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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

                           COMMISSION FILE NO. 0-26770

                                  NOVAVAX, INC.
             (Exact name of registrant as specified in its charter)


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<S>                                                                    <C>
                    DELAWARE                                                         22-2816046
State or other jurisdiction of incorporation or organization)          (I.R.S. Employer Identification No.)
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                  8320 GUILFORD ROAD, COLUMBIA, MARYLAND 21046
               (Address of principal executive offices) (Zip code)

       Registrant's telephone number, including area code: (301) 854-3900

           Securities registered pursuant to Section 12(b) of the Act:

               Title of each class: COMMON STOCK ($.01 PAR VALUE)

       Name of each exchange on which registered: AMERICAN STOCK EXCHANGE

        Securities registered pursuant to Section 12(g) of the Act: NONE

            Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                   Yes [X]                  No

            Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]

            The aggregate market value of 10,786,767 shares of the registrant's
Common Stock, par value $.01 per share, held by non-affiliates of the registrant
at March 31, 1999, as computed by reference to the closing price of such stock,
was approximately $40,500,000.

            The number of shares of the registrant's Common Stock, par value
$.01 per share, outstanding at March 31, 1999 was 13,253,119 shares.

DOCUMENTS INCORPORATED BY REFERENCE: Portions of the 1999 Novavax, Inc. Proxy
Statement are incorporated by reference into Part III of this Report.



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                                     PART I


ITEM 1. BUSINESS

            Novavax, Inc. ("Novavax" or the "Company") is a biopharmaceutical
company focused on the research and development of proprietary topical and oral
drug delivery and encapsulation technologies and the applications of those
technologies. The Company's technology platforms involve the use of proprietary,
microscopic, organized, non-phospholipid structures as vehicles for the delivery
of a wide variety of drugs and other therapeutic products, including certain
hormones, anti-bacterial and anti-viral products and vaccine adjuvants. These
technology platforms support three product development programs: hormone
replacement therapies, third party drug delivery and vaccine adjuvant
applications and anti-microbial agents.

            Hormone Replacement Therapies. The Company's hormone replacement
therapy program includes its two lead product candidates: ESTRASORB(TM), a
topical estrogen cream, and ANDROSORB(TM), a topical testosterone cream. The
Company has completed various pre-clinical and human safety studies for both
ESTRASORB and ANDROSORB. In addition, the Company completed dosing in a Phase
II, randomized, double-blind, placebo-controlled, dose-ranging ESTRASORB study
in January, 1999. A Phase I, multiple dose, pharmacokinetic ANDROSORB study that
began in the third quarter of 1998 is currently underway.

            Third Party Drug Delivery and Vaccine Adjuvant Applications.
Formulations of the Company's lipid technologies are expected to have broad
application as vehicles for the encapsulation and delivery of drugs developed by
other companies. Moreover, the Company believes that certain of its organized
lipid structures may provide effective and safe adjuvant carrier systems for a
variety of vaccines. The Company plans to leverage these technologies by
licensing its drug delivery, encapsulation and adjuvant technologies to third
parties for specific therapeutic indications.

            The Company currently has several research contracts in place to
provide anti-microbial products, vaccine products, services and adjuvant
technologies. One of these contracts is for the development of an adjuvant for
an immunotherapeutic vaccine for cervical dysplasia, a precancerous disease of
the cervix for a British vaccine company, Cantab Pharmaceuticals.

            Anti-Microbial Agents. The Company is also applying its lipid
technologies to develop anti-microbial agents that are capable of acting on
viruses, bacteria, spores and sperm. Potential product candidates include
Helicore(TM), an oral anti-bacterial preparation for the treatment of
Helicobacter pylori ("H. Pylori") infection, and two anti-microbial agents
targeting Bacillus anthracis and influenza A, respectively, as well as two
spermicide product candidates. Pre-clinical and clinical studies for these
product candidates are summarized below:

- -           The Company currently has completed several pre-clinical and Phase I
            safety studies with a number of formulations of Helicore.

- -           The Company currently has several anti-microbial agents in
            pre-clinical studies pursuant to a research collaboration with the
            University of Michigan. The studies are being performed at the
            University of Michigan and are being funded by Defense Advanced
            Research Projects Agency's ("DARPA") Unconventional Pathogen
            Countermeasures Program. Novavax is a subcontractor to the
            University of Michigan.

- -           The Company currently has two spermicide product candidates that are
            both expected to be part of clinical studies sponsored by the
            National Institutes of Health. The first of the product candidates
            is expected to enter Phase I clinical trials in the second quarter
            of 1999.



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            During the year ended December 31, 1998, the Company received
$681,000 for services related to vaccine and adjuvant technologies, including
the Cantab Pharmaceuticals contract, as well as from its BCTP development
subcontract from the University of Michigan. Future revenues that may result
from these and other partnerships include material transfer costs, technology
access fees, milestone payments and royalties.

            The Company also received net proceeds of $5,998,000 from the
private placement of 6,500 shares of Series A Custom Convertible Preferred
Stock. The sale of the Preferred Stock closed on January 28, 1998 at an
aggregate purchase price of $6,500,000. On October 1, 1998, the Company entered
into agreements to repurchase the remaining Preferred Stock. This transaction
was closed on October 16, 1998 and the Company repurchased the outstanding
balance of $4,979,000 at par ($1,000 per share) plus accrued dividends at the
annual rate of five percent. The repurchase was funded with cash balances on
hand at October 16, 1998. Prior to the repurchase, Preferred Stock representing
$1,522,000 of the original $6,500,000 had been converted into 1,043,956 common
shares.

            Novavax, Inc. was incorporated in Delaware in 1987.  On December 12,
1995, the Company's former parent, IGI, Inc. ("IGI") distributed its majority
interest in Novavax to the IGI stockholders (the "Distribution"). Until then,
Novavax had been the human pharmaceuticals subsidiary of IGI. The Company's
principal executive offices are located at 8320 Guilford Road, Columbia,
Maryland 21046.

            In connection with the Distribution, IGI paid Novavax $5,000,000 in
return for a fully paid-up, ten-year license (the "License Agreement") entitling
it to the exclusive use of the Company's technologies in the fields of (i)
animal pharmaceuticals, biologicals and other animal care products; (ii) foods,
food applications, nutrients and flavorings (except to the extent used in human
pharmaceuticals and vaccines); (iii) cosmetics, consumer products and topical
dermatological products for localized usage at the delivery zone, (specifically
excluding dermatologically administered pharmaceuticals which are delivered
systemically through the skin, anti-infectives for treating infectious
pathogens, replacement hormone therapy, spermicides and viracides)); (iv)
fragrances; and (v) chemicals, including herbicides, insecticides, pesticides,
paints and coatings, photographic chemicals and other specialty chemicals
including blood substitutes containing hemoglobin and other oxygen carrying
materials; and the processes for making the same. IGI has the option,
exercisable within the last year of the ten-year term, to extend the License
Agreement for an additional ten-year period for $1,000,000. Novavax retains the
right to use its technologies for all other applications, including but not
limited to, human vaccines and pharmaceuticals.

THE NOVAVAX TECHNOLOGY PLATFORMS

            Novavax has developed proprietary topical and oral drug delivery
technologies using microscopic, organized, non-phospholipid structures,
including Novasome(R) non-phospholipid vesicles ("Novasomes"), micellar
nanoparticles ("MNPs") and non-antibiotic, anti-microbial lipid emulsions. The
Company believes these structures may be useful for targeted delivery and
controlled release of certain drugs, along with inactivation of bacteria,
enveloped viruses, spores and sperm. Moreover, the Company believes that certain
of its organized lipid structures may provide effective and safe adjuvant
carrier systems for a variety of vaccines.

            Although other companies have developed liposome technologies, most
commercial liposomes are composed of delicate phospholipids. Due to their
inherent lack of stability and carrying capacity, only a limited number of drugs
may be used with these phospholipid liposomes. While capable of encapsulating
certain (principally water soluble) drugs, phospholipid liposomes have a number
of other significant disadvantages including their expense and the need to use


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potentially hazardous organic solvents in their manufacture. In addition, the
standard, multi-step phospholipid manufacturing process is relatively expensive.

            The Company believes its non-phospholipid technologies may allow for
a more cost-effective delivery of a wider variety of drugs and other
therapeutics than commercially available phospholipid liposomes and other
delivery vehicles. Its technologies may also be preferred over other available
transdermal delivery systems because its technologies may reduce side effects
such as skin irritation. Future applications may show advantages over injectable
delivery technologies, which are invasive, inconvenient, and sometimes painful.
In addition, the Company's anti-microbial lipid emulsions may avoid the problem
of pathogen mutation and resistance because of their non-antibiotic method of
action.

MICELLAR NANOPARTICLE EMULSIONS

            MNPs are proprietary, submicron-sized, water miscible,
non-phospholipid structures that have different structural characteristics and
are generally smaller than Novasome non-phospholipid vesicles. MNPs, like
Novasome non-phospholipid vesicles, are derived from amphiphilic molecules.

            Novavax scientists have demonstrated that MNPs are able to
incorporate alcohol soluble drugs, pesticides, vaccine adjuvants, proteins,
whole viruses, flavors, fragrances and colors. MNPs also have the ability to
entrap ethanol or methanol soluble drugs, and to deliver certain of these drugs
transdermally through intact skin. The MNP formulations used by Novavax for the
transdermal delivery of drugs have cosmetic properties similar to creams and
lotions. These transdermal formulations have the advantage over injectable
delivery systems of being less invasive and/or inconvenient and the may also
cause less skin irritation than patch transdermal delivery systems. MNPs are the
fundamental technology platform for Novavax's hormone replacement therapies.

NOVASOME NON-PHOSPHOLIPID VESICLES

            Novasomes are proprietary structures in which drugs or other
materials can be encapsulated for delivery into the body topically or orally.
Novasomes are made using the Company's patented manufacturing processes from a
variety of readily available chemicals called amphiphiles, which include fatty
alcohols and acids, ethoxylated fatty alcohols and acids, glycol esters of fatty
acids, glycerol fatty acid mono and diesters, ethoxylated glycerol fatty acid
esters, glyceryl ethers, fatty acid diethanolamides and dimethyl amides, fatty
acyl sarcosinates, "alkyds" and phospholipids.

            The Company plans to commercialize its Novasome technology in part
through products it develops itself and in part through third party drug
delivery application licenses. The Company believes that certain of its
organized lipid structures (such as Novasome lipid vesicles) may provide
effective and safe adjuvant carrier systems for a variety of vaccines. In
addition, the Company has developed structures for delivery of biologically
active molecules like antisense, genes and proteins.

            The Company currently has several research contracts in place to
provide vaccine products, services and adjuvant technologies. These contracts
include, but are not limited to, the development of an adjuvant for an
immunotherapeutic vaccine for cervical dysplasia, a precancerous disease of the
cervix for a British vaccine company, Cantab Pharmaceuticals.

NON-ANTIBIOTIC LIPID EMULSIONS

            The Company has developed proprietary lipid structures that it is
using in the development of a non-antibiotic, anti-bacterial preparation for the
treatment of H. pylori infection in humans. In



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addition, the Company has developed a proprietary non-antibiotic lipid emulsion
called BCTP that may inactivate enveloped viruses that cause human disease, as
well as certain spores, bacteria and sperm. BCTP is a highly effective microbial
killing agent. Pre-clinical studies indicate that BCTP has a low toxicity
profile. The emulsion seems to act on various microbials, including viruses,
bacteria, sperm and spores, by first fusing or merging with the lipid envelope
of the virus.

            Because BCTP is not an antibiotic, it is not associated with microbe
mutation and resistance caused by antibiotic use, which is now recognized as an
important public health problem. Novavax expects that BCTP-based products may be
preferred in many circumstances as an alternative to conventional antibiotics.
The Company currently has several research contracts in place to provide
non-antibiotic lipid emulsion products and services. These contracts include but
are not limited to the development a subcontract from the University of
Michigan, which is developing anti-infective defense systems against biological
warfare agents for the U.S. military.

NOVAVAX PRODUCT CANDIDATES

HORMONE REPLACEMENT THERAPY

            The Company is using its MNP technology in the development of
ESTRASORB, a cream designed for the delivery of 17b estradiol (estrogen hormone
replacement) through the skin. Estrogen replacement therapy is currently used
worldwide by menopausal (and post-menopausal) women to prevent osteoporosis,
cardiovascular disease and other menopausal symptoms (such as "hot flashes").
The hormone replacement market in the US is approximately $1.7 billion. This
market is believed to represent only 15-20% of the estimated 60.3 million women
over 40 years of age in the US who could potentially benefit from hormone
replacement therapy.

            Current estrogen replacement products include oral tablets and, more
recently, transdermal patches. Oral estrogen tablets, however, have been
associated with side effects primarily resulting from blood hormone level
fluctuations. Because of these side effects, transdermal patches for estrogen
replacement were developed. While these patches help reduce blood hormone
fluctuations, they may cause skin irritation and patient inconvenience
associated with wearing and changing an external patch.

            The Company believes that ESTRASORB may offer several advantages
over existing therapies used for estrogen replacement. ESTRASORB may be applied
to the skin much like a typical cosmetic lotion. The Company believes ESTRASORB
will be able to deliver a continuous amount of estrogen to the patient without
the fluctuations in blood hormone levels associated with oral tablets. In
addition, ESTRASORB does not contain materials that may cause the skin
irritation associated with transdermal patches.

            In 1995, the Company completed preclinical testing of ESTRASORB in a
primate model. Results of these studies demonstrated that ESTRASORB can be
utilized to deliver estradiol through intact skin with maintenance of serum
estradiol levels for six days after a single topical application. Based on these
results, the Company initiated a Phase I clinical trial of ESTRASORB involving
10 symptomatic menopausal women. In this study, each woman received a single
topical application of ESTRASORB. This study was completed in the fourth quarter
of 1996 with no significant adverse experiences noted.

            The Company has completed three additional clinical studies with
ESTRASORB. The first was a multiple-dose, dose ranging, pharmacokinetic study
completed in the third quarter of 1997 involving 20 subjects. The second was a
multiple-dose, pharmacokinetic, placebo controlled study completed in the fourth
quarter of 1997 involving 20 subjects. The third study was a single versus dual
site application study completed in the third quarter of 1998 involving 10
subjects. These studies demonstrated transdermal delivery of the drug and no
skin irritation was noted. A Phase



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II, randomized, double-blind, placebo-controlled, dose-ranging ESTRASORB study,
begun in the third quarter of 1998,was completed in the first quarter of 1999.
This study involved a 35 day dosing protocol and included 120 patients at six
clinical sites located in the United States.

            Testosterone replacement therapy is currently used by males who are
testosterone deficient as a result of either primary or secondary hypogonadism.
It is believed that testosterone in males is required to maintain sexual
function and libido, maintain lean body mass, increase hemoglobin synthesis and
maintain bone density. There are estimated to be one million testosterone
deficient men in the US. It is further estimated that only 100,000 to 150,000
men are currently being treated for testosterone deficiency. These numbers are
expected to grow with the aging of the population and the increasing awareness
of the benefits of hormone replacement therapy.

            Current testosterone replacement therapy products include deep
intramuscular injections or transdermal patches. The injections require frequent
visits to a physician and may be associated with pain at the injection site and
abscess. The transdermal patches may cause skin irritation and patient
inconvenience associated with wearing and changing external patches.

            The Company believes that ANDROSORB (its testosterone hormone
replacement therapy product) may offer several advantages over current
testosterone replacement therapies. ANDROSORB is a lotion that may be applied to
the skin, thus eliminating the need for intramuscular injections. In addition,
ANDROSORB does not contain materials that may cause the skin irritation
associated with transdermal patches.

            In September, 1996, the Company completed the animal testing of
ANDROSORB in its MNP transdermal drug delivery platform. In these tests, peak
blood levels of testosterone were approximately three times higher than
testosterone dissolved in ethanol alone. The Company completed human safety
studies involving 10 subjects and submitted the results to the FDA in the third
quarter of 1997. A multiple-dose, pharmacokinetic study involving 9 subjects was
completed in the fourth quarter of 1997, and a dose-ranging pharmacokinetic
study involving 8 subjects was completed in the second quarter of 1998. These
studies have demonstrated delivery of the drug resulting in elevated blood
hormone levels and there has not been any evidence of skin irritation. Another
dose-ranging pharmacokinetic study, begun in the third quarter of 1998, is
currently underway, involving 20 subjects.

MICROBICIDES

            The Company has developed proprietary lipid structures that it is
using in the development of a non-antibiotic, anti-bacterial preparation,
Helicore, for the treatment of H. pylori infection in humans. H. pylori was
recognized in 1994 by the National Institutes of Health as a causative agent of
peptic ulcer disease, antral gastritis and certain types of gastric cancer.
Current therapies for the treatment of H. pylori include the use of antibiotics
alone or antibiotics in combination with drugs that inhibit acid production in
the stomach. Problems associated with such therapies include, but are not
limited to, cost, toxicity, failure to sufficiently eradicate all the bacteria,
and acquired resistance to the antibiotic. In 1995, the Company began to test
formulations of Helicore in both animal studies and Phase I human safety
studies. Results from clinical studies completed in 1996 were submitted to the
FDA. Novavax is not currently conducting pre-clinical or clinical studies on
Helicore.

            The Company has also developed BCTP, a lipid emulsion that acts on
various microbials, including enveloped viruses, as well as spores and bacteria.
The product has also demonstrated spermicidal action. The Company believes that
the emulsion acts on the target by first fusing or merging with the lipid
envelope or outer membrane of the target. The Company believes that BCTP has
many potential applications. Pre-clinical studies indicate that viruses and
spores vulnerable to BCTP include influenza A and bacillus anthracis, but it may
also be appropriate for



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herpes, measles, mumps, rubella and many other microbes and pathogens. While
influenza vaccines are relatively effective at preventing the flu, BCTP unlike
vaccines, does not appear to promote mutation and resistance. Other advantages
of BCTP appear to include a low toxicity profile, inexpensive scale-up and
manufacturing costs, and a rapid and broad spectrum of killing.

            Certain pre-clinical studies have been conducted using the Company's
BCTP technology under a subcontract from the University of Michigan. The
University of Michigan is being funded by DARPA's Unconventional Pathogen
Countermeasures Program. Two studies have targeted Bacillus anthracis. In the
first study, BCTP inactivated greater than 90% of Bacillus anthracis after four
hours of incubation. In the second study, which simulated wounds, mice treated
with BCTP had greatly reduced skin lesions and swelling compared to untreated
mice. Two separate studies have targeted influenza A. In the first study, BCTP
reduced viral antigen levels in incubation by 99.6%. In the second study, mice
receiving influenza A and BCTP stayed healthy while all the mice who received
the virus only, developed severe pneumonia and two out of three mice died before
the conclusion of the study.

VACCINE ADJUVANTS

            Adjuvants are substances that make vaccines more effective. The
Company believes that its Novasome lipid vesicles and MNPs may provide effective
and safe adjuvant carrier systems for a variety of vaccines in a variety of
circumstances, including: (i) encapsulation and protection from destruction by
the body's normal enzymatic processes of delicate antigenic materials; (ii)
encapsulation of toxic materials, such as endotoxins and other potent toxins,
for gradual release, thereby providing protection of the body from the toxin
while generating an immune response to the toxic antigen; (iii) presentation of
small peptide antigens to elicit a heightened cellular immune response; and (iv)
delivery of genes and other molecules into targeted cells.

MANUFACTURING

            The development and manufacture of the Company's products are
subject to good laboratory practices ("GLP") and good manufacturing practices
("GMP") requirements prescribed by the FDA and to other standards prescribed by
the appropriate regulatory agency in the country of use. The Company has the
ability to produce quantities of Novasome lipid vesicles and MNPs sufficient to
support its needs for early-stage clinical trials. It does not presently have
FDA-certified facilities capable of producing the larger quantities of
pharmaceutical products required for larger scale clinical trials or commercial
production. The Company will need to rely on collaborators, licensees or
contract manufacturers or acquire such manufacturing facilities for later stage
clinical trials and commercial production of its own pharmaceuticals. There can
be no assurance that the Company will be able to obtain such facilities or
manufacture such products in a timely fashion at acceptable quality and prices,
that it or its suppliers will be able to comply with GLP or GMP, as applicable,
or that it or its suppliers will be able to manufacture an adequate supply of
product.

MARKETING

            The Company plans to market the pharmaceuticals for which it obtains
regulatory approvals either through joint ventures or corporate partnering
arrangements. The Company expects that such arrangements could include
technology licenses, research funding, milestone payments, collaborative product
development, royalties and equity investments in Novavax. Implementation of this
strategy will depend on many factors, including the market potential of its
products and technologies, the success in developing relationships with
distributors or marketing partners for the Company's products and the financial
resources available to the Company. 



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COMPETITION

            A number of large companies, such as Novartis, Procter & Gamble,
American Home Products, Parke-Davis, Solvay Pharmaceuticals, SmithKline Beecham,
Abbott Laboratories, Ortho Pharmaceuticals and Mead Johnson Laboratories,
produce and sell estrogen preparations for clinical indications identical to
those the Company proposes to target. SmithKline Beecham currently markets a
transdermal testosterone patch and Novartis markets an estrogen transdermal
patch. The competition to develop FDA-approved hormone replacement therapies is
intense and no assurance can be given that the Company's product candidates will
be developed into commercially successful products.

            A number of other companies have been working on vaccine adjuvants
for use in human vaccines. These include, but are not limited to, Chiron, Ribi
Immunochem Research, Aquila, Iscotec, Proteus International and Biomira. The
competition to develop FDA-approved human vaccine adjuvants is intense and no
assurance can be given that the Company's adjuvant product candidates will be
developed into commercially successful products.

            Primary competitors in the development of lipid structure and
vesicle encapsulation technologies are The Liposome Company, Sequus
Pharmaceuticals, Nexstar Pharmaceuticals and L'Oreal, as well as other
pharmaceutical, vaccine and chemical companies. The Company believes that,
except for L'Oreal, these companies have focused their development efforts on
pharmaceutical carrier systems for the treatment of infections and certain
cancers. To the Company's knowledge, The Liposome Company, Sequus and Nexstar
all base their lipid vesicle technologies on phospholipids.

            Most of the Company's competitors are larger than the Company and
have substantially greater financial, marketing and technical resources. In
addition, many of these competitors have substantially greater experience than
the Company in developing, testing and obtaining FDA and other approvals of
pharmaceuticals. Furthermore, if the Company commences commercial sales of
pharmaceuticals, it will also be competing with respect to manufacturing
efficiency and marketing capabilities, areas in which it has limited or no
experience. If any of the competitors develop new encapsulation technologies
that are superior to the Company's Novasome and MNP technologies, the ability of
the Company to expand into the pharmaceutical and vaccine adjuvant markets will
be materially and adversely affected.

            Competition among products will be based, among other things, on
product efficacy, safety, reliability, availability, price and patent position.
An important factor will be the timing of market introduction of the Company's
or competitors' products. Accordingly, the relative speed with which the Company
can develop products, complete the clinical trials and approval processes and
supply commercial quantities of the products to the market is expected to be an
important competitive factor. The Company's competitive position will also
depend upon its ability to attract and retain qualified personnel, to obtain
patent protection or otherwise develop proprietary products or processes and to
secure sufficient capital resources for the often substantial period between
technological conception and commercial sales.

RESEARCH AND DEVELOPMENT

            The Company's research is focused principally on the development and
commercialization of formulations for topical drug delivery and therapeutic
products, including anti-bacterial and anti-viral products and adjuvants for
vaccines. The Company intends to use third-party funding when available, through
collaborations, joint ventures or strategic alliances with other companies,
particularly potential distributors of the Company's products. Because of the
substantial funds required for clinical trials, the Company will have to obtain
additional financing for its future 



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human clinical trials. No assurance can be given that such financing will be
available on terms attractive to the Company, if at all.

            The Company bases its development decisions on costs and potential
return on investment, regulatory considerations, and the interest, sponsorship
and availability of funding from third parties. As of December 31, 1998, the
Company's research and development staff numbered 9 individuals. In addition to
its internal research and development efforts, the Company encourages the
development of product candidates in areas related to its present lines by
working with universities and government agencies. Novavax's research and
development expenditures approximated $3,361,000, $2,874,000 and $3,716,000 and
in the years ended December 31, 1998, 1997 and 1996, respectively.

PATENTS AND PROPRIETARY INFORMATION

            The Company, through a wholly-owned subsidiary, holds 45 U.S.
patents and has 125 foreign patents and patent applications covering its
technologies (which include a wide variety of component materials, its
continuous flow vesicle production process and its Novamix(R) production
equipment). The Company believes that these patents are important for the
protection of its technology as well as certain of the development processes
that underlie that technology. In addition, three U.S. patent applications are
pending covering the composition, manufacture and use of its organized lipid
structures and related technologies.

            The Company expects to engage in collaborations, sponsored research
agreements and preclinical testing agreements in connection with its future
pharmaceutical products and vaccine adjuvants, as well as clinical testing
agreements with academic and research institutions and U.S. government agencies,
such as the NIH, to take advantage of the technical expertise and staff of these
institutions and to gain access to clinical evaluation models, patients and
related technologies. Consistent with pharmaceutical industry and academic
standards, and the rules and regulations promulgated under the federal
Technology Transfer Act of 1986, these agreements may provide that developments
and results will be freely published, that information or materials supplied by
the Company will not be treated as confidential and that the Company will be
required to negotiate a license to any such developments and results in order to
commercialize products incorporating them. There can be no assurance that the
Company will be able to successfully obtain any such license at a reasonable
cost or that such developments and results will not be made available to
competitors of the Company on an exclusive or nonexclusive basis.

GOVERNMENT REGULATION

            The Company's research and development activities are subject to
regulation for safety, efficacy and quality by numerous governmental authorities
in the United States and other countries. The development, manufacturing and
marketing of human pharmaceuticals are subject to regulation in the United
States for safety and efficacy by the FDA in accordance with the Food, Drug and
Cosmetic Act.

            In the United States, human pharmaceuticals are subject to rigorous
FDA regulation including preclinical and clinical testing. The process of
completing clinical trials and obtaining FDA approvals for a new drug is likely
to take a number of years, requires the expenditure of substantial resources and
is often subject to unanticipated delays. There can be no assurance that any
product will receive such approval on a timely basis, if at all.

            The steps required before new products for use in humans may be
marketed in the United States include (i) preclinical tests, (ii) submission to
the FDA of an application for an Investigational New Drug application (IND),
which must be approved before human clinical trials commence, (iii) adequate and
well-controlled human clinical trials to establish the safety and



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efficacy of the product, (iv) submission of a New Drug Application ("NDA") for a
new drug or a Product License Application ("PLA") for a new biologic to the FDA
and (v) FDA approval of the NDA or PLA prior to any commercial sale or shipment
of the product.

            Preclinical tests include laboratory evaluation of product
formulation, as well as animal studies (if an appropriate animal model is
available) to assess the potential safety and efficacy of the product.
Formulations must be manufactured according to GMP and preclinical safety tests
must be conducted by laboratories that comply with FDA regulations regarding
GLP. The results of the preclinical tests, are submitted to the FDA as part of
an IND and are reviewed by the FDA prior to the commencement of human clinical
trials. There can be no assurance that submission of an IND will result in FDA
authorization to commence clinical trials. Clinical trials involve the
administration of the investigational new drug to healthy volunteers and to
patients under the supervision of a qualified principal investigator and are
typically conducted in three sequential phases, although the phases may overlap.
The Company or the FDA may suspend clinical trials at any time if the
participants are being exposed to an unacceptable health risk. The FDA may deny
an NDA or PLA if applicable regulatory criteria are not satisfied, require
additional testing or information, or require post marketing testing and
surveillance to monitor the safety of the Company's products.

