SECURITY AGREEMENT

            THIS SECURITY AGREEMENT (this "Agreement"),  dated as of November 1,
1999,  is made between  NORTH  AMERICAN  VACCINE,  INC., a Canadian  corporation
("Debtor") and BANK OF AMERICA,  N.A., a national banking association  ("Secured
Party".)

            Debtor and Secured Party hereby agree as follows:

            SECTION 1 DEFINITIONS; INTERPRETATION.
                      ---------------------------

            (a) All  capitalized  terms used in this Agreement and not otherwise
defined  herein shall have the meanings  assigned to them in the Loan  Agreement
(as defined below.)

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

            "COLLATERAL" has the meaning set forth in Section 2.

            "DOCUMENTS" means   the  Loan  Agreement  and all  other  documents,
agreements and instruments delivered to Secured Party in connection therewith or
with the Obligations.

            "EVENT OF DEFAULT" has the meaning set forth in Section 8.

            "LIEN" means any mortgage, deed of trust, pledge, security interest,
assignment,  deposit arrangement,  charge or encumbrance, lien, or other type of
preferential arrangement.

            "LOAN  AGREEMENT" means  the letter loan agreement dated November 1,
1999,  between  Secured  Party and Debtor,  pursuant to which  Secured Party has
agreed to make certain revolving loans to Debtor.

            "OBLIGATIONS" means    the   indebtedness,   liabilities  and  other
obligations  of  Debtor  to  Secured  Party  under or in  connection  with  this
Agreement and the other Documents,  including,  without limitation,  all amounts
owing under the Loan  Agreement  and all fees and all other  amounts  payable by
Debtor to Secured  Party  thereunder  or in  connection  therewith,  whether now
existing or  hereafter  arising,  and whether due or to become due,  absolute or
contingent, liquidated or unliquidated, determined or undetermined.

            "PERMITTED LIEN" means (i) any Lien in favor of Secured Party;  (ii)
any Lien  that is  subordinate  to the Lien on the  Collateral  created  by this
Agreement;  (iii) any Lien in favor of Baxter  International,  Inc.  under  that
certain  reimbursement  agreement  dated as of November 1, 1999;  (iv) any Liens
existing as of the date hereof and disclosed in writing to Secured Party.



<PAGE>


            "PERSON" means  an  individual,   corporation,   partnership,  joint
venture, trust, unincorporated  organization,  governmental agency or authority,
or any other entity of whatever nature.

            "UCC" means the Uniform  Commercial  Code as the same may, from time
to time, be in effect in the State of New York; PROVIDED,  HOWEVER, in the event
that, by reason of mandatory  provisions  of law, any or all of the  attachment,
perfection or priority of the security interest in any Collateral is governed by
the Uniform  Commercial Code as in effect in a jurisdiction other than the State
of New York, the term "UCC" shall mean the Uniform  Commercial Code as in effect
in such other  jurisdiction  for purposes of the provisions  hereof  relating to
such attachment,  perfection or priority and for purposes of definitions related
to such provisions.

            (c) Where applicable and except as otherwise  defined herein,  terms
used in this Agreement shall have the meanings assigned to them in the UCC.

            (d) In this  Agreement,  (i) the  meaning of defined  terms shall be
equally  applicable to both the singular and plural forms of the terms  defined;
and (ii) the captions and headings  are for  convenience  of reference  only and
shall not affect the construction of this Agreement.

            SECTION 2 SECURITY INTEREST.

            (a) As security for the payment and performance of the  Obligations,
Debtor hereby pledges, assigns, transfers, hypothecates and sets over to Secured
Party,  and  hereby  grants to  Secured  Party a  security  interest  in, all of
Debtor's  right,  title and  interest in, to and under the  following  property,
wherever  located  and whether now  existing or owned or  hereafter  acquired or
arising (collectively, the "Collateral"):

            (i)    all accounts,  accounts receivable,  contract rights,  rights
to payment, chattel paper, letters of credit, documents,  securities,  money and
instruments,  and  investment  property,  whether  held  directly  or  through a
securities  intermediary,  and other  obligations  of any kind  owed to  Debtor,
however evidenced;

            (ii)   all deposits and deposit  accounts  with  any  bank,  savings
and loan  association,  credit  union or like  organization,  and all  funds and
amounts therein, and whether or not held in trust, or in custody or safekeeping,
or otherwise restricted or designated for a particular purpose;

