<SUBMISSION>
<ACCESSION-NUMBER>0000950133-05-004829
<TYPE>8-K
<PUBLIC-DOCUMENT-COUNT>6
<PERIOD>20051101
<ITEMS>1.01
<ITEMS>9.01
<FILING-DATE>20051102
<DATE-OF-FILING-DATE-CHANGE>20051102
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>NOVAVAX INC
<CIK>0001000694
<ASSIGNED-SIC>2836
<IRS-NUMBER>222816046
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>8-K
<ACT>34
<FILE-NUMBER>000-26770
<FILM-NUMBER>051171486
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>508 LAPP ROAD
<CITY>MALVERN
<STATE>PA
<ZIP>19355
<PHONE>4849131200
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>508 LAPP ROAD
<CITY>MALVERN
<STATE>PA
<ZIP>19355
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>w14243e8vk.htm
<DESCRIPTION>FORM 8-K
<TEXT>
<HTML>
<HEAD>
<TITLE>e8vk</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>WASHINGTON, DC 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 8-K</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 12pt"><B>CURRENT REPORT</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 12pt"><B>PURSUANT TO SECTION 13 OR 15 (d)&nbsp;OF THE<BR>
SECURITIES EXCHANGE ACT OF 1934</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Date of Report (Date of earliest event reported): </B><U><B>November&nbsp;1, 2005</B></U></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B><FONT style="border-bottom: 1px solid #000000">NOVAVAX, INC.</FONT></B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Exact Name of Registrant as Specified in Charter)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Delaware
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">0-26770
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">22-2816046</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(State or Other Jurisdiction<BR>
of Incorporation)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Commission File<BR>
Number)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(IRS Employer<BR>
Identification Number)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">508 Lapp Road<BR>
Malvern, Pennsylvania 19355</DIV>

<DIV align="center"><DIV style="font-size: 3pt; margin-top: 1pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 0pt">(Address of Principal Executive Offices)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Registrant&#146;s telephone number, including area code: <U>(484)&nbsp;913-1200</U></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">(Former Name or Former Address, if Changed Since Last Report): <U>N/A</U></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Written communications pursuant to Rule&nbsp;425 under the Securities Act (17 CFR 230.425)</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Soliciting material pursuant to Rule&nbsp;14a-12 under the Exchange Act (17 CFR 240.14a-12)</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Pre-commencement communications pursuant to Rule&nbsp;14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Pre-commencement communications pursuant to Rule&nbsp;13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))</TD>
</TR>

</TABLE>
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>





<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1.01 Entry into a Material Definitive Agreement</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;1, 2005, Novavax entered into a securities purchase agreement with three investors
&#150; Cranshire Capital, L.P., Iroquois Master Fund, Ltd. and Omicron Master Trust &#150; for the purchase
and sale of 4,186,047 shares of its common stock at a price of $4.30 per share. Rodman &#038; Renshaw,
LLC acted as the placement agent for the offering pursuant to an agreement, dated November&nbsp;1, 2005,
by and between Novavax and the placement agent. The transaction is expected to close no later than
November&nbsp;4, 2005. The offered shares are registered pursuant to the company&#146;s $50,000,000 shelf
registration statement (File No.&nbsp;333-108006) that was originally filed with the Securities and
Exchange Commission on August&nbsp;15, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the terms of the securities purchase agreement, Novavax will sell $18,000,000 of
its common stock to the investors upon satisfaction of certain conditions precedent to closing,
including receipt by the company of the subscription amounts from the investors and the execution
of an officer&#146;s certificate by an authorized officer of the company certifying as to the accuracy
of the company&#146;s representations and warranties contained in the agreement, as well as delivery of
a legal opinion from counsel to Novavax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Novavax made certain representations and warranties to the investors in the securities
purchase agreement, including with respect to its organization and qualification, capitalization,
issuance of the securities, litigation and absence of material changes. Novavax also agreed to
provide indemnification for claims and actions arising out of or based on any untrue statement or
alleged untrue statement of a material fact contained in the applicable registration statement or
prospectus supplement, or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not misleading, with
certain exceptions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the terms of its agreement with the placement agent, Novavax will pay Rodman &#038;
Renshaw, LLC a fee of 5% of the gross proceeds of the offering. The placement agent is not
purchasing or selling any shares, nor is it required to arrange the purchase or sale of any
specific number or dollar amount of shares. Novavax also agreed to indemnify the placement agent
against certain liabilities, including liabilities under the Securities Act of 1933, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9.01. Financial Statements and Exhibits.</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Exhibits.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Agreement, dated November&nbsp;1, 2005, by and between Novavax, Inc. and Rodman &#038; Renshaw,
LLC</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">10</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Form of Securities Purchase Agreement dated November&nbsp;1, 2005</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">99.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Press Release dated November&nbsp;2, 2005</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">99.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Risk Factors</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">SIGNATURES
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">NOVAVAX, INC.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;/s/ Dr.&nbsp;Rahul Singhvi</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Dr.&nbsp;Rahul Singhvi
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President and Chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">November&nbsp;2, 2005

</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>2
<FILENAME>w14243exv4.htm
<DESCRIPTION>EXHIBIT 4
<TEXT>
<HTML>
<HEAD>
<TITLE>exv4</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;4</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="w14243w1424301.gif" alt="(RODMAN &#038; RENSHAW LOGO)">
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">November&nbsp;1, 2005
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Rahul Singhvi<BR>
President / Chief Executive Officer<BR>
Novavax, Inc.<BR>
508 Lapp Road<BR>
Malvern, PA 19355

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Dear Mr.&nbsp;Singhvi:

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The purpose of this letter agreement (the &#147;Agreement&#148;) is to set forth the terms and
conditions pursuant to which Rodman &#038; Renshaw, LLC (&#147;R&#038;R&#148;) shall introduce Novavax, Inc. (the
&#147;Company&#148;) to one or more investors in connection with the proposed offering (the &#147;Offering&#148;) of
securities (the &#147;Securities&#148;) of the Company. The terms of such Offering and the Securities shall
be mutually agreed upon by the Company and the investor(s). R&#038;R&#146;s engagement under this Agreement
shall be exclusive until November&nbsp;4, 2005, and thereafter shall be non-exclusive. The identities of
the investors to which R&#038;R introduces the Company shall be proprietary information of R&#038;R and shall
not be divulged to third parties by the Company, nor used by the Company outside the scope of R&#038;R&#146;s
engagement as described herein, other than as required by applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In consideration of the services rendered by R&#038;R under this Agreement, the Company agrees to
pay R&#038;R the following fees and other compensation:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A cash fee payable immediately upon the closing of any portion of any Financing
(including without limitation the Offering) and equal to 5% of the aggregate capital
raised.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>$25,000 legal expense allowance.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Agreement shall be governed by and construed in accordance with the laws of the State of
New York, without regard to conflicts of law principles. Any dispute arising out of this Agreement
shall be adjudicated in the courts of the State of New York or in the federal courts sitting in the
Southern District of New York, and each of the parties hereto agrees that service of process upon
it by registered or certified mail at its address set forth herein shall be deemed adequate and
lawful. The Company shall indemnify R&#038;R in accordance with the terms of Section&nbsp;4.6 of that certain
Securities Purchase Agreement among the Company and the purchasers listed therein dated the date
hereof. The Company acknowledges and agrees that R&#038;R is not and shall not be construed as a
fiduciary of the Company and shall have no duties or liabilities to the equity holders or the
creditors of the Company or any other person by virtue of this Agreement or the retention of R&#038;R
hereunder, all of which are hereby expressly waived.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Agreement constitutes the entire understanding and agreement between the parties hereto
with respect to its subject matter and there are no agreements or understandings with respect to
the subject matter hereof which are not contained in this Agreement. This Agreement may be
modified only in writing signed by the party to be charged hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the foregoing correctly sets forth our agreement, please confirm this by signing and
returning to us the duplicate copy of this letter.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Very truly yours,</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">RODMAN &#038; RENSHAW, LLC</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreed to and accepted
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">as of the date first written above:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">NOVAVAX, INC.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
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<DIV align="center" style="font-size: 10pt; margin-top: 6pt">1270
Avenue of Americas, 16th Floor<BR>
New York, NY 10020
</DIV>
<P align="center" style="font-size: 10pt">
</DIV>


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<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>w14243exv10.htm
<DESCRIPTION>EXHIBIT 10
<TEXT>
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;10</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECURITIES PURCHASE AGREEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Securities Purchase Agreement (this &#147;<U>Agreement</U>&#148;) is dated as of November&nbsp;1, 2005,
among Novavax, Inc. a Delaware corporation (the &#147;<U>Company</U>&#148;), and each purchaser identified
on the signature pages hereto (each, including its successors and assigns, a &#147;<U>Purchaser</U>&#148;
and collectively the &#147;<U>Purchasers</U>&#148;); and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, subject to the terms and conditions set forth in this Agreement, the Company desires
to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to
purchase from the Company in the aggregate, up to $18,000,000 of shares of Common Stock on the
Closing Date pursuant to an effective Registration Statement on Form S-3, file no. 333-108006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration the receipt and adequacy of which are hereby acknowledged,
the Company and each Purchaser agree as follows:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">ARTICLE I.
</DIV>