            In addition to obtaining FDA approval for each PLA, an Establishment
License Application ("ELA") must be filed and approved by the FDA for the
manufacturing facilities of a biologic product before commercial marketing of
the biologic product is permitted. The regulatory process may take many years
and requires the expenditure of substantial resources.

            In addition to regulations enforced by the FDA, the Company also is
subject to regulation under the Occupational Safety and Health Act, the
Environmental Protection Act, the Toxic Substances Control Act, the Resource
Conservation and Recovery Act and other present and potential future federal,
state or local regulations. The Company's research and development involves the
controlled use of hazardous materials, chemicals and viruses. Although the
Company believes that its safety procedures for handling and disposing of such
materials comply with the standards prescribed by state and federal regulations,
the risk of accidental contamination or injury from these materials cannot be
completely eliminated. In the event of such an accident, the Company could be
held liable for any damages that result, and any such liability could exceed the
resources of the Company.

            In both domestic and foreign markets, the ability of the Company to
commercialize its product candidates will depend, in part, on the availability
of reimbursement from third-party payers, such as government health
administration authorities, private health insurers and other organizations. If
adequate coverage and reimbursement levels are not provided by government and
third-party payers for uses of the Company's therapeutic products, the market
acceptance of these products would be adversely affected.

            There have been a number of federal and state proposals during the
last few years to subject the pricing of pharmaceuticals to government control
and to make other changes to the medical care system of the United States. It is
uncertain what legislative proposals will be adopted or what actions federal,
state or private payers for medical goods and services may take in response to
any medical reform proposals or legislation. The Company cannot predict the
effect medical reforms may have on its business, and no assurance can be given
that any such reforms will not have a material adverse effect on the Company.




                                       10

<PAGE>   11

EMPLOYEES

            The Company had 16 full-time employees as of December 31, 1998, of
whom 9 are in research and development. The Company has no collective bargaining
agreement with its employees and believes that its employee relations are good.


I
TEM 2. PROPERTIES

            The Company leases approximately 12,000 square feet of
administrative offices and laboratory space for its corporate headquarters and
pharmaceutical development, located at 8320 Guilford Road, Columbia, Maryland.
The Company believes its facilities are adequate to produce quantities of
Novasome lipid vesicles and MNPs sufficient to support its needs for early-stage
clinical trials. It does not presently have FDA certified facilities capable of
producing the larger quantities of pharmaceutical products required for larger
scale clinical trials or commercial production. The Company will need to rely on
collaborators, licensees or contract manufacturers or acquire such manufacturing
facilities for later stage clinical trials and commercial production of its own
pharmaceuticals.

            The Company also leases 2,363 square feet of space located in
Rockville, Maryland. This space contains the Company's certified animal facility
and laboratories for its biologics development which includes the vaccine and
vaccine adjuvant product and services group.


ITEM 3. LEGAL PROCEEDINGS

            The Company is not a party to any legal proceedings.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

            No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended December 31, 1998.

EXECUTIVE OFFICERS OF THE REGISTRANT

            The Company's executive officers hold office until the first meeting
of the Board of Directors following the annual meeting of stockholders and until
their successors are duly chosen and qualified, or until they resign or are
removed from office in accordance with the Company's By-laws.

            The following table provides certain information with respect to the
Company's executive officers.


<TABLE>
<CAPTION>
                                                            PRINCIPAL OCCUPATION AND OTHER BUSINESS
NAME                                AGE                     EXPERIENCE DURING THE PAST FIVE YEARS
- ----                                ---                     -------------------------------------

<S>                                 <C>         <C>
 Mitchell J. Kelly                  39          Interim President and Chief Executive Officer since September, 1998 and Director
                                                since February, 1997. Chairman and Chief Executive Officer of Anaconda Capital
                                                Management, L.L.C., 1995 to present. Junction Partners and Junction Advisors, Inc.,
                                                1984 to 1994; President, 1992 to 1994; Vice President 1988 to 1992; Research
                                                Director,
</TABLE>


                                       11

<PAGE>   12


<TABLE>
<S>                                 <C>         <C>
                                                1986 to 1988; Research Analyst and portfolio manager, 1984 to 1986.

D. Craig Wright, M.D.               48          President--Biologics Division of Novavax since 1998 and Chief Scientific Officer of
                                                Novavax since 1993.  Founder and Senior Director of Medical Research of Univax
                                                Biologics, Inc., a biopharmaceutical company, from 1988 to 1992.

 Richard J. Harwood, Ph.D.          55          Vice President, Pharmaceutical Product Development since March, 1998.  Consultant
                                                K. W. Tunnell Company, Inc., 1995 to 1998.  Vice President, Research and
                                                Development, Private Formulations, Inc., 1993 to 1995. Technical Planning Director,
                                                Worldwide Strategic Product Planning, Bristol-Myers Squibb, 1986 to 1993. Department
                                                Director, Product Development, Rorer Group, Inc., 1982 to 1986. Research Fellow,
                                                Merck and Co., Inc., 1970 to 1982.

Donald J. MacPhee                   47          Interim Chief Financial Officer since February, 1999.   Controller, Environmental 
                                                Tectonics Corporation, 1997 to 1998. Vice President of IGI, Inc., 1990 to 1997, and 
                                                Chief Financial Officer of IGI, Inc., 1987 to 1997. 
</TABLE>




                                     PART II


ITEM 5.     MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER 
            MATTERS

            The Company's Common Stock was held by 905 stockholders of record as
of March 31, 1999. The Company has never paid cash dividends on its Common
Stock. The Company currently anticipates that it will retain all of its earnings
for use in the development of its business and does not anticipate paying any
cash dividends in the foreseeable future.

            The principal market for the Company's Common Stock ($.01 par value)
is traded on the American Stock Exchange under the symbol "NOX". The following
table shows the range of high and low closing prices of the Company's common
stock on the American Stock Exchange for the periods indicated.


<TABLE>
<CAPTION>
                                                                            HIGH                  LOW
                                                                            ----                  ---
<S>                                                                      <C>                   <C>
        1998
First quarter                                                            $  6 1/8               $ 3 3/4
Second quarter                                                              4 13/16                2 13/16
Third quarter                                                               3 7/8                  1 1/4
Fourth quarter                                                              3 1/4                  1 1/4

         1997
First quarter                                                            $  4 3/4               $  3 1/4
Second quarter                                                              4 7/16                 2 5/8
Third quarter                                                               6                      4
Fourth quarter                                                              5 3/4                  4 1/8
</TABLE>


                                       12

<PAGE>   13


RECENT SALES OF UNREGISTERED SECURITIES

            On January 23, 1998, the Company sold 6,500 shares of Series A
Custom Convertible Preferred Stock (the "Series A Preferred Stock") to four
accredited investors in a private placement conducted pursuant to Section 4(2)
of the Securities Act of 1933 for an aggregate purchase price of $6,500,000 with
net proceeds of $5,998,000. On October 16, 1998 the Company repurchased the
outstanding shares of Series A Preferred Stock for $4,979,000 ($1,000 per share)
plus accrued interest of five percent per annum. Prior to the repurchase, shares
of Series A Preferred Stock representing $1,522,000 of the original $6,500,000
investment had been converted into 1,043,956 common shares.

            On June 30, 1998, the Company sold 12,500 shares of treasury stock
to the Secretary of the Company at $4.00 per share in an unregistered sale
conducted under Section 4(2) of the Securities Act, resulting in aggregate gross
and net proceeds to the Company of $50,000.


ITEM 6. SELECTED FINANCIAL DATA


<TABLE>
<CAPTION>
                                           FOR THE YEARS ENDED DECEMBER 31,
                                           --------------------------------
                                  1994          1995          1996          1997          1998
<S>                         <C>           <C>           <C>           <C>           <C>
STATEMENT OF
OPERATIONS DATA:

Revenues (1)                       685           268            56           520           681

Loss from operations            (4,661)       (6,744)       (5,534)       (4,791)       (5,152)

Net Loss                        (5,690)       (8,494)       (5,495)       (4,547)       (4,817)

Loss applicable to common
stockholders                    (5,690)       (8,494)       (5,495)       (4,547)       (7,045)

Per share information:
(basic and diluted)

Loss applicable to common
stockholders                       n/a        ($0.85)       ($0.54)       ($0.39)       ($0.57)

Weighted average number            N/A     9,937,936    10,132,896    11,667,428    12,428,426
of shares outstanding (2)

<CAPTION>
                                                      AS OF DECEMBER 31,
                                                      ------------------

                                  1994          1995          1996          1997          1998
<S>                         <C>           <C>            <C>          <C>           <C>
BALANCE SHEET DATA:

Total current assets               502         4,761         3,221         4,303         1,207

Working capital                    306         4,330         2,640         4,014           349
</TABLE>




                                       13

<PAGE>   14


<TABLE>
<S>                             <C>           <C>           <C>           <C>           <C>
Total assets                     3,133         7.530         5,722         6,823         3,819

Stockholders' (deficit)
equity (3)                      (2,203)        7,099         5,117         6,522         2,961
</TABLE>



(1)         Includes payments for licensing agreements and technology
            application review.

(2)         On December 12, 1995, IGI, Inc. ("IGI") distributed to the holders
            of record of IGI's common stock, at the close of business on the
            Record Date, November 28, 1995, one share of the Company's common
            stock for every share of IGI common stock outstanding (the
            "Distribution").

(3)         In connection with the Distribution, IGI paid Novavax $5,000,000
            in return for a fully paid-up, ten-year license (the "License
            Agreement") entitling IGI to exclusive use of certain Novavax
            technology in specific fields. Novavax recorded this payment under
            the License Agreement as a capital contribution in its financial
            statements to reflect the intercompany nature and substance of the
            transaction. The form was structured as a prepaid license
            agreement to address various considerations of the Distribution
            including tax and financial considerations.


 ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

            Certain statements under Item 1 and Item 7 contained herein or as
may otherwise be incorporated by reference herein constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements include, but are not limited to, statements
regarding future product development and related clinical trials and statements
regarding future research and development. 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 any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, the following: general economic and
business conditions; competition; technological advances; ability to obtain
rights to technology; ability to obtain and enforce patents; ability to
commercialize and manufacture products; results of preclinical studies; results
of research and development activities; business abilities and judgment of
personnel; availability of qualified personnel; changes in, or failure to comply
with, governmental regulations; ability to obtain adequate financing in the
future; and other factors referenced herein. All forward-looking statements
included in this document are based on information available to the Company on
the date hereof, and the Company assumes no obligation to update any such
forward-looking statements. Accordingly, past results and trends should not be
used by investors to anticipate future results or trends.

            The following is a discussion of the historical consolidated
financial condition and results of operations of Novavax and its subsidiaries.
The discussion should be read in conjunction with the consolidated financial
statements and notes thereto set forth in Item 8 to this Report.

 RESULTS OF OPERATIONS

            The Company has incurred net losses since its inception from the
development of its technologies for human pharmaceuticals, vaccines and vaccine
adjuvants. Novavax expects the losses to continue and to most likely increase in
the near-term, as it conducts additional human clinical trials and seeks
regulatory approval for its product candidates. The Company also expects to
continue to incur substantial operating losses over the extensive time period
required to develop



                                       14

<PAGE>   15

the Company's products, or until such time as revenues, to offset the losses,
are sufficient to fund its continuing operations.

1998 COMPARED TO 1997

            The net loss of $4,817,000 for the year ended December 31, 1998 was
$271,000 or 6% higher than the net loss of $4,547,000 for the year ended
December 31, 1997. The 1997 net loss includes non-cash compensation expense of
$578,000 compared to $11,000 included in the 1998 net loss. This compensation
expense relates to the amortization of below-market priced stock options granted
in 1995. Other 1998 non-cash charges include $281,000 of depreciation and patent
amortization expense, compared to $254,000 of similar expenses in 1997. The
dividend on preferred stock of $225,000 and the accretion of offering costs of
$420,000 relate to dividends paid and fees incurred with the placement and 
subsequent conversion and repurchase of preferred stock. The deemed dividend on
preferred stock of $1,583,000 relates to the beneficial conversion feature of
the preferred stock which allowed for conversion into common stock at a price 
per share discounted to the then-quoted market price of the common stock. (See
Notes 10 and 11 of the  Notes to the Consolidated Financial Statements).

            Revenues of $681,000 were recognized during 1998, principally from
contracts related to vaccine and adjuvant technologies services as well as
supplying new chemical structures designed to inactivate viruses, bacteria and
bacterial spores. This reflects a $161,000 or 31% increase over revenues in
1997.

            General and administrative expenses include all costs associated
with the marketing of the Company's technology to potential industry partners
and those activities associated with identifying additional sources of capital.
It also includes costs associated with management and administrative activities.
General and administrative expenses were approximately $2,472,000 and $2,437,000
for the years ended December 31, 1998 and 1997, respectively. The increase of
$35,000 was attributable to increased costs associated with securing strategic
alliances and potential sources of financing.

            Research and development expenses include scientific staffing,
supplies and other costs related to the ongoing development of the Novavax
technologies as well as the development of the Company's product candidates.
Research and development expenses were approximately $3,361,000 and $2,874,000
for the years ended December 31, 1998 and 1997, respectively. The $487,000 or
17% increase in these expenses was due principally to costs associated with the
Company's Phase II clinical trials.

            Interest income was approximately $335,000 and $245,000 for the
years ended December 31, 1998 and 1997, respectively. These amounts reflect
interest earned on the average cash balances on hand throughout the year.

 1997 COMPARED TO 1996

            The net loss of $4,547,000 for the year ended December 31, 1997 was
$948,000 or 17%, lower than the net loss of $5,495,000 for the year ended
December 31, 1996. The 1997 net loss includes non-cash compensation expense of
$578,000 compared to $1,507,000 included in the 1996 net loss. This compensation
expense relates to the amortization of below-market priced stock options granted
in 1995. Other 1997 non-cash charges include $254,000 of depreciation and patent
amortization expense. Non-cash charges in 1996 included $335,000 for the
disposal of property and equipment and $328,000 of depreciation and patent
amortization expense.

            Revenues of $520,000 were recognized during 1997 compared to $56,000
during 1996. The increase was due primarily to two contracts related to vaccine
products, services and adjuvant technologies.


                                       15

<PAGE>   16

            General and administrative expenses include all costs associated
with the marketing of the Company's technology to potential industry partners
and those activities associated with identifying additional sources of capital.
It also includes costs associated with management and administrative activities.
General and administrative expenses were approximately $2,437,000 and $1,874,000
for the years ended December 31, 1997 and 1996, respectively. The increase of
$563,000 was attributable to increased costs associated with securing strategic
alliances and potential sources of financing as well as the increased staffing
and infrastructure growth including the hiring of a new Chief Financial Officer
and Chief Executive Officer.

            Research and development expenses include scientific staffing,
supplies and other costs related to the ongoing development of the Novavax
technologies as well as the development of the Company's product candidates.
Research and development expenses were approximately $2,874,000 and $3,716,000
for the years ended December 31, 1997 and 1996, respectively. Although such
expenses have decreased by $842,000, this change is primarily caused by the net
decrease in the amortization of below-market priced stock options granted in
1995 of $934,000 and the non-recurring charge of $335,000 for the disposal of
assets in 1996.

            Research and development expenses, before these items were
$2,407,000 and $1,908,000 for 1997 and 1996. After considering the impact of
these aforementioned non-cash expenses, research and development costs increased
by $499,000. The increase was primarily due to the number of product candidates
in clinical trials and the growth of the underlying research and development
infrastructure including facility expansion.

            Interest income was approximately $244,000 and $138,000 for the
years ended December 31, 1997 and 1996, respectively. The increase in net
interest income was a direct result of an increase in the average cash balances
on hand throughout the year.

 YEAR 2000

            The Company is evaluating and working to resolve the potential
impact of the Year 2000 on the Company's computerized information systems'
ability to accurately process information that may be date-sensitive. Any of the
Company's programs that recognize a date using "00" as the year 1900 rather than
the year 2000, could result in errors or system failures. The Company primarily
uses personal computers for administrative and accounting systems. In addition,
the Company has certain laboratory equipment with microprocessors.

            Along with a review of the hardware and software employed by the
Company, our business partners and suppliers have been surveyed to determine
their Year 2000 readiness. A list of such business partners and suppliers that
have a material relationship with the Company has been compiled. The Company is
currently in the process of seeking information from these third parties
regarding their state of readiness for Year 2000 compliance. The Company
considers many of its relationships with these third parties to be of a material
nature, such that if these third parties were unable to become Year 2000
compliant, the Company would be adversely affected. These relationships
encompass many areas that affect the Company's ability to do business including,
but not limited to, financial institutions, utility companies and contract
manufacturers.

            The Company does not believe that it will incur material incremental
costs in its efforts to address this issue and has not incurred incremental
costs to date. The Company has not been given any indication that its business
partners and suppliers will not be Year 2000 compliant by the Year 2000. The
Company plans to continue, on a timely basis, to monitor and address any
significant Year 2000 issues and will update estimates accordingly.

 LIQUIDITY AND CAPITAL RESOURCES



                                       16

<PAGE>   17

            Novavax's capital requirements depend on numerous factors, including
but not limited to the progress of its research and development programs, the
progress of preclinical and clinical testing, the time and costs involved in
obtaining regulatory approvals, the costs of filing, prosecuting, defending and
enforcing any patent claims and other intellectual property rights, competing
technological and market developments, and changes in Novavax's development of
commercialization activities and arrangements. The Company currently has three
product candidates in development. Future activities including clinical
development and the establishment of commercial-scale manufacturing capabilities
are subject to the Company's ability to raise funds through equity financing, or
collaborative arrangements with corporate partners. Novavax's future growth will
depend on its ability to commercialize its Novavax technologies for human
pharmaceutical applications.

            Net cash used in 1998 for operating activities was $3,624,000. From
the date of the Distribution, Novavax has conducted its operations with
approximately $5,000,000 paid by IGI under the IGI License Agreement along with
net proceeds from several financing transactions completed and described herein.
In addition, the Company has received sources of cash from the sale of
scientific prototype vaccines and adjuvants and from the exercise of stock
options.

            In October 1996, Novavax received $1,656,000, net of all transaction
costs, from the sale of 505,000 common shares that were privately placed with
accredited institutional investors.

            In February 1997, Novavax received $5,003,000, net of fees and
expenses, from the private placement of 1,200,000 shares of its Common Stock
with an accredited institutional investor, a principal of which has subsequently
become a director of Novavax. In connection with this transaction, Novavax
granted warrants to purchase an additional 600,000 shares of the Company's
Common Stock at a price of $6.00 per share and 600,000 shares at $8.00 per
share. These warrants have a three-year term, expiring in March 2000.

            In January 1998, the Company entered into Subscription Agreements 
to effectuate the private placement of 6,500 shares of Series A Custom
Convertible Preferred Stock, $1,000 par value (the "Preferred Stock"). The
closing occurred on January 28, 1998 (the "Issuance Date") at an aggregate
purchase price of $6,500,000. The Company paid a placement agent fee of
$425,000 in connection with this financing.

            The Preferred Stock was convertible into shares of Common Stock at a
conversion price equal to (i) during a period of 90 days following the Issuance
Date, 100% of the average of the two lowest consecutive trade prices of the
Common Stock as reported on the American Stock Exchange for the 25 trading days
immediately preceding the conversion date (the "Two Day Average Trading Price")
or (ii) during the period on and after the date which is 91 days after the
Issuance Date, 94% of the Two Day Average Trading Price (the "Conversion
Price"). From the Issuance Date, there was a ceiling price of $6.33 and within
the first 180 days after the Issuance Date, the Conversion Price had applicable
floor prices, based on conversion dates.

            Prior to the subsequent repurchase of all the outstanding Preferred
Stock, $1,522,000 of the original issue had been converted into 1,043,956 shares
of Common Stock, pursuant to the terms and conditions of the Preferred Stock. On
October 1, 1998, the Company entered into agreements to repurchase the remaining
Preferred Stock. This transaction closed on October 16, 1998 and the Company
repurchased the remaining outstanding $4,979,000 of Preferred Stock plus accrued
dividends at the annual rate of five percent. The repurchase was funded with
cash balances on hand at October 16, 1998. The terms of the Preferred Stock
required the Company to pay the holders of the Preferred Stock $225,000 in
dividends. This amount was paid in cash of $179,000 and through the issuance of
32,492 shares of the Company's Common Stock, valued at $46,000. The Company
incurred transaction fees associated with the placement, conversion and
repurchase of the Preferred Stock of $502,000 which are included in the
accompanying financial 



                                       17

<PAGE>   18

statements as accretion of Preferred Stock. On December 31, 1998, the Company
had $1,031,000 in cash, cash equivalents and marketable securities on hand.

            In April, 1999, The Company entered into Stock and Warrant Purchase
Agreements for the private placement of 1,651,100 shares of its Common Stock to
accredited investors (the "Private Placement"). One of the principals of one of
the investors is also a director of the Company. The issuance price of the
Common Stock was $2.50 per share. Each share was sold together with a
non-transferable warrant for the purchase of .25 additional shares at an
exercise price of $3.75. The warrants have a three-year term. Gross proceeds
from the Private Placement were $4,128,000. Placement agent fees were
approximately $215,000, which was paid with cash of $107,000 and 42,933 shares
of the Company's Common Stock, which were issued together with non-transferable
warrants for the purchase of 10,733 shares of the Company's Common Stock at an
exercise price of $3.75. These warrants have a three-year term. Additionally,
non-transferable warrants for the purchase of 143,000 shares of the Company's
Common Stock, with an exercise price of $3.00 per share and a three-year term,
were issued to the placement agent. Other costs connected with the Private 
Placement, including legal, stock exchange listing and registration fees, were
approximately $50,000. Net proceeds to the Company from the Private Placement
were approximately $4,000,000.

            As of April 14, 1999, Novavax estimates that the money received from
the most recent sale of Common Stock and its existing cash resources will be
sufficient to finance its operations at current and projected levels of
development activity for approximately 12 to 13 months.

            Past spending levels are not necessarily indicative of future
spending. Future expenditures for product development, especially relating to
outside testing and human clinical trials, are discretionary and, accordingly,
can be adjusted to available cash. Moreover, the Company will seek to establish
one or more collaborations with industry partners to defray the costs of
clinical trials and other related activities. Novavax will also seek to obtain
additional funds through public or private equity or debt financings,
collaborative arrangements with pharmaceutical companies or from other sources.
There can be no assurance that additional funding or bank financing will be
available at all or on acceptable terms to permit successful commercialization
of Novavax's technologies and products. If adequate funds are not available,
Novavax may be required to significantly delay, reduce the scope of or eliminate
one or more of its research or development programs, or seek alternative
measures including arrangements with collaborative partners or others that may
require Novavax to relinquish rights to certain of its technologies, product
candidates or products.


 
ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

            Not applicable.


 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

            The financial statements and notes thereto listed in the
accompanying index to financial statements (Item 14) are filed as part of this
Annual Report and are incorporated herein by this reference.


 ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
            FINANCIAL DISCLOSURE

            None.

                                       18

<PAGE>   19

                                    PART III


 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

            The information required by this item is contained in part under the
caption "Executive Officers of the Registrant" in Part I hereof, and the
remainder is contained in the Company's Proxy Statement for the Company's Annual
Meeting of Stockholders to be held on June 8, 1999 (the "1999 Proxy Statement")
under the captions "Proposal 1 -- Election of Directors" and "Beneficial
Ownership of Common Stock" and is incorporated herein by this reference. The
Company expects to file the 1999 Proxy Statement within 120 days after the close
of the fiscal year ended December 31, 1998.

            Officers are elected on an annual basis and serve at the discretion
of the Board of Directors.


 ITEM 11. EXECUTIVE COMPENSATION

            The information required by this item is contained in the Company's
1999 Proxy Statement under the captions "Executive Compensation" and "Director
Compensation" and is incorporated herein by this reference.


 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

            The information required by this item is contained in the Company's
1999 Proxy Statement under the caption "Beneficial Ownership of Common Stock"
and is incorporated herein by this reference.


 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

            The information required by this item is contained the Company's
1999 Proxy Statement under the caption "Certain Relationships and Related
Transactions" and is incorporated herein by reference.



                                     PART IV


 ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

 (a) (1)          Financial Statements:


                  Report of Independent Accountants; Consolidated Balance
                  Sheets as of December 31, 1998 and 1997; Consolidated
                  Statements of Operations for the years ended December 31,
                  1998, 1997 and 1996; Consolidated Statements of Cash Flows for
                  the years ended December 31, 1998, 1997 and 1996; Consolidated
                  Statements of Stockholders' Equity for the years ended
                  December 31, 1998, 1997 and 1996; Notes to Consolidated
                  Financial Statements.

 (a) (2)          Financial Statement Schedules:

                  Schedules are either not applicable or not required because
                  the information required is contained in the financial
                  statements or notes thereto. Condensed financial information
                  of the Registrant is omitted since there are no substantial
                  amounts of restricted net assets applicable to the Company's
                  consolidated subsidiaries.


                                       19

<PAGE>   20

 (a) (3)          Exhibits Required to be Filed by Item 601 of Regulation S-K:

                  Exhibits marked with a single asterisk are filed herewith,
                  and exhibits marked with a double plus sign reference
                  management contracts, compensatory plans or arrangements,
                  filed in response to Item 14 (a)(3) of the instructions to
                  Form 10-K. The other exhibits listed have previously been
                  filed with the Commission and are incorporated herein by
                  reference.

       3.1        Amended and Restated Certificate of Incorporation of Novavax,
                  Inc. [Incorporated by reference to Exhibit 3.1 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  December 31, 1996, File No. 0-26770, filed March 21, 1997 (the
                  "1996 Form 10-K").]

       3.2        Amended and Restated By-laws of Novavax, Inc.  [Incorporated
                  by reference to Exhibit 3.2 to the 1996 Form 10-K.]

       3.3        Certificate of Designations of Series A Custom Convertible 
                  Preferred Stock dated January 28, 1998.  [Incorporated by 
                  reference to Exhibit 4.2 to the Company's Registration
                  Statement on Form S-3, File No. 333-46409, filed February 17,
                  1998.]

       4.         Specimen stock certificate for shares of Common Stock, par
                  value $.01 per share. [Incorporated by reference to Exhibit
                  4.1 to the Company's Registration Statement on Form 10, File
                  No. 0-26770, filed September 14, 1995 (the "Form 10").]

       10.1       License Agreement between IGEN, Inc. and Micro-Pak, Inc.  
                  [Incorporated by reference to Exhibit 10.3 to the Company's
                  Annual Report on Form 10-K for the fiscal year ended December
                  31, 1995, File No. 0-26770, filed April 1, 1996, (the "1995
                  Form 10-K").]

 ++   10.2        1995 Stock Option Plan.  [Incorporated by reference to Exhibit
                  10.4 to the Form 10.]