            (iii)  all inventory,  including, without limitation, all materials,
raw materials, parts, components, work in progress, finished goods, merchandise,
supplies,  and all  other  goods  which  are  held  for  sale,  lease  or  other
disposition  or  furnished  under  contracts  of service or consumed in Debtor's
business, including, without limitation, those held for display or demonstration
or out on lease or consignment;

            (iv)   all equipment,  including, without limitation, all machinery,
furniture,  furnishings,  fixtures,  trade fixtures,  tools, parts and supplies,
automobiles, trucks, tractors and other vehicles, appliances, computer and other


                                       2.
<PAGE>


electronic  data  processing  equipment  and other  office  equipment,  computer
programs and related data processing software, and all additions, substitutions,
replacements,  parts,  accessories,  and  accessions  to and for the  foregoing;
excluding,  however,  the  equipment  collateral  identified  in the  agreements
referred to in Schedule 4(c)(ii) of the Loan Agreement;

            (v)    all  general  intangibles  and  other  personal  property  of
Debtor, including, without limitation, (A) all tax and other refunds, rebates or
credits of every kind and nature to which Debtor is now or hereafter  may become
entitled;  (B) all  intellectual  property and all rights therein of any type or
description,  including,  without  limitation,  all inventions and  discoveries,
patents and patent  applications,  copyrights  and  applications  for  copyright
(together with the underlying  works of authorship)  whether or not  registered,
together with any renewals and extensions thereof, trademarks, service marks and
trade names, and applications for registration of such trademarks, service marks
and trade names, trade secrets,  trade dress, trade styles,  logos, other source
of  business  identifiers,   mask-works,   mask-work  registrations,   mask-work
applications,  software,  confidential  and  proprietary  information,  customer
lists, other license rights, advertising materials,  operating manuals, methods,
processes,   know-how,   algorithms,   formulae,   databases,   quality  control
procedures, product, service and technical specifications, operating, production
and quality control manuals, sales literature,  drawings,  specifications,  blue
prints,  descriptions,  inventions,  name  plates and  catalogs,  and the entire
goodwill of or  associated  with the  businesses  now or hereafter  conducted by
Debtor connected with and symbolized by any of the aforementioned properties and
assets,  and all  licenses  relating to any of the  foregoing,  all  reissuance,
continuations  and  continuations-in-part  of the  foregoing,  all other  rights
derived from or associated  with the  foregoing,  including the right to sue and
recover  for past  infringement,  and all  income  and  royalties  with  respect
thereto;  (C) all good will,  choses in action  and  causes of  action;  (D) all
interests in limited and general  partnerships and limited liability  companies;
and (E) all indemnity  agreements,  guaranties,  insurance  policies,  insurance
claims,  and other  contractual,  equitable and legal rights of whatever kind or
nature;

            (vi)   all books, records  and other  written,  electronic  or other
documentation  in whatever form  maintained by or for Debtor in connection  with
the  ownership  of the assets  described in this Section 2 or the conduct of its
business or evidencing or containing information relating to the Collateral; and

            (vii)  all products and proceeds, including insurance  proceeds,  of
any and all of the foregoing.

            (b) Anything  herein to  the  contrary  notwithstanding,  (i) Debtor
shall remain liable under any contracts, agreements and other documents included
in the Collateral, to the extent set forth therein, to perform all of its duties
and obligations  thereunder to the same extent as if this Agreement had not been
executed,  (ii) the  exercise  by Secured  Party of any of the rights  hereunder
shall not  release  Debtor  from any of its  duties or  obligations  under  such
contracts,  agreements and other documents included in the Collateral, and (iii)
Secured Party shall not have any  obligation or liability  under any  contracts,
agreements  and other  documents  included in the  Collateral  by reason of this
Agreement,  nor  shall  Secured  Party  be  obligated  to  perform  any  of  the
obligations  or duties of Debtor  thereunder or to take any action to collect or
enforce  any  such  contract,  agreement  or  other  document  included  in  the
Collateral hereunder.