<DIV align="center" style="font-size: 10pt">DEFINITIONS</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <U>Definitions</U>. In addition to the terms defined elsewhere in this Agreement, for all
purposes of this Agreement, the following terms have the meanings indicated in this Section&nbsp;1.1:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Action</U>&#148; shall have the meaning ascribed to such term in Section&nbsp;3.1(j).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Affiliate</U>&#148; means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a Person as
such terms are used in and construed under Rule&nbsp;144. With respect to a Purchaser, any
investment fund or managed account that is managed on a discretionary basis by the same
investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Closing</U>&#148; means the closing of the purchase and sale of the Common Stock
pursuant to Section&nbsp;2.1.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Closing Date</U>&#148; means the Trading Day when all of the Transaction Documents have
been executed and delivered by the applicable parties thereto, and all conditions precedent
to (i)&nbsp;the Purchasers&#146; obligations to pay the Subscription Amount and (ii)&nbsp;the Company&#146;s
obligations to deliver the Securities have been satisfied or waived.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Closing Price</U>&#148; means, for any date, the price determined by the first of the
following clauses that applies: (a)&nbsp;if the Common Stock is then listed or quoted on a
Trading Market, the closing bid price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed or quoted as
reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. Eastern Time to
4:02 p.m. Eastern Time); (b)&nbsp;if the Common Stock is not then listed or
quoted on a Trading Market and if prices for the Common Stock are then quoted on the
OTC Bulletin Board, the closing bid price of the Common Stock for such date (or the
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">nearest preceding date) on the OTC Bulletin Board; (c)&nbsp;if the Common Stock is not then listed or
quoted on the OTC Bulletin Board and if prices for the Common Stock are then reported in the
&#147;Pink Sheets&#148; published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported; or (d)&nbsp;in all other cases, the fair market
value of a share of Common Stock as determined by an independent appraiser selected in good
faith by the Purchasers and reasonably acceptable to the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Commission</U>&#148; means the Securities and Exchange Commission.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Common Stock</U>&#148; means the common stock of the Company, par value $0.01 per
share, and any securities into which such common stock may hereafter be reclassified.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Common Stock Equivalents</U>&#148; means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock,
including without limitation, any debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Stock.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Company Counsel</U>&#148; means White White &#038; Van Etten LLP.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Disclosure Schedules</U>&#148; means the Disclosure Schedules of the Company delivered
concurrently herewith.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Effective Date</U>&#148; means the date that the Registration Statement was first
declared effective by the Commission.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Evaluation Date</U>&#148; shall have the meaning ascribed to such term in Section
3.1(l).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Exchange Act</U>&#148; means the Securities Exchange Act of 1934, as amended.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Exempt Issuance</U>&#148; means the issuance of (a)&nbsp;shares of Common Stock or options
to employees, officers or directors of the Company pursuant to any stock or option plan duly
adopted by a majority of the non-employee members of the Board of Directors of the Company
or a majority of the members of a committee of non-employee directors established for such
purpose, (b)&nbsp;securities upon the exercise of or conversion of any Securities issued
hereunder, convertible securities, options or warrants issued and outstanding on the date of
this Agreement, provided that such securities have not been amended since the date of this
Agreement to increase the number of such securities or to decrease the exercise or
conversion price of any such securities, and (c)&nbsp;securities issued pursuant to acquisitions
or strategic transactions, provided any such issuance shall only be to a Person which is,
itself or through its subsidiaries, an operating company in a business synergistic with the
business of the Company and in which the Company receives benefits in addition to the
investment of funds, but shall not include a transaction
in which the Company is issuing securities primarily for the purpose of raising capital
or to an entity whose primary business is investing in securities.
</DIV>

<P align="center" style="font-size: 10pt">2
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>GAAP</U>&#148; shall have the meaning ascribed to such term in Section&nbsp;3.1(h).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Liens</U>&#148; means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Material Adverse Effect</U>&#148; shall have the meaning ascribed to such term in
Section&nbsp;3.1(b).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Per Share Purchase Price</U>&#148; equals $4.30.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Person</U>&#148; means an individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint stock
company, government (or an agency or subdivision thereof) or other entity of any kind.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Proceeding</U>&#148; means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as a
deposition), whether commenced or threatened.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Prospectus Supplement</U>&#148; means the supplement to the base prospectus contained
in the Registration Statement to be filed in connection with the sale to the Purchasers of
the Securities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Purchaser Party</U>&#148; shall have the meaning ascribed to such term in Section&nbsp;4.6.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Registration Statement</U>&#148; means the registration statement of the Company,
Commission File No.&nbsp;333-108006, as amended, covering the sale to the Purchasers of the
Securities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Required Approvals</U>&#148; shall have the meaning ascribed to such term in Section
3.1(e).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Rule&nbsp;144</U>&#148; means Rule&nbsp;144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same effect as such
Rule.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>SEC Reports</U>&#148; shall have the meaning ascribed to such term in Section&nbsp;3.1(h).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Securities</U>&#148; means the Shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Securities Act</U>&#148; means the Securities Act of 1933, as amended.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Shares</U>&#148; means the shares of Common Stock issued or issuable to each Purchaser
pursuant to this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Short Sales</U>&#148; shall include, without limitation, all &#147;short sales&#148; as defined
in Rule&nbsp;200 of Regulation&nbsp;SHO of the Exchange Act, but does not include any reservation or
location of borrowable shares.
</DIV>

<P align="center" style="font-size: 10pt">3
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Subscription Amount</U>&#148; means, as to each Purchaser, the amounts set forth below
such Purchaser&#146;s signature block on the signature page hereto, in United States dollars and
in immediately available funds.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Subsidiary</U>&#148; shall mean the subsidiaries of the Company, if any, set forth on
<U>Schedule&nbsp;3.1(a)</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Trading Day</U>&#148; means a day on which the Common Stock is traded on a Trading
Market.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Trading Market</U>&#148; means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the Nasdaq Capital Market,
the American Stock Exchange, the New York Stock Exchange, or the Nasdaq National Market.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Transaction Documents</U>&#148; means this Agreement and any other documents or
agreements executed in connection with the transactions contemplated hereunder.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">ARTICLE II.
</DIV>

<DIV align="center" style="font-size: 10pt">PURCHASE AND SALE</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 <U>Closing</U>. On the Closing Date, each Purchaser shall purchase from the Company,
severally and not jointly with the other Purchasers, and the Company shall issue and sell to each
Purchaser, a number of Shares equal to such Purchaser&#146;s Subscription Amount divided by the Per
Share Purchase Price. The aggregate Subscription Amounts for Shares sold hereunder shall be up to
$18,000,000. Upon satisfaction of the conditions set forth in Sections&nbsp;2.2 and 2.3, the Closing
shall occur at the offices of Company Counsel or such other location as the parties shall mutually
agree.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 <U>Deliveries</U>. (a)&nbsp;On the Closing Date, the Company shall deliver or cause to be
delivered to each Purchaser the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) this Agreement duly executed by the Company;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) upon the Company&#146;s receipt of the purchase price therefor, the receipt by
each Purchaser, via the DTC DWAC system, of the number of Shares equal to such
Purchaser&#146;s Subscription Amount divided by the Per Share Purchase Price, registered
in the name of such Purchaser;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) an officer&#146;s certificate of the Company&#146;s Chief Executive Officer or
Chief Financial Officer, in form reasonably acceptable to the Purchasers, certifying
the continuing accuracy of the Company&#146;s representations and
warranties made in this Agreement and the Company&#146;s performance of the
covenants to be performed by it pursuant to this Agreement at or prior to Closing;
and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) a legal opinion of Company Counsel, in the form of <U>Exhibit&nbsp;B</U>
attached hereto.
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;On the Closing Date, each Purchaser shall deliver or cause to be delivered to the
Company the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) this Agreement duly executed by such Purchaser; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) such Purchaser&#146;s Subscription Amount by wire transfer to the account as
specified in writing by the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 <U>Closing Conditions</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the accuracy in all material respects when made and on the Closing Date of
the representations and warranties of the Purchasers contained herein;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) all obligations, covenants and agreements of the Purchasers required to be
performed at or prior to the Closing Date shall have been performed; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the delivery by the Purchasers of the items set forth in Section&nbsp;2.2(b)
of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The respective obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being met:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained herein;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been performed;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the delivery by the Company of the items set forth in Section&nbsp;2.2(a) of
this Agreement;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) there shall have been no Material Adverse Effect with respect to the
Company since the date hereof, which shall not have been reasonably cured by the
Company; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) From the date hereof to the Closing Date, trading in the Common Stock shall
not have been suspended by the Commission (except for any suspension of trading of
limited duration agreed to by the Company, which suspension shall be terminated
prior to the Closing), and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg Financial Markets shall not have been
suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by such service, or
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New
York State authorities nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any financial market
which, in each case, in the reasonable judgment of each Purchaser, makes it
impracticable or inadvisable to purchase the Shares at the Closing.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">ARTICLE III.
</DIV>