   *++10.3        First Amendment to Novavax, Inc. 1995 Stock Option Plan
                  approved by the stockholders of the Company on May 14, 1998,
                  and by the Board of Directors on March 16, 1998.

 ++   10.4        Director Stock Option Plan. [Incorporated by reference to
                  Exhibit 10.5 to the Form 10.]

      10.5        Stock Purchase Agreement dated October 9, 1996 by and between
                  the Company and the purchasers named therein. [Incorporated by
                  reference to Exhibit 4.4 to the Company's Registration
                  Statement on Form S-3, File No. 333-14305, filed October 17,
                  1996.]

       10.6       Agreement of Lease by and between the Company and Rivers
                  Center Associates Limited Partnership, dated September 25,
                  1996. [Incorporated by reference to Exhibit 10.7 to the 1996
                  Form 10-K.]

       10.7       Stock and Warrant Purchase Agreement dated February 10, 1997
                  by and between the Company and Anaconda Opportunity Fund, L.P.
                  [Incorporated by reference to Exhibit 4.4 to the Company's
                  Registration Statement on Form S-3, File No. 333-22685, filed
                  March 4, 1997 (the "Anaconda S-3").]


       10.8       Form of Warrant issued by the Company to Anaconda Opportunity
                  Fund, L.P. [Incorporated by reference to Exhibit 4.5 to the
                  Anaconda S-3.]

                                       20

<PAGE>   21

       10.9       Forms of Subscription Agreement dated January 23, 1998 and
                  Letter Agreement dated February 19, 1998, by and between the
                  Company and each of the four purchasers, Delta Opportunity
                  Fund, Ltd., Olympus Securities, Ltd., Nelson Partners, OTATO
                  Limited Partnership. [Incorporated by reference to Exhibit 4.5
                  to the Company's Registration Statement on Form S-3, File No.
                  333-46409, filed February 17, 1998.]

    ++10.10       Employment Agreement dated May 15, 1997, by and between the
                  Company and Richard F. Maradie. [Incorporated by reference to
                  Exhibit 10.10 to the Company's Annual Report on Form 10-K for
                  the fiscal year ended December 31, 1997, File No. 0-26770,
                  filed March 31, 1998.]

   *++10.11       Amended and Restated Employment Agreement dated July 24, 1998,
                  by and between the Company and Brenda L. Fugagli.

   *++10.12       Employment Agreement dated February 23, 1998, by and between
                  the Company and Thomas G. Tachovsky.

   *++10.13       Employment Agreement dated March 5, 1998, by and between the
                  Company and Richard J. Harwood.

   *++10.14       Employment Agreement dated March 31, 1998, by and between the 
                  Company and D. Craig Wright.

   *++10.15       Separation and Release Agreement effective September 4, 1998, 
                  by and between the Company and Richard F. Maradie.

     *10.16       Form of Stock and Warrant Purchase Agreement dated April 14, 
                  1999, by and between the Company and the purchasers named
                  therein.

      21          List of Subsidiaries [Incorporated by reference to Exhibit 21 
                  to the 1995 Form 10-K.]

 *    23          Consent of PricewaterhouseCoopers LLP, Independent
                  Accountants.

 *    27          Financial Data Schedule

 (b)              Reports on Form 8-K:

                  Form 8-K filed November 19, 1998.


                                       21

<PAGE>   22

                                   SIGNATURES

            Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

                                      NOVAVAX, INC.

 Date:  April 14, 1999                By: /s/ Mitchell J. Kelly
                                          --------------------------
                                          Mitchell J. Kelly, Interim President
                                          and Chief Executive Officer

            Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacity and on the date indicated.


<TABLE>
<CAPTION>
            NAME                                TITLE                               DATE
            ----                                -----                               ----
<S>                                             <C>                                 <C> 
 /s/ Mitchell J. Kelly                          Interim President and               April 14, 1999
 ---------------------                          Chief Executive Officer  
 Mitchell J. Kelly                              and Director             
                                                

 /s/Donald J. MacPhee                           Principal Financial &               April 14, 1999
 --------------------                           Accounting Officer 
 Donald J. MacPhee                                                 


 /s/Gary C. Evans                               Director                            April 14, 1999
- -----------------
 Gary C. Evans

 /s/ J. Michael Lazarus                         Director                            April 9, 1999
 ----------------------
 J. Michael Lazarus

 /s/ John O. Marsh, Jr.                         Director                            April 14, 1999
 ----------------------
 John O. Marsh, Jr.

 /s/Michael A. McManus                          Director                            April 14, 1999
 ---------------------
 Michael A. McManus
</TABLE>




                                       22

<PAGE>   23


<TABLE>
<S>                                             <C>                                 <C> 
 /s/Denis M. O'Donnell                          Director                            April 14, 1999
 ---------------------
 Denis M. O'Donnell

 /s/ Ronald A. Schiavone                        Director                            April 14, 1999
 -----------------------
 Ronald A. Schiavone

 /s/ Ronald H. Walker                           Director                            April  8, 1999
 --------------------
 Ronald H. Walker
</TABLE>




                                       23


<PAGE>   24
INDEX TO THE CONSOLIDATED
FINANCIAL STATEMENTS





<TABLE>
<CAPTION>
               DESCRIPTION
 <S>                                                      <C>
 Report of Independent Accountants                        F-2


 Consolidated Statements of Operations
   for each of the three years in the
   period ended December 31, 1998                         F-3



 Consolidated Balance Sheets as of
   December 31, 1998 and 1997                             F-4


 Consolidated Statements of Cash Flows
   for each of the three years in the period
   ended December 31, 1998                                F-5


 Consolidated Statements of Changes in
   Stockholders' Equity for each of the three
   years in the period ended December 31, 1998            F-6


 Notes to the Consolidated Financial Statements           F-7

</TABLE>






                                      F-1

<PAGE>   25

REPORT OF INDEPENDENT ACCOUNTANTS





To the Board of Directors and Stockholders of Novavax, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of changes in
stockholders' equity present fairly, in all material respects, the financial
position of Novavax, Inc. and it subsidiaries at December 31, 1998 and 1997,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.  These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits.  We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation.  We believe that
our audits provide a reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP

McLean, Virginia
March 17, 1999, except for the fourth

paragraph of Note 1 which is as of
April 14, 1999





                                      F-2

<PAGE>   26
NOVAVAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)


<TABLE>
<CAPTION>
                                                                 FOR THE YEARS ENDED DECEMBER 31,
                                                      -------------------------------------------------
                                                            1998              1997            1996
                                                      --------------     -------------     ------------
<S>                                                     <C>              <C>               <C>
 Revenues                                                $      681        $      520         $     56
                                                      --------------     -------------     ------------

 Operating expenses:
   General and administrative                                 2,472             2,437            1,874
   Research and development                                   3,361             2,874            3,716
                                                      --------------     -------------     ------------

 Total operating expenses                                     5,833             5,311            5,590
                                                      --------------     -------------     ------------

 Loss from operations                                       (5,152)           (4,791)          (5,534)
 Interest income, net                                           335               244              137
                                                      --------------     -------------     ------------


 Loss before income taxes                                   (4,817)           (4,457)          (5,397)
 Provision for income taxes                                      --                --             (98)
                                                      --------------     -------------     ------------

 Net loss                                                   (4,817)           (4,547)          (5,495)
 Dividend on preferred stock                                  (225)                --               --
 Deemed dividend on preferred stock                         (1,583)                --               --
 Accretion of offering costs                                  (420)                --               --
                                                      --------------     -------------     ------------

 Loss applicable to common stockholders                  $  (7,045)        $  (4,547)       $  (5,495)
                                                      ==============     =============     ============

 Per share information (basic and diluted)

 Loss applicable to common stockholders                  $   (0.57)        $   (0.39)       $   (0.54)
                                                      ==============     =============     ============

 Weighted average number of common
         shares outstanding (basic and diluted)          12,428,426        11,667,428       10,132,896
                                                      ==============     =============     ============
</TABLE>






The accompanying notes are an integral part of the consolidated financial
statements.





                                      F-3

<PAGE>   27
NOVAVAX, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)


<TABLE>
<CAPTION>
                                                                                           AS OF DECEMBER 31,
                                                                               -------------------------------------
                                                                                    1998                  1997
                                                                               ----------------      ---------------
ASSETS
<S>                                                                            <C>                      <C>
Current assets:

  Cash and cash equivalents                                                        $     1,031           $    3,847
  Accounts receivable                                                                      138                  250
  Prepaid expenses and other current assets                                                 38                  206
                                                                               ----------------      ---------------
      Total current assets                                                               1,207                4,303
                                                                               ----------------      ---------------

Property and equipment, net                                                              1,020                  889
                                                                               ----------------      ---------------
Patent costs, net                                                                        1,590                1,573
                                                                               ----------------      ---------------
Other assets                                                                                 2                   58
                                                                               ----------------      ---------------

Total assets                                                                        $    3,819           $    6,823
                                                                               ================      ===============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Capital lease obligations, current maturities                                     $       36           $       11
  Accounts payable                                                                         793                  238
  Accrued payroll                                                                           29                   40
                                                                               ----------------      ---------------
      Total current liabilities                                                            858                  289
Capital lease obligations, less current maturities                                          --                   13
                                                                               ================      ===============


Total liabilities                                                                          858                  302
                                                                               ----------------      ---------------

Commitments and contingencies

Stockholders' equity:
  Preferred stock, $.01 par value, 2,000,000 shares authorized;                            --                    --
    no shares issued and outstanding
  Common stock, $.01 par value, 30,000,000 shares authorized;
    13,253,118 issued and outstanding at December 31, 1998,
    and 12,031,757 shares issued and 12,012,013 outstanding at
    December 31, 1997                                                                      133                  120
  Additional paid-in capital                                                            41,231               37,853
  Accumulated deficit                                                                 (38,388)             (31,343)
  Deferred compensation on stock options granted                                          (15)                 (25)
  Treasury stock, 19,744 shares, cost basis at December 31, 1997                            --                 (83)
                                                                               ----------------      ---------------
Total stockholders' equity                                                               2,961                6,522
                                                                               ----------------      ---------------

Total liabilities and stockholders' equity                                          $    3,819           $    6,824
                                                                               ================      ===============
</TABLE>



The accompanying notes are an integral part of the consolidated financial
statements.





                                      F-4

<PAGE>   28
NOVAVAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                           FOR THE YEARS ENDED DECEMBER 31,
                                                                                    ------------------------------------------------
                                                                                           1998             1997             1996
                                                                                        ---------         --------        ---------
<S>                                                                                 <C>               <C>             <C>
Cash flows from operating activities:
  Net loss                                                                               $(4,817)         $(4,547)         $(5,495)
  Reconciliation of net loss to net cash used by
     operating activities:
     Non-cash compensation expense                                                             10              577            1,507
     Depreciation and amortization                                                            281              254              328
     Disposal of property and equipment                                                        --               --              335
     Issuance of stock to 401(k) plan                                                          22               10               --
     Changes in operating assets and liabilities:
       Accounts receivable                                                                    112            (257)               61
       Prepaid expenses and other assets                                                      224                4            (185)
       Accounts payable and accrued expenses                                                  544            (286)            (185)
                                                                                        ---------         --------        ---------
Net cash used by operating activities                                                     (3,624)          (4,245)          (3,316)
                                                                                        ---------         --------        ---------

Cash flows from investing activities:
  Proceeds from the sale of marketable securities                                              --              501            (501)
  Capital expenditures                                                                      (231)             (45)             (99)
  Deferred patent costs                                                                     (146)            (198)            (244)
                                                                                        ---------         --------        ---------
Net cash used by investing activities                                                       (377)              258            (844)
                                                                                        ---------         --------        ---------

Cash flows from financing activities:
  Payment of capital lease obligations                                                       (38)             (11)               --
  Issuance of preferred stock                                                               6,500               --               --
  Dividend on preferred stock                                                               (179)               --               --
  Offering costs of preferred stock                                                         (502)               --               --
  Repurchase of preferred stock                                                           (4,978)               --               --
  Proceeds from private placements of common stock                                             50            5,003            1,656
  Proceeds from the exercise of stock options                                                 332              361              351
                                                                                        ---------         --------        ---------
Net cash provided from financing activities                                                 1,185            5,353            2,007
                                                                                        ---------         --------        ---------

Net change in cash and cash equivalents                                                   (2,816)            1,366          (2,153)
Cash at beginning of period                                                                 3,847            2,481            4,634
                                                                                        ---------         --------        ---------

Cash and cash equivalents at end of period                                               $  1,031          $ 3,847         $  2,481
                                                                                        =========         ========        =========
</TABLE>






The accompanying notes are an integral part of the consolidated financial
statements.





                                      F-5

<PAGE>   29
NOVAVAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION)



<TABLE>
<CAPTION>
                                                                                              DEFERRED
                                                                                            COMPENSATION
                                         COMMON STOCK          ADDITIONAL                    ON STOCK                    TOTAL
                                                                PAID-IN                      OPTIONS       TREASURY  STOCKHOLDERS
                                        SHARES       DOLLARS      CAPITAL       DEFICIT       GRANTED       STOCK        EQUITY
                                        ------       -------      -------       -------       -------       -----        ------
<S>                                     <C>           <C>       <C>             <C>         <C>           <C>          <C>
BALANCE, DECEMBER 31, 1995               9,937,936    $    99   $     30,188    $ (21,301)  $    (1,887)   $            $    7,099
                                                                                                                 --
                                        
Options and  warrants granted as                --         --            222            --         (222)         --             --
   compensation                         
Amortization of deferred                        --         --             --            --         1,506         --          1,506
  compensation                          
Private sale of common stock, net          505,000          5          1,651            --            --         --          1,656
Exercise of stock options                  217,774          2            349            --            --         --            351
                                        
Net loss                                        --         --             --       (5,495)            --         --        (5,495)
                                      ---------------------------------------------------------------------------------------------
                                        
                                        
BALANCE, DECEMBER 31, 1996              10,660,710        106         32,410      (26,796)         (603)         --          5,117
                                        
Options granted as compensation                 --         --             --            --            --         --             --
Company contribution to  employee              771         --              3            --            --          7             10
401(k) plan                             
Amortization of deferred                        --         --             --            --           578         --            578
    Compensation                        
Private sale of common stock, net        1,200,000         12          4,991            --            --                     5,003
Exercise of stock options                  170,276          2            450            --            --       (90)            362
Net loss                                        --         --             --       (4,547)            --         --        (4,547)
                                      ---------------------------------------------------------------------------------------------
                                        
BALANCE, DECEMBER 31, 1997              12,031,757        120         37,853      (31,343)          (25)       (83)          6,522
                                        
Company contribution to employee                42          1           (12)            --            --         33             22
401(k) plan                             
Amortization of deferred                        --         --             --            --            10         --             10
    compensation                        
Value of beneficial conversion          
    feature of preferred stock                  --         --          1,583            --            --         --          1,583
Conversion of preferred stock            1,043,956         11          1,475            --            --         --          1,486
Dividend on  preferred stock                32,944         --             --         (225)            --         --          (225)
Deemed dividend on preferred stock              --         --             --       (1,583)            --         --        (1,583)
Accretion of offering costs                     --         --             --         (420)            --         --          (420)
Private sale of common stock, net               --         --             --            --            --         50             50
Exercise of stock options                  144,419          1            332            --            --         --            333
Net loss                                        --         --             --       (4,817)            --         --        (4,817)
                                      ---------------------------------------------------------------------------------------------
                                        
BALANCE, DECEMBER 31, 1998              13,253,118    $   133   $     41,231    $ (38,388)  $       (15)   $     --     $    2,961
                                      =============================================================================================
</TABLE>






The accompanying notes are an integral part of the consolidated financial
statements.





                                      F-6

<PAGE>   30
NOVAVAX, INC.  AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION


DESCRIPTION OF BUSINESS

Novavax, Inc., a Delaware corporation ("Novavax" or the "Company"), is a
biopharmaceutical company focused on the research and development of
proprietary topical and oral drug delivery technologies and applications of
those technologies.  The Company's technology platforms involve the use of
proprietary, microscopic, organized, non-phospholipid structures as vehicles
for the delivery of a wide variety of drugs and other therapeutic products,
including certain hormones, anti-bacterial and anti-viral products and vaccine
adjuvants.  These technology platforms support three product development
programs: hormone replacement therapies, third party drug delivery and vaccine
adjuvant applications and anti-microbial agents.  The regulatory process is
lengthy, requiring substantial funds, and the Company cannot predict when
approval of any product or a license to sell any product might occur.  In
addition, there can be no assurance the Company will have sufficient funds
necessary or that the additional funds will be available at all or on
acceptable terms.  The Company also recognizes that the commercial launch of
any product is subject to certain risks including but not limited to
manufacturing scale-up and market acceptance.

BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of
Novavax and its wholly owned subsidiaries Micro-Pak, Inc., Micro Vesicular
Systems, Inc. and Lipovax, Inc.  All significant intercompany accounts and
transactions have been eliminated in consolidation.

FINANCING REQUIREMENTS

Past spending levels are not necessarily indicative of future spending.  The
Company will seek to establish one or more collaborations with industry
partners to defray the costs of clinical trials and other related activities.
Novavax will also seek to obtain additional funds through public or private
equity or debt financings, collaborative arrangements with pharmaceutical
companies or from other sources.  If adequate funds are not available, Novavax
may be required to significantly delay, reduce the scope of or eliminate one or
more of its research or development programs, or seek alternative measures.
As of April 14, 1999, Novavax estimates that the money received from the most
recent sale of Common Stock (discussed below) and its existing cash resources
will be sufficient to finance its operations at current and projected levels of
development activity for the next 12 to 13 months.



                                      F-7

<PAGE>   31
NOVAVAX, INC.  AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION, CONTINUED


SUBSEQUENT EVENT

In April 1999, the Company entered into Stock and Warrant Purchase Agreements
for the private placement of 1,651,100 shares of its Common Stock to accredited
investors (the "Private Placement").  One of the principals of one of the
investors is also a director of the Company.  The issuance price of the Common
Stock was $2.50 per share. Each share was sold together with a non-transferable
warrant for the purchase of .25 additional shares at an exercise price of $3.75.
The warrants have a three-year term. Gross proceeds from the Private Placement
were $4,128,000.  Placement agent fees were approximately $215,000, which was
paid with cash of $107,000 and 42,933 shares of the Company's Common Stock,
which were issued together with non-transferable warrants for the purchase of
10,733 shares of the Company's Common Stock at an exercise price of $3.75. These
warrants have a three-year term. Addititionally, non-transferable warrants for
the purchase of 143,00 shares of the Company's Common Stock, with an exercise
price of $3.00 per share and a three-year term, were issued to the placement
agent. Other costs connected with the Private Placement, including legal, stock
exchange listing and registration fees, were approximately $50,000.  Net
proceeds to the Company from the Private Placement were approximately
$4,000,000.


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS AND MARKETABLE SECURITIES

Cash equivalents are considered to be short-term highly liquid investments with
original maturities of 90 days or less.  Marketable securities consist of
investments in fixed income securities with original maturities of greater than
three months and less than one year. Marketable securities are stated at cost,
which approximates market.  Interest income is accrued as earned.





                                      F-8

<PAGE>   32
NOVAVAX, INC.  AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED



PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost.  Depreciation of furniture,
fixtures and equipment is provided under the straight-line method over the
estimated useful lives, generally five years. Amortization of leasehold
improvements is provided over the estimated useful lives of the improvements or
the term of the lease, which ever is shorter.  Furniture and equipment held
under capital leases are amortized under the straight-line method over the
shorter of the lease term or the estimated useful life of the asset.

Repair and maintenance costs are charged to operations as incurred while major
improvements are capitalized. When assets are retired or disposed of, the cost
and accumulated depreciation thereon are removed from the accounts and any
gains or losses are included in operations.  Accumulated depreciation was
$691,000 and $539,000 at December 31, 1998 and 1997, respectively.

PATENT COST

Costs associated with obtaining patents, principally legal costs and filing
fees, are being amortized on a straight-line basis over the remaining economic
lives of the respective patents. The Company periodically evaluates the
carrying amount of these assets based on current licensing and future
commercialization efforts and if warranted, impairment would be recognized.
Accumulated amortization of patent costs was $678,000 and $549,000 at December
31, 1998 and 1997, respectively.

REVENUE RECOGNITION

Revenues from the sale of scientific prototype vaccines and adjuvants are
recorded as the products are produced and shipped.  Revenues earned under
research contracts are recognized when the related contract provisions are met.





                                      F-9

<PAGE>   33
NOVAVAX, INC.  AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


NET LOSS PER SHARE

Basic earnings per share is computed by dividing the net loss available to
common shareholders by the weighted average number of common share outstanding
during the period.  Diluted loss per share is computed by dividing net loss
available to common shareholders by the weighted average number of common
shares outstanding after giving effect to all dilutive potential common shares
that were outstanding during the period.

Potential common shares are not included in the computation of dilutive
earnings per share if they are antidilutive.  Net loss per share as reported
was not adjusted for potential common shares as they are antidilutive.

INCOME TAXES

The Company's income taxes are determined in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109, which requires the
asset and liability method of accounting for income taxes.  Under the asset and
liability method deferred income taxes are recognized for the tax consequences
of temporary differences by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying amounts
and the tax basis of existing assets and liabilities.

The effect on deferred taxes of changes in tax rates is recognized in income in
the period that includes the enactment date.  A valuation allowance is recorded
based on management's determination of the ultimate realizability of future
deferred tax assets.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Significant estimates include valuation of patent costs and benefits for income
taxes and related valuation allowances.  Actual results could differ from those
estimates.





                                      F-10

<PAGE>   34
NOVAVAX, INC.  AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

NEW ACCOUNTING STANDARDS

The Financial Accounting Standards Board ("FASB") has issued two new standards,
which became effective for reporting periods beginning after December 15, 1997.
SFAS No. 130, Reporting Comprehensive Income, requires additional disclosures
with respect to certain changes in assets and liabilities that previously were
not required to be reported as results of operations for the period.  There was
no impact of this pronouncement on the Company's financial statements.

SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, requires financial and descriptive information with respect to
"operating segments" of an entity based on the way management makes internal
operating decisions. The Company considers its operations to be in one business
segment, biotechnology, therefore there was no impact of this pronouncement on
the Company's financial statements..

The FASB has issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, which becomes effective for years beginning after June 15,
1999.  SFAS No. 133 requires that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
The statement requires that changes in the derivatives fair value be recognized
in earnings unless specific hedge accounting criteria are met.  The Company
will adopt SFAS No. 133 by January 1, 2000.  Because of the Company's minimal
use of derivatives, management does not anticipate that adoption of this
statement will have a material effect on the earnings or financial position of
the Company.

3. SUPPLEMENTAL CASH FLOW INFORMATION


<TABLE>
<CAPTION>
                             (AMOUNTS IN THOUSANDS)
Cash paid for:
                         1998          1997        1996
                       -------       -------    ---------
 <S>                   <C>           <C>        <C>
 Taxes                 $    --       $    --    $     100
 Interest                    9            --           11
                                            
</TABLE>


   For the years ended December 31, 1998, 1997 and 1996, the Company had the
following non-cash financing and investing activities:



<TABLE>
<CAPTION>
                                                                    (AMOUNTS IN THOUSANDS)
                                                                   1998       1997       1996
                                                                 --------  ---------  ---------
     <S>                                                          <C>       <C>        <C>
     Capital lease obligation for the purchase of furniture and   $   50    $    --    $    36
     equipment
</TABLE>



                                      F-11

<PAGE>   35
NOVAVAX, INC.  AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

4. PROPERTY AND EQUIPMENT

Property and equipment, stated at cost, is comprised of the following:


<TABLE>
<CAPTION>
                                                        (AMOUNTS IN THOUSANDS)
                                                      1998               1997
                                                     ------             ------
 <S>                                               <C>                 <C>
 Machinery and equipment                           $    1,249          $   1,021
 Leasehold improvements                                   329                327
 Equipment under capital leases                            87                 36
 Furniture and fixtures                                    46                 44
                                                 -------------      -------------
                                                        1,711              1,428
 Less accumulated depreciation                          (691)              (539)
                                                 -------------      -------------
                                                   $    1,020          $     889
                                                 =============      =============
</TABLE>



During 1996, the disposal of property and equipment having a net book value of
$335,000 was recorded relating to the closing of one of the Novavax
subsidiaries' laboratory.  Depreciation expense of $152,000, $134,000, and
$221,000 was recorded in the years ended December 31, 1998, 1997 and 1996,
respectively.


5. STOCK OPTIONS AND WARRANTS

1995 STOCK OPTION PLAN

Under the Novavax 1995 Stock Option Plan (the "Plan"), options may be granted
to officers, employees and consultants or advisors to Novavax and any present
or future subsidiary to purchase a maximum of 4,400,000 shares of Novavax
common stock. Incentive options, having a maximum term of ten years, can be
granted at no less than 100% of the fair market value of Novavax's stock at the
time of grant and are generally exercisable in cumulative increments over
several years from the date of grant.  Both incentive and non-statutory stock
options may be granted under the Plan.  There is no minimum exercise price for
non-statutory stock options.

1995 DIRECTOR STOCK OPTION PLAN

The 1995 Director Stock Option Plan (the "Director Plan") provides for the
issuance of up to 500,000 shares of Novavax Common Stock.  140,000, 110,000 and
80,000 options were granted under this plan in 1998, 1997 and 1996,
respectively.  The exercise price per share is the fair market value on the
date of grant.  Options granted to eligible directors are exercisable in full
beginning six months after the date of grant and terminate ten years after the
date of grant.





                                      F-12

<PAGE>   36
NOVAVAX, INC.  AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

5. STOCK OPTIONS AND WARRANTS, CONTINUED

Such options cease to be exercisable at the earlier of their expiration or
three years after an eligible director ceases to be a director for any reason.
In the event that an eligible director ceases to be a director on account of
his death, his outstanding options (whether exercisable or not on the date of
death) may be exercised within three years after such date (subject to the
condition that no such option may be exercised after the expiration of ten
years from its date of grant).