                                       3.
<PAGE>


            (c) Notwithstanding the foregoing  provisions of this Section 2, the
grant of a security  interest  as provided  herein  shall not extend to, and the
term "Collateral" shall not include,  (1) that certain U.S. Patent No. 5,425,946
which is covered by a security  interest  in favor of Bankers  Trust  Company as
evidenced by the filing in the U.S.  Patent and Trademark  Office (the "Excluded
Patent Collateral"), and (2) any general intangibles of Debtor (whether owned or
held as licensee or lessee,  or otherwise),  to the extent that (i) such general
intangibles are not assignable or capable of being encumbered as a matter of law
or under the terms of the license,  lease or other agreement  applicable thereto
(but solely to the extent that any such restriction  shall be enforceable  under
applicable law),  without the consent of the licensor or lessor thereof or other
applicable party thereto and (ii) such consent has not been obtained;  PROVIDED,
HOWEVER,  that the foregoing grant of security interest shall extend to, and the
term "Collateral" shall include,  (A) any general intangible which is an account
receivable  or a  proceed  of,  or  otherwise  related  to  the  enforcement  or
collection  of, any  account  receivable,  or goods which are the subject of any
account  receivable,  (B) any and all proceeds of any general  intangibles which
are otherwise  excluded to the extent that the assignment or encumbrance of such
proceeds is not so  restricted,  and (C) upon  obtaining the consent of any such
licensor,  lessor or other  applicable  party's consent with respect to any such
otherwise excluded general intangibles,  such general intangibles as well as any
and all proceeds  thereof that might have  theretofore  have been  excluded from
such grant of a security interest and the term "Collateral."

            (d) This Agreement  shall create a continuing  security  interest in
the Collateral  which shall remain in effect until terminated in accordance with
Section 19 hereof.

            SECTION 3  FINANCING  STATEMENTS,  ETC.  Debtor  shall  execute  and
deliver to Secured Party concurrently with the execution of this Agreement,  and
at any  time  and  from  time  to time  thereafter,  all  financing  statements,
assignments,  continuation financing statements, termination statements, account
control  agreements,  and other  documents and  instruments,  in form reasonably
satisfactory to Secured Party,  and take all other action,  as Secured Party may
reasonably request, to perfect and continue perfected,  maintain the priority of
or provide  notice of the security  interest of Secured Party in the  Collateral
and to accomplish the purposes of this Agreement.

            SECTION 4  REPRESENTATIONS  AND  WARRANTIES.  Debtor  represents and
warrants to Secured Party that:

            (a) Debtor is a corporation duly organized,  validly existing and in
good standing under the law of the jurisdiction of its incorporation and has all
requisite  power and authority to execute,  deliver and perform its  obligations
under this Agreement.

            (b) The  execution,  delivery  and  performance  by  Debtor  of this
Agreement have been duly authorized by all necessary corporate action of Debtor,
and this  Agreement  constitutes  the legal,  valid and  binding  obligation  of
Debtor,  enforceable against Debtor in accordance with its terms, except in each
case  as  such   enforceability   may  be  limited  by  bankruptcy,   insolvency
reorganization,  liquidation,  moratorium  or  other  similar  laws  of  general
application and equitable principles relating to or affecting creditors' rights.


                                       4.
<PAGE>


            (c) Except as  otherwise  disclosed  in writing by Debtor to Secured
Party, no authorization,  consent, approval, license, exemption of, or filing or
registration with, any governmental  authority or agency, or approval or consent
of any other Person, is required for the due execution,  delivery or performance
by Debtor of this Agreement.

            (d) Debtor's chief executive  office and principal place of business
is located at the address set forth in  SCHEDULE  1; all other  locations  where
Debtor conducts business or Collateral is kept are set forth in SCHEDULE 1.

            (e) Except as  otherwise  disclosed  in writing by Debtor to Secured
Party,  Debtor is the sole and complete owner of the  Collateral,  free from any
Lien other than Permitted Liens.

            (f) Other than the Excluded Patent Collateral,  all of Debtor's U.S.
and  foreign  patents  and  patent  applications,  copyrights  (whether  or  not
registered),  applications  for copyright,  trademarks,  service marks and trade
names (whether registered or unregistered), and applications for registration of
such trademarks, service marks and trade names, are set forth in SCHEDULE 2.

            SECTION 5  COVENANTS.  So  long  as any  of the  Obligations  remain
unsatisfied, Debtor agrees that:

            (a) Debtor shall appear in and defend any action, suit or proceeding
which may affect to a material  extent its title to, or right or interest in, or
Secured Party's right or interest in, the  Collateral,  and shall do and perform
all reasonable acts that may be necessary and appropriate to maintain,  preserve
and protect the Collateral.