<DIV align="center" style="font-size: 10pt">REPRESENTATIONS AND WARRANTIES</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 Representations and Warranties of the Company. Except as set forth under the
corresponding section of the Disclosure Schedules which Disclosure Schedules shall be deemed a part
hereof, the Company hereby makes the representations and warranties set forth below to each
Purchaser:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Subsidiaries</U>. All of the direct and indirect subsidiaries of the Company
are set forth on <U>Schedule&nbsp;3.1(a)</U>. The Company owns, directly or indirectly, all of
the capital stock or other equity interests of each Subsidiary free and clear of any Liens,
and all the issued and outstanding shares of capital stock of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities. If the Company has no subsidiaries, then references
in the Transaction Documents to the Subsidiaries will be disregarded.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>Organization and Qualification</U>. The Company and each of the Subsidiaries
is an entity duly incorporated or otherwise 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 or default of any of the provisions of its respective certificate or
articles of incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct 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 have or
reasonably be expected to result in (i)&nbsp;a material adverse effect on the legality, validity
or enforceability of any Transaction Document, (ii)&nbsp;a material adverse effect on the results
of operations, assets, business, prospects or financial condition of the Company and the
Subsidiaries, taken as a whole, or (iii)&nbsp;a material adverse effect on the Company&#146;s ability
to perform in any material
respect on a timely basis its obligations under any Transaction Document (any of (i),
(ii)&nbsp;or (iii), a &#147;<U>Material Adverse Effect</U>&#148;) and no Proceeding has been instituted in
any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <U>Authorization; Enforcement</U>. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">each of the Transaction Documents and otherwise to carry out its obligations thereunder. The execution
and delivery of each of the Transaction Documents by the Company and the consummation by it
of the transactions contemplated thereby have been duly authorized by all necessary action
on the part of the Company and no further action is required by the Company in connection
therewith other than in connection with the Required Approvals. Each Transaction Document
has been (or upon delivery will have been) duly executed by the Company and, when delivered
in accordance with the terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms except (i)&nbsp;as limited
by general equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of creditors&#146; rights
generally, (ii)&nbsp;as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii)&nbsp;insofar as indemnification and
contribution provisions may be limited by applicable law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <U>No Conflicts</U>. The execution, delivery and performance of the Transaction
Documents by the Company, the issuance and sale of the Shares and the consummation by the
Company of the other transactions contemplated thereby do not and will not (i)&nbsp;conflict with
or violate any provision of the Company&#146;s or any Subsidiary&#146;s certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)&nbsp;conflict with,
violate or constitute a default (or an event that with notice or lapse of time or both would
become a default) under, result in the creation of any Lien upon any of the properties or
assets of the Company or any Subsidiary, 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 Company or Subsidiary
debt or otherwise) or other understanding 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, or
(iii)&nbsp;subject to the Required Approvals, conflict with or 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), or by which any property or asset of the Company
or a Subsidiary is bound or affected; except in the case of each of clauses (ii)&nbsp;and (iii),
such as could not have or reasonably be expected to result in a Material Adverse Effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <U>Filings, Consents and Approvals</U>. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other governmental authority
or other Person in connection with the execution, delivery and performance by the Company of
the Transaction Documents, other than (i)&nbsp;filings required pursuant to
Section&nbsp;4.3 of this Agreement, and (ii)&nbsp;such filings as are required to be made under
applicable federal and state securities laws (collectively, the &#147;<U>Required
Approvals</U>&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <U>Issuance of the Securities</U>. The Shares 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 imposed by the Company
other than restrictions on transfer provided for in the Transaction Documents or
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">applicable federal and state securities laws. The Company has reserved from its duly authorized
capital stock the maximum number of shares of Common Stock issuable pursuant to this
Agreement. The issuance by the Company of the Shares has been registered under the
Securities Act and all of the Shares when delivered will be freely transferable and tradable
on the Trading Market by the Purchasers without restriction (other than any restrictions
arising solely from an act or omission of a Purchaser). The Registration Statement is
effective and available for the issuance of the Shares thereunder and the Company has not
received any notice that the Commission has issued or intends to issue a stop-order with
respect to the Registration Statement or that the Commission otherwise has suspended or
withdrawn the effectiveness of the Registration Statement, either temporarily or
permanently, or intends or has threatened in writing to do so. The &#147;Plan of Distribution&#148;
section under the Registration Statement permits the issuance and sale of the Shares
hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) <U>Capitalization</U>. The capitalization of the Company as of June&nbsp;30, 2005 is
as set forth in the Company&#146;s quarterly report on Form 10-Q for the fiscal quarter ended
June&nbsp;30, 2005, as filed with the Commission on August&nbsp;9, 2005. Except as disclosed on
<U>Schedule&nbsp;3.1(g)</U>, the Company has not issued any capital stock since its most
recently filed periodic report under the Exchange Act, other than pursuant to the exercise
of employee stock options under the Company&#146;s stock option plans, the issuance of shares of
Common Stock to employees pursuant to the Company&#146;s employee stock purchase plan and
pursuant to the conversion or exercise of outstanding Common Stock Equivalents. No Person
has any right of first refusal, preemptive right, right of participation, or any similar
right to participate in the transactions contemplated by the Transaction Documents, which
right has not been waived prior to the date hereof. Except as set forth in the SEC Reports
or the Prospectus Supplement, there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may become bound
to issue additional shares of Common Stock or Common Stock Equivalents. Except as set forth
in the SEC Reports or the Prospectus Supplement, the issue and sale of the Securities will
not obligate the Company to issue shares of Common Stock or other securities to any Person
(other than the Purchasers) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under such
securities. All of the outstanding shares of capital stock of the Company are validly
issued, fully paid and nonassessable, have been issued in material compliance with all
federal and state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or purchase
securities. No further
approval or authorization of any stockholder or the Board of Directors of the Company
is required for the issuance and sale of the Shares. There are no stockholders agreements,
voting agreements or other similar agreements with respect to the Company&#146;s capital stock to
which the Company is a party or, to the knowledge of the Company, between or among any of
the Company&#146;s stockholders.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) <U>SEC Reports; Financial Statements</U>. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it under the
Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the Company was
required by law to file such material) (the foregoing materials, including the exhibits
thereto and documents incorporated by reference therein, being collectively referred to
herein as the &#147;<U>SEC Reports</U>&#148;) 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, except for any failure to timely file which would not reasonably be expected to
have a Material Adverse Effect. As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (&#147;<U>GAAP</U>&#148;),
except as may be otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes required by GAAP,
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, year-end audit adjustments.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <U>Material Changes</U>. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in the SEC
Reports or <U>Schedule&nbsp;3.1(i)</U>, (i)&nbsp;there has been no event, occurrence or development
that has had or that could reasonably be expected to result in a Material Adverse Effect,
except as has been reasonably cured by the Company (ii)&nbsp;the Company has not incurred any
liabilities (contingent or otherwise) other than (A)&nbsp;trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company&#146;s financial statements pursuant to
GAAP or required to be disclosed in filings made with the Commission, (iii)&nbsp;the Company has
not altered its method of accounting, (iv)&nbsp;the Company has not declared or made any dividend
or distribution of cash or other property to its stockholders or purchased, redeemed or made
any agreements to purchase or redeem any shares of its capital stock and (v)&nbsp;the Company has
not issued any equity securities to any officer, director or Affiliate, except pursuant to
existing Company stock option and incentive plans. The
Company does not have pending before the Commission any request for confidential
treatment of information.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) <U>Litigation</U>. Except as disclosed in the SEC Reports, there is no action,
suit, notice of violation, or proceeding pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their respective
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">properties before or by any court, arbitrator, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) (collectively, an
&#147;<U>Action</U>&#148;) which could, if there were an unfavorable decision, have or reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary,
nor, to the knowledge of the Company, any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. To the knowledge of the Company,
since January&nbsp;1, 2003 there has not been, and there is currently not pending or
contemplated, any investigation by the Commission involving the Company or any current or
former director or officer of the Company. The Commission has not issued any stop order or
other order suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Securities Act.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) <U>Compliance</U>. Neither the Company nor any Subsidiary (i)&nbsp;is in default under
or in violation of (and no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii)&nbsp;is in violation of
any order of any court, arbitrator or governmental body, or (iii)&nbsp;is in violation of any
statute, rule or regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws applicable to its business, except in each case as
would not have a Material Adverse Effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) <U>Sarbanes-Oxley; Internal Accounting Controls</U>. To its knowledge, the
Company is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002
which are applicable to it as of the Closing Date. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management&#146;s general or specific
authorizations, (ii)&nbsp;transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management&#146;s general or specific
authorization, and (iv)&nbsp;the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as defined in
Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)) for the Company and designed such disclosure
controls and procedures to ensure that material information relating to the Company,
including its Subsidiaries, is made known to the certifying officers by others within those
entities, particularly during the period in which the Company&#146;s most recently filed periodic
report under the Exchange Act, as the case may be, is being
prepared. The Company&#146;s certifying officers have evaluated the effectiveness of the
Company&#146;s disclosure controls and procedures as of a date prior to the filing date of the
most recently filed periodic report under the Exchange Act (such date, the &#147;<U>Evaluation
Date</U>&#148;). The Company presented in its most recently filed periodic report under the
Exchange Act the conclusions of the certifying officers about the effectiveness of the
Company&#146;s disclosure controls and procedures based on their evaluations as of the
</DIV>

