reservation, of all Released Claims arising out of facts occurring or existing during the time periods specified therein to the maximum extent permitted by law. Each of the parties does expressly waive any and all rights which it may have with respect to any Released Claims under any provision of law that might otherwise limit the effect or scope of the Releases, including any applicable statute or decisional law. The parties hereby acknowledge that any of them may hereafter discover facts in addition to or different from those that the party now knows or believes to be true with respect to the Released Claims arising out of facts occurring or existing during the time periods specified in Section 2 and Section 3. Except as set forth in Section 5, the parties hereby expressly agree to assume the risk of any mistake of fact with regard to any such Released Claims, or with regard to any of the facts which are not known to them relating thereto, or with regard to the possible discovery of additional or different facts, and to assume the risk of the possible discovery of additional or different facts. Except as set forth in Section 5, each of the parties hereby expressly agrees that, notwithstanding the foregoing, it is their intention hereby to fully, finally, completely and forever settle and release each, every, and all of the Released Claims arising out of facts occurring or existing during time periods specified in Section 2 and Section 3, and that, in furtherance of such intention, this Agreement and the Releases herein given shall be and remain effective in all respects, notwithstanding the discovery or existence of any such additional or different facts occurring or existing during the time periods specified in Section 2 and Section 3.

     5. AVC Agreements, Exchange Agreement and Registration Rights Agreement. The AVC Agreements, the Exchange Agreement and the Registration Rights Agreement shall remain in full force and effect, and neither King nor Novavax shall be released from their obligations thereunder.

     6. Representations.

          (a) Each party represents and warrants that: (i) it has the right, power and authority to enter into and perform its obligations under this Agreement and (ii) this Agreement constitutes a legal, valid and binding obligation upon itself.

          (b) Each party represents that it has not made any assignment, transfer, conveyance or other disposition of any of the Collaboration Agreements.

          (c) Each of King and Parkedale represents that it has no knowledge of any claim of any of its respective shareholders against any Novavax Party, and Novavax represents that, after giving effect to the Anaconda Release dated as of the date hereof among King, Parkedale and Anaconda Opportunity

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Fund, L.P., Novavax has no knowledge of any claim of any of its shareholders against any King Party.

          (d) The parties hereby acknowledge that in agreeing to the terms of this Agreement, they are not acting under duress, undue influence, misapprehension or misrepresentation by the other party hereto.

     7. Governing Law; Consent to Jurisdiction.

          (a) This Agreement, the rights of the parties and all claims, actions, causes of action or suits, litigation, controversies, investigations, hearings, charge, complaints, demands, notices or proceedings arising in whole or in part under or in connection herewith, shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.

          (b) The parties irrevocably submit to the exclusive jurisdiction of any court located in the City of Wilmington, Delaware or the United States Federal Court sitting in the District of Delaware over any suit, action or proceeding arising out of or relating to this Agreement. Each of the parties consents to process being served in any such suit, action or proceeding by serving a copy thereof upon the agent for service of process; provided, that to the extent lawful and possible, written notice of such service will also be mailed to such party, as the case may be. Each of the parties agrees that such service will be deemed in every respect effective service of process upon such party in any such suit, action or proceeding and will be taken and held to be valid personal service upon such party. Nothing in this subsection will affect or limit any right to serve process in any manner permitted by law, or to enforce in any lawful manner a judgment obtained in a court described in this Section 7 in any other jurisdiction. Each of the parties waives any right it may have to assert the doctrine of forum non conveniens or to object to venue to the extent any proceeding is brought in a court located in the City of Wilmington, Delaware or the United States Federal Court sitting in the District of Delaware.

     8. Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original, but all such counterparts together shall constitute but one agreement.

     9. Entire Agreement; Amendments. This Agreement, the Exchange Agreement and the Registration Rights Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede all prior agreements and undertakings, both written and oral, between or among the parties, with respect to the subject matter hereof and are not intended to confer upon any other person any right or remedies hereunder. The terms and conditions

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hereof may not be modified, altered or otherwise amended except by an instrument in writing executed by the parties.

     10. Successors and Assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by Novavax without the prior written consent of King, or by King or Parkedale without the prior written consent of Novavax. The terms and conditions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their successors and permitted assigns.

     11. Construction.

          (a) The parties acknowledge that the parties have reviewed and revised this Agreement with their respective counsel and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.

          (b) Unless the context of this Agreement otherwise requires: (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; (iii) the terms “hereof”, “herein”, “hereby” and derivative or similar words refer to this entire Agreement; (iv) all references herein to “Articles” or “Sections” are to Articles or Sections of this Agreement; (v) the term “or” has, except as otherwise indicated, the inclusive meaning represented by the phrase “and/or”; (vi) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation” and “parties” or “Parties” means the signatories to this Agreement.

          (c) This Agreement shall be construed to give effect to the intent of the parties.

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     IN WITNESS WHEREOF, the parties have caused this Termination Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above.

KING PHARMACEUTICALS, INC.
	By:	/s/ Brian A. Markison
	Name:	Brian A. Markison
	Title:	President and Chief Executive Officer

PARKEDALE PHARMACEUTICALS, INC.
	By:	/s/ Brian A. Markison
	Name:	Brian A. Markison
	Title:	President and Chief Executive Officer

NOVAVAX, INC.
	By:	/s/ Nelson M. Sims
	Name:	Nelson M. Sims
	Title:	President and Chief Executive Officer