            (b) Debtor  shall  comply in all  material  respects  with all laws,
regulations  and  ordinances,  and all  policies  of  insurance,  relating  in a
material  way to the  possession,  operation,  maintenance  and  control  of the
Collateral.

            (c) Debtor shall give prompt written notice to Secured Party (and in
any event not later than 30 days  following any change  described  below in this
subsection)  of: (i) any change in the  location  of  Debtor's  chief  executive
office or principal  place of  business,  (ii) any change in the  locations  set
forth in  Schedule  1;  (iii)  any  change  in its name,  (iv) any  changes  in,
additions  to or other  modifications  of its trade  names and trade  styles set
forth in  Schedule  1 or  Schedule  2, and (v) any  changes in its  identity  or
structure in any manner which might make any financing statement filed hereunder
incorrect or misleading.

            (d) Debtor shall keep  separate,  accurate  and  complete  books and
records with respect to the  Collateral,  disclosing  Secured  Party's  security
interest hereunder.

            (e) Except as  otherwise  disclosed  in writing by Debtor to Secured
Party,  Debtor shall not surrender or lose  possession of (other than to Secured
Party),  sell,  lease,  rent,  or  otherwise  dispose of or transfer  any of the
Collateral or any right or interest  therein,  except in the ordinary  course of
business; PROVIDED that no such disposition or transfer of Collateral consisting
of  investment  property or  instruments  shall be permitted  while any Event of
Default exists.

            (f) Debtor  shall  keep the  Collateral  free  of all  Liens  except
Permitted Liens.


                                       5.
<PAGE>


            (g) Debtor shall pay and discharge all taxes, fees,  assessments and
governmental  charges or levies  imposed upon it with respect to the  Collateral
prior to the date on which penalties  attach thereto,  except to the extent such
taxes, fees,  assessments or governmental  charges or levies are being contested
in good faith by appropriate proceedings.

            (h) Debtor shall maintain and preserve its corporate existence,  its
rights to transact  business and all other  rights,  franchises  and  privileges
necessary or desirable in the normal course of its business and  operations  and
the  ownership of the  Collateral,  except in connection  with any  transactions
expressly permitted by the Documents.

            (i) Upon the request of Secured Party,  Debtor shall (i) immediately
deliver to Secured Party, or an agent designated by it,  appropriately  endorsed
or  accompanied  by  appropriate  instruments  of  transfer or  assignment,  all
documents  and  instruments,  all  certificated  securities  with respect to any
investment property,  all letters of credit and all accounts and other rights to
payment at any time evidenced by promissory  notes,  trade  acceptances or other
instruments,  (ii) cause any  securities  intermediaries  to show on their books
that Secured  Party is the  entitlement  holder with  respect to any  investment
property,  and/or obtain  account  control  agreements in favor of Secured Party
from such  securities  intermediaries,  in form and  substance  satisfactory  to
Secured Party, with respect to any investment property,  as requested by Secured
Party,  (iii) mark all  documents and chattel paper with such legends as Secured
Party shall  reasonably  specify,  and (iv) obtain  consents  from any letter of
credit  issuers with respect to the assignment to Secured Party of any letter of
credit proceeds.

            (j) Debtor shall at any reasonable time and from time to time permit
Secured Party or any of its agents or  representatives  to visit the premises of
Debtor  and  inspect  the  Collateral  and to  examine  and make  copies  of and
abstracts from the records and books of account of Debtor.

            (k) Debtor  shall:  (i) with such  frequency  as  Secured  Party may
require,  furnish to Secured Party such lists of customers and other information
relating  to the  accounts  and other  rights to payment as Secured  Party shall
reasonably request;  (ii) give only normal discounts,  allowances and credits as
to accounts  and other rights to payment,  in the  ordinary  course of business,
according to normal trade practices utilized by Debtor, and enforce all accounts
and other rights to payment strictly in accordance with their terms, except that
Debtor  may  grant  any  extension  of the time for  payment  or enter  into any
agreement  to make a rebate or  otherwise  to reduce the amount owing on or with
respect to, or compromise or settle for less than the full amount  thereof,  any
account or other right to payment, in the ordinary course of business, according
to normal and prudent  trade  practices  utilized by Debtor;  and (iii) upon the
request of Secured Party (A) at any time,  notify all or any designated  portion
of the account  debtors and other  obligors on the  accounts and other rights to
payment of the security  interest  hereunder,  and (B) upon the  occurrence  and
during the  continuance of an Event of Default,  notify the account  debtors and
other  obligors on the accounts  and other  rights to payment or any  designated
portion  thereof that payment shall be made directly to Secured Party or to such
other Person or location as Secured Party shall specify.