<P align="center" style="font-size: 10pt">10
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Evaluation
Date. Since the Evaluation Date, there have been no changes in the Company&#146;s internal
control over financial reporting (as such term is defined in Rules&nbsp;13a-15(f) and 15d-15(f)
under the Exchange Act) that have materially affected, or are reasonably likely to
materially affect, the Company&#146;s internal control over financial reporting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) <U>Listing and Maintenance Requirements</U>. The Company&#146;s Common Stock is
registered pursuant to Section 12(g) of the Exchange Act, and the Company has taken no
action designed to, or which to its knowledge is likely to have the effect of, terminating
the registration of the Common Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such registration. The
Company has not, in the 12&nbsp;months preceding the date hereof, received notice from any
Trading Market on which the Common Stock is or has been listed or quoted to the effect that
the Company is not in compliance with the listing or maintenance requirements of such
Trading Market. The Company is in compliance with all such listing and maintenance
requirements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) <U>Application of Takeover Protections</U>. The Company and its Board of
Directors have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the Company&#146;s
Certificate of Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a result of the
Purchasers and the Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation the Company&#146;s issuance of the Securities
and the Purchasers&#146; ownership of the Securities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) <U>Disclosure</U>. The Company confirms that, neither the Company nor any
officer, director or employee of the Company acting on its behalf has provided any of the
Purchasers or their agents or counsel with any information that constitutes or might
constitute material, non-public information that is not set forth in the Prospectus
Supplement. The Company understands and confirms that the Purchasers will rely on the
foregoing representations and covenants in effecting transactions in securities of the
Company. All disclosure provided to the Purchasers regarding the Company, its business and
the transactions contemplated hereby furnished by or on behalf of the Company with respect
to the representations and warranties made herein are true and correct with respect to such
representations and warranties 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
light of the circumstances under which they were made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated hereby
other than those specifically set forth in Section&nbsp;3.2 hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p) <U>Effective Registration Statement</U>. The Registration Statement has been
declared effective by the Commission and the Company knows of no reason why the Registration
Statement will not continue to remain effective for the foreseeable future.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q) <U>Acknowledgment Regarding Purchasers&#146; Purchase of Shares</U>. The Company
acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an
arm&#146;s length purchaser with respect to the Transaction Documents and the transactions
contemplated hereby. The Company further acknowledges that no Purchaser is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with respect to
this Agreement and the transactions contemplated hereby and any advice given by any
Purchaser or any of their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is merely incidental to the Purchasers&#146;
purchase of the Shares. The Company further represents to each Purchaser that the Company&#146;s
decision to enter into this Agreement has been based solely on the independent evaluation of
the transactions contemplated hereby by the Company and its representatives.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r) <U>Approvals</U>. The issuance and listing on the Nasdaq National Market of the
Shares requires no further approvals, including but not limited to, the approval of
shareholders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s) <U>Acknowledgement Regarding Purchasers&#146; Trading Activity</U>. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding, it is understood and agreed
by the Company (i)&nbsp;that, other than as set forth in Section&nbsp;4.11 herein, none of the
Purchasers have been asked to agree, nor has any Purchaser agreed, to desist from purchasing
or selling, long and/or short, securities of the Company, or &#147;derivative&#148; securities based
on securities issued by the Company or to hold the Securities for any specified term; (ii)
that past or future open market or other transactions by any Purchaser, including Short
Sales, and specifically including, without limitation, Short Sales or &#147;derivative&#148;
transactions, before or after the closing of this or future private placement transactions,
may negatively impact the market price of the Company&#146;s publicly-traded securities; (iii)
that any Purchaser, and counter parties in &#147;derivative&#148; transactions to which any such
Purchaser is a party, directly or indirectly, presently may have a &#147;short&#148; position in the
Common Stock, and (iv)&nbsp;that each Purchaser shall not be deemed to have any affiliation with
or control over any arm&#146;s length counter-party in any &#147;derivative&#148; transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Purchasers acknowledge and agree that the Company does not make or has not made any
representations or warranties with respect to the transactions contemplated hereby other than those
specifically set forth in this Section&nbsp;3.1.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 <U>Representations and Warranties of the Purchasers</U>. Each Purchaser hereby, for itself
and for no other Purchaser, represents and warrants as of the date hereof and as of the Closing
Date to the Company as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Organization; Authority</U>. Such Purchaser is an entity duly incorporated or
otherwise organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable) with full right, corporate
or partnership power and authority to own and use its properties and assets and to carry on
its business as currently conducted and to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">obligations thereunder. The execution, delivery and performance by such Purchaser of the transactions
contemplated by this Agreement and each other Transaction Document have been duly authorized
by all necessary corporate or similar action on the part of such Purchaser and no such
further action is required. Each Transaction Document to which it is a party has been (or
upon delivery will have been) duly executed by such Purchaser, and, when delivered by such
Purchaser in accordance with the terms thereof, will constitute the valid and legally
binding obligation of such Purchaser, enforceable against it in accordance with its terms,
except (i)&nbsp;as limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting enforcement of
creditors&#146; rights generally, (ii)&nbsp;as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies and (iii)&nbsp;insofar as
indemnification and contribution provisions may be limited by applicable law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>Purchaser Representation</U>. Such Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the Securities.
Such Purchaser is not required to be registered as a broker-dealer under Section&nbsp;15 of the
Exchange Act or otherwise.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <U>Experience of Such Purchaser</U>. Such Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the prospective
investment in the Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the Securities and, at
the present time, is able to afford a complete loss of such investment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <U>Short Sales</U>. Such Purchaser has not directly or indirectly, nor has any
Person acting on behalf of or pursuant to any understanding with such Purchaser, executed
any Short Sales in the securities of the Company (including, without limitations, any Short
Sales involving the Company&#146;s securities) since 9 P.M. (New York Time) on October&nbsp;24, 2005
which was the time that such Purchaser was first contacted regarding an investment in the
Company (&#147;<U>Discussion Time</U>&#148;) through the date hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <U>Securities Laws</U>. If a Purchaser engaged in any of the trading activities
described in Section&nbsp;3.1(d) above, such Purchaser did so in compliance with federal
securities laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company acknowledges and agrees that each Purchaser does not make or has not made any
representations or warranties with respect to the transactions contemplated hereby other than those
specifically set forth in this Section&nbsp;3.2.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">ARTICLE IV.
</DIV>

<DIV align="center" style="font-size: 10pt">OTHER AGREEMENTS OF THE PARTIES</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <U>No Transfer Restrictions</U>.Certificates evidencing the Shares shall not contain any
legend restricting their transferability by the Purchaser. The Company shall cause its counsel to
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">issue a legal opinion to the Company&#146;s transfer agent if required by the Company&#146;s transfer agent
to effect a transfer of any of the Securities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <U>Furnishing of Information</U>As long as any Purchaser owns Securities, the Company
covenants to use its best efforts to timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by the Company after the date
hereof pursuant to the Exchange Act. As long as any Purchaser owns Securities, if the Company is
not required to file reports pursuant to the Exchange Act, it will prepare and furnish to the
Purchasers and make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule&nbsp;144. The Company further covenants
that it will take such further action as any holder of Securities may reasonably request, all to
the extent required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the limitation of the exemptions provided by Rule&nbsp;144.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 <U>Securities Laws Disclosure; Publicity. </U>The Company shall, by 9:00 a.m. Eastern
time on the Trading Day following the date hereof, file a Current Report on Form 8-K which attaches
as exhibits all material agreements relating to this transaction, in each case reasonably
acceptable to each Purchaser, if such Purchaser is readily available to review such Form 8-K in a
timely manner, disclosing the material terms of the transactions contemplated hereby.
Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser,
or include the name of any Purchaser in any filing with the Commission or any regulatory agency or
Trading Market, except as set forth in the exhibits to be attached to the Form 8-K contemplated
above, without the prior written consent of such Purchaser (such consent not to be unreasonably
withheld), except (i)&nbsp;as required by federal securities law and (ii)&nbsp;to the extent such disclosure
is required by law or Trading Market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure permitted under subclause (i)&nbsp;or (ii).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4 <U>Shareholders Rights Plan</U>. No claim will be made or enforced by the Company or, to
the knowledge of the Company, any other Person that any Purchaser is an &#147;Acquiring Person&#148; under
any shareholders rights plan or similar plan or arrangement in effect or hereafter adopted by the
Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or
arrangement, by virtue of receiving Securities under the Transaction Documents or under any other
agreement between the Company and the Purchasers. The Company shall conduct its
business in a manner so that it will not become subject to the Investment Company Act of 1940,
as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5 <U>Non-Public Information</U>. The Company covenants and agrees that neither it nor any
other Person acting on its behalf will provide any Purchaser or its agents or counsel with any
information that the Company believes constitutes material non-public information, unless prior
thereto such Purchaser shall have executed a written agreement regarding the confidentiality and
use of such information. The Company understands and confirms that each Purchaser shall be relying
on the foregoing representations in effecting transactions in securities of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6 <U>Indemnification of Purchasers</U>. Subject to the provisions of this Section&nbsp;4.6,
the Company will indemnify and hold the Purchasers and their directors, officers, shareholders,
</DIV>

<P align="center" style="font-size: 10pt">14
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">partners, employees and agents (each, a &#147;<U>Purchaser Party</U>&#148;) harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys&#146; fees and costs of
investigation reasonably incurred in connection with defending or investigating any suit or action
in respect thereof to which any such Purchaser Party may become a party under the Securities Act,
the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses arise out of or are based on (a)&nbsp;any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus Supplement, or (b)&nbsp;the
omission or alleged omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, <U>provided</U> that the Company will not
be liable in any such case to the extent that any such liability, obligation, claim, contingency,
damage, cost or expense arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the Purchasers for inclusion
therein. If any action shall be brought against any Purchaser Party in respect of which indemnity
may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in
writing, and the Company shall have the right to assume the defense thereof with counsel of its own
choosing. Any Purchaser Party shall have the right to employ separate counsel in any such action
and participate in the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Purchaser Party except to the extent that (i)&nbsp;the employment thereof has been
specifically authorized by the Company in writing, (ii)&nbsp;the Company has failed after a reasonable
period of time to assume such defense and to employ counsel or (iii)&nbsp;in such action there is, in
the reasonable opinion of such separate counsel, a material conflict on any material issue between
the position of the Company and the position of such Purchaser Party. The Company will not be
liable to any Purchaser Party under this Agreement (i)&nbsp;for any settlement by a Purchaser Party
effected without the Company&#146;s prior written consent, which shall not be unreasonably withheld or
delayed; or (ii)&nbsp;to the extent, but only to the extent, that a loss, claim, damage or liability is
attributable to any Purchaser Party&#146;s breach of any of the representations, warranties, covenants
or agreements made by the Purchasers in this Agreement or in the other Transaction Documents.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7 <U>Listing of Common Stock</U>. The Company hereby agrees to use best efforts to maintain the
listing of the Common Stock on a Trading Market. The Company further agrees, if the Company applies
to have the Common Stock traded on any other Trading Market, it will include in such application
all of the Shares and will take such other action as is necessary to cause all of the Shares to be
listed on such other Trading Market as promptly as possible. The Company will take all action
reasonably necessary to continue the listing and trading of its Common Stock on a Trading Market
and will comply in all respects with the Company&#146;s reporting, filing and other obligations under
the bylaws or rules of the Trading Market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8 <U>Equal Treatment of Purchasers</U>. 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 is also offered to all of the parties to the Transaction
Documents. For clarification purposes, this provision constitutes a separate right granted to each
Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the
Company to treat the Purchasers as a class and shall not in any way be construed
</DIV>

<P align="center" style="font-size: 10pt">15
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities
or otherwise.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.9 <U>Subsequent Equity Sales</U>. From the date hereof until 30&nbsp;days after the Closing
Date, neither the Company nor any Subsidiary shall issue shares of Common Stock or Common Stock
Equivalents, without the prior written consent of each Purchaser (such consent not to be
unreasonably withheld). Notwithstanding the foregoing, this Section&nbsp;4.9 shall not apply in respect
of an Exempt Issuance or in respect of shares of Common Stock and Common Stock Equivalents which
the Company is not permitted to register under the Securities Act for at least 12&nbsp;months following
the Closing Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.10 <U>Approval of Subsequent Equity Sales</U>. The Company shall not issue shares of
Common Stock or Common Stock Equivalents if such issuance would require shareholder approval
pursuant to Rule&nbsp;4350 of the NASD Marketplace Rules, unless and until such shareholder approval is
obtained.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.11 <U>Short Sales</U>. Each Purchaser covenants that neither it nor any Affiliates acting
on its behalf or pursuant to any understanding with it will execute any Short Sales during the
period from the Discussion Time until prior to the time that the transactions contemplated by this
Agreement are first publicly announced as described in Section&nbsp;4.3. Notwithstanding the foregoing,
no Purchaser makes any representation, warranty or covenant hereby that it will not engage in Short
Sales in the securities of the Company after the time that the transactions contemplated by this
Agreement are first publicly announced as described in Section&nbsp;4.3.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">ARTICLE V.
</DIV>