   Activity under the 1995 Stock Option Plan and 1995 Director Stock Option
Plan was:

<TABLE>
<CAPTION>

                                                                             1995 STOCK           1995 DIRECTOR
                                                                             OPTION PLAN        STOCK OPTION PLAN
                                                                             -----------        -----------------
 <S>                                                                         <C>                   <C>
 BALANCE, JANUARY 1, 1996                                                        3,048,635               120,000
   Granted at weighted average price of $4.96 per share                            660,000                80,000
   Exercised at weighted average price of $1.61 per share                        (217,774)
   Expired or canceled weighted at average price of $3.84 per share               (18,000)
                                                                              -------------     -----------------
 BALANCE, DECEMBER 31, 1996                                                      3,472,861               200,000

   Granted at weighted average price of $4.18 per share                            300,000               110,000
   Exercised at weighted average price of $2.86 per share                        (190,693)
   Expired or canceled at weighted average price of $3.58 per share              (378,610)
                                                                              -------------     -----------------
 BALANCE, DECEMBER 31, 1997                                                      3,203,558               310,000

   Granted at weighted average price of $4.03 per share                            501,000               140,000
   Exercised at weighted average price of $2.06 per share                        (124,419)
   Expired or canceled at weighted average price of $3.74 per share              (465,892)              (10,000)
                                                                              -------------     -----------------
 BALANCE, DECEMBER 31, 1998                                                      3,114,247              440,000
                                                                              -------------     -----------------

 Price range                                                                 $0.01 to 7.00         $1.94 to 5.81
 Weighted average exercise price                                                  $   3.53             $    3.45
 Exercisable                                                                     2,443,680               440,000
 Available for grant:
    December 31, 1998                                                              702,867                60,000
</TABLE>






                                      F-13

<PAGE>   37
NOVAVAX, INC.  AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


5. STOCK OPTIONS AND WARRANTS, CONTINUED


Information with respect to stock options outstanding at December 31, 1998 is
as follows:




<TABLE>
<CAPTION>
                                                                            WEIGHTED
                                                         NUMBER              AVERAGE              WEIGHTED
                                                           OF               REMAINING             AVERAGE
         PRICE RANGE                                     OPTIONS           CONTRACTUAL            EXERCISE
                                                       OUTSTANDING            LIFE                 PRICE
   -----------------------------------------        ------------------------------------------------------------
<S>                                                        <C>                 <C>                        <C>
    Options issued at below market value:

                    $0.01                                    487,814           7.0                        $0.01
- -----------------------------------------           -----------------   -------------------     ----------------
 Options issued at market value:
                $1.21 to 2.50                                112,811           9.1                        $1.84
                $2.51 to 3.50                              1,040,735           5.9                        $3.13
                $3.51 to 4.50                                972,922           5.9                        $4.00
                $4.51 to 7.00                                939,965           6.5                        $5.49
                                                    -----------------   -------------------     ----------------
                                                           3,554,247           6.3                        $3.52
                                                    =================   ===================     ================
</TABLE>




In connection with its stock option plans, Novavax makes no charges to
operations in connection with stock options granted at the fair market value at
the date of grant.  With respect to options which were granted below fair
market value at the date of grant, the Company records compensation expense for
the difference between the fair market value at the date of grant and the
exercise price, as the options become exercisable. $9,000, $472,000 and
$1,411,000 related to such options has been included as compensation expense in
1998, 1997 and 1996, respectively.





                                      F-14

<PAGE>   38
NOVAVAX, INC.  AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

5. STOCK OPTIONS AND WARRANTS, CONTINUED

The Company has adopted the disclosure-only provisions of SFAS No. 123 as they
pertain to financial statement recognition of compensation expense attributable
to option grants.  As such, no compensation cost has been recognized on the
Company's option plans.  If the Company had elected to recognize the
compensation cost for the 1995 Stock Option Plan and the 1995 Director Stock
Option Plan consistent with SFAS 123, the Company's net loss and loss per share
on a pro forma basis would be:


<TABLE>
<CAPTION>
                                                 1998                   1997                      1996
                                          -----------------         ------------             -------------
 <S>                                     <C>                        <C>                      <C>
 Net loss applicable to common
 stockholders (amounts in thousands):
   As reported                            $       (7,045)           $    (4,547)             $    (5,495)
   Pro forma                              $       (7,983)           $    (5,114)             $    (6,354)
 Basic and diluted loss per share
   As reported                            $         (.57)           $      (.39)             $      (.54)
   Pro forma                              $         (.64)           $      (.44)             $      (.63)
 Risk-free interest rates                            6.0%                5.2%-7.2%                  5.97%
 Expected life in years:
   Employees                                          6.0                    6.0                      6.0
   Directors                                          3.0                    3.0                      3.0
 Dividend yield                                      0.0%                   0.0%                     0.0%
 Volatility:
   Options issued by Novavax after
       November 28, 1995                             105%                    47%                      75%
   Options issued by Novavax prior to
      November 28, 1995                                --                     --                      50%
 Weighted average remaining
    Contractual life in years                         6.7                    6.9                      5.7
 Weighted average fair value at date of
    Grant                                 $          1.21           $       3.41             $       3.11
</TABLE>


NON-EMPLOYEE OPTIONS

The Company has entered into agreements to receive advisory and consulting
services from several individuals, four of whom serve on the Novavax Scientific
Advisory Board.  Non-qualified stock options have been granted to these
individuals under the 1995 Stock Option Plan. Using the Black-Scholes
option-pricing model, charges of $2,000, $40,000 and $30,000 related to these
options have been recorded in the Consolidated Statements of Operations during
1998, 1997 and 1996, respectively.





                                      F-15

<PAGE>   39
NOVAVAX, INC.  AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

5. STOCK OPTIONS AND WARRANTS, CONTINUED

COMMON STOCK WARRANTS

In connection with the October 1996 private stock sale, the Company provided
the underwriter warrants for the purchase of 50,000 shares of common stock, par
value $.01 per share.  The warrants are fully exercisable at $3.75 per share
and expire on October 30, 2001.  In November 1996, in consideration for
services performed by a consultant, the Company also issued warrants for 50,000
shares of common stock, par value $.01 per share. The warrants are exercisable
at $5.00 per share, and are fully vested at December 31, 1998.  These warrants
expire in November 2001. In March 1997, Novavax privately placed 1,200,000
shares of common stock.  As part of the transaction, Novavax also granted
warrants to purchase an additional 600,000 shares at a price of $6.00 per share
and 600,000 shares at a price of $8.00 per share.  The warrants have a
three-year term and expire in March 2000.   As of December 31, 1998, no
warrants had been exercised.  Using the Black-Scholes option-pricing model,
charges related to these warrants of $66,000 in 1997 and 1996 are included in
the Statement of Operations.


6. INCOME TAXES

Deferred tax assets (liabilities) included in the balance sheets consist of the
following:

<TABLE>
<CAPTION>
                                                             (AMOUNTS IN THOUSANDS)

                                                         1998                  1997
                                                    --------------      -------------
 <S>                                                 <C>                <C>
 Net operating losses                                 $     6,880         $    4,888
 Research tax credits                                         826                821
 Disqualifying stock options                                  719                717
 Alt-min tax credit                                            94                 94
 Equipment and furniture                                       30                 18
 Deferred patent costs                                      (614)              (608)
 Accrued vacation pay                                           6                 --
 Other                                                         --                (1)
                                                    --------------      -------------
                                                            7,941              5,929
 Less valuation allowance                                 (7,941)            (5,929)
                                                    --------------      -------------
 Deferred taxes, net                                 $       --           $      --
                                                    ==============      =============
</TABLE>



Realization of net deferred tax assets at the balance sheet dates is dependent
on the Company's ability to generate future taxable income, which is uncertain.
Accordingly, a full valuation allowance was recorded against these assets as of
December 31, 1998 and 1997.





                                      F-16

<PAGE>   40
NOVAVAX, INC.  AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

6. INCOME TAXES, CONTINUED

Novavax has recorded no net provision for income taxes in 1998 and 1997 and
$98,000 in 1996 in the accompanying financial statements due to the uncertainty
regarding ultimate realization of certain net operating losses and other tax
credit carryforwards.

 Federal net operating losses and tax credits available to Novavax are as
follows:



<TABLE>
<CAPTION>
                                                                             (AMOUNTS IN THOUSANDS)
 <S>                                                                              <C>
 Federal net operating losses expiring through the year 2018                      $   17,246
 State net operating losses expiring through the year 2013                            21,991
 Research tax credits expiring through the year 2018                                     827
 Alternative-minimum tax credit (no expiration)                                           94
</TABLE>



7. COMMITMENTS AND CONTINGENCIES

Novavax leases laboratory and office space, machinery and equipment under
capital and non-cancelable operating lease agreements expiring at various dates
through 2006.  Future minimum rental commitments under noncancelable leases as
of December 31, 1998 are as follows:


<TABLE>
<CAPTION>
                                                                  (AMOUNTS IN THOUSANDS)
                                                           OPERATING                   CAPITAL
                        YEAR                                LEASES                     LEASES
                        ----                              ------------                ----------
<S>                                                          <C>                        <C>
                        1999                                   $  177                   $    39
                        2000                                      157                        --
                        2001                                      146                        --
                        2002                                      149                        --
                        2003                                      153                        --
                  Thereafter                                      483                        --
                                                          ------------                ----------
Total lease payments                                           $1,265                        39
                                                          ============
Less: amount representing interest                                                            3
                                                                                      ==========
Present value of net minimum lease payments                                             $    36
                                                                                      ==========
</TABLE>


Aggregate rental expenses approximated $219,000, $279,000 and $183,000 in 1998,
1997 and 1996, respectively.





                                      F-17

<PAGE>   41
NOVAVAX, INC.  AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

7. COMMITMENTS AND CONTINGENCIES , CONTINUED

In October 1996, the Company entered into a 10-year operating lease for office
and laboratory facilities.  In connection with this lease agreement, Novavax is
required to maintain a "Net Asset Value" of $2,000,000.  The term "Net Asset
Value" is defined as the difference between the total assets and the total
liabilities.  If the Net Asset Value falls below $2,000,000, the Company is
required to provide other reasonable financial assurances to the landlord
within five days of the landlord's request.  The financial assurances may be,
but without limitation to, the following: a bond for the landlord's benefit, an
increase in the deposit, or a letter of credit, as reasonably believed
necessary by the landlord or its lenders.

Also in October 1996, the Company entered into a 2-year operating lease for
approximately 2,363 square feet of laboratory space.  This shared space houses
the Company's certified animal facility and laboratories for its biologics
development, which includes the vaccine adjuvant program.  Both leases include
various renewal options, purchase options and escalation clauses.   In October
1998, the Company exercised its option to extend the lease for one year.

8. SIGNIFICANT CUSTOMERS

Novavax's revenue includes amounts earned from arrangements with various
industry partners. In the year ended December 31, 1998, three different
customers each represented in excess of 10% of revenues.  These three customers
accounted for 56%, 25% and 11% of the Company's total revenue for 1998,
compared to 46%, 1% and 43% for the same respective customers for 1997. Revenue
for 1996 was not material.

9. EMPLOYEE BENEFITS

The Company has a defined contribution 401(k) retirement plan (the "Plan"),
pursuant to which employees who have completed ninety days of employment with
the Company as of specified dates may elect to contribute to the Plan, in whole
percentages, up to 15% of their compensation and a maximum contribution of
$10,000 and $9,500, in 1998 and 1997, respectively.  The Company matches 25% of
the first 5% of compensation contributed by the participant and $4.00 per week
of employment during the year.  All contributions by the Company are made
quarterly in the form of the Company's Common Stock and are immediately vested.
The Company has recorded charges to expenses related to the Plan of
approximately $23,000 and $16,000 in 1998 and 1997, respectively.





                                      F-18

<PAGE>   42
NOVAVAX, INC.  AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

10.  FINANCING TRANSACTIONS

In October 1996, the Company received $1,656,000, net of fees and expenses,
from the private placement of 505,000 share of its Common Stock with accredited
institutional investors.

In March 1997, the Company received $5,003,000, net of fees and expenses, from
the private placement of 1,200,000 shares of its Common Stock with an
accredited institutional investor, a principal of which has subsequently become
a director of Novavax.  In connection with this transaction, Novavax granted
warrants to purchase an additional 600,000 shares of the Company's Common Stock
at $6.00 per share and 600,000 shares at $8.00 per share.  These warrants have
a three-year term, expiring in March 2000.

In January, 1998, the Company entered into Subscription Agreements to effectuate
the private placement of 6,500 shares of mandatorily redeemable Series A Custom
Convertible Preferred Stock, $1,000 par value per share (the "Preferred Stock").
The closing occurred on January 28, 1998 (the "Issuance Date") at an aggregate
purchase price of $6,500,000.

The Preferred Stock was convertible into shares of Common Stock at a conversion
price equal to (i) during a period of 90 days following the Issuance Date, 100%
of the average of the two lowest consecutive trade prices of the Common Stock
as reported on the American Stock Exchange for the 25 trading days immediately
preceding the conversion date (the "Two Day Average Trading Price") or (ii)
during the period on and after the date which is 91 days after the Issuance
Date, 94% of the Two Day Average Trading Price.

Prior to the subsequent repurchase of all the outstanding Preferred Stock,
$1,522,000 of the original shares had been converted into 1,043,956 shares of
Common Stock, pursuant to the terms and conditions of the Preferred Stock.  On
October 1, 1998, the Company entered into agreements to repurchase the
remaining Preferred Stock.  This transaction closed on October 16, 1998 and the
Company repurchased the outstanding $4,979,000 of Preferred Stock.  The Company
incurred placement agent and other transaction fees relating to the placement,
conversion and repurchase of the Preferred Stock of $502,000, which are
included in the accompanying financial statements as preferred stock offering
costs.  The terms of the Preferred Stock required the Company to pay the
holders of the Preferred Stock $225,000 in dividends.  This amount was paid in
cash of $179,000 and through the issuance of 32,942 shares of common stock
valued at $46,000.  The preferred stock transactions were:


<TABLE>
    <S>                                            <C>
    Private sale of preferred stock, net           $ 4,415
    Deemed dividend  of preferred stock              1,583
    Conversion of preferred stock                   (1,439)
    Accretion of offering costs                        420
    Repurchase of preferred stock                   (4,979)
                                                   -------
                                                        --
                                                   -------
</TABLE>






                                      F-19

<PAGE>   43
NOVAVAX, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

11. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The consolidated results of operations included in the Company's 1998 Form
10-Qs for the periods ended March 31, June 30 and September 30 have been
restated to account for, in accordance with Topic D-60, the beneficial
conversion feature relating to the Preferred Stock issued in January 1998. In
Topic D-60 the SEC staff addressed the issuance of convertible preferred stock
with a non-detachable conversion feature that is "in the money" at the date of
issue (a "beneficial conversion feature"). Topic D-60 requires the beneficial
conversion feature be recognized and measured by allocating a portion of the
proceeds equal to the intrinsic value of that feature to additional paid-in
capital. For convertible preferred securities, the SEC staff believes that any
discount resulting from an allocation of proceeds to the beneficial conversion
feature is analogous to a dividend and should be recognized as a return to the
preferred stockholders over the minimum period in which the preferred
stockholders can realize the return of the beneficial conversion. The original
amount of $455,000 allocable to the beneficial conversion feature was recorded
as a charge to accumulated deficit by the Company in its March 31, 1998 Form
10-Q was an error. The correct amount is $1.58 million, which has been recorded
to additional paid-in capital and recognized as a charge to accumulated
deficit. The original amount attributable to the beneficial conversion was
recognized as a return to the preferred stockholders in the first quarter of
1998. The restated amount has been recognized over 180 days, the minimum period
in which the preferred stockholders can realize the maximum beneficial
conversion. In addition, with respect to the preferred stock the Company did
not properly accrue the related dividends or accrete the offering costs in the
appropriate quarters during 1998. The restated amounts recognize the dividends
as earned and offering cost have been accreted

Quarterly results of operations (unaudited) for the years ended December 31,
1998 and 1997 are as follows (in thousands, except per share information):


<TABLE>
<CAPTION>
                                                    AS PREVIOUSLY REPORTED
                                                                    SECOND                         FOURTH
1998                                             FIRST QUARTER      QUARTER      THIRD QUARTER     QUARTER
<S>                                                  <C>            <C>               <C>             <C>
Revenues                                              $    205       $    120          $    199        $    157
Loss from operations                                  $  (927)       $(1,278)          $(1,286)        $(1,661)
Net Loss                                              $  (834)       $(1,159)          $(1,181)        $(1,690)
Deemed dividend on preferred stock                    $  (455)       $      -          $      -        $      -
Dividend on preferred stock                           $      -       $      -          $      -        $   (11)
Accretion of preferred stock offering costs           $      -       $      -          $      -        $  (260)
Loss applicable to common stockholders               $ (1,289)      $( 1,159)          $(1,181)        $(1,961)
Basic and diluted loss per share                      $  (.11)       $  (.10)          $  (.10)        $  (.15)
</TABLE>



                                      F-20

<PAGE>   44
NOVAVAX, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

11. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)


<TABLE>
<CAPTION>
                                                            AS RESTATED
                                                                     SECOND                           FOURTH
1998                                               FIRST QUARTER     QUARTER        THIRD QUARTER     QUARTER
<S>                                                    <C>             <C>             <C>              <C>
Revenues                                                $    205        $    120        $    199         $    157
Loss from operations                                    $  (927)        $(1,278)        $(1,286)         $(1,661)
Net Loss                                                $  (834)        $(1,149)        $(1,144)         $(1,690)
Deemed dividend on preferred stock                      $  (479)        $(1,104)        $      -         $      -
Dividend on preferred stock                             $   (55)        $   (81)        $   (78)         $   (11)
Accretion of preferred stock offering costs             $   (41)        $   (61)        $   (58)         $  (260)
Loss applicable to common stockholders                  $(1,409)        $(2,395)        $(1,280)         $(1,961)
Basic and diluted loss per share                        $  (.12)        $  (.20)        $  (.10)         $  (.15)
</TABLE>




<TABLE>
<CAPTION>
                                                                    AS PREVIOUSLY REPORTED
                                                                     SECOND                           FOURTH
1997                                               FIRST QUARTER     QUARTER        THIRD QUARTER     QUARTER
<S>                                                    <C>             <C>             <C>              <C>
Revenues                                                $      -        $    150        $     80         $    290
Loss from operations                                    $(1,244)        $(1,213)        $(1,205)         $(1,129)
Net loss                                                $(1,210)        $(1,134)        $(1,139)         $(1,064)
Basic and diluted net loss per share                    $  (.11)        $  (.10)        $  (.10)         $  (.08)
</TABLE>


The effect of the restatement noted above on the Company's previously reported
quarterly results of operations for the year ended December 31, 1998 is as
follows (in thousands except per share information):


<TABLE>
<CAPTION>
                                                      INCREASE (DECREASE)
                                                                    SECOND                            FOURTH
1998                                             FIRST QUARTER      QUARTER         THIRD QUARTER     QUARTER
<S>                                                     <C>            <C>                 <C>           <C>
Revenues                                                 $    -         $     -             $    -        $    -
Loss from operations                                     $    -         $     -             $    -        $    -
Net loss                                                 $    -         $  (10)             $ (37)        $    -
Deemed dividend on preferred stock                       $   24         $ 1,104             $    -        $    -
Dividend on preferred stock                              $   55         $    81             $   78        $    -
Accretion of preferred stock offering costs              $   41         $    61             $   58        $    -
Loss applicable to common stockholders                   $  120         $ 1,236             $   99        $    -
Basic and diluted loss per share                         $  .01         $   .10             $    -        $    -
</TABLE>



                                      F-21

<PAGE>   45


 
                                 EXHIBIT INDEX

 Exhibit

 3.1        *
 3.2        *
 3.3        *
 4          *
 10.1       *
 10.2       *
 10.3
 10.4       *
 10.5       *
 10.6       *
 10.7       *
 10.8       *
 10.9       *
 10.10      *
 10.11
 10.12
 10.13
 10.14
 10.15
 10.16
 21         *
 23
 27

* These exhibits are incorporated by reference






<PAGE>   1
                                                                    EXHIBIT 10.3

                                  NOVAVAX, INC.

                         AMENDMENT TO STOCK OPTION PLAN


       Pursuant to the resolution of the Board of Directors of Novavax, Inc.
adopted on March 16, 1998, and approved by the stockholders of Novavax, Inc. on
May 14, 1998, Section 4 of the Novavax, Inc. 1995 Stock Option Plan is hereby
amended by deleting the number "4,000,000" and inserting in its place the number
"4,400,000" so that the first sentence of Section 4 now reads in its entirety as
follows:

       "Subject to adjustment as provided in Section 15 below, the maximum
       number of shares of Common Stock which may be issued and sold under the
       Plan is 4,400,000 shares."


                                             NOVAVAX, INC.


                                              /s/ David A. White
                                             -----------------------------------
                                             David A. White, Secretary






<PAGE>   1
                                                                   EXHIBIT 10.11

                    AMENDED AND RESTATED EMPLOYMENT AGREEMENT

       This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Employment
Agreement" or this "Agreement") dated as of July 24, 1998, between Novavax,
Inc., a Delaware corporation having its principal office at 8320 Guilford Road,
Columbia, Maryland 21046 (the "Company") and Brenda Fugagli ("Employee")
residing at 988 Stonington Drive, Arnold, Maryland 21012, amends and restates in
its entirety the Employment Agreement between the Company and Employee dated as
of July 24, 1997.

       The Company and Employee hereby agree as follows:

       1. Employment. The Company hereby employs Employee and Employee hereby
accepts employment upon the terms and conditions hereinafter set forth. (As used
throughout this Agreement, "Company" shall mean and include any and all of its
present and future subsidiaries and any and all subsidiaries of a subsidiary.)
Employee warrants that she is free to enter into and perform this Agreement and
is not subject to any employment, confidentiality, non-competition or other
agreement which prohibits, restricts, or would be breached by either her
acceptance of or her performance under this Agreement.

       2. Duties. Employee shall devote her full business
 time to the
performance of services as Vice President, Treasurer and Chief Financial Officer
or such other senior management services as may from time to time be designated
by the Company's Chief Executive Officer or the Board of Directors. During the
term of this Agreement, Employee's services shall be completely exclusive to the
Company and she shall devote her entire business time, attention and energies to
the business of the Company and the duties to which the Company shall assign her
from time to time. Employee agrees to perform her services faithfully and to the
best of her ability and to carry out the policies and directives of the Company.
Employee agrees to take no action which is in bad faith and prejudicial to the
interests of the Company during her employment hereunder. Employee shall be
based in Columbia, Maryland but she may be required from time to time to perform
duties hereunder for reasonably short periods of time outside said area.

       3. Term. The term of this Agreement shall be one year beginning July 21,
1997 and ending July 20, 1999, provided, however, that this Agreement shall be
automatically extended for periods of one year after such date, unless and until
the Company or Employee shall have delivered to the other written notice of its
or her election to terminate this Agreement as of July 20, 1999, or as of the
end of any such one-year extension period, such notice to be delivered at least
30 days prior to the date of termination (the "Term").

       4. Compensation.

          (a) Base Compensation. For all Employee's services and covenants under
this Agreement, the Company shall pay Employee an initial annual salary of
$135,000, subject to annual review by the Board of Directors of the Company and
payable in accordance with the Company's payroll policy as constituted from time
to time.

          (b) Stock Options. In connection with her employment, Employee has
received stock options to purchase 100,000 shares of the Company's Common Stock,
$.01 par value, at an exercise price equal to the closing price of the Company's
Common Stock on the date of grant. The options are subject to a Incentive Stock
Option Agreement (and, to the extent required by the Internal Revenue Code, a
Non-Statutory Stock Option Agreement) which includes an option vesting schedule
as follows: one-third of the shares on the six-month anniversary of the date of
grant, one-third of the shares on the eighteen-month anniversary of the date of
grant and one-third of the shares on the thirty-month anniversary of the date of
grant. Employee will also be eligible to receive additional stock options
annually, based on job performance, in an amount to be 



<PAGE>   2

determined by the Compensation and Stock Option Committee of the Board of
Directors at the December Board meetings.

          (c) Bonus Program. During the Term, the Employee shall be entitled to
participate in a bonus program, if any, maintained from time to time by the
Company for the benefit of senior executives and other employees of the Company
under which award payments, if any, are based on performance criteria mutually
determined by the Employee and the Company.

       5. Expenses. Employee shall be entitled to reimbursement for reasonable
expenses incurred by Employee in connection with the performance of her duties
hereunder upon receipt of vouchers therefor in accordance with such procedures
as the Company has heretofore or may hereafter establish.

       6. Employee Benefits.

          (a) Employee shall be entitled to three weeks of paid vacation time
during the first year, calculated on a calendar year basis in accordance with
Company policies in effect from time to time. Thereafter, Employee shall be
entitled to three weeks of vacation plus one day for each year of Employee's
employment after the first year, up to a maximum of four weeks per year.

          (b) Employee shall be entitled to the use of a Company automobile
during the Term in accordance with Company policies in effect from time to time.

          (c) Employee shall be entitled to participate in all group insurance
programs, stock option plans or other fringe benefit plans which the Company may
now or hereafter in its sole and absolute discretion make available generally to
its employees, but the Company shall not be required to establish any such
program or plan.

       7. Termination of Employment. Notwithstanding any other provision of this
Agreement, Employee's employment may be terminated:

          (a) By the Company, in the event of Employee's willful failure or
refusal to perform in all material respects the services required of her hereby,
after a specific written warning with regard thereto, which shall include a
statement of corrective actions and a 30 day period for the Employee to respond
and implement such actions, has been given to Employee by the Chief Executive
Officer of the Company or its Board of Directors, her willful failure or refusal
to carry out any proper direction by the Chief Executive Officer or the Board of
Directors with respect to the services to be rendered by her hereunder or the
manner of rendering such services, her willful misconduct in the performance of
her duties hereunder or her commission of a felony involving moral turpitude;

          (b) By the Company, upon 30 days' notice to Employee, if she should be
prevented by illness, accident or other disability (mental or physical) from
discharging her duties hereunder for one or more periods totalling three months
during any twelve-month period;

          (c) By the Company, without cause, or by Employee with "Good Reason"
(as hereinafter defined), provided that if Employee's employment is terminated
pursuant to this Section 7(c), Employee shall be entitled to receive her then
current salary as set forth in Section 4(a) above, but not a performance bonus,
for one year from the date of termination, payable in accordance with the
Company's payroll policy as constituted from time to time, together with any
accrued vacation pay at her then current salary and in the amounts set forth in
Section 4(a) above. The Employee shall be entitled to terminate her employment
for "Good Reason" if her responsibilities and authority are reduced or diluted
in any material way (other than for cause) without her consent or if she is
relocated to another Company office or facility more than 50 miles from
Columbia, Maryland without her consent.


                                       2

<PAGE>   3

          (d) By the event of Employee's death during the term of her
employment, whereupon the Company's obligation to pay further compensation
hereunder shall cease forthwith, except that Employee's legal representative
shall be entitled to receive her fixed compensation for the period up to the
last day of the month in which such death shall have occurred.

       8. All Business to be Property of the Company; Assignment of Intellectual
Property.

          (a) Employee agrees that any and all presently existing business of
the Company and all business developed by her or any other employee of the
Company including without limitation all contracts, fees, commissions,
compensation, records, customer or client lists, agreements and any other
incident of any business developed, earned or carried on by Employee for the
Company is and shall be the exclusive property of the Company, and (where
applicable) shall be payable directly to the Company.

          (b) Employee hereby grants to the Company (without any separate
remuneration or compensation other than that received by her from time to time
in the course of her employment) her entire right, title and interest throughout
the world in and to, all research, information, procedures, developments, all
inventions and improvements whether patentable or nonpatentable, patents and
applications therefor, trademarks and applications therefor, copyrights and
applications therefor, programs, trade secrets, plans, methods, and all other
data and know-how (herein sometimes "Intellectual Property") made, conceived,
developed and/or acquired by her solely or jointly with others during the period
of her employment with the Company, which are either (i)made, conceived,
developed or acquired during regular business hours or on the premises of, or
using properties of, the Company or in the regular scope of Employee's
employment by the Company or (ii) if related to the Company's business, whether
or not made, conceived, developed or acquired during regular business hours or
on the premises of, or using properties of, the Company or in the regular scope
of Employee's employment by the Company.