                                       6.
<PAGE>


            (l) Debtor shall (i) notify Secured Party of any material claim made
or  asserted  against  the  Collateral  by any  Person  and of any change in the
composition  of the Collateral or other event which could  materially  adversely
affect the value of the Collateral or Secured Party's Lien thereon; (ii) furnish
to  Secured  Party  such  statements  and  schedules  further   identifying  and
describing  the  Collateral  and such other  reports  and other  information  in
connection with the Collateral as Secured Party may reasonably  request,  all in
reasonable  detail; and (iii) upon reasonable request of Secured Party make such
demands and requests for  information  and reports as Debtor is entitled to make
in respect of the Collateral.

            (m) If and when  Debtor  shall  obtain  rights  to any new  patents,
trademarks,  service marks,  trade names or copyrights,  or otherwise acquire or
become  entitled  to the benefit  of, or apply for  registration  of, any of the
foregoing,  Debtor (i) shall  promptly  notify  Secured  Party  thereof and (ii)
hereby authorizes Secured Party to modify,  amend, or supplement  SCHEDULE 2 and
from time to time to include  any of the  foregoing  and make all  necessary  or
appropriate filings with respect thereto.

            (n) Debtor shall not enter into any agreement (including any license
or royalty agreement) pertaining to any of its patents, copyrights,  trademarks,
service marks and trade names, except for non-exclusive licenses in the ordinary
course of business.

            (o) Debtor  shall   give  Secured  Party  immediate  notice  of  the
establishment  of any new deposit  account and any new  securities  account with
respect to any investment property.

            SECTION 6  COLLECTION OF ACCOUNTS.  Until  Secured  Party  exercises
its rights hereunder to collect the accounts and other rights to payment, Debtor
shall endeavor in the first instance diligently to collect all amounts due or to
become due on or with respect to the  accounts  and other rights to payment.  At
the request of Secured Party,  upon the occurrence and during the continuance of
any Event of Default,  all remittances received by Debtor shall be held in trust
for Secured Party and, in accordance with Secured Party's instructions, remitted
to  Secured  Party or  deposited  to an  account  of  Secured  Party in the form
received  (with any  necessary  endorsements  or  instruments  of  assignment or
transfer). At the request of Secured Party, upon and after the occurrence of any
Event of Default,  Secured Party shall be entitled to receive all  distributions
and  payments  of  any  nature  with  respect  to  any  investment  property  or
instruments, and all such distributions or payments received by the Debtor shall
be held in trust for  Secured  Party and, in  accordance  with  Secured  Party's
instructions,  remitted to Secured Party or deposited to an account with Secured
Party in the form received  (with any necessary  endorsements  or instruments of
assignment  or transfer).  Following  the  occurrence of an Event of Default any
such distributions and payments with respect to any investment  property held in
any securities account shall be held and retained in such securities account, in
each case as part of the Collateral hereunder. Additionally, Secured Party shall
have the right,  upon the  occurrence  of an Event of Default,  following  prior
written notice to the Debtor,  to vote and to give consents,  ratifications  and
waivers with respect to any investment property and instruments, and to exercise
all rights of conversion, exchange, subscription or any other rights, privileges
or options  pertaining  thereto,  as if Secured  Party were the  absolute  owner
thereof;  PROVIDED  that Secured Party shall have no duty to exercise any of the
foregoing  rights  afforded to it and shall not be  responsible to the Debtor or
any other Person for any failure to do so or delay in doing so.