<DIV align="center" style="font-size: 10pt">MISCELLANEOUS</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <U>Termination</U>. This Agreement may be terminated by any Purchaser, as applied to
such Purchaser, by written notice to the other parties, if the Closing has not been consummated
on or before November&nbsp;7, 2005, provided however that no such termination will affect the right
of any party to sue for any breach by the other party (or parties).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <U>Fees and Expenses</U>. The Company shall deliver, prior to the Closing, a completed
and executed copy of the Closing Statement, attached hereto as <U>Annex A</U>. Except as otherwise
set forth in this Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this Agreement. The Company
shall pay all stamp and other taxes and duties levied in connection with the delivery of the
Securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3 <U>Entire Agreement</U>. The Transaction Documents, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such documents, exhibits and
schedules.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4 <U>Notices</U>. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective
</DIV>

<P align="center" style="font-size: 10pt">16
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">on the earliest of (a)&nbsp;the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on a Trading Day, (b)&nbsp;the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto on a day that is not a Trading Day or later than
5:30 p.m. (New York City time) on any Trading Day, (c)&nbsp;the second Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d)&nbsp;upon actual
receipt by the party to whom such notice is required to be given. The address for such notices and
communications shall be as set forth on the signature pages attached hereto.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5 <U>Amendments; Waivers</U>. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the Company and each
Purchaser or, in the case of a waiver, by the party against whom enforcement of any such waiver is
sought. No waiver of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair the exercise of any
such right.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.6 <U>Headings</U>. The headings herein are for convenience only, do not constitute a part
of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The
language used in this Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against any party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.6 <U>Successors and Assigns</U>. This Agreement shall be binding upon and inure to the benefit
of the parties and their successors and permitted assigns. The Company may not assign this
Agreement or any rights or
obligations hereunder without the prior written consent of each Purchaser. Any Purchaser may
assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns
or transfers any Securities, provided such transferee agrees in writing to be bound, with respect
to the transferred Securities, by the provisions hereof that apply to the &#147;Purchasers&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.7 <U>No Third-Party Beneficiaries</U>. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in
Section&nbsp;4.6.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.8 <U>Governing Law</U>. All questions concerning the construction, validity, enforcement
and interpretation of the Transaction Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by this Agreement and any
other Transaction Document (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City 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
</DIV>

<P align="center" style="font-size: 10pt">17
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">herewith or with any
transaction contemplated hereby or discussed herein (including with respect to the enforcement of
any of the Transaction Documents), 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, or that such suit, action or proceeding is improper or inconvenient venue for such
proceeding. 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 via
registered or certified mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for 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. The
parties hereby waive all rights to a trial by jury. If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in
such action or proceeding shall be reimbursed by the other party for its attorneys&#146; fees and other
costs and expenses incurred with the investigation, preparation and prosecution of such action or
proceeding.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.9 <U>Survival</U>. The representations and warranties herein shall survive the Closing and
delivery of the Shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.10 <U>Execution</U>. This Agreement may be executed in two or more counterparts, all of
which when taken together 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, it being
understood that both parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission, such signature shall create a valid and binding obligation
of the party executing (or on whose behalf such signature is executed) with the same force and
effect as if such facsimile signature page were an original thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.11 <U>Severability</U>. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt
to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.12 <U>Rescission and Withdrawal Right</U>. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction Documents, whenever
any Purchaser exercises a right, election, demand or option under a Transaction Document and the
Company does not timely perform its related obligations within the periods therein provided, then
such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.13 <U>Replacement of Securities</U>. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued
in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument under such
</DIV>

<P align="center" style="font-size: 10pt">18
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">circumstances shall also pay any reasonable third-party costs associated with the issuance of such
replacement Securities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.14 <U>Remedies</U>. In addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, each of the Purchasers and the Company will be
entitled to specific performance under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by reason of any breach of the
obligations set forth herein and hereby agree to waive in any such action for specific performance
of any such obligation the defense that a remedy at law would be adequate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.15 <U>Payment Set Aside</U>. To the extent that the Company makes a payment or payments to
any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights
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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.16 <U>Independent Nature of Purchasers&#146; Obligations and Rights</U>. The obligations of
each Purchaser under any Transaction Document are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in
any Transaction Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Purchasers are in any way acting in concert
or as a group with respect to such obligations or the transactions contemplated by the Transaction
Document. Each Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose. Each Purchaser has been represented by its
own separate legal counsel in their review and negotiation of the Transaction Documents. For
reasons of administrative convenience only, Purchasers and their respective counsel have chosen to
communicate with the Company through Feldman Weinstein LLP (&#147;<U>FW</U>&#148;). FW does not represent
all of the Purchasers but only Rodman &#038; Renshaw LLC, who has acted as placement agent to the
transaction. The Company has elected to provide all Purchasers with the same terms and Transaction
Documents for the convenience of the Company and not because it was required or requested to do so
by the Purchasers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.17 <U>Construction</U>. The parties agree that each of them and/or their respective counsel
has reviewed and had an opportunity to revise the Transaction Documents and, therefore, 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 the Transaction Documents or any amendments
hereto.
</DIV>

<P align="center" style="font-size: 10pt">19
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><I>(Signature Page Follows)</I>
</DIV>


<P align="center" style="font-size: 10pt">20
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">Novavax, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><U>Address for Notice</U>:</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name: Rahul Singhvi
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">508 Lapp Road</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title: President and CEO
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Malvern PA 19355</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">With a copy to (which shall not constitute notice):</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">White White &#038; Van Etten LLP</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">55 Cambridge Parkway</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Cambridge MA 02142</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Attention: David A. White, Esq.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;REMAINDER OF PAGE INTENTIONALLY LEFT BLANK<BR>
SIGNATURE PAGES FOR PURCHASERS FOLLOW&#093;
</DIV>


<P align="center" style="font-size: 10pt">21
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;PURCHASER SIGNATURE PAGES TO NVAX SECURITIES PURCHASE AGREEMENT&#093;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first indicated above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Name of Purchaser:<BR>
<I>Signature of Authorized Signatory of Purchaser</I>:<BR>
Name of Authorized Signatory:<BR>
Title of Authorized Signatory:<BR>
Email Address of Authorized Entity:

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Address for Notice of Purchaser:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Address for Delivery of Securities for Purchaser (if not same as above):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">DWAC Instructions for Common Stock:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Subscription Amount: $
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">EIN Number: <B>&#091;PROVIDE THIS UNDER SEPARATE COVER&#093;</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;SIGNATURE PAGES CONTINUE&#093;
</DIV>


<P align="center" style="font-size: 10pt">22
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Annex A</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CLOSING STATEMENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the attached Securities Purchase Agreement, dated as of the date hereto, the purchasers
shall purchase up to $&#95;&#95;&#95;,000,000 of Common Stock from &#091;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, a &#091;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> corporation
(the &#147;<U>Company</U>&#148;). All funds will be wired into the &#091;Company&#146;s account. All funds will be
disbursed in accordance with this Closing Statement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Disbursement Date: </B>&#091;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>I. </B><U><B>PURCHASE PRICE </B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Gross Proceeds to be Received</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>II. </B><U><B>DISBURSEMENTS</B></U></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Total Amount Disbursed:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top"><B>$</B></TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD nowrap valign="top"></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>WIRE INSTRUCTIONS</B></U><B>:<BR>
See attached</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To: <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</DIV>