       9. Confidentiality. Except as necessary in performance of services for
the Company or if required by law and except for such information that becomes
generally available to the public through no fault of Employee, Employee shall
not, either during the period of her employment with the Company or thereafter,
use for her own benefit or disclose to or use for the benefit of any person
outside the Company, any information concerning any Intellectual Property, or
other confidential or proprietary information of the Company, including without
limitation, any of the materials listed in Section 8(a), whether Employee has
such information in her memory or embodied in writing or other tangible form.
All originals and copies of any of the foregoing, however and whenever produced,
shall be the sole property of the Company, not to be removed from the premises
or custody of the Company without in each instance first obtaining authorization
of the Company, which authorization may be revoked by the Company at any time.
Upon the termination of Employee's employment in any manner or for any reason,
Employee shall promptly surrender to the Company all copies of any of the
foregoing, together with any documents, materials, data, information and
equipment belonging to or relating to the Company's business and in her
possession, custody or control, and Employee shall not thereafter retain or
deliver to any other person any of the foregoing or any summary or memorandum
thereof.

       10. Non-Competition Covenant. As the Employee is being granted options to
purchase stock in the Company and as such has a financial interest in the
success of the Company's business and as Employee recognizes that the Company
would be substantially injured by Employee competing with the Company, Employee
agrees and warrants that within the United States, she will not, unless acting
with the Company's express prior written consent, directly or indirectly, while
an employee of the Company and during the Non-Competition Period, as defined
below, own, operate, join, control, participate in, or be connected as an
officer, director, employee, partner, stockholder, consultant, or otherwise
with, any business or entity which competes with the business of the Company (or
its successors or assigns) as such business is now constituted or 


                                       3

<PAGE>   4

as it may be constituted at any time during the term of this Agreement;
provided, however, that Employee may own less than one percent of the equity of
a publicly traded company. The "Non-Competition Period" shall be a period of one
year following termination of employment.

       Employee and the Company are of the belief that the period of time and
the area herein specified are reasonable in view of the nature of the business
in which the Company is engaged and proposes to engage, the state of its
business development and Employee's knowledge of this business. However, if such
period or such area should be adjudged unreasonable in any judicial proceeding,
then the period of time shall be reduced by such number of months or such area
shall be reduced by elimination of such portion of such area, or both, as are
deemed unreasonable, so that this covenant may be enforced in such area and
during such period of time as is adjudged to be reasonable.

       11. Non-Solicitation Agreement. Employee agrees and covenants that she
will not, unless acting with the Company's express written consent, directly or
indirectly, during the term of this Agreement or for a period of one year
thereafter solicit, entice away or interfere with the Company's contractual
relationships with any customer, officer or employee of the Company.

       12. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given upon the earlier of actual
receipt or three days after having been mailed by first class mail, postage
prepaid, or twenty-four hours after having been sent by Federal Express or
similar overnight delivery services, as follows: (a) if to Employee, at the
address shown at the head of this Agreement, or to such other person(s) or
address(es) as Employee shall have furnished to the Company in writing; and (b)
if to the Company, at the address shown at the head of this Agreement,
Attention: Richard F. Maradie, with a copy to David A. White, Esq., White &
McDermott, P.C., 65 William Street, Suite 209, Wellesley, Massachusetts 02481,
or to such other person(s) or address(es) as the Company shall have furnished to
the Employee in writing.

       13. Assignability. In the event that the Company shall be merged with, or
consolidated into, any other corporation, or in the event that it shall sell and
transfer substantially all of its assets to another corporation, the terms of
this Agreement shall inure to the benefit of, and be assumed by, the corporation
resulting from such merger or consolidation, or to which the Company's assets
shall be sold and transferred. This Agreement shall not be assignable by
Employee, but it shall be binding upon, and to the extent provided in Section 7
shall inure to the benefit of, her heirs, executors, administrators and legal
representatives.

       14. Entire Agreement. This Agreement contains the entire agreement
between the Company and Employee with respect to the subject matter hereof and
there have been no oral or other prior agreements of any kind whatsoever as a
condition precedent or inducement to the signing of this Agreement or otherwise
concerning this Agreement or the subject matter hereof.

       15. Equitable Relief. Employee recognizes and agrees that the Company's
remedy at law for any breach of the provisions of Sections 8, 9, 10 or 11 hereof
would be inadequate, and she agrees that for breach of such provisions, the
Company shall, in addition to such other remedies as may be available to it at
law or in equity or as provided in this Agreement, be entitled to injunctive
relief and to enforce its rights by an action for specific performance. Should
Employee engage in any activities prohibited by this Agreement, she agrees to
pay over to the Company all compensation, remuneration or monies or property of
any sort received in connection with such activities; such payment shall not
impair any rights or remedies of the Company or obligations or liabilities of
Employee which such parties may have under this Agreement or applicable law.


                                       4

<PAGE>   5

       16. Amendments. This Agreement may not be amended, nor shall any change,
waiver, modification, consent or discharge be effected except by written
instrument executed by the Company and Employee.

       17. Severability. If any part of any term or provision of this Agreement
shall be held or deemed to be invalid, inoperative or unenforceable to any
extent by a court of competent jurisdiction, such circumstances shall in no way
affect any other term or provision of this Agreement, the application of such
term or provision in any other circumstances, or the validity or enforceability
of this Agreement.

       18. Paragraph Headings. The paragraph headings used in this Agreement are
included solely for convenience and shall not affect, or be used in connection
with, the interpretation hereof.

       19. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the law of the State of Delaware, without regard to
the principles of conflict of law thereof.

       20. Resolution of Disputes. With the exception of proceedings for
equitable relief brought pursuant to Section 15 of this Agreement or any stock
option agreement, any disputes arising under or in connection with this
Agreement or any stock option agreement including, without limitation, any
assertion by any party hereto that the other party has breached any provision of
this Agreement, shall be resolved by arbitration, to be held in Baltimore,
Maryland, in accordance with the rules and procedures of the American
Arbitration Association. All costs, fees and expenses, including reasonable
attorney fees, of any arbitration or equitable relief proceeding in connection
with this Agreement shall be borne by, and be the obligation of, the Company. In
no event shall the Employee be required to reimburse the Company for any of the
costs and expenses incurred by the Company relating to any arbitration. The
obligation of the Company under this Section 20 shall survive the termination
for any reason of the Term (whether such termination is by the Company or by the
Employee).

       21. Indemnification. The Employee shall be entitled to liability and
expense indemnification to the fullest extent permitted by the Company's current
By-laws and Certificate of Incorporation, whether or not the same are
subsequently amended.

       22. Survivorship. The respective rights and obligations of the parties to
this Agreement shall survive any termination of this Agreement or the Employee's
employment hereunder for any reason to the extent necessary to the intended
preservation of such rights and obligations.

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

                                      NOVAVAX, INC.

[SEAL]

                                      By: /s/ Richard F. Maradie,
                                         ---------------------------------------
                                         Richard F. Maradie, President and
                                         Chief Executive Officer



                                      /s/ Brenda Fugagli
                                      ------------------------------------------
                                      Brenda Fugagli


                                       5



<PAGE>   1
                                                                   EXHIBIT 10.12

                              EMPLOYMENT AGREEMENT

       AGREEMENT (the "Employment Agreement" or this "Agreement") effective as
of the 23rd day of February, 1998, between Novavax, Inc., a Delaware corporation
having its principal office at 8320 Guilford Road, Columbia, Maryland 21046 (the
"Company") and Thomas G. Tachovsky ("Employee") residing at 39 Riverside
Terrace, North Easton, Massachusetts 02356.

       The Company and Employee hereby agree as follows:

       1. Employment. The Company hereby employs Employee and Employee hereby
accepts employment upon the terms and conditions hereinafter set forth. (As used
throughout this Agreement, "Company" shall mean and include any and all of its
present and future subsidiaries and any and all subsidiaries of a subsidiary.)
Employee warrants that he is free to enter into and perform this Agreement and
is not subject to any employment, confidentiality, non-competition or other
agreement which prohibits, restricts, or would be breached by either his
acceptance of or his performance under this Agreement.

       2. Duties. Employee shall devote his full business time to the
performance of services as Vice President, Business Development or such other
senior management services as may from time to time
 be designated by the
Company's Chief Executive Officer or the Board of Directors. During the term of
this Agreement, Employee's services shall be completely exclusive to the Company
and he shall devote his entire business time, attention and energies to the
business of the Company and the duties to which the Company shall assign him
from time to time. Employee agrees to perform his services faithfully and to the
best of his ability and to carry out the policies and directives of the Company.
Employee agrees to take no action which is in bad faith and prejudicial to the
interests of the Company during his employment hereunder.

       3. Term. The term of this Agreement shall be one year beginning on the
date hereof and ending February 22, 1999, provided, however, that this Agreement
shall be automatically extended for periods of one year after such date, unless
and until the Company or Employee shall have delivered to the other written
notice of its or his election to terminate this Agreement as of February 22,
1999, or as of the end of any such one-year extension period, such notice to be
delivered at least 30 days prior to the date of termination (the "Term")

       4. Compensation.

          (a) Base Compensation. For all Employee's services and covenants under
this Agreement, the Company shall pay Employee an initial annual salary of
$130,000, subject to annual review by the Board of Directors of the Company and
payable in accordance with the Company's payroll policy as constituted from time
to time.

          (b) Stock Options. Employee shall be entitled to receive stock options
to purchase 75,000 shares of the Company's Common Stock, $.01 par value, at an
exercise price equal to the closing price of the Company's Common Stock on the
date of grant, February 11, 1998. The options will be subject to a Incentive
Stock Option Agreement (and, to the extent required by the Internal Revenue
Code, a Non-Statutory Stock Option Agreement) which shall vest as follows:
one-third of the shares on the six-month anniversary of the date of grant,
one-third of the shares on the eighteen-month anniversary of the date of grant,
and one-third of the shares on the thirty-month anniversary of the date of
grant.

          (c) Bonus Program. During the Term, the Employee shall be entitled to
participate in a bonus program, if any, maintained from time to time by the
Company for the benefit of senior executives and other employees of the Company
under which award payments, if any, are based 



<PAGE>   2

on performance criteria and milestones to be mutually determined by the Employee
and the Company.

       5. Reimbursable Expenses.

          (a) Employee shall be entitled to reimbursement for reasonable
expenses incurred by Employee in connection with the performance of his duties
hereunder upon receipt of vouchers therefor in accordance with such procedures
as the Company has heretofore or may hereafter establish.

          (b) Employee shall be entitled to reimbursement for reasonable
expenses associated with commuting from his residence in Massachusetts to the
Company's office in Columbia, Maryland, including airfare, parking, tolls,
rental cars and up to $200 per month for living accommodations in the Columbia,
Maryland area, provided that Employee makes reasonable efforts to minimize all
such expenses. Employee will be reimbursed for such expenses upon receipt of
vouchers therefor in accordance with such procedures as the Company has
heretofore or may hereafter establish. Employee is responsible for all income
and other applicable taxes due and payable with respect to any reimbursement
received hereunder.

       6. Employee Benefits.

          (a) Employee shall be entitled to three weeks of paid vacation time
during the first year, calculated on a calendar year basis in accordance with
Company policies in effect from time to time. Thereafter, Employee shall be
entitled to three weeks of vacation plus one day for each year of Employee's
employment after the first year, up to a maximum of four weeks per year.

          (b) Employee shall be entitled to participate in all group insurance
programs, stock option plans or other fringe benefit plans which the Company may
now or hereafter in its sole and absolute discretion make available generally to
its employees, but the Company shall not be required to establish any such
program or plan.

       7. Termination of Employment. Notwithstanding any other provision of this
Agreement, Employee's employment may be terminated:

          (a) By the Company, in the event of Employee's willful failure or
refusal to perform in all material respects the services required of him hereby,
after a specific written warning with regard thereto, which shall include a
statement of corrective actions and a 30 day period for the Employee to respond
and implement such actions, has been given to Employee by the Chief Executive
Officer of the Company or its Board of Directors, his willful failure or refusal
to carry out any proper direction by the Chief Executive Officer or the Board of
Directors with respect to the services to be rendered by him hereunder or the
manner of rendering such services, his willful misconduct in the performance of
his duties hereunder or his commission of a felony involving moral turpitude;

          (b) By the Company, upon 30 days' notice to Employee, if he should be
prevented by illness, accident or other disability (mental or physical) from
discharging his duties hereunder for one or more periods totalling three months
during any twelve-month period;

          (c) By the Company, without cause, or by Employee with "Good Reason"
(as hereinafter defined), provided that if Employee's employment is terminated
pursuant to this Section 7(c), Employee shall be entitled to receive his then
current salary as set forth in Section 4(a) above, but not a performance bonus,
for one year from the date of termination, payable in accordance with the
Company's payroll policy as constituted from time to time, together with any
accrued vacation pay at his then current salary and in the amounts set forth in
Section 4(a) above. The Employee 


                                       2

<PAGE>   3

shall be entitled to terminate his employment for "Good Reason" if his
responsibilities and authority are reduced or diluted in any material way (other
than for cause) without his consent or if he is relocated to another Company
office or facility more than 50 miles from Columbia, Maryland without his
consent.

          (d) By the event of Employee's death during the term of his
employment; whereupon the Company's obligation to pay further compensation
hereunder shall cease forthwith, except that Employee's legal representative
shall be entitled to receive his fixed compensation for the period up to the
last day of the month in which such death shall have occurred.

       8. All Business to be Property of the Company; Assignment of Intellectual
Property.

          (a) Employee agrees that any and all presently existing business of
the Company and all business developed by him or any other employee of the
Company including without limitation all contracts, fees, commissions,
compensation, records, customer or client lists, agreements and any other
incident of any business developed, earned or carried on by Employee for the
Company is and shall be the exclusive property of the Company, and (where
applicable) shall be payable directly to the Company.

          (b) Employee hereby grants to the Company (without any separate
remuneration or compensation other than that received by him from time to time
in the course of his employment) his entire right, title and interest throughout
the world in and to, all research, information, procedures, developments, all
inventions and improvements whether patentable or nonpatentable, patents and
applications therefor, trademarks and applications therefor, copyrights and
applications therefor, programs, trade secrets, plans, methods, and all other
data and know-how (herein sometimes "Intellectual Property") made, conceived,
developed and/or acquired by him solely or jointly with others during the period
of his employment with the Company, which are either (i)made, conceived,
developed or acquired during regular business hours or on the premises of, or
using properties of, the Company or in the regular scope of Employee's
employment by the Company or (ii) if related to the Company's business, whether
or not made, conceived, developed or acquired during regular business hours or
on the premises of, or using properties of, the Company or in the regular scope
of Employee's employment by the Company.

       9. Confidentiality. Except as necessary in performance of services for
the Company or if required by law and except for such information that becomes
generally available to the public through no fault of Employee, Employee shall
not, either during the period of his employment with the Company or thereafter,
use for his own benefit or disclose to or use for the benefit of any person
outside the Company, any information concerning any Intellectual Property, or
other confidential or proprietary information of the Company, including without
limitation, any of the materials listed in Section 8(a), whether Employee has
such information in his memory or embodied in writing or other tangible form.
All originals and copies of any of the foregoing, however and whenever produced,
shall be the sole property of the Company, not to be removed from the premises
or custody of the Company without in each instance first obtaining authorization
of the Company, which authorization may be revoked by the Company at any time.
Upon the termination of Employee's employment in any manner or for any reason,
Employee shall promptly surrender to the Company all copies of any of the
foregoing, together with any documents, materials, data, information and
equipment belonging to or relating to the Company's business and in his
possession, custody or control, and Employee shall not thereafter retain or
deliver to any other person any of the foregoing or any summary or memorandum
thereof.

       10. Non-Competition Covenant. As the Employee is being granted options to
purchase stock in the Company and as such has a financial interest in the
success of the Company's business and as Employee recognizes that the Company
would be substantially injured by Employee competing with the Company, Employee
agrees and warrants that within the United States, he will


                                       3

<PAGE>   4

not, unless acting with the Company's express prior written consent, directly or
indirectly, while an employee of the Company and during the Non-Competition
Period, as defined below, own, operate, join, control, participate in, or be
connected as an officer, director, employee, partner, stockholder, consultant,
or otherwise with, any business or entity which competes with the business of
the Company (or its successors or assigns) as such business is now constituted
or as it may be constituted at any time during the term of this Agreement;
provided, however, that Employee may own less than one percent of the equity of
a publicly traded company. The "Non-Competition Period" shall be a period of one
year following termination of employment.

       Employee and the Company are of the belief that the period of time and
the area herein specified are reasonable in view of the nature of the business
in which the Company is engaged and proposes to engage, the state of its
business development and Employee's knowledge of this business. However, if such
period or such area should be adjudged unreasonable in any judicial proceeding,
then the period of time shall be reduced by such number of months or such area
shall be reduced by elimination of such portion of such area, or both, as are
deemed unreasonable, so that this covenant may be enforced in such area and
during such period of time as is adjudged to be reasonable.

       11. Non-Solicitation Agreement. Employee agrees and covenants that he
will not, unless acting with the Company's express written consent, directly or
indirectly, during the term of this Agreement or for a period of one year
thereafter solicit, entice away or interfere with the Company's contractual
relationships with any customer, officer or employee of the Company.

       12. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given upon the earlier of actual
receipt or three days after having been mailed by first class mail, postage
prepaid, or twenty-four hours after having been sent by Federal Express or
similar overnight delivery services, as follows: (a) if to Employee, at the
address shown at the head of this Agreement, or to such other person(s) or
address(es) as Employee shall have furnished to the Company in writing; and (b)
if to the Company, at the address shown at the head of this Agreement,
Attention: Richard F. Maradie, with a copy to David A. White, Esq., White &
McDermott, P.C., 65 William Street, Suite 209, Wellesley, Massachusetts 02181,
or to such other person(s) or address(es) as the Company shall have furnished to
the Employee in writing.

       13. Assignability. In the event that the Company shall be merged with, or
consolidated into, any other corporation, or in the event that it shall sell and
transfer substantially all of its assets to another corporation, the terms of
this Agreement shall inure to the benefit of, and be assumed by, the corporation
resulting from such merger or consolidation, or to which the Company's assets
shall be sold and transferred. This Agreement shall not be assignable by
Employee, but it shall be binding upon, and to the extent provided in Section 7
shall inure to the benefit of, his heirs, executors, administrators and legal
representatives.

       14. Entire Agreement. This Agreement contains the entire agreement
between the Company and Employee with respect to the subject matter hereof and
there have been no oral or other prior agreements of any kind whatsoever as a
condition precedent or inducement to the signing of this Agreement or otherwise
concerning this Agreement or the subject matter hereof.

       15. Equitable Relief. Employee recognizes and agrees that the Company's
remedy at law for any breach of the provisions of Sections 8, 9, 10 or 11 hereof
would be inadequate, and he agrees that for breach of such provisions, the
Company shall, in addition to such other remedies as may be available to it at
law or in equity or as provided in this Agreement, be entitled to injunctive
relief and to enforce its rights by an action for specific performance. Should
Employee engage in any activities prohibited by this Agreement, he agrees to pay
over to the Company all compensation, remuneration or monies or property of any
sort received in connection with such 


                                       4

<PAGE>   5

activities; such payment shall not impair any rights or remedies of the Company
or obligations or liabilities of Employee which such parties may have under this
Agreement or applicable law.

       16. Amendments. This Agreement may not be amended, nor shall any change,
waiver, modification, consent or discharge be effected except by written
instrument executed by the Company and Employee.

       17. Severability. If any part of any term or provision of this Agreement
shall be held or deemed to be invalid, inoperative or unenforceable to any
extent by a court of competent jurisdiction, such circumstances shall in no way
affect any other term or provision of this Agreement, the application of such
term or provision in any other circumstances, or the validity or enforceability
of this Agreement.

       18. Paragraph Headings. The paragraph headings used in this Agreement are
included solely for convenience and shall not affect, or be used in connection
with, the interpretation hereof.

       19. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the law of the State of Delaware, without regard to
the principles of conflict of law thereof.

       20. Resolution of Disputes. With the exception of proceedings for
equitable relief brought pursuant to Section 15 of this Agreement or any stock
option agreement, any disputes arising under or in connection with this
Agreement or any stock option agreement including, without limitation, any
assertion by any party hereto that the other party has breached any provision of
this Agreement, shall be resolved by arbitration, to be held in Baltimore,
Maryland, in accordance with the rules and procedures of the American
Arbitration Association. All costs, fees and expenses, including reasonable
attorney fees, of any arbitration or equitable relief proceeding in connection
with this Agreement shall be borne by, and be the obligation of, the Company. In
no event shall the Employee be required to reimburse the Company for any of the
costs and expenses incurred by the Company relating to any arbitration. The
obligation of the Company under this Section 20 shall survive the termination
for any reason of the Term (whether such termination is by the Company or by the
Employee).

       21. Indemnification. The Employee shall be entitled to liability and
expense indemnification to the fullest extent permitted by the Company's current
By-laws and Certificate of Incorporation, whether or not the same are
subsequently amended.

       22. Survivorship. The respective rights and obligations of the parties to
this Agreement shall survive any termination of this Agreement or the Employee's
employment hereunder for any reason to the extent necessary to the intended
preservation of such rights and obligations.

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

                                   NOVAVAX, INC.

[SEAL

                                   By: /s/ Richard F. Maradie
                                      ---------------------------------------
                                      Richard F. Maradie, President and CEO



                                    /s/ Thomas G. Tachovsky
                                   ------------------------------------------
                                   Thomas G. Tachovsky


                                       5



<PAGE>   1
                                                                   EXHIBIT 10.13

                              EMPLOYMENT AGREEMENT

       AGREEMENT (the "Employment Agreement" or this "Agreement") effective as
of the 5th day of March, 1998, between Novavax, Inc., a Delaware corporation
having its principal office at 8320 Guilford Road, Columbia, Maryland 21046 (the
"Company") and Richard J. Harwood ("Employee") residing at 3219 Adams Court
North, Bensalem, Pennsylvania 19020.

       The Company and Employee hereby agree as follows:

       1. Employment. The Company hereby employs Employee and Employee hereby
accepts employment upon the terms and conditions hereinafter set forth. (As used
throughout this Agreement, "Company" shall mean and include any and all of its
present and future subsidiaries and any and all subsidiaries of a subsidiary.)
Employee warrants that he is free to enter into and perform this Agreement and
is not subject to any employment, confidentiality, non-competition or other
agreement which prohibits, restricts, or would be breached by either his
acceptance of or his performance under this Agreement.

       2. Duties. Employee shall devote his full business time to the
performance of services as Vice President, Pharmaceutical Development or such
other senior management services as may from time to time be
 designated by the
Company's Chief Executive Officer or the Board of Directors. During the term of
this Agreement, Employee's services shall be completely exclusive to the Company
and he shall devote his entire business time, attention and energies to the
business of the Company and the duties to which the Company shall assign him
from time to time. Employee agrees to perform his services faithfully and to the
best of his ability and to carry out the policies and directives of the Company.
Employee agrees to take no action which is in bad faith and prejudicial to the
interests of the Company during his employment hereunder. Employee shall be
based in Columbia, Maryland but he may be required from time to time to perform
duties hereunder for reasonably short periods of time outside said area.

       3. Term. The term of this Agreement shall be one year beginning on the
date hereof and ending March 4, 1999, provided, however, that this Agreement
shall be automatically extended for periods of one year after such date, unless
and until the Company or Employee shall have delivered to the other written
notice of its or his election to terminate this Agreement as of March 4, 1999,
or as of the end of any such one-year extension period, such notice to be
delivered at least 30 days prior to the date of termination (the "Term").

       4. Compensation.

          (a) Base Compensation. For all Employee's services and covenants under
this Agreement, the Company shall pay Employee an initial annual salary of
$140,000, subject to annual review by the Board of Directors of the Company and
payable in accordance with the Company's payroll policy as constituted from time
to time.

          (b) Stock Options. Employee shall be entitled to receive stock options
to purchase 100,000 shares of the Company's Common Stock, $.01 par value, at an
exercise price equal to the closing price of the Company's Common Stock on the
date of grant, February 11, 1998. The options will be subject to a Incentive
Stock Option Agreement (and, to the extent required by the Internal Revenue
Code, a Non-Statutory Stock Option Agreement) which shall vest as follows:
one-third of the shares on the six-month anniversary of the date of grant,
one-third of the shares on the eighteen-month anniversary of the date of grant,
and one-third of the shares on the thirty-month anniversary of the date of
grant.

          (c) Bonus Program. During the Term, the Employee shall be entitled to
participate in a bonus program, if any, maintained from time to time by the
Company for the benefit of senior 



<PAGE>   2

executives and other employees of the Company under which award payments, if
any, are based on performance criteria and milestones to be mutually determined
by the Employee and the Company.

       5. Reimbursable Expenses.

          (a) Employee is expected to relocate to the Columbia, Maryland area
within twelve months of the date hereof, for which the Company will reimburse
Employee for actual moving expenses in an amount not to exceed $30,000. An
advanced sum of $15,000 will be paid to cover all commuting expenses until
Employee is relocated. This $15,000 advance will be deducted from the $30,000
relocation allowance provided to Employee. If Employee's employment with the
Company is terminated for any reason before March 4, 1999, the entire amount of
the $15,000 advance shall be immediately due and payable to Novavax, Inc. and
such amount may be offset against any amount then due and payable to Employee.
The Employee is responsible for all income and other applicable taxes due and
payable with respect to the $30,000 relocation allowance, including the $15,000
advance payment.

          (b) Employee shall be entitled to reimbursement for reasonable
expenses incurred by Employee in connection with the performance of his duties
hereunder upon receipt of vouchers therefor in accordance with such procedures
as the Company has heretofore or may hereafter establish.

       6. Employee Benefits.

          (a) Employee shall be entitled to three weeks of paid vacation time
during the first year, calculated on a calendar year basis in accordance with
Company policies in effect from time to time. Thereafter, Employee shall be
entitled to three weeks of vacation plus one day for each year of Employee's
employment after the first year, up to a maximum of four weeks per year.

          (b) Employee shall be entitled to participate in all group insurance
programs, stock option plans or other fringe benefit plans which the Company may
now or hereafter in its sole and absolute discretion make available generally to
its employees, but the Company shall not be required to establish any such
program or plan.

       7. Termination of Employment. Notwithstanding any other provision of this
Agreement, Employee's employment may be terminated:

          (a) By the Company, in the event of Employee's willful failure or
refusal to perform in all material respects the services required of him hereby,
after a specific written warning with regard thereto, which shall include a
statement of corrective actions and a 30 day period for the Employee to respond
and implement such actions, has been given to Employee by the Chief Executive
Officer of the Company or its Board of Directors, his willful failure or refusal
to carry out any proper direction by the Chief Executive Officer or the Board of
Directors with respect to the services to be rendered by him hereunder or the
manner of rendering such services, his willful misconduct in the performance of
his duties hereunder or his commission of a felony involving moral turpitude;

          (b) By the Company, upon 30 days' notice to Employee, if he should be
prevented by illness, accident or other disability (mental or physical) from
discharging his duties hereunder for one or more periods totalling three months
during any twelve-month period;

          (c) By the Company, without cause, or by Employee with "Good Reason"
(as hereinafter defined), provided that if Employee's employment is terminated
pursuant to this Section 7(c), Employee shall be entitled to receive his then
current salary as set forth in Section 4(a) above, 


                                       2

<PAGE>   3

but not a performance bonus, for one year from the date of termination, payable
in accordance with the Company's payroll policy as constituted from time to
time, together with any accrued vacation pay at his then current salary and in
the amounts set forth in Section 4(a) above. The Employee shall be entitled to
terminate his employment for "Good Reason" if his responsibilities and authority
are reduced or diluted in any material way (other than for cause) without his
consent or if he is relocated to another Company office or facility more than 50
miles from Columbia, Maryland without his consent.