                                       7.
<PAGE>


            SECTION 7  AUTHORIZATION;  SECURED PARTY APPOINTED ATTORNEY-IN-FACT.
Secured Party shall have the right to, in the name of Debtor,  or in the name of
Secured Party or otherwise, upon notice to but without the requirement of assent
by Debtor,  and Debtor hereby constitutes and appoints Secured Party (and any of
Secured Party's  officers,  employees or agents  designated by Secured Party) as
Debtor's true and lawful attorney-in-fact, with full power and authority to: (i)
sign any of the financing  statements and other documents and instruments  which
must be  executed  or filed to  perfect  or  continue  perfected,  maintain  the
priority  of or  provide  notice of Secured  Party's  security  interest  in the
Collateral   (including  any  notices  to  or  agreements  with  any  securities
intermediary);  (ii) assert,  adjust, sue for,  compromise or release any claims
under any  policies  of  insurance;  and (iii)  execute  any and all such  other
documents and instruments,  and do any and all acts and things for and on behalf
of Debtor,  which  Secured Party may deem  reasonably  necessary or advisable to
maintain,  protect, realize upon and preserve the Collateral and Secured Party's
security  interest  therein and to  accomplish  the purposes of this  Agreement.
Secured Party agrees that, except upon and during the continuance of an Event of
Default,  it shall not exercise the power of attorney,  or any rights granted to
Secured  Party,  pursuant  to clauses  (ii) and (iii).  The  foregoing  power of
attorney is coupled with an interest and  irrevocable so long as the Obligations
have not been paid and performed in full. Debtor hereby ratifies,  to the extent
permitted by law, all that Secured Party shall  lawfully and in good faith do or
cause to be done by virtue of and in compliance with this Section 7.

            SECTION 8  EVENTS OF DEFAULT.  Any  of  the  following  events which
shall occur and be continuing shall constitute an "Event of Default":

            (a) Debtor shall fail to pay when due any amount  payable  hereunder
or under any other  Document  or in respect of the  Obligations  or an "Event of
Default" shall occur under the Loan Agreement.

            (b) Any  representation or warranty by Debtor under or in connection
with this Agreement any other Document shall prove to have been incorrect in any
material respect when made or deemed made.

            (c) Debtor shall fail to perform or observe in any material  respect
any other term,  covenant or  agreement  contained in this  Agreement,  the Loan
Agreement or any other  Document on its part to be performed or observed and any
such failure shall remain  unremedied for a period of 5 days from the occurrence
thereof;  or any "Event of Default" as defined in the Loan Agreement  shall have
occurred.

            (d) Any material  impairment  in the value of the  Collateral or the
priority of Secured Party's Lien hereunder.

            (e) Any levy upon, seizure or attachment of any of the Collateral.

            SECTION 9   REMEDIES.

            (a) Upon the  occurrence  and  continuance  of any Event of Default,
Secured  Party may  declare any of the  Obligations  to be  immediately  due and


                                       8.
<PAGE>


payable and shall have, in addition to all other rights and remedies  granted to
it in this Agreement or any other Document, all rights and remedies of a secured
party under the UCC and other applicable laws.

            (b) For the purpose of enabling Secured Party to exercise its rights
and  remedies  under  this  Section  9 or  otherwise  in  connection  with  this
Agreement,  Debtor hereby grants to Secured Party an irrevocable,  non-exclusive
and  assignable  license  (exercisable  without  payment  or  royalty  or  other
compensation to Debtor) to use, license or sublicense any intellectual  property
Collateral.

            (c) The  cash  proceeds  actually  received  from  the sale or other
disposition  or collection  of  Collateral,  and any other  amounts  received in
respect of the Collateral the application of which is not otherwise provided for
herein,  shall be applied  FIRST,  to the  payment of the  reasonable  costs and
expenses of Secured Party in exercising or enforcing its rights hereunder and in
collecting or attempting to collect any of the Collateral, and to the payment of
all other amounts  payable to Secured Party  pursuant to Section 13 hereof;  and
SECOND,  to the payment of the  Obligations.  Any surplus  thereof  which exists
after payment and performance in full of the Obligations  shall be promptly paid
over to Debtor or  otherwise  disposed  of in  accordance  with the UCC or other
applicable  law.  Debtor shall remain liable to Secured Party for any deficiency
which exists after any sale or other disposition or collection of Collateral.

            SECTION 10  CERTAIN  WAIVERS.  Debtor  waives, to the fullest extent
permitted by law, (i) any right of  redemption  with respect to the  Collateral,
whether before or after sale hereunder,  and all rights,  if any, of marshalling
of the Collateral or other collateral or security for the Obligations;  (ii) any
right to require Secured Party (A) to proceed against any Person, (B) to exhaust
any other collateral or security for any of the  Obligations,  (C) to pursue any
remedy  in  Secured  Party's  power,  or (D) to make or give  any  presentments,
demands  for  performance,  notices  of  nonperformance,  protests,  notices  of
protests or notices of dishonor in connection  with any of the  Collateral;  and
(iii) all claims,  damages, and demands against Secured Party arising out of the
repossession,  retention, sale or application of the proceeds of any sale of the
Collateral