<P align="center" style="font-size: 10pt">23
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<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>4
<FILENAME>w14243exv99w1.htm
<DESCRIPTION>EXHIBIT 99.1
<TEXT>
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<TITLE>exv99w1</TITLE>
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;99.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Novavax Executes Definitive Agreements for $18 Million Public Offering</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">
MALVERN, Pa., Nov. 2 /PRNewswire-FirstCall/ -- Novavax, Inc. (Nasdaq: NVAX - News) today announced
that it has entered into definitive agreements to raise $18 million through the issuance of 4,186,047 shares of its common
stock at a price of $4.30 per share. The shares of common stock will be issued pursuant to an effective shelf registration statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">
Rodman &amp; Renshaw, LLC acted as the exclusive placement agent for the offering. The Company currently plans to use the
net proceeds from the offering for general corporate purposes, including but not limited to i) clinical development
of virus like particles (VLP)-based avian and seasonal flu vaccines, including the development of appropriate adjuvants, and
demonstration of large-scale production capabilities, for such vaccines; ii) internal research and development programs,
such as preclinical and clinical testing and studies of our product candidates and the development of new technologies;
iii) expansion of and investment in the Company&#146;s
research and development facilities, including compliance with cGMP (current General Manufacturing Practices) and GLP (General
Laboratory Practices) rules and regulations and iv) other general corporate purposes. A copy of the final prospectus relating
to the offering may be obtained from Dennis Genge, Vice President and Chief Financial Officer, Novavax, Inc.,
508 Lapp Road, Malvern, PA 19355, when available.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">
About Novavax, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">
Novavax, Inc. is a product development company focused on the research, development and commercialization of products
utilizing its proprietary drug delivery and biological technologies for large and growing markets.
Novavax&#146;s
drug delivery technologies include the micellar nanoparticle (MNP) technology which is the basis for the
development of its first FDA-approved product,
ESTRASORB&#174;. In addition to MNP, Novavax drug delivery technologies include
Novasomes&#174; (paucillamellar non-phospholipid liposomes) and
Sterisomes&#174; (subcutaneous depot injection) technologies.
Novavax&#146;s
vaccine technologies include its virus like particle (VLP) manufacturing technology utilizing the baculovirus expression system in insect
cells as well as novel vaccine adjuvants based on Novasomes and dendrimer technologies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">
Statements made in this press release that state
Novavax&#146;s
or management&#146;s
intentions, hopes, beliefs, expectations, or predictions of the future are forward-looking statements. Forward-looking
statements include but are not limited to statements regarding usage of cash, product sales, future product development
and related clinical trials and future research and development, including FDA approval.
Novavax&#146;s
actual results could differ materially from those expressed in such forward-looking statements. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company, or industry results, to be materially different from those expressed or implied
by such forward-looking statements. Such factors include, among other things, the following: general economic and business conditions;
ability to enter into future collaborations with industry partners, including an ESTRASORB&#174;
licensing agreement; competition; unexpected changes in technologies and technological advances; ability to obtain rights to technology; ability
to obtain and enforce patents; ability to commercialize and manufacture products; ability to establish and maintain commercial-scale
manufacturing capabilities; results of clinical studies; progress of research and development activities; business abilities and
judgment of personnel; availability of qualified personnel; changes in, or failure to comply with,
governmental regulations; the ability to obtain adequate financing in the future through product licensing, co-promotional
arrangements, public or private equity financing or otherwise; and other factors referenced herein. Additional information is contained
in Novavax&#146;s
annual report on Form 10K for the year ended December 31, 2004 and quarterly reports on Form 10Q for the
quarters ended March 31, 2005 and June 30, 2005, incorporated herein by reference. Statements made herein should be read in
conjunction with Novavax&#146;s annual and quarterly reports filed with the SEC. Copies of these filings may
be obtained by contacting Novavax at 508 Lapp Road, Malvern, PA 19355 Tel 484-913-1200 or the SEC at http://www.sec.gov.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>5
<FILENAME>w14243exv99w2.htm
<DESCRIPTION>EXHIBIT 99.2
<TEXT>
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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;99.2</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RISK FACTORS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Investing in our common stock involves a high degree of risk. You should carefully consider
the following risk factors and all other information contained in this prospectus supplement and
the accompanying prospectus and incorporated by reference into the accompanying prospectus before
purchasing our common stock. The risks and uncertainties described below are not the only ones
facing us. Additional risks and uncertainties that we are unaware of, or that we currently deem
immaterial, also may become important factors that affect us. If any of the following risks occur,
our business, financial condition or results of operations could be materially and adversely
affected. In that case, the trading price of our common stock could decline, and you may lose some
or all of your investment.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">RISKS RELATED TO OUR BUSINESS
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We have repositioned ourselves from a specialty biopharmaceutical to a product development
company and face all the risks inherent in the implementation of a new business strategy.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In conjunction with the sale of our prenatal and related product lines and the grant of an
exclusive North American license to our lead product ESTRASORB, we have changed the focus of the
company from the development and commercialization of specialty pharmaceutical products to the
research and development of new products using our proprietary drug delivery and biological
platforms. We cannot predict whether we will be successful implementing our new business strategy.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to focus our research and development activities on areas in which we have
particular strengths and on technologies that appear promising. These technologies often are on
the cutting edge of modern science. As a result, the outcome of any research or development
program is highly uncertain. Only a very small fraction of these programs ultimately result in
commercial products or even product candidates and a number of events could delay our development
efforts and negatively impact our ability to obtain regulatory approval for, and to market and
sell, a product candidate. Product candidates that initially appear promising often fail to yield
successful products. In many cases, preclinical or clinical studies will show that a product
candidate is not efficacious, or that it raises safety concerns or has other side effects, which
outweigh the intended benefit. Success in preclinical or early clinical trials may not translate
into success in large-scale clinical trials. Further, success in clinical trials will likely lead
to increased investment, adversely affecting short-term profitability, to bring such products to
market. Even after a product is approved and launched, general usage or post-marketing studies may
identify safety or other previously unknown problems with the product which may result in
regulatory approvals being suspended, limited to narrow indications or revoked, or which may
otherwise prevent successful commercialization.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We must identify products and product candidates for development with our technologies and
establish successful government and third-party relationships.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our long-term ability to generate product-related revenue depends in part on our
ability to identify products and product candidates that may utilize our drug delivery and
biological technologies. If internal efforts do not generate sufficient product candidates, we
will need to identify third parties that wish to license our technologies for development of their
products or product candidates. We may be unable to license our technologies to third parties for
a number of reasons, including:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an inability to negotiate license terms that would allow us to make an appropriate
return from resulting products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an inability to identify suitable products or product candidates within, or
complementary to, our areas of expertise; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an unwillingness of the part of competitors to utilize the technologies of a competing
company</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>or
disclose the existence or status of new products or products candidates under development.
</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our near and long-term viability will also depend in part on our ability to successfully
establish new strategic collaborations with pharmaceutical and biotechnology companies and
government agencies. We will either need to develop or acquire these resources on our own, which
will require substantial funding, time and effort, or will need to enter into additional
collaborative agreements or government contracts to assist in the development and commercialization
of some of these potential products. Establishing strategic collaborations and obtaining government
funding are difficult and time-consuming. Potential collaborators may reject collaborations based
upon their assessment of our financial, regulatory or intellectual property position; government
agencies may reject contract or grant applications based on their assessment of public need, the
public interest and our products&#146; ability to address these areas. If we fail to establish a
sufficient number of collaborations or government relationships on acceptable terms, we may not
generate sufficient revenue. Even if we successfully establish new collaborations or obtain
government funding, these relationships may never result in the successful development or
commercialization of any product candidates or the generation of any sales or royalty revenue.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our success depends on our ability to maintain the proprietary nature of our technology.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success in large part depends on our ability to maintain the proprietary nature of our
technology and other trade secrets, including our proprietary drug delivery and biological
technologies. To do so, we must prosecute and maintain existing patents, obtain new patents and
pursue trade secret and other intellectual property protection. We also must operate without
infringing the proprietary rights of third parties or letting third parties infringe our rights. We
currently have 51 U.S. patents and corresponding foreign patents and patent applications covering
our technologies. However, patent issues relating to pharmaceuticals involve complex legal,
scientific and factual questions. To date, no consistent policy has emerged regarding the breadth
of biotechnology patent claims that are granted by the U.S. Patent and Trademark Office or enforced
by the federal courts. Therefore, we do not know whether our patent applications will result in the
issuance of patents, or that any patents issued to us will provide us with any competitive
advantage. We also cannot be sure that we will develop additional proprietary products that are
patentable. Furthermore, there is a risk that others will independently develop or duplicate
similar technology or products or circumvent the patents issued to us.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There is a risk that third parties may challenge our existing patents or claim that we are
infringing their patents or proprietary rights. We could incur substantial costs in defending
patent infringement suits or in filing suits against others to have their patents declared invalid
or claim infringement. It is also possible that we may be required to obtain licenses from third
parties to avoid infringing third-party patents or other proprietary rights. We cannot be sure that
such third-party licenses would be available to us on acceptable terms, if at all. If we are unable
to obtain required third-party licenses, we may be delayed in or prohibited from developing,
manufacturing or selling products requiring such licenses.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although our patents include claims covering various features of our products and product
candidates, including composition, methods of manufacture and use, our patents do not provide us
with complete protection against the development of competing products. Some of our know-how and
technology is not patentable. To protect our proprietary rights in unpatentable intellectual
property and trade secrets, we require employees, consultants, advisors and collaborators to enter
into confidentiality agreements. These agreements may not provide meaningful protection for our
trade secrets, know-how or other proprietary information in the event of any unauthorized use or
disclosure.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We have limited financial resources and we are not certain that we will be able to obtain
financing to maintain our operations or to fund the development of future products.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the near term we will not generate revenues from product sales, licensing fees, royalties,
milestones, contract research and other sources in an amount sufficient to fund our operations, and
we will therefore use our cash resources and could require additional funds to maintain our
operations, continue our research and development programs, commence future preclinical and
clinical trials, seek regulatory approvals and market our products. We will seek such additional
funds through public or private equity or

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">debt financings, collaborative arrangements and other sources. We cannot be certain that
adequate additional funding will be available to us on acceptable terms, if at all. If we cannot
raise the additional funds required for our anticipated operations, we may be required to delay
significantly, reduce the scope of or eliminate one or more of our research or development
programs, downsize our general and administrative infrastructure or programs, or seek alternative
measures to avoid insolvency, including arrangements with collaborative partners or others that may
require us to relinquish rights to certain of our technologies, product candidates or products. If
we raise additional funds through future offerings of shares of our common stock or other
securities, such offerings would cause dilution of existing stockholders&#146; percentage ownership in
the Company. These future offerings also could have a material and adverse effect on the price of
our common stock.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We have a history of losses and our future profitability is uncertain.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our expenses have exceeded our revenues since our formation in 1987, and our accumulated
deficit at December&nbsp;31, 2004 was $130.7&nbsp;million. Our net revenues for the last three years were
$8.3&nbsp;million in 2004, $11.8&nbsp;million in 2003 and $15.0&nbsp;million in 2002. For the six months ended
June&nbsp;30, 2005 and 2004, our revenues were $3.3&nbsp;million and $6.2&nbsp;million, respectively. We have
received a limited amount of product-related revenue from research contracts, licenses and
agreements to provide vaccine products, services and adjuvant technologies. We cannot be certain
that we will be successful in entering into strategic alliances or collaborative arrangements with
other companies that will result in other significant revenues to offset our expenses. Our net
losses for the last three years were $25.9&nbsp;million in 2004, $17.3&nbsp;million in 2003 and $22.7&nbsp;million
in 2002, while they were $14.6&nbsp;million and $12.9&nbsp;million for the six months ended June&nbsp;30, 2005 and
2004, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our losses have resulted from research and development expenses, sales and marketing expenses
for ESTRASORB, protection of our intellectual property and other general operating expenses. Our
losses increased due to the launch of ESTRASORB as we expanded our manufacturing capacity and sales
and marketing capabilities, and may increase as and when we conduct additional and larger clinical
trials for our product candidates. Therefore, we expect our cumulative operating loss to increase
until such time, if ever, product sales, licensing fees, royalties, milestones, contract research
and other sources generate sufficient revenue to fund our continuing operations. We cannot predict
when, if ever, we might achieve profitability and cannot be certain that we will be able to sustain
profitability, if achieved.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We have received a comment letter from the Securities and Exchange Commission regarding our
annual report on Form 10-K/A for the fiscal year ended December&nbsp;31, 2004, and we have yet to
receive confirmation from the Commission that all matters raised in that letter have been resolved
to the satisfaction of the Commission.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company received a comment letter from the Commission on July&nbsp;12, 2005 relating to the
Company&#146;s annual report on Form 10-K/A for the fiscal year ended December&nbsp;31, 2004. The Company
responded to such comment letter on July&nbsp;26, 2005 and had subsequent telephone conferences with the
Staff of the Commission. Following such telephone conferences, the Company submitted a follow-up
response letter on October&nbsp;31, 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has not yet received confirmation from the Commission that all matters raised in
its letter dated July&nbsp;12, 2005 have been resolved to the Commission&#146;s satisfaction. The sole
remaining open issue relates to the Company&#146;s recording of a $2.5&nbsp;million intangible asset in
connection with the termination of the Company&#146;s business relationship with King Pharmaceuticals,
Inc. in July&nbsp;2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Commission requested a detailed calculation supporting the $2.5&nbsp;million intangible asset
recorded, inquired as to why such amount qualified as an intangible asset and requested the
specific authoritative literature the Company used in arriving at its conclusions. In its October
31, 2005 supplemental response letter, the Company clarified its initial response and provided a
detailed explanation of its accounting for the intangible asset. However, the Company has not
received confirmation from the Staff at the Commission that the Company&#146;s explanation is sufficient
or acceptable. If the Commission were to determine that the Company improperly recorded the
intangible asset, it may require the Company
</DIV>