          (d) By the event of Employee's death during the term of his
employment; whereupon the Company's obligation to pay further compensation
hereunder shall cease forthwith, except that Employee's legal representative
shall be entitled to receive his fixed compensation for the period up to the
last day of the month in which such death shall have occurred.

       8. All Business to be Property of the Company; Assignment of Intellectual
Property.

          (a) Employee agrees that any and all presently existing business of
the Company and all business developed by him or any other employee of the
Company including without limitation all contracts, fees, commissions,
compensation, records, customer or client lists, agreements and any other
incident of any business developed, earned or carried on by Employee for the
Company is and shall be the exclusive property of the Company, and (where
applicable) shall be payable directly to the Company.

          (b) Employee hereby grants to the Company (without any separate
remuneration or compensation other than that received by him from time to time
in the course of his employment) his entire right, title and interest throughout
the world in and to, all research, information, procedures, developments, all
inventions and improvements whether patentable or nonpatentable, patents and
applications therefor, trademarks and applications therefor, copyrights and
applications therefor, programs, trade secrets, plans, methods, and all other
data and know-how (herein sometimes "Intellectual Property") made, conceived,
developed and/or acquired by him solely or jointly with others during the period
of his employment with the Company, which are either (i)made, conceived,
developed or acquired during regular business hours or on the premises of, or
using properties of, the Company or in the regular scope of Employee's
employment by the Company or (ii) if related to the Company's business, whether
or not made, conceived, developed or acquired during regular business hours or
on the premises of, or using properties of, the Company or in the regular scope
of Employee's employment by the Company.

       9. Confidentiality. Except as necessary in performance of services for
the Company or if required by law and except for such information that becomes
generally available to the public through no fault of Employee, Employee shall
not, either during the period of his employment with the Company or thereafter,
use for his own benefit or disclose to or use for the benefit of any person
outside the Company, any information concerning any Intellectual Property, or
other confidential or proprietary information of the Company, including without
limitation, any of the materials listed in Section 8(a), whether Employee has
such information in his memory or embodied in writing or other tangible form.
All originals and copies of any of the foregoing, however and whenever produced,
shall be the sole property of the Company, not to be removed from the premises
or custody of the Company without in each instance first obtaining authorization
of the Company, which authorization may be revoked by the Company at any time.
Upon the termination of Employee's employment in any manner or for any reason,
Employee shall promptly surrender to the Company all copies of any of the
foregoing, together with any documents, materials, data, information and
equipment belonging to or relating to the Company's business and in his
possession, custody or control, and Employee shall not thereafter retain or
deliver to any other person any of the foregoing or any summary or memorandum
thereof.


                                       3

<PAGE>   4

       10. Non-Competition Covenant. As the Employee is being granted options to
purchase stock in the Company and as such has a financial interest in the
success of the Company's business and as Employee recognizes that the Company
would be substantially injured by Employee competing with the Company, Employee
agrees and warrants that within the United States, he will not, unless acting
with the Company's express prior written consent, directly or indirectly, while
an employee of the Company and during the Non-Competition Period, as defined
below, own, operate, join, control, participate in, or be connected as an
officer, director, employee, partner, stockholder, consultant, or otherwise
with, any business or entity which competes with the business of the Company (or
its successors or assigns) as such business is now constituted or as it may be
constituted at any time during the term of this Agreement; provided, however,
that Employee may own less than one percent of the equity of a publicly traded
company. The "Non-Competition Period" shall be a period of one year following
termination of employment.

       Employee and the Company are of the belief that the period of time and
the area herein specified are reasonable in view of the nature of the business
in which the Company is engaged and proposes to engage, the state of its
business development and Employee's knowledge of this business. However, if such
period or such area should be adjudged unreasonable in any judicial proceeding,
then the period of time shall be reduced by such number of months or such area
shall be reduced by elimination of such portion of such area, or both, as are
deemed unreasonable, so that this covenant may be enforced in such area and
during such period of time as is adjudged to be reasonable.

       11. Non-Solicitation Agreement. Employee agrees and covenants that he
will not, unless acting with the Company's express written consent, directly or
indirectly, during the term of this Agreement or for a period of one year
thereafter solicit, entice away or interfere with the Company's contractual
relationships with any customer, officer or employee of the Company.

       12. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given upon the earlier of actual
receipt or three days after having been mailed by first class mail, postage
prepaid, or twenty-four hours after having been sent by Federal Express or
similar overnight delivery services, as follows: (a) if to Employee, at the
address shown at the head of this Agreement, or to such other person(s) or
address(es) as Employee shall have furnished to the Company in writing; and (b)
if to the Company, at the address shown at the head of this Agreement,
Attention: Richard F. Maradie, with a copy to David A. White, Esq., White &
McDermott, P.C., 65 William Street, Suite 209, Wellesley, Massachusetts 02181,
or to such other person(s) or address(es) as the Company shall have furnished to
the Employee in writing.

       13. Assignability. In the event that the Company shall be merged with, or
consolidated into, any other corporation, or in the event that it shall sell and
transfer substantially all of its assets to another corporation, the terms of
this Agreement shall inure to the benefit of, and be assumed by, the corporation
resulting from such merger or consolidation, or to which the Company's assets
shall be sold and transferred. This Agreement shall not be assignable by
Employee, but it shall be binding upon, and to the extent provided in Section 7
shall inure to the benefit of, his heirs, executors, administrators and legal
representatives.

       14. Entire Agreement. This Agreement contains the entire agreement
between the Company and Employee with respect to the subject matter hereof and
there have been no oral or other prior agreements of any kind whatsoever as a
condition precedent or inducement to the signing of this Agreement or otherwise
concerning this Agreement or the subject matter hereof.

       15. Equitable Relief. Employee recognizes and agrees that the Company's
remedy at law for any breach of the provisions of Sections 8, 9, 10 or 11 hereof
would be inadequate, and he agrees that for breach of such provisions, the
Company shall, in addition to such other remedies as 


                                       4

<PAGE>   5

may be available to it at law or in equity or as provided in this Agreement, be
entitled to injunctive relief and to enforce its rights by an action for
specific performance. Should Employee engage in any activities prohibited by
this Agreement, he agrees to pay over to the Company all compensation,
remuneration or monies or property of any sort received in connection with such
activities; such payment shall not impair any rights or remedies of the Company
or obligations or liabilities of Employee which such parties may have under this
Agreement or applicable law.

       16. Amendments. This Agreement may not be amended, nor shall any change,
waiver, modification, consent or discharge be effected except by written
instrument executed by the Company and Employee.

       17. Severability. If any part of any term or provision of this Agreement
shall be held or deemed to be invalid, inoperative or unenforceable to any
extent by a court of competent jurisdiction, such circumstances shall in no way
affect any other term or provision of this Agreement, the application of such
term or provision in any other circumstances, or the validity or enforceability
of this Agreement.

       18. Paragraph Headings. The paragraph headings used in this Agreement are
included solely for convenience and shall not affect, or be used in connection
with, the interpretation hereof.

       19. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the law of the State of Delaware, without regard to
the principles of conflict of law thereof.

       20. Resolution of Disputes. With the exception of proceedings for
equitable relief brought pursuant to Section 15 of this Agreement or any stock
option agreement, any disputes arising under or in connection with this
Agreement or any stock option agreement including, without limitation, any
assertion by any party hereto that the other party has breached any provision of
this Agreement, shall be resolved by arbitration, to be held in Baltimore,
Maryland, in accordance with the rules and procedures of the American
Arbitration Association. All costs, fees and expenses, including reasonable
attorney fees, of any arbitration or equitable relief proceeding in connection
with this Agreement shall be borne by, and be the obligation of, the Company. In
no event shall the Employee be required to reimburse the Company for any of the
costs and expenses incurred by the Company relating to any arbitration. The
obligation of the Company under this Section 20 shall survive the termination
for any reason of the Term (whether such termination is by the Company or by the
Employee).

       21. Indemnification. The Employee shall be entitled to liability and
expense indemnification to the fullest extent permitted by the Company's current
By-laws and Certificate of Incorporation, whether or not the same are
subsequently amended.

       22. Survivorship. The respective rights and obligations of the parties to
this Agreement shall survive any termination of this Agreement or the Employee's
employment hereunder for any reason to the extent necessary to the intended
preservation of such rights and obligations.


                                       5

<PAGE>   6

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

                                      NOVAVAX, INC.

[SEAL]

                                      By:  /s/ Richard F. Maradie
                                         ---------------------------------------
                                         Richard F. Maradie, President and CEO



                                        /s/ Richard J. Harwood
                                      ------------------------------------------
                                      Richard J. Harwood


                                       6



<PAGE>   1
                                                                   EXHIBIT 10.14

                              EMPLOYMENT AGREEMENT

       AGREEMENT (the "Employment Agreement" or this "Agreement") dated as of
the 31st day of March, 1998, between Novavax, Inc., a Delaware corporation
having its principal office at 8320 Guilford Road, Columbia, Maryland 21046
(the "Company") and D. Craig Wright, M.D. ("Employee") residing at 14740 Maine
Cove Terrace, Gaithersburg, Maryland 20878.

       The Company and Employee hereby agree as follows:

       1. Employment. The Company hereby employs Employee and Employee hereby
accepts employment upon the terms and conditions hereinafter set forth. (As used
throughout this Agreement, "Company" shall mean and include any and all of its
present and future subsidiaries and any and all subsidiaries of a subsidiary.)
Employee warrants that he is free to enter into and perform this Agreement and
is not subject to any employment, confidentiality, non-competition or other
agreement which would restrict his performance under this Agreement.

       2. Duties. Employee shall devote his full business time to the
performance of services as President and Chief Scientific Officer of the Novavax
Biologics division of the Company or such other senior management services as
may from time to time be designated by
 the Company's Chief Executive Officer or
the Board of Directors. During the term of this Agreement, Employee's services
shall be completely exclusive to the Company and he shall devote his entire
business time, attention and energies to the business of the Company and the
duties to which the Company shall assign him from time to time. Notwithstanding
the foregoing, it is understood and acknowledged by the parties that Employee
may serve on the boards of civic and charitable organizations during his
employment, may serve on the boards of one or two business entities during his
employment, may accept academic appointments to teach in medical schools during
one quarter of each year during his employment and may become a partner in
investment entities (such as a mutual fund or a venture capital fund) provided
that his time devoted to such investment entities is during non-business hours
or on vacation days. Employee agrees to perform his services faithfully and to
the best of his ability and to carry out the policies and directives of the
Company. Employee agrees to take no action which is in bad faith and prejudicial
to the interests of the Company during his employment hereunder.

       3. Term. The term of this Agreement shall begin on the date of this
Agreement and shall end on June 30, 2002, unless earlier terminated in
accordance with Section 7 hereof (the "Term").

       4. Compensation.

          (a) Base Compensation. For all Employee's services and covenants under
this Agreement, the Company shall pay Employee an initial annual salary of
$170,000, subject to annual review by the Board of Directors of the Company and
payable in accordance with the Company's payroll policy as constituted from time
to time.

          (b) Stock Options. Employee shall be entitled to receive stock options
to purchase 60,000 shares of the Company's Common Stock, $.01 par value, at an
exercise price equal to the closing price of the Company's Common Stock on March
11, 1998. The options will be subject to a Incentive Stock Option Agreement
(and, to the extent required by the Internal Revenue Code, a Non-Statutory Stock
Option Agreement) which shall include an option vesting schedule as follows:
one-third of the shares on the six-month anniversary of the date of grant,
one-third of the shares on the eighteen-month anniversary of the date of grant
and one-third of the shares on the thirty-month anniversary of the date of
grant.

          (c) Bonus Program. During each calendar year of the Term, a bonus pool
shall be established consisting of 5% of the revenues received during the prior
year by the Novavax 



<PAGE>   2

Biologics division of the Company, such bonus pool not to exceed $100,000 per
year. Employee shall have exclusive discretion to determine which employees of
the Novavax Biologics division of the Company, including Employee, shall receive
bonuses from such bonus pool and the amounts of such bonuses.

          (d) Patent Assignment Bonus. Employee shall be entitled to receive a
bonus of $5,000 for each patent application in which Employee is listed as the
inventor that is assigned to the Company. If on any such patent application
there is listed more that one inventor, the amount of the bonus shall be reduced
proportionately.

       5. Expenses. Employee shall be entitled to reimbursement for reasonable
expenses incurred by Employee in connection with the performance of his duties
hereunder upon receipt of vouchers therefor in accordance with such procedures
as the Company has heretofore or may hereafter establish.

       6. Employee Benefits.

          (a) Employee shall be entitled to four weeks paid vacation time per
year, calculated on a calendar year basis in accordance with Company policies in
effect from time to time.

          (b) Employee shall be entitled to participate in all group insurance
programs, stock option plans or other fringe benefit plans which the Company may
now or hereafter in its sole and absolute discretion make available generally to
its employees, but the Company shall not be required to establish any such
program or plan.

          (c) Employee shall be entitled to the use of a Company automobile
during the Term in accordance with Company policies in effect from time to time.

       7. Termination of Employment. Notwithstanding any other provision of this
Agreement, Employee's employment may be terminated:

          (a) By the Company, in the event of Employee's willful failure or
refusal to perform in all material respects the services required of him hereby,
after a specific written warning with regard thereto, which shall include a
statement of corrective actions and a 30 day period for the Employee to respond
and implement such actions, has been given to Employee by the Chief Executive
Officer of the Company or its Board of Directors, his willful failure or refusal
to carry out any proper direction by the Chief Executive Officer or the Board of
Directors with respect to the services to be rendered by him hereunder or the
manner of rendering such services, his willful misconduct in the performance of
his duties hereunder or his commission of a felony involving moral turpitude;

          (b) By the Company, upon 30 days' notice to Employee, if he should be
prevented by illness, accident or other disability (mental or physical) from
discharging his duties hereunder for one or more periods totalling three months
during any twelve-month period;

          (c) By the Company, without cause, provided that if Employee's
employment is terminated pursuant to this Section 7(c), Employee shall be
entitled to receive his then current salary as set forth in Section 4(a) above,
but not a performance bonus, for two years from the date of termination, payable
in accordance with the Company's payroll policy as constituted from time to time
together with any accrued vacation pay and in the amounts set forth in Section
4(a) above;

          (d) By Employee with "Good Reason" (as hereinafter defined), provided
that if Employee's employment is terminated pursuant to this Section 7(d),
Employee shall be entitled to receive his then current salary as set forth in
Section 4(a) above, but not a performance bonus, for 


                                       2

<PAGE>   3

one year from the date of termination, payable in accordance with the Company's
payroll policy as constituted from time to time together with any accrued
vacation pay at his then current salary and in the amounts set forth in Section
4(a) above. The Employee shall be entitled to terminate his employment for "Good
Reason" if his responsibilities and authority are reduced or diluted in any
material way (other than for cause) without his consent.

          (e) By the event of Employee's death during the term of his
employment; whereupon the Company's obligation to pay further compensation
hereunder shall cease forthwith, except that Employee's legal representative
shall be entitled to receive his fixed compensation for the period up to the
last day of the month in which such death shall have occurred.

       8. All Business to be Property of the Company; Assignment of Intellectual
Property.

          (a) Employee agrees that any and all presently existing business of
the Company and all business developed by him or any other employee of the
Company including without limitation all contracts, fees, commissions,
compensation, records, customer or client lists, agreements and any other
incident of any business developed, earned or carried on by Employee for the
Company is and shall be the exclusive property of the Company, and (where
applicable) shall be payable directly to the Company.

          (b) Employee hereby grants to the Company (without any separate
remuneration or compensation other than that received by him from time to time
in the course of his employment) his entire right, title and interest throughout
the world in and to, all research, information, procedures, developments, all
inventions and improvements whether patentable or nonpatentable, patents and
applications therefor, trademarks and applications therefor, copyrights and
applications therefor, programs, trade secrets, plans, methods, and all other
data and know-how (herein sometimes "Intellectual Property") made, conceived,
developed and/or acquired by him solely or jointly with others during the period
of his employment with the Company, which are either (i)made, conceived,
developed or acquired during regular business hours or on the premises of, or
using properties of, the Company or in the regular scope of Employee's
employment by the Company or (ii) if related to the Company's business, whether
or not made, conceived, developed or acquired during regular business hours or
on the premises of, or using properties of, the Company or in the regular scope
of Employee's employment by the Company.

          (c) Subject to any prior rights granted to IGEN, Inc., a subsidiary of
IGI, Inc., if the Company decides to abandon an application or patent, for which
Employee was the inventor, the Company will give 30 days' notice to Employee of
its intent to abandon such patent or application and, upon notice from Employee
that he desires to receive an assignment of such patent or application, the
Company shall assign all of its rights in and to such patent or application to
Employee for no additional consideration from the Employee.

       9. Confidentiality. Except as necessary in performance of services for
the Company or if required by law and except for such information that becomes
generally available to the public through no fault of Employee, Employee shall
not, either during the period of his employment with the Company or thereafter,
use for his own benefit or disclose to or use for the benefit of any person
outside the Company, any information concerning any Intellectual Property, or
other confidential or proprietary information of the Company, including without
limitation, any of the materials listed in Section 8(a), whether Employee has
such information in his memory or embodied in writing or other tangible form.
All originals and copies of any of the foregoing, however and whenever produced,
shall be the sole property of the Company, not to be removed from the premises
or custody of the Company without in each instance first obtaining authorization
of the Company, which authorization may be revoked by the Company at any time.
Upon the termination of Employee's employment in any manner or for any reason,
Employee shall promptly surrender to the Company all copies of any of the
foregoing, together with any documents, 


                                       3

<PAGE>   4

materials, data, information and equipment belonging to or relating to the
Company's business and in his possession, custody or control, and Employee shall
not thereafter retain or deliver to any other person any of the foregoing or any
summary or memorandum thereof.

       10. Non-Competition Covenant. As the Employee is a significant
stockholder of the Company and as such has a financial interest in the success
of the Company's business and as Employee recognizes that the Company would be
substantially injured by Employee competing with the Company, Employee agrees
and warrants that within the United States, he will not, unless acting with the
Company's express prior written consent, directly or indirectly, while an
employee of the Company and during the Non-Competition Period, as defined below,
own, operate, join, control, participate in, or be connected as an officer,
director, employee, partner, stockholder, consultant, or otherwise with, any
business or entity which competes with the business of the Company (or its
successors or assigns) as such business is now constituted or as it may be
constituted at any time during the term of this Agreement; provided, however,
that Employee may own less than one percent of the equity of a publicly traded
company. The "Non-Competition Period" shall be a period of two years following
termination of employment.

       Employee and the Company are of the belief that the period of time and
the area herein specified are reasonable in view of the nature of the business
in which the Company is engaged and proposes to engage, the state of its
business development and Employee's knowledge of this business. However, if such
period or such area should be adjudged unreasonable in any judicial proceeding,
then the period of time shall be reduced by such number of months or such area
shall be reduced by elimination of such portion of such area, or both, as are
deemed unreasonable, so that this covenant may be enforced in such area and
during such period of time as is adjudged to be reasonable.

       11. Non-Solicitation Agreement. Employee agrees and covenants that he
will not, unless acting with the Company's express written consent, directly or
indirectly, during the term of this Agreement or for a period of two years
thereafter, solicit, entice away or interfere with the Company's contractual
relationships with any customer, officer or employee of the Company.

       12. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given upon the earlier of actual
receipt or three days after having been mailed by first class mail, postage
prepaid, or twenty-four hours after having been sent by Federal Express or
similar overnight delivery services, as follows: (a) if to Employee, at the
address shown at the head of this Agreement, or to such other person(s) or
address(es) as Employee shall have furnished to the Company in writing; and (b)
if to the Company, at the address shown at the head of this Agreement,
Attention: Richard F. Maradie, with a copy to David A. White, Esq., White &
McDermott, P.C., 65 William Street, Suite 209, Wellesley, Massachusetts 02181,
or to such other person(s) or address(es) as the Company shall have furnished to
the Employee in writing.

       13. Assignability. In the event that the Company shall be merged with, or
consolidated into, any other corporation, or in the event that it shall sell and
transfer substantially all of its assets to another corporation, the terms of
this Agreement shall inure to the benefit of, and be assumed by, the corporation
resulting from such merger or consolidation, or to which the Company's assets
shall be sold and transferred. This Agreement shall not be assignable by
Employee, but it shall be binding upon, and to the extent provided in Section 7
shall inure to the benefit of, his heirs, executors, administrators and legal
representatives.

       14. Entire Agreement. This Agreement contains the entire agreement
between the Company and Employee with respect to the subject matter hereof and
there have been no oral or other prior agreements of any kind whatsoever as a
condition precedent or inducement to the signing of this Agreement or otherwise
concerning this Agreement or the subject matter hereof.


                                       4

<PAGE>   5

       15. Equitable Relief. Employee recognizes and agrees that the Company's
remedy at law for any breach of the provisions of Sections 8, 9, 10 or 11 hereof
would be inadequate, and he agrees that for breach of such provisions, the
Company shall, in addition to such other remedies as may be available to it at
law or in equity or as provided in this Agreement, be entitled to injunctive
relief and to enforce its rights by an action for specific performance. Should
Employee engage in any activities prohibited by this Agreement, he agrees to pay
over to the Company all compensation, remuneration or monies or property of any
sort received in connection with such activities; such payment shall not impair
any rights or remedies of the Company or obligations or liabilities of Employee
which such parties may have under this Agreement or applicable law.

       16. Amendments. This Agreement may not be amended, nor shall any change,
waiver, modification, consent or discharge be effected except by written
instrument executed by the Company and Employee.

       17. Severability. If any part of any term or provision of this Agreement
shall be held or deemed to be invalid, inoperative or unenforceable to any
extent by a court of competent jurisdiction, such circumstances shall in no way
affect any other term or provision of this Agreement, the application of such
term or provision in any other circumstances, or the validity or enforceability
of this Agreement.

       18. Paragraph Headings. The paragraph headings used in this Agreement are
included solely for convenience and shall not affect, or be used in connection
with, the interpretation hereof.

       19. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the law of the State of Delaware, without regard to
the principles of conflict of law thereof.

       20. Resolution of Disputes. With the exception of proceedings for
equitable relief brought pursuant to Section 15 of this Agreement or any stock
option agreement, any disputes arising under or in connection with this
Agreement or any stock option agreement including, without limitation, any
assertion by any party hereto that the other party has breached any provision of
this Agreement, shall be resolved by arbitration, to be held in Baltimore,
Maryland, in accordance with the rules and procedures of the American
Arbitration Association. All costs, fees and expenses, including reasonable
attorney fees, of any arbitration or equitable relief proceeding in connection
with this Agreement shall be borne by, and be the obligation of, the Company. In
no event shall the Employee be required to reimburse the Company for any of the
costs and expenses incurred by the Company relating to any arbitration. The
obligation of the Company under this Section 20 shall survive the termination
for any reason of the Term (whether such termination is by the Company or by the
Employee).

       21. Indemnification. The Employee shall be entitled to liability and
expense indemnification to the fullest extent permitted by the Company's current
By-laws and Certificate of Incorporation, whether or not the same are
subsequently amended.

       22. Survivorship. The respective rights and obligations of the parties to
this Agreement shall survive any termination of this Agreement or the Employee's
employment hereunder for any reason to the extent necessary to the intended
preservation of such rights and obligations.


                                       5

<PAGE>   6

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

                                    NOVAVAX, INC.

[SEAL]

                                    By:   /s/ Richard F. Maradie
                                       ----------------------------------------
                                       Richard F. Maradie, President and CEO



                                      /s/ D. Craig Wright
                                    -------------------------------------------
                                    D. Craig Wright, M.D.


                                       6



<PAGE>   1
                                                                   EXHIBIT 10.15

                              [Novavax Letterhead]

September 10, 1998 (as amended by letter dated September 25, 1998)

Richard F. Maradie
325 Epping Way
Annapolis, MD 21401

Dear Rick:

This letter contains information regarding your separation from employment with
Novavax on September 4, 1998. The Company has agreed to offer you separation
benefits as summarized below.

Separation Pay

You have been paid through September 4, 1998, and you will be paid two weeks in
lieu of notice in your last paycheck. If you sign your separation agreement and
your period of revocation has expired, you will receive 50 weeks of separation
pay, not including the two weeks pay in lieu of notice, at your base
compensation rate.

Medical and Dental Benefits

Your medical, dental and vision coverage with Great West will end on September
30, 1998. Information on extending this coverage through COBRA is attached. Your
COBRA payments will be paid by Novavax for a period of one year from October 1,
1998 through September 30, 1999.

Life Insurance And Disability

Your group term life insurance policy will end on September 30, 1998. You may
convert to an individual policy, as described in the information attached. Your
short and long term disability coverage will
 end as of September 4, 1998.

401(k) Savings Plan

Our records indicate that you are participating in the Employee Savings and
Investment Plan. There is information attached describing your distribution
options for funds currently in your account. Please be aware that you have 60
days from the date you receive this information to chose a distribution option.

Manchester Transition Program

Novavax has negotiated a contract for outplacement support with a Career
Consultant to assist you during the transition process. Your six month program
begins with your first appointment on Monday September 21, 1998 at 9:00 a.m.
Documentation is required.

Legal Services

Novavax has agreed to cover a maximum of $5,000.00 in costs for legal counsel
regarding corporate indemnification. Invoices from the attorney should be
submitted directly to Novavax.

If you have any questions relating to any of the benefits described above,
please contact me.

Sincerely,
/s/ Brenda Fugagli
Brenda Fugagli
Executive Vice President and COO
enclosures



<PAGE>   2

                                  NOVAVAX, INC.

                        SEPARATION AND RELEASE AGREEMENT

Novavax, Inc. and Richard F. Maradie hereby agree the following sets out the
complete agreement and understanding regarding the termination of my employment
with Novavax, Inc. (the "Company" or "Novavax"), which shall be effective
September 4, 1998.

1.     I hereby acknowledge that the separation compensation offered to me has
       been explained. I also acknowledge that I have been given at least
       twenty-one (21) days to review Novavax' Separation and Release Agreement
       ("Agreement") required for my receipt of separation benefits. I certify
       that I have been advised in writing to consult an attorney, and that I
       have had the opportunity to obtain all advice and information deemed
       necessary with respect to the matters covered by this Agreement,
       including the opportunity to consult with legal counsel or anyone else of
       my choosing.

2.     In consideration for the separation benefits I am eligible to receive, as
       described to me by letter dated September 10, 1998 as amended September
       25, 1998:

       (i)     I agree not to take any action which disparages or criticizes the
               Company, its management, or its practices or which disrupts or
               impairs its normal operations, including actions that would
               result in the filing of any claims, lawsuits or charges against
               the Company as a result of anything which has occurred up to and
               including the present date.