            SECTION 11  NOTICES.  All notices or other communications  hereunder
shall be in writing  (including by facsimile  transmission) and mailed,  sent or
delivered to the respective  parties hereto at or to their respective  addresses
or facsimile  numbers set forth below their names on the signature pages hereof,
or at or to such other address or facsimile number as shall be designated by any
party in a written  notice to the other  parties  hereto.  All such  notices and
other  communications  shall  be  effective  (i)  if  delivered  by  hand,  when
delivered; (ii) if sent by mail, upon the earlier of the date of receipt or five
business days after deposit in the mail,  first class (or air mail, with respect
to communications to be sent to or from the United States); and (iii) if sent by
facsimile transmission, when sent.

            SECTION 12  NO WAIVER; CUMULATIVE REMEDIES.  No  failure on the part
of Secured Party to exercise,  and no delay in  exercising,  any right,  remedy,
power or privilege  hereunder shall operate as a waiver  thereof,  nor shall any
single  or  partial  exercise  of any such  right,  remedy,  power or  privilege
preclude  any other or further  exercise  thereof or the  exercise  of any other
right, remedy,


                                       9.
<PAGE>


power or privilege.  The rights and remedies under this Agreement are cumulative
and not  exclusive  of any  rights,  remedies,  powers and  privileges  that may
otherwise be available to Secured Party.

            SECTION 13 COSTS AND EXPENSES.

            (a) Subject to the terms of any other written fee agreement  between
Debtor and Secured Party or Guarantor, Debtor agrees to pay on demand:

            (i)    the   reasonable   out-of-pocket   costs   and   expenses  of
Secured Party,  and the reasonable fees and  disbursements of counsel to Secured
Party, in connection with the negotiation,  preparation, execution, delivery and
administration of this Agreement and the Note, and any amendments, modifications
or waivers of the terms thereof, and the custody of the Collateral;

            (ii)   all audit, consulting, search, recording,  filing and similar
costs,  fees and expenses  incurred or sustained by Secured  Party in connection
with this Agreement or the Collateral; and

            (iii)  all costs and  expenses of  Secured  Party,  and the fees and
disbursements  of counsel,  in  connection  with the  enforcement  or  attempted
enforcement  of,  and  preservation  of any  rights  or  interests  under,  this
Agreement and the Loan Agreement, including in any out-of-court workout or other
refinancing or restructuring or in any bankruptcy case, and the protection, sale
or collection of, or other realization upon, any of the Collateral.

            (b) Any amounts  payable to Secured  Party under this  Section 13 or
otherwise  under this Agreement if not paid upon demand shall bear interest from
the date of such demand until paid in full, at the default rate specified in the
Loan Agreement.

            SECTION 14  BINDING  EFFECT.  This Agreement  shall be binding upon,
inure to the benefit of and be  enforceable  by Debtor,  Secured Party and their
respective successors and assigns.

            SECTION 15  GOVERNING LAW. This Agreement  shall be governed by, and
construed  in  accordance  with,  the law of the  State of New  York,  except as
required  by  mandatory  provisions  of law and to the  extent the  validity  or
perfection of the security interests  hereunder,  or the remedies hereunder,  in
respect of any Collateral  are governed by the law of a jurisdiction  other than
New York.

            SECTION 16  ENTIRE AGREEMENT; AMENDMENT. This Agreement contains the
entire  agreement of the parties with respect to the subject  matter  hereof and
shall not be amended except by the written agreement of the parties.

            SECTION 17  SEVERABILITY.  Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
all  applicable  laws  and  regulations.  If,  however,  any  provision  of this
Agreement  shall be prohibited by or invalid under any such law or regulation in
any  jurisdiction,  it shall,  as to such  jurisdiction,  be deemed  modified to


                                      10.
<PAGE>


conform to the minimum  requirements  of such law or regulation,  or, if for any
reason it is not deemed so modified, it shall be ineffective and invalid only to
the extent of such  prohibition  or invalidity  without  affecting the remaining
provisions of this Agreement, or the validity or effectiveness of such provision
in any other jurisdiction.

            SECTION 18  COUNTERPARTS.  This  Agreement  may be  executed  in any
number of counterparts and by different parties hereto in separate counterparts,
each of which  when so  executed  shall be deemed to be an  original  and all of
which taken together shall constitute but one and the same agreement.