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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">to restate the relevant portions of its financial statements. While such a restatement would
have no impact on the Company&#146;s bottom line, the announcement of a financial statement restatement
would likely negatively impact the price of the Company&#146;s common stock and could materially and
adversely affect the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Many of our competitors have significantly greater resources and experience, which may
negatively impact our commercial opportunities and those of our licensees.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The biotechnology and pharmaceutical industries are subject to intense competition and rapid
and significant technological change. We have many potential competitors, including major drug and
chemical companies, specialized biotechnology firms, academic institutions, government agencies and
private and public research institutions. Many of our competitors have significantly greater
financial and technical resources, experience and expertise in:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>research and development;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>preclinical testing;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>clinical trials;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>regulatory processes and approvals;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>production and manufacturing; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>sales and marketing of approved products.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Large and established companies such as Merck &#038; Co., Inc., GlaxoSmithKline PLC, Chiron Corp.
and MedImmune Inc., among others, compete in the vaccine market. In particular, these companies
have greater experience and expertise in securing government contracts and grants to support their
research and development efforts, conducting testing and trials and obtaining regulatory approvals
to market such products, and manufacturing such products on a broad scale.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Smaller or early-stage companies and research institutions may also prove to be significant
competitors, particularly through collaborative arrangements with large and established
pharmaceutical or other companies. We will also face competition from these parties in recruiting
and retaining qualified scientific and management personnel, establishing clinical trial sites and
patient registration for clinical trials, and acquiring and in-licensing technologies and products
complementary to our programs or potentially advantageous to our business. If any of our
competitors succeed in obtaining approval from the FDA or other regulatory authorities for their
products sooner that we do or for products that are more effective or less costly than ours, our
commercial opportunity could be significantly reduced.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to effectively compete, we will have to make substantial investments in sales and
marketing or partner with one or more established companies. There is no assurance that we will be
successful in gaining significant market share for any product or product candidate. Our
technologies and products also may be rendered obsolete or noncompetitive as a result of products
introduced by our competitors to the marketplace more rapidly and at a lower cost.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>The return on our investment in ESTRASORB depends in large part on the success of our
relationship with Esprit and our ability to manufacture the product.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2005, we entered into a license agreement and a supply agreement with Esprit Pharma
for ESTRASORB. Under the license agreement, we granted Esprit exclusive rights to market ESTRASORB
in North America. In consideration for such rights, Esprit is to pay the company certain milestone
payments, and Novavax also is entitled to receive a 10% royalty on all future net sales of
ESTRASORB.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While our license agreement with Esprit gives us some limited protections with respect to that
company&#146;s ESTRASORB marketing and sales efforts and, we believe, creates incentives for Esprit
consistent with our own, we cannot control the amount and timing of the marketing efforts that
Esprit devotes to ESTRASORB or make any assurances that Esprit&#146;s promotion and marketing of
ESTRASORB in North America will be successful. We do not have a history of working together with
Esprit and cannot predict the success of the collaboration, nor can we give any assurances that
Esprit will not reduce or curtail its efforts to market ESTRASORB because of factors affecting its
business or operations beyond our control. Any loss of Esprit as a partner in the commercialization
of ESTRASORB, dispute over terms of, or decisions regarding the license and supply agreement or
other adverse developments in our relationship with Esprit may harm our business and might
accelerate our need for additional capital. We also can give no assurances that Esprit will be
more successful than Novavax in gaining market acceptance of ESTRASORB. Prescription trends for
ESTRASORB have not met our expectations to date and Esprit will face similar obstacles to gaining
market share of the estrogen therapy market, including competition from large and established
companies with similar estrogen therapy products.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Numerous companies worldwide currently produce and sell estrogen products for clinical
indications identical to those for ESTRASORB. Currently, the oral and patch product segments
account for approximately 75% and 15% of the market, respectively, according to 2004 Verispan data.
Wyeth commits significant resources to the sale and marketing of its product,
Premarin<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, in order to maintain its market leadership position. Several other companies
compete in the estrogen category including Berlex Laboratories, Inc., Novartis Pharma AG and Solvay
Pharmaceuticals. Recently, Solvay introduced an alcohol-based gel product, Estrogel, which is
directly competitive with ESTRASORB. These and other products sold by our competitors have all
achieved a degree of market penetration superior to ESTRASORB.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, under the supply agreement, Novavax is obligated to supply Esprit with ESTRASORB
through the manufacture of the product at Novavax&#146;s pharmaceutical plant in Philadelphia,
Pennsylvania. We have only limited experience with the large capacity manufacturing required for
the commercial sale of a product. Although we have validated our manufacturing methods for the
product with the FDA, we will remain subject to that agency&#146;s rules and regulations regarding good
manufacturing practices, which are enforced by the FDA through its facilities inspection program.
Compliance with such rules and regulations requires us to spend substantial funds and hire and
retain qualified personnel. We face the possibility that we may not be able to meet Esprit&#146;s
supply requirements under the agreement in a timely fashion at acceptable quality, quantity and
prices or in compliance with applicable regulations. If our facility fails to comply with
applicable regulations, we will be forced to utilize a third party contractor to manufacture the
product. We may not be able to enter into alternative manufacturing arrangements at commercially
acceptable rates, if at all. Moreover, the manufacturers we use may not provide sufficient
quantities of product to meet our specifications or our delivery, cost and other requirements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We must utilize our manufacturing facility for products other than ESTRASORB.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Currently we are only manufacturing ESTRASORB at our facility in Philadelphia and will
manufacture the product at a loss until production volumes increase or we enter into contract
manufacturing arrangements with third parties to more fully utilize the facility&#146;s capacity, as the
facility is able to accommodate a much greater production schedule than its currently schedule, and
offset the fixed costs related to the manufacturing process and facility. Until we increase
production of ESTRASORB or enter into such contract manufacturing arrangements for sufficient
quantities, the cost of sales percentages will continue to be unusually high and we will continue
to manufacture the product at a loss. In addition, while the Company was successful in negotiating
a substantial reduction in its monthly rent for the facility during 2005, such reductions will
expire in the summer of 2006 and the Company expects lease costs to increase, potentially by a
material amount. Although we are working to design alternative packaging solutions to further
streamline production and lower costs of production, there can be no assurances that such efforts
will result in meaningful cost savings or otherwise be successful.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We have not completed the development of products other than ESTRASORB and we may not
succeed in obtaining the FDA approval necessary to sell additional products.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The development, manufacture and marketing of our pharmaceutical and biological products are
subject to government regulation in the United States and other countries. In the United States
and most foreign countries, we must complete rigorous preclinical testing and extensive human
clinical trials that demonstrate the safety and efficacy of a product in order to apply for
regulatory approval to market the product. ESTRASORB is the only product developed by the company
to have been approved for sale in the United States. Approval outside the U.S. may take longer or
may require additional clinical trials. Our product candidate ANDROSORB has completed Phase I human
clinical studies. Additional product candidates are in preclinical laboratory or animal studies.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Before applying for FDA approval to market any new drug product candidates, we must first
submit an Investigational New Drug application (&#147;IND&#148;) that explains to the FDA results of the
pre-clinical testing conducted in laboratory animals and what we propose to do for human testing.
At this stage, the FDA decides whether it is reasonably safe to move forward with testing the drug
on humans. We must then conduct Phase 1 studies and larger-scale Phase 2 and 3 human clinical
trials that demonstrate the safety and efficacy of our products to the satisfaction of the FDA.
Only after these trials are complete can a New Drug Application (&#147;NDA&#148;) be filed with the FDA
requesting approval of the drug for marketing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vaccine clinical development follows the same general pathway as for drugs and other
biologics. A sponsor who wishes to begin clinical trials with a vaccine must submit an IND
describing the vaccine, its method of manufacture and quality control tests for release.
Pre-marketing (pre-licensure) vaccine clinical trials are typically done in three phases. Initial
human studies, referred to as Phase 1, are safety and immunogenicity studies performed in a small
number of closely monitored subjects. Phase 2 studies are dose-ranging studies and may enroll
hundreds of subjects. Finally, Phase 3 trials typically enroll thousands of individuals and
provide the critical documentation of effectiveness and important additional safety data required
for licensing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If successful, the completion of all three phases of clinical development can be followed by
the submission of a Biologics License Application (&#147;BLA&#148;). Also during this stage, the proposed
manufacturing facility undergoes a pre-approval inspection during which production of the vaccine
as it is in progress is examined in detail. Vaccine approval also requires the provision of
adequate product labeling to allow health care providers to understand the vaccine&#146;s proper use,
including its potential benefits and risks, to communicate with patients and parents, and to safely
deliver the vaccine to the public. Until a vaccine is given to the general population, all
potential adverse events cannot be anticipated. Thus, many vaccines undergo Phase 4 studies after
a BLA has been approved and the vaccine is licensed and on the market.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These processes are expensive and can take many years to complete, and we may not be able to
demonstrate the safety and efficacy of our products to the satisfaction of such regulatory
authorities. Regulatory authorities may also require additional testing and we may be required to
demonstrate that our proposed products represent an improved form of treatment over existing
therapies, which we may be unable to do so without conducting further clinical studies. Moreover,
if the FDA grants regulatory approval of a product, the approval may be limited to specific
indications or limited with respect to its distribution, and expanded or additional indications for
approved drugs may not be approved, which could limit our revenues. Foreign regulatory authorities
may apply similar limitations or may refuse to grant any approval. Consequently, even if we
believe that preclinical and clinical data are sufficient to support regulatory approval for our
product candidates, the FDA and foreign regulatory authorities may not ultimately grant approval
for commercial sale in any jurisdiction. If our drug candidates are not approved, our ability to
generate revenues may be limited and our business will be adversely affected.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We may fail to obtain regulatory approval for our products on a timely basis or comply with
our continuing regulatory obligations after approval is obtained.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Delays in obtaining regulatory approval can be extremely costly in terms of lost sales
opportunities and increased clinical trial costs. The speed with which we complete our clinical
trials and
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">our applications for marketing approval will depend on several factors, including the
following:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the rate of patient enrollment and retention, which is a function of many factors,
including the size of the patient population, the proximity of patients to clinical sites,