       (ii)    I also understand and agree that the Company may terminate my
               continued eligibility for separation benefits and immediately
               recover all benefits previously paid to me if I engage in
               misconduct or otherwise violate Company policy, including, but
               not limited to any action that violates this Agreement or harms
               the reputation of the Company with its customers, suppliers or
               the public; interferes with existing contractual or employment
               relationships with customers, suppliers or Company employees; or
               misappropriates, misuses, or discloses any trade secret or other
               confidential information I learned while actively employed by the
               Company.

       (iii)   In addition, and in further consideration of my eligibility for
               the separation pay and benefits described to me, the sufficiency
               of which consideration I acknowledge, I hereby agree to release
               and discharge the Company, its affiliate corporations, and all of
               its officers, directors, employees, agents and attorneys from any
               and all losses, expenses, claims, rights, entitlements, whether
               known or unknown, I now have or have had or may later claim to
               have had arising out of any alleged violation of my rights while
               employed by the Company, including but not limited to, claims for
               back pay, for reinstatement or for recovery of any losses or
               other damages to me or my property resulting from any alleged
               violation of local, state or federal law, such as (but not
               limited to) claims arising under Title VII of the Civil Rights
               Act of 1964, 42 U.S.C. Section 200 et seq. (prohibiting
               discrimination on account of race, sex, national origin or
               religion); the Age Discrimination in Employment Act of 1967, 29
               U.S.C. Section 621 et seq. (prohibiting discrimination on account
               of age), the Americans with Disabilities Act of 1990, 42 U.S.C.
               Section 12, 101 et seq., (prohibiting discrimination on account
               of disabilities), or any similar federal, state, or local law
               relating to my employment.

       (iv)    I will not hereafter pursue any individual claim against the
               Company, its affiliated corporations, or any of its officers,
               directors, employees or agents, by filing a lawsuit in any local,
               state or federal court for or on account of anything which has
               occurred up to the present time as a result of my previous
               employment.



<PAGE>   3

3.     I understand that I may revoke this Agreement entirely by delivering a
       signed notice of revocation to the Company within seven (7) days after I
       sign this Agreement. In that event, this Agreement will be canceled and
       void, I will not be entitled to any of the separation benefits provided
       by this Agreement, and neither party to this Agreement shall have any
       rights or obligations arising under it.

4.     This Agreement shall be binding upon and shall be for the benefit of the
       Company and myself, as well as our respective heirs, personal
       representatives, successors and assigns.

5.     The provisions of this Agreement shall be severable, and the invalidity
       of any provision shall not affect the validity of other provisions.

6.     I have carefully read this Agreement, I understand its meaning and
       intent, I have not been coerced into signing this Agreement, and I
       voluntarily agree to abide by its terms. I acknowledge that the
       separation benefits described in this Agreement are adequate
       consideration for my signing it and that no other promise or agreement of
       any kind has been made to me by the Company to cause me to execute this
       Agreement and that the only consideration for my execution of this
       Agreement is set forth in this document.


/s/ Richard F. Maradie                                 9/22/98
- --------------------------------                     ----------------------
Employee Signature                                   Dated

For Novavax,
In exchange for the employee's execution of this release, the Company promises
to provide separation benefits as described to him or her.



Witnessed: /s/ Sally Kiernan                         Dated:    9/22/98
          --------------------------                        ---------------

NOTE: This Agreement must be signed, dated and returned to the Company without
any alternation. Any modification or alternation of any terms of this Agreement
will void the Agreement in its entirety.




<PAGE>   1
                                                                   EXHIBIT 10.16

                                 NOVAVAX, INC.

                      STOCK AND WARRANT PURCHASE AGREEMENT

         This Stock and Warrant Purchase Agreement (the "Agreement") is made as
of April 14, 1999 between Novavax, Inc., a Delaware corporation (the
"Company"), and the purchasers who are signatories hereto (the "Purchasers").

         WHEREAS, the Company wishes to sell and the Purchasers desire to
purchase shares of the Company's Common Stock, $.01 par value per share (the
"Shares") and warrants for the purchase of shares of Common Stock exercisable
for a term of three years from the date of issuance at an exercise price equal
of $3.75 per share (the "Warrants"), as such are being offered by the Company
pursuant to a Private Placement Memorandum dated January 25, 1999 (together
with its Appendices, the "Memorandum");

         NOW, THEREFORE, the parties hereto hereby agree as follows:

         1.  Purchase and Sale of Shares and Warrants.

                 1.1  Sale to the Purchasers. Subject to the terms and
conditions hereof, the Company will issue and sell to the Purchasers, and each
Purchaser will purchase from the Company the nearest whole number of Shares
that can be purchased at the Purchase Price (as defined in Section 1.4) on the
Closing Date for the dollar amount of the Purchaser's Investment (a
"Purchaser's Investment
 Amount") as set forth opposite such Purchaser's name on
the signature page hereto.  The obligations of each Purchaser hereunder are
several and not joint and no Purchaser shall be obligated to purchase any
number of Shares in excess of the number that may be acquired for such
Purchaser's Investment Amount.

                 1.2  Warrants.  Each Share sold shall be sold together with a
Warrant, substantially in the form of the Warrant appearing as Exhibit B
hereto, for the purchase of 0.25 additional shares of Common Stock (the
"Warrant Shares") at an exercise price equal of $3.75 per share.

                 1.3  Aggregate Sale.  Pursuant to this Agreement, the Company
shall sell Shares for aggregate Purchaser's Investment Amounts totaling between
$2,000,000 and $6,000,000.

                 1.4  Purchase Price.  The Purchase Price for each Share shall
be $2.50.

         2.  Closing Date and Delivery.

                 2.1  Closing Date.  The closing of the purchase and sale of
the Shares and Warrants hereunder (the "Closing") will be held at 10:00 a.m. on
April 13, 1999 or such later date as the Company may designated by written
notice to all offerees and Purchasers but not later than April 30, 1999 (the
"Closing Date").  The Closing will be conducted at the offices of White &
McDermott, P.C., 65 William Street, Wellesley, Massachusetts 02481.

                 2.2  Delivery. On the Closing Date, the Company shall deliver
the following to each Purchaser:  (a) a stock certificate registered in each
Purchaser's name representing the Shares purchased by such Purchaser, (b) a
Warrant in such Purchaser's name representing the right to acquire 0.25 Warrant
Shares for each Share purchased and (c) an opinion of White & McDermott, P.C.
dated the Closing Date and substantially in the form attached hereto as Exhibit
A.   Before 5:00 p.m. eastern time on April 12, 1999, each Purchaser shall pay
to the Company by certified check or wire transfer the amount of the
Purchaser's Investment Amount as set forth opposite such Purchaser's name on
the signature page hereto.

<PAGE>   2
         3.  Representations and Warranties by the Company. The Company
represents and warrants to the Purchasers as of the date hereof that:

                 3.1  Organization and Standing.  The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has the requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted.  The Company is qualified to do business and is in good standing as
a foreign corporation in every jurisdiction in which the failure to so qualify
would have a material adverse effect on the financial condition or business of
the Company.

                 3.2  Changes.  Except as set forth in the Memorandum, since
September 30, 1998, the Company has not, to the extent material to the Company,
(i) incurred any debts, obligations or liabilities, absolute, accrued or
contingent, whether due or to become due, other than in the ordinary course of
business, (ii) mortgaged, pledged or subjected to lien, charge, security
interest or other encumbrance any of its assets, tangible or intangible, (iii)
waived any debt owed to the Company or its subsidiaries, (iv) satisfied or
discharged any lien, claim or encumbrance or paid any obligation other than in
the ordinary course of business, (v) declared or paid any dividends, or (vi)
entered into any transaction other than in the usual and ordinary course of
business.

                 3.3  Litigation.  There are no legal actions, suits,
arbitrations or other legal, administrative or governmental proceedings pending
or, to the best of the Company's knowledge, threatened against the Company or
its properties, assets or business, and the Company is not aware of any facts
which might result in or form the basis for any such action, suit or other
proceeding, in each case which, if adversely determined, would individually or
in the aggregate have a material adverse effect on the financial condition or
business of the Company.

                 3.4  Compliance with Other Instruments.  Except for such
matters which, either individually or in the aggregate, would not have a
material adverse effect on the financial condition or business of the Company,
the execution and delivery of, and the performance and compliance with, this
Agreement and the Warrants and the transactions contemplated hereby or thereby,
with or without the giving of notice or passage of time, will not (i) result in
any breach of, or constitute a default under, or result in the imposition of
any lien or encumbrance upon any asset or property of the Company pursuant to
any agreement or other instrument to which the Company is a party or by which
it or any of its properties, assets or rights is bound or affected, (ii)
violate the Certificate of Incorporation or Bylaws of the Company, or any law,
rule, regulation, judgment, order or decree, or (iii) except for the
registration of the Shares and the Warrant Shares under the Securities Act of
1933, the listing of the Shares and the Warrant Shares on the American Stock
Exchange, Inc. and such consents, approvals, authorizations, registrations or
qualifications as may be required under the Securities Exchange Act of 1934 and
applicable state securities laws in connection with the purchase of the Shares
and the Warrants by the Purchasers, require any consent, approval,
authorization or order of or filing with any court or governmental agency or
body.

                 3.5  Reports and Financial Statements. The Appendices to the
Memorandum contain true and complete copies of the Company's Form 10-K/A for
the year ended December 31, 1997, the Company's Proxy Statement in connection
with the 1998 Annual Meeting of Stockholders and all Forms 10-Q and 8-K filed
by the Company with the Securities and Exchange Commission (the "SEC") after
January 1, 1998, in each case without exhibits thereto (the "SEC Reports").  As
of their respective filing dates, the Company SEC Reports were prepared in all
material respects in accordance with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Company SEC Reports.  The audited consolidated
financial statements and unaudited interim financial statements of the Company
included in the Company SEC Reports have been prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis (except as may be indicated therein or in the notes thereto) and fairly
present, in all material respects, the financial





                                       2

<PAGE>   3
position of the Company as at the dates thereof and the results of its
operations and cash flows for the periods then ended subject, in the case of
the unaudited interim financial statements, to normal year-end adjustments and
any other adjustments described in such financial statements.

                 3.6  Shares.  The Shares and the Warrant Shares, when issued
and paid for pursuant to the terms of this Agreement or the Warrants, as the
case may be, will be duly and validly authorized, issued and outstanding, fully
paid, nonassessable and free and clear of all pledges, liens, encumbrances and
restrictions (other than those arising from the private placement of the Shares
and the Warrant Shares).

                 3.7  Securities Laws.  Based in part upon the representations
and warranties of the Purchasers contained in Article 4 of this Agreement, the
offer, sale and issuance of the Shares and the Warrants as contemplated by this
Agreement are exempt from the registration requirements of the Securities Act,
and from the registration or qualifications requirements of the laws of any
applicable state or other U.S. jurisdiction.

                 3.8  Capital Stock.  On December 31, 1998, 13,253,188 shares
of the Company's Common Stock were issued and outstanding, no shares of the
Company's Preferred Stock were issued and outstanding, options to purchase
3,554,247 shares of the Company's Common Stock were issued and outstanding and
warrants to purchase 1,300,000 shares of the Company's Common Stock were issued
and outstanding.  All of the outstanding shares of the Company's capital stock
are validly issued, fully paid and nonassessable.  Except as set forth in this
Section 3.8 or the Memorandum, as of December 31, 1998, there are no
outstanding subscriptions, options, warrants, calls, contracts, demands,
commitments, conversion rights or other agreements or arrangements of any
character or nature whatever under which the Company is or may be obligated to
issue its Common Stock, preferred stock or warrants or options to purchase
Common Stock or preferred stock.  No holder of any security of the Company is
entitled to any preemptive or similar rights to purchase any securities of the
Company.

                 3.9  Corporate Acts and Proceedings.  This Agreement has been
duly authorized by the requisite corporate action and has been duly executed
and delivered by an authorized officer of the Company, and is a valid and
binding obligation of the Company, enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and as to limitations on the enforcement of the
remedy of specific performance and other equitable remedies.  The requisite
corporate action necessary to the authorization, reservation, issuance and
delivery of the Shares, the Warrants and the Warrant Shares has been taken by
the Company.  Upon execution and delivery thereof by a duly authorized officer
of the Company, the Warrants will be valid and binding obligations of the
Company, enforceable in accordance with their terms except as such
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and as to limitations on the enforcement of the remedy of
specific performance and other equitable remedies.

                 3.10  No Implied Representations.  All of the Company's
representations and warranties are contained in this Agreement, and no other
representations or warranties by the Company shall be implied.

                 3.11  Filing of Reports.  Since the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, the Company has filed
with the Commission all reports and other material required to be filed by it
therewith pursuant to Section 13, 14 or 15(d) of the Exchange Act and the
Company is eligible to register the offer and resale of the Shares and the
Warrant Shares on a Registration Statement on Form S-3, or a successor form.





                                       3

<PAGE>   4
                 3.12  Closing Date.  All the representations and warranties
made by the Company in this Section 3 shall be true and complete from the date
of this Agreement through the Closing Date and the Company shall provide each
Purchaser, before the Closing, with any documents or information necessary for
such representations and warranties to remain true and complete as of the
Closing Date.

         4.  Representations and Warranties by the Purchasers; Restrictions on
Transfer.

         Each Purchaser severally represents and warrants to, and covenants and
agrees with, the Company, as of the Closing Date, as follows:

                 4.1  Authorization.  Purchaser has all requisite legal and
corporate or other power and capacity and has taken all requisite corporate or
other action to execute and deliver the Agreement, to purchase the Shares and
the Warrants to be purchased by it and to carry out and perform all of its
obligations under the Agreement.  This Agreement constitutes the legal, valid
and binding obligation of Purchaser, enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and as to limitations on the enforcement of the
remedy of specific performance and other equitable remedies.

                 4.2  Accredited Investor Status.  Purchaser is an "Accredited
Investor" as defined in Rule 501 of Regulation D under the Securities Act of
1933.  Purchaser acknowledges receiving and reviewing the Memorandum (including
its Appendices).  Purchaser is aware of the Company's business affairs and
financial condition and has had access to and has acquired sufficient
information about the Company to reach an informed and knowledgeable decision
to acquire the Shares and the Warrants.  Purchaser has such business and
financial experience as is required to give it the capacity to protect its own
interests in connection with the purchase of the Shares and the Warrants and is
able to bear the risks of an investment in the Shares and the Warrants.
Purchaser is not itself a "broker" or a "dealer" as defined in the Exchange Act
of 1934 and is not an "affiliate" of the Company as defined in Rule 405 of the
Securities Act, except as indicated below:

_____________________________________________________________________.

                 4.3  Investment Intent.  Purchaser is purchasing the Shares
and the Warrants for its own account as principal, for investment purposes
only, and not with a present view to or for resale, distribution or
fractionalization thereof, in whole or in part, within the meaning of the
Securities Act. Purchaser understands that its acquisition of the Shares and
the Warrants has not been registered under the Securities Act or registered or
qualified under any state securities law in reliance on specific exemptions
therefrom, which exemptions may depend upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein.  Purchaser has, in
connection with its decision to purchase the number of Shares and the Warrants
set forth in this Agreement, relied solely upon the Memorandum and the
representations and warranties of the Company contained herein.  Purchaser will
not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose
of (or solicit any offers to buy, purchase or otherwise acquire or take a
pledge of) any of the Shares or Warrants, except in compliance with the
Securities Act and the rules and regulations promulgated thereunder.

                 4.4  Registration or Exemption Requirements.  Purchaser
further acknowledges and understands that neither the Shares nor the Warrants
may be resold or otherwise transferred except in a transaction registered under
the Securities Act or unless an exemption from such registration is available.
Purchaser understands that until the Shares and Warrant Shares have been
registered for resale by the Purchasers in compliance with applicable
securities laws, the certificates evidencing the Shares, the Warrants and
Warrant Shares will be imprinted with a legend that prohibits the transfer of
the Shares, Warrants and Warrant Shares unless (a) such transaction is





                                       4

<PAGE>   5
registered or such registration is not required, and (b) if the transfer is
pursuant to an exemption from registration an opinion reasonably satisfactory
to the Company of counsel reasonably satisfactory to the Company is obtained to
the effect that the transaction is not required to be registered or is so
exempt.

                 4.5  Restriction on Sales, Short Sales and Hedging
Transactions.  Purchaser represents and agrees that during the period from the
date Purchaser was first contacted with respect to the potential purchase of
Shares and Warrants through the date of the execution of the Agreement by
Purchaser, Purchaser did not, and from such date through the effectiveness of
the Registration Statement (as defined below), Purchaser will not, directly or
indirectly, execute or effect or cause to be executed or effected any short
sale, option or equity swap transactions in or with respect to the Company's
Common Stock or any other derivative security transaction the purpose or effect
of which is to hedge or transfer to a third party all or any part of the risk
of loss associated with the ownership of the Shares and Warrants by the
Purchaser.

                 4.6  No Legal, Tax Or Investment Advice.  Purchaser
understands that nothing in the Memorandum, this Agreement or any other
materials presented to Purchaser in connection with the purchase and sale of
the Shares and the Warrants constitutes legal, tax or investment advice.
Purchaser has consulted such legal, tax and investment advisors as it, in its
sole discretion, has deemed necessary or appropriate in connection with its
purchase of the Shares and the Warrants.

                 4.7  Closing Date.  All the representations and warranties
made by each Purchaser in this Section 4 shall be true and complete from the
date of this Agreement through the Closing Date and each Purchaser shall
provide the Company, before the Closing, with any documents or information
necessary for such representations and warranties to remain true and complete
as of the Closing Date.

         5.  Covenants

                 5.1  Registration Requirements.

                          (a) Within 14 days after the Closing Date, the
Company shall prepare and file a registration statement (the "Registration
Statement") with the SEC under the Securities Act to register the offer and
resale of the Shares and the Warrant Shares by the Purchasers (together, the
"Registrable Securities"), and shall use its reasonable efforts to secure the
effectiveness of such Registration Statement as soon as reasonably practicable
thereafter.

                          (b) The Company shall pay all Registration Expenses
(as defined below) in connection with any registration, qualification or
compliance hereunder and each Purchaser shall pay all Selling Expenses (as
defined below) and other expenses that are not Registration Expenses relating
to the Registrable Securities resold by such Purchaser.  "Registration
Expenses" shall mean all expenses, except for Selling Expenses, incurred by the
Company in complying with the registration provisions herein described,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration.  "Selling Expenses" shall
mean all selling commissions, underwriting fees and stock transfer taxes
applicable to the Registrable Securities and all fees and disbursements of
counsel for any Purchaser.

                          (c) If the Registration Statement becomes effective,
the Company will use its best efforts to:  (i) keep such registration effective
until the second anniversary of the date such Registration Statement is
declared effective (or, in the case of Warrant Shares, the first anniversary of
the date of issuance of such Warrant Shares, but in any event not later than
the fourth anniversary of the date such Registration Statement is declared
effective); provided, however, if Rule 144 is





                                       5

<PAGE>   6
amended so that the longest period that Rule 144 restricts the manner in which
privately placed securities may be sold is a period shorter than two years,
then the period required by this clause shall be reduced to (A) such shorter
period, (B) such date as all of the Registrable Securities have been resold, or
(C) such date as all Registrable Securities may be sold pursuant to Rule 144
(or any successor rule); (ii) except as provided in Section 5.1(e), prepare and
file with the SEC such amendments and supplements to the Registration Statement
and the prospectus used in connection with the Registration Statement as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by the Registration Statement; (iii)
furnish such number of prospectuses and other documents incident thereto,
including any amendment of or supplement to the prospectus, as Purchaser from
time to time may reasonably request; (iv) cause the Shares and the Warrant
Shares to be listed on the American Stock Exchange or any securities exchange
or quoted on each quotation service on which the Common Stock of the Company is
then listed or quoted; (v) provide a transfer agent and registrar for all
securities registered pursuant to the Registration Statement and a CUSIP number
for all such securities; and (vi) file the documents required of the Company
and otherwise use its best efforts to maintain requisite blue sky clearance in
all U.S. jurisdictions in which any of the Shares are originally sold and all
other states specified in writing by Purchaser, provided, however, that the
Company shall not be required to qualify to do business in any state in which
it is not now so qualified or has not so consented.

                          (d) The Company shall furnish to each Purchaser upon
request a reasonable number of copies of a supplement to or an amendment of the
prospectus used in connection with the Registration Statement as may be
necessary to facilitate the public sale or other disposition of all or any of
the Registrable Securities held by Purchaser.

                          (e) At any time after the effective date of the
Registration Statement, the Company may by notice to the Purchasers refuse to
permit any Purchaser to resell any Registrable Securities pursuant to the
Registration Statement for a period not to exceed 30 days; provided, however,
that to exercise this right, the Company must deliver a certificate in writing
to each Purchaser to the effect that a delay in such sale is necessary because
a sale pursuant to such Registration Statement in its then-current form would
not be in the best interests of the Company and its shareholders due to
disclosure obligations of the Company. Notwithstanding the foregoing, the
Company shall not be entitled to exercise its right to block such sales more
than three times during the effectiveness of the Registration Statement nor
more than one time in any four month period.  Each Purchaser hereby covenants
and agrees that it will not sell any Registrable Securities pursuant to the
Registration Statement during such blockage periods as set forth in this
Section 5.1(e).

                          (f) In the event that the Registration Statement has
not become effective on or before 120 days from the Closing Date, the Company
shall issue to each Purchaser an additional warrant to purchase the nearest
whole number of shares equal to five percent of the number of Shares purchased
by such Purchaser on the Closing Date, at an exercise price of $3.75 per share. 
Similarly, in the event that the Registration Statement has not become
effective on or before the dates which are 150 days from the Closing Date, 180
days from the Closing Date, 210 days from the Closing Date and 240 days from
the Closing Date, the Company shall issue to each Purchaser on each such
occasion an additional warrant to purchase the nearest whole number of shares
equal to five percent of the number of Shares purchased by such Purchaser on
the Closing Date, at an exercise price of $3.75 per share.  The maximum number
of shares purchasable pursuant to warrants issued pursuant to this Agreement
shall be equal to twenty five percent of the number of Shares purchased by each
such Purchaser on the Closing Date.





                                       6

<PAGE>   7
                 5.2.  Indemnification and Contribution

                          (a) The Company agrees to indemnify and hold harmless
each Purchaser from and against any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) to which such Purchaser may become
subject (under the Securities Act or otherwise) insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of, or are based upon, any untrue statement or alleged untrue statement of a
material fact or omission to state a material fact in the Registration
Statement on the effective date thereof, or arise out of any failure by the
Company to fulfill any undertaking included in the Registration Statement, and
the Company will, as incurred, reimburse such Purchaser for any legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim; provided, however, that the Company shall
not be liable in any such case to the extent that such loss, claim, damage or
liability arises out of, or is based upon (i) an untrue statement or omission
in such Registration Statement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Purchaser
specifically for use in preparation of the Registration Statement or (ii) an
untrue statement or omission in any prospectus that is corrected in any
subsequent prospectus, or supplement or amendment thereto, that was delivered
to a Purchaser prior to the pertinent sale or sales by such Purchaser and not
delivered by such Purchaser to the entity to which it made such sale(s) prior
to such sale(s).

                          (b) Each Purchaser, severally and not jointly, agrees
to indemnify and hold harmless the Company from and against any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) to which
the Company may become subject (under the Securities Act or otherwise) insofar
as such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon (i) an untrue statement or
alleged untrue statement of a material fact or omission to state a material
fact in the Registration Statement in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such Purchaser
specifically for use in preparation of the Registration Statement (provided,
however, that no Purchaser shall be liable in any such case for any untrue
statement or omission in any prospectus which statement has been corrected, in
writing, by such Purchaser and delivered to the Company at least 14 days before
the sale from which such loss occurred), or (ii) an untrue statement or
omission in any prospectus that is corrected in any subsequent prospectus or
supplement or amendment thereto, that was delivered to a Purchaser prior to the
pertinent sale or sales by such Purchaser and not delivered by such Purchaser
to the entity to which it made such sale(s) prior to such sale(s), and each
Purchaser, severally and not jointly, will, as incurred, reimburse the Company
for any legal or other expenses reasonably incurred in investigating, defending
or preparing to defend any such action, proceeding or claim.  Notwithstanding
the foregoing, no Purchaser shall be liable, or required to indemnify the
Company, in the aggregate, for any amount in excess of the net proceeds
received by the Purchaser from the sale of the Shares or the Warrant Shares, as
the case may be, to which such loss, claim, damage or liability relates.

                          (c) Promptly after receipt by any indemnified person
of a notice of a claim or the beginning of any action in respect of which
indemnity is to be sought against an indemnifying person pursuant to this
Section 5.2, such indemnified person shall notify the indemnifying person in
writing of such claim or of the commencement of such action and, subject to the
provisions hereinafter stated, in case any such action shall be brought against
an indemnified person, the indemnifying person shall be entitled to participate
therein, and, to the extent that it shall wish, to assume the defense thereof,
with counsel reasonably satisfactory to the indemnified person.  After notice
from the indemnifying person to such indemnified person of the indemnifying
person's election to assume the defense thereof, the indemnifying person shall
not be liable to such indemnified person for any legal expenses subsequently
incurred by such indemnified person in connection with the defense thereof;
provided, however, that if there exists or shall exist a conflict of interest
that would make it inappropriate in the reasonable judgment of the indemnified
person for the same counsel to represent both the indemnified person and such
indemnifying person or





                                       7

<PAGE>   8
any affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
further, that the indemnifying person shall not be obligated to assume the
expenses of more than one counsel to represent all indemnified persons.

                          (d) If the indemnification provided for in this
Section 5.2 is unavailable to or insufficient to hold harmless an indemnified
party under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages
or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and
the Purchasers on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations.  The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company on the one hand or a Purchaser on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.  The Company and the Purchasers agree that
it would not be just and equitable if contribution pursuant to this subsection
(d) were determined by pro rata allocation (even if the Purchasers were treated
as one entity for such purpose) or by any other method of allocation which does
not take into account the equitable considerations referred to above in this
subsection (d).  The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim.  Notwithstanding the
provisions of this subsection (d), no Purchaser shall be required to contribute
in the aggregate any amount in excess of the net proceeds received by the
Purchaser from the sale of the Shares or Warrant Shares, as the case may be, to
which such loss, claim, damage or liability relates.  No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.  The Purchaser's obligations in
this subsection (d) to contribute are several in proportion to their sales of
Shares or Warrant Shares, as the case may be, to which such loss relates and
not joint.

                          (e) The obligations of the Company and the Purchasers
under this Section 5.2 shall be in addition to any liability which the Company
and the respective Purchasers may otherwise have and shall extend, upon the
same terms and conditions, to directors, officers, employees and agents of the
Company and the Purchasers and to each person, if any, who controls the Company
or any Purchaser within the meaning of the Securities Act and the Exchange Act.

         6.  Restrictions on Transferability of Shares and Warrants; Compliance
with Securities Act.

                 6.1  Restrictions on Transferability.  Neither the Shares nor
the Warrants shall be transferable in the absence of registration under the
Securities Act or an exemption therefrom or in the absence of compliance with
any term of the Agreement.