the eligibility criteria for the study and the nature of the protocol;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>institutional review board approval of the protocol and the informed consent form;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>prior regulatory agency review and approval;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to manufacture or obtain sufficient quantities of materials for use in clinical trials;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>negative test results or side effects experienced by trial participants;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>analysis of data obtained from preclinical and clinical activities, which are
susceptible to varying interpretations and which interpretations could delay, limit or
prevent regulatory approval;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in the policies of regulatory authorities for drug or vaccine approval during
the period of product development; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the availability of skilled and experienced staff to conduct and monitor clinical
studies and to prepare the appropriate regulatory applications.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have limited experience in conducting and managing the preclinical and clinical trials
necessary to obtain regulatory marketing approvals. We may not be able to obtain the approvals
necessary to conduct clinical studies. We also face the risk that the results of our clinical
trials may be inconsistent with the results obtained in preclinical studies or that the results
obtained in later phases of clinical trials may be inconsistent with those obtained in earlier
phases. A number of companies in the specialty biopharmaceutical and product development industry
have suffered significant setbacks in advanced clinical trials, even after experiencing promising
results in early animal and human testing. If regulatory approval of a drug is granted, such
approval is likely to limit the indicated uses for which it may be marketed.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore, even if a product gains regulatory approval, the product and the manufacturer of
the product will be subject to continuing regulatory review, including adverse event reporting
requirements and the FDA&#146;s general prohibition against promoting products for unapproved uses.
Failure to comply with any post-approval requirements can, among other things, result in warning
letters, product seizures, recalls, fines, injunctions, suspensions or revocations of marketing
licenses, operating restrictions and criminal prosecutions. Any of these enforcement actions, any
unanticipated changes in existing regulatory requirements or the adoption of new requirements, or
any safety issues that arise with any approved products, could adversely affect our ability to
market products and generate revenues and thus adversely affect our ability to continue our
business.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also may be restricted or prohibited from marketing or manufacturing a product, even after
obtaining product approval, if previously unknown problems with the product or its manufacture are
subsequently discovered and we cannot assure you that newly discovered or developed safety issues
will not arise following any regulatory approval. With the use of any drug by a wide patient
population, serious adverse events may occur from time to time that initially do not appear to
relate to the drug itself, and only if the specific event occurs with some regularity over a period
of time, does the drug become suspect as having a causal relationship to the adverse event. Any
safety issues could cause us to suspend or cease marketing of our approved products, possibly
subject us to substantial liabilities, and adversely affect our ability to generate revenues and
our financial condition.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>The price of our common stock has been and may continue to be volatile.</I></B>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, the market price of our common stock has fluctuated over a wide range. In
fiscal year 2004, our common stock traded in a range from $2.93 to $6.92. Between January&nbsp;1, 2005
and October&nbsp;31, 2005, our common stock traded in a range from $0.70 to $6.01. It is likely that
the price of our common stock will fluctuate in the future. The market prices of securities of
small-capitalization, specialty biopharmaceutical companies, including ours, from time to time
experience significant price and volume fluctuations unrelated to the operating performance of
these companies. In particular, the market price of our common stock may fluctuate significantly
due to a variety of factors, including:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to obtain government contracts to develop vaccines and other biological
product and technologies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>governmental agency actions including the FDA&#146;s determination with respect to new drug
applications for new products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to obtain financing; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to develop additional products, including biologicals and vaccines.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the occurrence of any of the risks described in this &#147;Risk and Factors&#148; section
could have a material and adverse impact on the market price of our common stock.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our substantial indebtedness could adversely affect our cash flow and prevent us from
fulfilling our obligations.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of October&nbsp;31, 2005, we had approximately $29.9&nbsp;million of outstanding indebtedness. Our
substantial amount of outstanding indebtedness could have significant consequences. For example,
it:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>could increase our vulnerability to general adverse economic and industry conditions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>requires us to dedicate a substantial portion of our cash flow from operations to
service payments on our indebtedness, reducing the availability of our cash flow to fund
future capital expenditures, working capital, execution of our growth strategy, research
and development costs and other general corporate requirements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>could limit our flexibility in planning for, or reacting to, changes in our business
and the pharmaceutical industry, which may place us at a competitive disadvantage compared
with competitors that have less indebtedness; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>could limit our ability to obtain additional funds, even when necessary to maintain
adequate liquidity.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may incur additional indebtedness for various reasons, which would increase the risks
associated with our substantial leverage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Health care insurers and other payors may not pay for our products or may impose limits on
reimbursement.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our ability and the ability of our licensees to successfully commercialize ESTRASORB and
future products will depend, in part, on the extent to which reimbursement for such products will
be available from third-party payors such as Medicare, Medicaid, health maintenance organizations,
health insurers and other public and private payors. If we succeed in bringing products to the
market, we cannot be assured that third-party payors will pay for such products or establish and
maintain price levels sufficient for realization of an appropriate return on our investment in
product development. For example, ESTRASORB currently is being sold as an outpatient prescription
drug. Medicare does not cover the costs of most outpatient prescription drugs. We expect that over
time ESTRASORB will be treated the same as
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">other estrogen therapy products with respect to government and third-party payor
reimbursement, however, additional time is required to increase the number of payors who currently
accept our product for reimbursement. There can be no assurance that ESTRASORB will receive similar
reimbursement treatment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many health maintenance organizations and other third-party payors use formularies, or lists
of drugs for which coverage is provided under a health care benefit plan, to control the costs of
prescription drugs. Each payor that maintains a drug formulary makes its own determination as to
whether a new drug will be added to the formulary and whether particular drugs in a therapeutic
class will have preferred status over other drugs in the same class. This determination often
involves an assessment of the clinical appropriateness of the drug and, in some cases, the cost of
the drug in comparison to alternative products. There can be no assurance that ESTRASORB or any of
our future products will be added to payors&#146; formularies, that our products will have preferred
status to alternative therapies, or that the formulary decisions will be conducted in a timely
manner. We may also decide to enter into discount or formulary fee arrangements with payors, which
could result in us receiving lower or discounted prices for ESTRASORB or future products.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We may have product liability exposure.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The administration of drugs to humans, whether in clinical trials or after marketing
clearances are obtained, can result in product liability claims. We maintain product liability
insurance coverage in the total amount of $10.0&nbsp;million for claims arising from the use of our
currently marketed products and products in clinical trials prior to FDA approval. Coverage is
becoming increasingly expensive, however, and we may not be able to maintain insurance at a
reasonable cost. There can be no assurance that we will be able to maintain our existing insurance
coverage or obtain coverage for the use of our other products in the future. This insurance
coverage and our resources may not be sufficient to satisfy liabilities resulting from product
liability claims. A successful claim may prevent us from obtaining adequate product liability
insurance in the future on commercially desirable terms, if at all. Even if a claim is not
successful, defending such a claim would be time-consuming and expensive, may damage our reputation
in the marketplace, and would likely divert management&#146;s attention.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We have made loans to certain of our directors, and have guaranteed a brokerage margin loan
for one of these directors, which could have a negative impact on our stock price.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2002, pursuant to our 1995 Stock Option Plan, we approved the payment of the exercise price
of options by two of our directors through the delivery of full-recourse, interest-bearing
promissory notes, in the aggregate principal amount of approximately $1.5&nbsp;million, secured by a
pledge of the underlying shares. As of December&nbsp;31, 2004, accrued interest receivable related to
the borrowing was $209,000. In addition, in 2002 we executed a conditional guaranty of a brokerage
margin account for a director in the amount of $500,000. Due to heightened sensitivity in the
current environment surrounding related-party transactions, these transactions could be viewed
negatively in the market and our stock price could be negatively affected. Our corporate governance
policies have been revised and our 2005 stock incentive plan prohibits any additional loans or
guarantees to directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">RISKS RELATED TO THIS OFFERING
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Management will have broad discretion as to the use of proceeds from this offering, and we may
not use the proceeds effectively.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not designated the amount of net proceeds we will use for any particular purpose.
Accordingly, our management will have broad discretion as to the application of the net proceeds
and could use them for purposes other than those contemplated at the time of this offering. Our
stockholders may not agree with the manner in which our management chooses to allocate and spend
the net proceeds. Moreover, our management may use the net proceeds for corporate purposes that may
not increase our market value or make us profitable.
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Because the total price you will pay for your shares in the offering will be much greater than
the value of our assets after subtracting our liabilities, the value of your investment in our
common stock will be diluted.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you purchase our common stock in this offering, the price you will pay for our common stock
will be much greater than the book value per share of our outstanding common stock after the
offering. In addition, the total amount of our capital will be less than it would have been had you
and all of the existing stockholders, optionees, and warrant holders paid the same amount per share
for our common stock. Accordingly, you will suffer immediate and substantial dilution of your
investment. In the past, we have issued options and warrants to buy our common stock at prices
below the offering price. You will experience further dilution to the extent that additional shares
of our common stock are issued upon the exercise of outstanding stock options and warrants. See
&#147;Dilution&#148; for a detailed calculation of the dilution that will result from this offering.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>The issuance of shares of our common stock in connection with this offering will cause
additional shares of common stock to be issuable upon conversion of certain outstanding convertible
notes of the company.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Assuming that we issue an aggregate of 4,186,047 shares of our common stock at a public
offering price of $4.30 per share, an additional 108,001 shares of common stock will be issuable
upon the conversion of $29&nbsp;million aggregate principal amount of 4.75% convertible notes that are
due July&nbsp;15, 2009. Accordingly, you will suffer additional dilution of your investment. See
&#147;Dilution&#148; for a detailed calculation of the dilution that will result from this offering.
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>


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end
</TEXT>
</DOCUMENT>
</SUBMISSION>