                 6.2  Restrictive Legend.  Until and unless the Shares and
Warrant Shares are registered under the Securities Act, each certificate
representing the Shares and the Warrant Shares and each Warrant shall bear
substantially the following legend (in addition to any legends required under
applicable state securities laws):


         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
         INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE
         SECURITIES ACT OF 1933, AS AMENDED OR THE SECURI-





                                       8

<PAGE>   9
         TIES LAWS OF ANY STATE.  THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED
         IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.

                 6.3  Transfer of Shares and Warrants.  Each Purchaser hereby
covenants with the Company not to make any sale of the Shares or Warrants
except either (a) a sale of Shares or Warrant Shares in accordance with the
Registration Statement, in which case the Purchaser covenants to comply with
the requirement of delivering a current prospectus, (b) a sale of Shares or
Warrant Shares in accordance with Rule 144, in which case the Purchaser
covenants to comply with Rule 144 and to deliver such additional certificates
and documents as the Company may reasonably request, or (c) subject to such
conditions as the Company in its sole discretion shall impose, in accordance
with another exemption from the registration requirements of the Securities
Act.  The legend set forth in Section 6.2 will be removed from a certificate
representing Shares or the Warrant Shares, as the case may be, following and in
connection with any sale of Shares or Warrant Shares pursuant to subsection (a)
or (b) hereof but not in connection with any sale of Shares or Warrant Shares
pursuant to subsection (c) hereof.

         7.  Miscellaneous.

                 7.1  Survival of Representations and Warranties.  All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement, any investigation at any time made by or on behalf
of the Purchaser, and the sale and purchase of the Shares and the Warrants and
payment therefor.

                 7.2  Headings.  The headings of the sections of this Agreement
have been inserted for convenience of reference only and do not constitute a
part of this Agreement.

                 7.3  Choice of Law.  It is the intention of the parties that
the internal laws of the State of Delaware, without regard to the body of law
controlling conflicts of law, shall govern the validity of this Agreement, the
construction of its terms and the interpretation of the rights and duties of
the parties set forth herein.

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

                 7.5  Assignment; Parties in Interest.  This Agreement may not
be pledged, assigned or otherwise transferred by the Purchasers except by
operation of law but all the terms and provision of this Agreement shall be
binding upon and inure to the benefit of and be enforced by the successors in
interest of the parties hereto.  Each successive transferee of the Purchasers
shall be deemed to be a Purchaser for the purpose of Section 5 of this
Agreement.



            [The remainder of this page is intentionally left blank]





                                       9

<PAGE>   10
         IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized representatives as
of the day and year first above written.

                                                   NOVAVAX, INC.



                                                   By: /s/ Mitchell J. Kelly
                                                      --------------------------
                                                   Title: President and CEO
                                                         -----------------------


<TABLE>
<CAPTION>
No. of Shares    Investment Amount             Signature of Purchaser                    Date
- -------------    -----------------             ----------------------                    ----
<S>              <C>                           <C>                                       <C>
                 $                             
- -------------     ---------------              -----------------------                   -------
                 (No. Shares x $2.50)          Name:
                                               Address:
</TABLE>






                                       10

<PAGE>   11
                                   EXHIBIT A

         FORM OF OPINION OF COUNSEL TO BE DELIVERED TO THE PURCHASERS ON
CLOSING DATE.

         The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.

         The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as now being conducted and
to enter into and perform its obligations under this Agreement.

         The Shares and the Warrant Shares have been duly authorized for
issuance and sale to the Purchasers pursuant to this Agreement and the Warrants
and, when issued and delivered by the Company pursuant to this Agreement or the
Warrants against payment of the consideration set forth herein, will be validly
issued and fully paid and non-assessable.

         This Agreement and each Warrant have been duly authorized, executed
and delivered by the Company and are enforceable in accordance with their terms
except as such enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and as to limitations on the enforcement of the
remedy of specific performance and other equitable remedies.

         Except for such matters which, either individually or in the
aggregate, would not have a material adverse effect on the financial condition
or business of the Company, the execution, delivery and performance of this
Agreement and the consummation of the transactions in the manner contemplated
herein and the compliance by the Company with its obligations hereunder and
thereunder will not (i) conflict with or constitute a breach of, or default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to, any
contract or other instrument or agreement to which the Company is a party or by
which it or any of them may be bound, or to which any of the property or assets
of the Company is subject, (ii) result in any violation of the provisions of
the charter or bylaws of the Company or any applicable statute, law, rule,
regulation, ordinance, code, or any applicable decision or order of any court
or regulatory agency exercising appropriate jurisdiction, and (iii) except for
the registration of the Shares and the Warrant Shares under the Securities Act
and the listing of the Shares and the Warrant Shares on the American Stock
Exchange, Inc. and such consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and applicable state
securities laws in connection with the purchase of the Shares or the Warrants
by the Purchasers, no consents, approval, authorization or order of or filing
with any court or governmental agency or body is required for the execution,
delivery and performance of the Agreement by the Company and the consummation
of the transactions contemplated by the Agreement.

<PAGE>   12
                                  EXHIBIT B -

                           FORM OF WARRANT AGREEMENT

<PAGE>   13
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED EXCEPT AS PERMITTED HEREIN AND PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND SUCH
REGISTRATION OR QUALIFICATION AS MAY BE REQUIRED UNDER THE SECURITIES LAWS OF
ANY STATE OR (ii) AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH
SECURITIES LAWS.

            NONTRANSFERABLE WARRANT FOR THE PURCHASE OF COMMON STOCK

No. [99-1]                                                      _________ Shares

         THIS CERTIFIES that, for receipt in hand of $50.00 and other value
received, __________________________ (the "Holder") is entitled to subscribe
for and purchase from Novavax, Inc., a Delaware corporation (the "Company"),
upon the terms and conditions set forth herein, at any time or from time to
time after the date hereof, and before 5:00 p.m. on April __, 2002, eastern
time (the "Exercise Period"), _________ fully paid and nonassessable shares
(the "Warrant Shares") of the Company's Common Stock, par value $.01 per share
(the "Common Stock"), at a price of $3.75 per share (the "Exercise Price").
This Warrant may not be sold, transferred, assigned or hypothecated, in whole
or in part, at any time except by will or the laws of descent and distribution
(a "Permitted Transfer").  As used herein the term "this Warrant" shall mean
and include this Warrant and any Warrant or Warrants hereafter issued as a
consequence of the exercise of this Warrant in whole or in part.

         The number of shares of Common Stock issuable at the Exercise Price
may be adjusted from time to time as hereinafter set forth.

         1.  Exercise of Warrant.

                 (a) Manner of Exercise.  This Warrant may be exercised in
whole or in part at any time or from time to time during the Exercise Period by
the surrender of this Warrant (with the form of election to exercise attached
hereto duly executed) to the Company at its office at 8320 Guilford Road,
Columbia, MD 21046 or such other place as is designated in writing by the
Company, together with a certified or bank cashier's check payable to the order
of the Company in an amount equal to the Exercise Price multiplied by the
number of Warrant Shares for which this Warrant is being exercised.

                 (b) Delivery of Stock Certificates, etc.  Upon each exercise
of the Holder's rights to purchase the Warrant Shares granted pursuant to this
Warrant, as reissued from time to time, the Holder shall be deemed to be the
holder of record of the Warrant Shares issuable upon such exercise,
notwithstanding that the transfer books of the Company shall then be closed or
certificates representing such Warrant Shares shall not then have been actually
delivered to the Holder.  As soon as practicable after each such exercise of
this Warrant, the Company shall issue and deliver to the Holder a certificate
or certificates for the Warrant Shares issuable upon such exercise, registered
in the name of the Holder or its designee.  If this Warrant should be exercised
in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute, and deliver a new Warrant evidencing the right of the
Holder to purchase the balance of the Warrant Shares (or portions thereof)
subject to purchase hereunder.

                 (c) Warrant Register.  Any Warrants issued upon a Permitted
Transfer or exercise in part of this Warrant (together with this Warrant, the
"Warrants") shall be numbered and shall be registered in a warrant register as
they are issued.  The Company shall be entitled to treat the

<PAGE>   14
registered holder or his permitted transferees of any Warrant on the Warrant
Register as the owner in fact thereof for all purposes and shall not be bound
to recognize any equitable or other claim to or interest in such Warrant on the
part of any other person, and shall not be liable for any registration or
transfer of such Warrants which are registered or to be registered in the name
of a fiduciary or the nominee of a fiduciary.  Such Warrants shall be
transferable on the books of the Company only upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment, or authority to
transfer.  In all cases of transfer by an attorney, executor, administrator,
guardian, or other legal representative, duly authenticated evidence of his or
its authority shall be produced.  Upon any registration of transfer, the
Company shall deliver a new Warrant or Warrants to the person entitled thereto.
The Warrants may be exchanged, at the option of the Holder thereof, for another
Warrant, or other Warrants of different denominations, of like tenor, and
representing in the aggregate the right to purchase a like number of Warrant
Shares (or portions thereof) upon surrender to the Company or its duly
authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause Warrants to be transferred on its books to any person if,
in the written opinion of counsel to the Company, such transfer does not comply
with the provisions of the Securities Act of 1933, as amended (the "Securities
Act"), and the rules and regulations thereunder.

         2.  Authorized Stock; Listing.  The Company shall at all times reserve
and keep available out of its authorized and unissued Common Stock, solely for
the purpose of providing for the exercise of the rights to purchase all Warrant
Shares granted pursuant to this Warrant, such number of shares of Common Stock
as shall, from time to time, be sufficient therefor.  The Company covenants
that all shares of Common Stock issuable upon exercise of this Warrant, upon
receipt by the Company of the purchase price therefor, shall be validly issued,
fully paid, nonassessable, and free of preemptive or similar contractual rights
to subscribe for shares of Common Stock.  The Company shall list and maintain
the listing of the Warrant Shares on the American Stock Exchange (or other
national securities exchange upon which the Common Stock is listed).

         3.  Adjustments.

                 (a) Stock Dividends, Splits, Combinations, etc.  In case the
Company shall at any time after the date of this Warrant (i) declare a
dividend, or make a distribution, on the outstanding Common Stock in shares of
its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine
the outstanding Common Stock into a smaller number of shares, or (iv) issue any
shares of its capital stock by reclassification of the Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), then, in each case, the Exercise
Price, and the number and kind of shares of Common Stock receivable upon
exercise of this Warrant, in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination, or
reclassification, shall be proportionately adjusted so that the Holder after
such time shall be entitled to receive the aggregate number and kind of shares
which if such Warrant had been exercised immediately prior to such time, it
would have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification.  Such adjustment
shall be made successively whenever any event listed above shall occur.

                 (b) Sale of Stock, Options, Rights, etc.  In case the Company
shall issue, or fix a record date for the issuance of, shares of Common Stock
or rights, options, or warrants entitling the holders thereof to subscribe for
or purchase Common Stock (or securities convertible into or exchangeable for
Common Stock) at a price per share (or having a conversion price per share, if
a security convertible into or exchangeable for Common Stock) less than the
Current Market Price, (as defined in Section 3(d)) the Exercise Price shall be
reduced to a price determined by multiplying the then current Exercise Price by
a fraction (i) numerator of which shall be (a) the number of shares of Common
Stock outstanding immediately prior to such issue or sale plus (b) the number





                                       2

<PAGE>   15
of shares of Common Stock which the aggregate consideration received by the
Company in connection with such issuance or sale would purchase at the Current
Market Price, and (ii) the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such issuance or sale.  Such
adjustment shall become effective at the close of business on such date of
issuance or record date; provided, however, that, to the extent the shares of
Common Stock (or securities convertible into or exchangeable for shares of
Common Stock) are not delivered, the Exercise Price shall be readjusted after
the expiration of such rights, options, or warrants (but only with respect to
Warrants exercised after such expiration), to the Exercise Price which would
then be in effect had the adjustments made upon the issuance of such rights,
options, or warrants been made upon the basis of delivery of only the number of
shares of Common Stock (or securities convertible into or exchangeable for
shares of Common Stock) actually issued.  No readjustment shall have the effect
of increasing the Exercise Price by an amount greater than the original
adjustment.  In case part or all of any consideration may be paid in a form
other than cash, the value of such consideration shall be as determined in good
faith by the Board of Directors of the Company, whose determination shall be
conclusive absent manifest error.  Shares of Common Stock owned by or held for
the account of the Company or any majority-owned subsidiary shall not be deemed
outstanding for the purpose of any such computation.

                 In the case of the issuance of options to purchase or rights
to subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, the following provisions shall
apply:

                          (i) the shares of Common Stock deliverable upon
exercise of such options to purchase or rights to subscribe for Common Stock
shall be deemed to have been issued at the time such options or rights were
issued and for a consideration equal to the consideration, if any, received by
the Company upon the issuance of such options or rights plus the purchase price
provided in such options or rights for the Common Stock covered thereby;

                          (ii) the shares of Common Stock deliverable upon
conversion of or in exchange for any such convertible or exchangeable
securities or upon the exercise of options to purchase or rights to subscribe
for such convertible or exchangeable securities and subsequent conversion or
exchange thereof shall be deemed to have been issued at the time such
securities were issued or such options or rights were issued and for a
consideration equal to the consideration, if any, received by the Company for
any such securities and related options or rights (excluding any cash received
on account of accrued interest or accrued dividends), plus the additional
consideration, if any, to be received by the Company upon the conversion or
exchange of such securities or the exercise of any related options or rights;

                          (iii) in the event of any increase in the
consideration payable to the Company upon exercise of such options or rights or
upon conversion of or in exchange for such convertible or exchangeable
securities, including, but not limited to, a change resulting from any
antidilution provisions thereof, the Exercise Price with respect to the
adjustment which was made upon the issuance of such options, rights or
securities, and any subsequent adjustments based thereon, shall be recomputed
to reflect such change, but no further adjustment shall be made for the actual
issuance of Common Stock or any payment of such consideration upon the exercise
of any such options or rights or the conversion or exchange of such securities.

                 (c) Extraordinary Dividends.  In case the Company shall
distribute to all holders of Common Stock (including any such distribution made
to the stockholders of the Company in connection with a consolidation or merger
in which the Company is the continuing corporation) evidences of its
indebtedness or assets (other than dividends payable in shares of Common
Stock), or subscription rights, options, or warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase
shares of Common Stock (excluding those referred to in





                                       3

<PAGE>   16
paragraph 3(b) hereof), then, in each case, the Exercise Price shall be
adjusted by multiplying the Exercise Price in effect immediately prior to the
record date for the determination of stockholders entitled to receive such
distribution by a fraction, the numerator of which shall be the current
Exercise Price per share of Common Stock on such record date, less the fair
market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be conclusive absent manifest error) of the
portion of the evidences of indebtedness or assets so to be distributed, or of
such subscription rights, options, or warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock, applicable to one share, and the denominator of which shall be such
current Exercise Price per share of Common Stock.  Such adjustment shall be
made whenever any such distribution is made, and shall become effective on the
date of such distribution retroactive to the record date for the determination
of stockholders entitled to receive such distribution.

                 (d) Current Market Price.  For the purpose of any computation
under this paragraph 3, Current Market Price per share of Common Stock on any
date shall be deemed to be the average daily closing price for the ten trading
days immediately preceding such day.  The closing price for any day shall be
the last reported sales price regular way or, in case no such reported sale
takes place on such day, the closing bid price regular way, in either case on
the principal national securities exchange (including the NASDAQ National
Market System) on which the Common Stock is listed or admitted to trading or,
if the Common Stock is not listed or admitted to trading on any national
securities exchange, the highest reported bid price as furnished by the
National Association of Securities Dealers, Inc. through NASDAQ or a similar
organization if NASDAQ is no longer reporting such information.  If on any such
date the Common Stock is not quoted by any such organization, the fair value of
a share of Common Stock on such date, as determined in good faith by the Board
of Directors of the Company, whose determination shall be conclusive absent
manifest error, shall be used.

                 (e) De Minimis Exception.  No adjustment in the Exercise Price
shall be required if such adjustment is less than $.05; provided, however, that
any adjustments which by reason of this paragraph 3 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this paragraph 3 shall be made to the nearest cent or to
the nearest one-thousandth of a share, as the case may be.

                 (f) Date of Issuance.  In any case in which this paragraph 3
shall require that an adjustment in the Exercise Price be made effective as of
a record date for a specified event, the Company may elect to defer, until the
occurrence of such event, issuing to any Holder who exercised any Warrants
after such record date, the shares of Common Stock, if any, issuable upon such
exercise over and above the shares of Common Stock, if any, issuable upon such
exercise on the basis of the Exercise Price in effect prior to such adjustment.

                 (g) Adjustment to Number of Shares.  Upon each adjustment of
the Exercise Price as a result of the calculations made in paragraphs 3(a),
3(b), or 3(c) hereof, each Warrant outstanding prior to the making of the
adjustment in the Exercise Price shall thereafter evidence the right to
purchase, at the adjusted Exercise Price, that number of shares (calculated to
the nearest thousandth) obtained by dividing (i) the product obtained by
multiplying the number of shares purchasable upon exercise of a Warrant prior
to adjustment of the number of shares by the Exercise Price in effect prior to
adjustment of the Exercise Price by (ii) the Exercise Price in effect after
such adjustment of the Exercise Price.

                 (h) Notice of Adjustments.  Whenever there shall be an
adjustment as provided in this paragraph 3, the Company shall promptly cause
written notice thereof to be sent by overnight courier, to the Holder, at its
principal office, which notice shall be accompanied by an officer's certificate
setting forth the number of Warrant Shares purchasable upon the exercise of
this Warrant and the Exercise Price after such adjustment and setting forth a
brief statement of the facts requiring





                                       4

<PAGE>   17
such adjustment and the computation thereof, which officer's certificate shall
be conclusive evidence of the correctness of any such adjustment absent any
error.

                 (i) No Fractional Shares.  The Company shall not be required
to issue fractions of shares of Common Stock or other capital stock of the
Company upon the exercise of the Warrants.  If any fraction of a share would be
issuable on the exercise of any Warrant (or specified portions thereof), the
Company shall purchase such fraction for an amount in cash equal to the same
fraction of the Current Market Price on the date of exercise of the Warrant.

                 (j) Employee Stock Options; Outstanding Options/Warrants.  No
adjustment in the Exercise Price shall be required in the case of the issuance
of shares under or grant by the Company of options to employees, directors or
consultants of the Company under any stock option plan of the Company approved
by the stockholders of the Company, or the issuance of any and all shares of
Common Stock upon exercise of such options or upon the issuance of shares under
any options, warrants, or convertible securities outstanding as of the date
hereof.

         4.  Business Combinations.

                 (a) In case the Company, after the date hereof (i) shall
consolidate with or merge into any other person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (ii) shall permit
any other person to consolidate with or merge into the Company and the Company
shall be the continuing or surviving person but, in connection with such
consolidation or merger, the Common Stock or other securities of the Company
which the Holder of this Warrant may receive upon exercise ("Other Securities")
shall be changed into or exchanged for stock or other securities of any other
person or cash or any other property, or (iii) shall transfer all or
substantially all of its properties or assets to any other person, or (iv)
shall effect a capital reorganization or reclassification of the Common Stock
or Other Securities (other than a capital reorganization or reclassification
resulting in the issue of additional shares of Common Stock for which
adjustment in the Exercise Price is provided in paragraph 3(a) or 3(b)), then,
and in the case of each such transaction, proper provision shall be made so
that, upon the basis and the terms and in the manner provided in this Warrant,
the Holder of this Warrant, upon the exercise hereof at any time after the
consummation of such transaction, shall be entitled to receive (at the
aggregate Exercise Price in effect at the time of such consummation for all
Common Stock or Other Securities issuable upon such exercise immediately prior
to such consummation), in lieu of the Common Stock or Other Securities issuable
upon such exercise prior to such consummation, the highest amount of
securities, cash or other property to which such Holder would actually have
been entitled as a shareholder upon such consummation if such Holder had
exercised the rights represented by this Warrant immediately prior thereto,
subject to adjustments (subsequent to such consummation) as nearly equivalent
as possible to the adjustments provided in paragraph 3; provided that if a
purchase, tender or exchange offer shall have been made to and accepted by the
holders of more than 50% of the outstanding shares of Common Stock, and if the
Holder of this Warrant so designates in a notice given to the Company on or
before the date immediately preceding the date of the consummation of such
transaction, the Holder of this Warrant shall be entitled to receive the
highest amount of securities, cash or other property to which such Holder would
actually have been entitled as a shareholder if the Holder of this Warrant had
exercised such Warrant prior to the expiration of such purchase, tender or
exchange offer and accepted such offer, less the Exercise Price that would have
been payable upon such exercise, subject to adjustments (from and after the
consummation of such purchase, tender or exchange offer) as nearly equivalent
as possible to the adjustments provided for in paragraph 3.

                 (b) In the event of any transaction described in clauses (i)
through (iv) of paragraph 4(a), each person (other than the Company) which may
be required to deliver any stock, securities, cash or property upon the
exercise of this Warrant as provided herein shall assume in writing (i) the
obligations of the Company under this Warrant (and if the Company shall survive
the





                                       5

<PAGE>   18
consummation of such transaction, such assumption shall be in addition to, and
shall not release the Company from, any continuing obligations of the Company
under this Warrant) and (ii) the obligation to deliver to such Holder such
shares of stock, securities, cash or property as, in accordance with the
foregoing provisions of this paragraph 4, such Holder may be entitled to
receive.

         5.  Notice.  In case at any time the Company shall propose:

                 (a) to pay any dividend or make any distribution on shares of
Common Stock in shares of Common Stock or make any other distribution to all
holders of Common Stock; or

                 (b) to issue any rights, warrants, or other securities to all
holders of Common Stock entitling them to purchase any additional shares of
Common Stock or any other rights, warrants, or other securities; or

                 (c) to effect any consolidation, merger, sale, reorganization
or reclassification described in paragraph 4; or

                 (d) to effect any liquidation, dissolution, or winding-up of
the Company; or

                 (e) to take any other action which would cause an adjustment
to the Exercise Price;

then, and in any one or more of such cases, the Company shall give written
notice thereof, by overnight courier, to the Holder at the Holder's address as
it shall appear in the Warrant Register, mailed at least 20 business days prior
to (i) the date as of which the holders of record of shares of Common Stock to
be entitled to receive any such dividend, distribution, rights, warrants, or
other securities are to be determined, (ii) the date on which any such
consolidation, merger, sale, reorganization or reclassification, liquidation,
dissolution, or winding-up is expected to become effective, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares or warrants for securities or other property,
if any, deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up; or (iii) the earlier of the date or record date in
respect of such action which would require an adjustment to the Exercise Price.

         6.  Taxes.  The issuance of any shares or warrants or other securities
upon the exercise of this Warrant, and the delivery of certificates or other
instruments representing such shares, warrants, or other securities, shall be
made without charge to the Holder for any tax or other charge in respect of
such issuance.  The Company shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of any certificate in a name other than that of the Holder and the
Company shall not be required to issue or deliver any such certificate unless
and until the person or persons requesting the issue thereof shall have paid to
the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.

         7.  Certain Rights.

                 (a) In case any event shall occur as to which the provisions
of paragraph 3 or 4 are not strictly applicable but the failure to make any
adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles of such
paragraphs, then in each such case, the Exercise Price and/or the amount of any
Common Stock, cash, securities or other assets to be delivered upon exercise of
this Warrant shall be adjusted on a basis consistent with the essential intent
and principles established in paragraph 3 or 4, as necessary to preserve the
purchase rights represented by this Warrant.





                                       6

<PAGE>   19
                 (b) The Company will not, by amendment of its Certificate of
Incorporation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of
this Warrant.

         8.  Legend.  The securities issued upon exercise of the Warrants shall
be subject to a stop transfer order and the certificate or certificates
evidencing any such securities shall bear the following legend:

THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAW AND SUCH REGISTRATION OR QUALIFICATION AS MAY BE REQUIRED
UNDER THE SECURITIES LAWS OF ANY STATE OR (ii) AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT OR SUCH SECURITIES LAWS.

         9.  Miscellaneous.

                 (a) Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction, or mutilation of any Warrant (and upon surrender
of any Warrant if mutilated), and upon reimbursement of the Company's
reasonable incidental expenses, the Company shall execute and deliver to the
Holder thereof a new Warrant of like date, tenor, and denomination.

                 (b) The Holder of any Warrant shall not have, solely on
account of such status, any rights of a stockholder of the Company, either at
law or in equity, or to any notice of meetings of stockholders or of any other
proceedings of the Company, except as provided in this Warrant.

                 (c) This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.

                 (d) This Warrant shall be construed in accordance with the
laws of the State of Delaware, without giving effect to conflict of laws.

         IN WITNESS WHEREOF, the undersigned have set their hand to this
Warrant Agreement as of April ___, 1999.

                                  NOVAVAX, INC.



                                  By:
                                     ---------------------------------------
                                     Mitchell J. Kelly,  Interim President &
                                     Chief Executive Officer


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


                                       7

<PAGE>   20
To:  Novavax, Inc.
     8320 Guilford Road
     Columbia, MD  21046
     Attention:  President


                              ELECTION TO EXERCISE

         The undersigned hereby exercises its or his rights to purchase Warrant
Shares covered by the within Warrant and tenders payment herewith in the amount
of $__________ in accordance with the terms thereof, and requests that
certificates for such securities be issued in the name of, and delivered to:

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

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

- --------------------------------------------------------------------------------
     (Print Name, Address and Social Security or Tax Identification Number)

and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the
Warrant Shares covered by the within Warrant be registered in the name of, and
delivered to, the undersigned at the address stated below.



Dated:                                     Name:
      -----------------------------------       ---------------------------
                                                   (Print)


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

                                      -------------------------------------
                                      (Signature)








<PAGE>   1
                                                                      Exhibit 23

                       CONSENT OF INDEPENDENT ACCOUNTANTS

     We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-80277, 33-80279 and 333-3384) and in the
Prospectus constituting part of the Registration Statements on Form S-3 (Nos.
333-14305, 333-5367, 333-22685 and 333-46409) of Novavax, Inc. of our report
dated March 17, 1999 except for the fourth paragraph of Note 1 which is as of
April 14, 1999, appearing on page F-2 of this Annual Report on Form 10-K.


PRICEWATERHOUSECOOPERS LLP


McLean, Virginia
April 14, 1999





<TABLE> <S> <C>

<ARTICLE> 5
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-END>                               DEC-31-1998
<CASH>                                           1,031
<SECURITIES>                                         0
<RECEIVABLES>                                      138
<ALLOWANCES>                                         0
<INVENTORY>                                          0
<CURRENT-ASSETS>                                 1,207
<PP&E>                                           1,711
<DEPRECIATION>                                   (691)
<TOTAL-ASSETS>                                   3,819
<CURRENT-LIABILITIES>                              858
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                           133
<OTHER-SE>                                           0
<TOTAL-LIABILITY-AND-EQUITY>                     3,819
<SALES>                                            681
<TOTAL-REVENUES>                                   681
<CGS>                                                0
<TOTAL-COSTS>                                    5,833
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                   0
<INCOME-PRETAX>                                (4,817)
<INCOME-TAX>                                         0
<INCOME-CONTINUING>                            (4,817)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                (2,228)
<CHANGES>                                            0
<NET-INCOME>                                   (7,045)
<EPS-PRIMARY>                                   (0.57)
<EPS-DILUTED>                                   (0.57)
        

</TABLE>