            SECTION 19  TERMINATION.  Upon payment  and  performance  in full of
all Obligations, this Agreement shall terminate and Secured Party shall promptly
execute  and  deliver  to  Debtor  such  documents  and  instruments  reasonably
requested  by  Debtor  as shall be  necessary  to  evidence  termination  of all
security  interests  given by  Debtor  to  Secured  Party  hereunder;  PROVIDED,
HOWEVER,  that the  obligations  of Debtor under Section 13 hereof shall survive
such termination.


                                      11.
<PAGE>


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


                                          NORTH AMERICAN VACCINE, INC.


                                          By: /s/ Lawrence J. Hineline
                                              ------------------------
                                             Title: Vice President Finance

                                          10150 Old Columbia Road
                                          Columbia, Maryland  21046
                                          Attn:  Vice President Finance
                                          Fax:   (410) 309-4077






                                          BANK OF AMERICA, N.A.


                                          By:  /s/ Lawrence J. Gordon
                                               -----------------------
                                             Title:  Vice President

                                          Bank of America Center
                                          700 Louisiana Street
                                          TX4-213-08-10
                                          Houston, Texas  77002-2700
                                          Attn:  Lawrence J. Gordon
                                          Fax:   (713) 247-6719






                                      12.
<PAGE>


                                   SCHEDULE 1
                            to the Security Agreement


1.    LOCATIONS OF CHIEF EXECUTIVE OFFICE AND OTHER LOCATIONS, INCLUDING OF
      COLLATERAL

      a.    Chief Executive Office and Principal Place of Business:


            North American Vaccine, Inc.
            10150 Old Columbia Road
            Columbia, Maryland 21046

      b. Other  locations  where Debtor  conducts  business or any Collateral is
         kept:

            North American Vaccine, Inc.
            9000 Virginia Manor Road
            Suite 290
            Beltsville, Maryland 20705

            North American Vaccine, Inc.
            12140 Indian Creek Court
            Beltsville, Maryland 20705

            AMVAX, Inc.
            12040 Indian Creek Court
            Beltsville, Maryland  20705

            American Vaccine Corporation
            1105 North Market Street, Suite 940
            Wilmington, Delaware 19801


1.    TRADE NAMES AND TRADE STYLES; OTHER CORPORATE, TRADE OR FICTITIOUS
      NAMES, ETC.

      See Schedule B attached hereto.



                                      S-1.
<PAGE>



                                   SCHEDULE 2
                            to the Security Agreement



1. PATENTS AND PATENT APPLICATIONS.


      See Schedule A attached hereto.



2. COPYRIGHTS (REGISTERED AND UNREGISTERED) AND COPYRIGHT APPLICATIONS.


      None.



3.  TRADEMARKS,  SERVICE MARKS AND TRADE NAMES AND  TRADEMARK,  SERVICE MARK AND
TRADE NAME APPLICATIONS.

      See Schedule B attached hereto.




                                      S-2.

<PAGE>

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                                 SCHEDULE A
------------------------------------------------------------------------------------------------------------------------------------
                                                 PATENTS AND PATENT APPLICATIONS OF ASSIGNOR
------------------------------------------------------------------------------------------------------------------------------------
TITLE                             INVENTORS         ASSIGNEE           APPL. NO./            APPL. DATE/GRANT     STATUS
                                                                       PATENT NO.            DATE
------------------------------------------------------------------------------------------------------------------------------------
ISSUED U.S. PATENTS
------------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>                <C>                <C>                  <C>                   <C>
Method for the High Level         Blake, et al.      NVX                08/798,760           February 11, 1997     Notice of
Expression, Purification and                         (co-exclusive      (Notice of Allowance                       Allowance issued
Refolding of the Outer Membrane                      license with PMC)  issued Jan. 1999)                          January 1999
Group B Porin Proteins                                                                                             (fee paid April
                                                                                                                   1999)
------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level         Blake, et al.      NVX & Rockefeller  5,439,808            August 8, 1995        Patent
Expression, Purification and                         University
Refolding of the Outer Membrane                      (co-exclusive
Group B Porin Proteins from                          license with PMC)
Neisseria Meningitidis
------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level         Blake, et al.      NVX                5,747,287            May 5, 1998           Patent
Expression, Purification and                         (co-exclusive
Refolding of the Outer Membrane                      license with PMC)
Group B Porin Proteins from
Neisseria Meningitidis
------------------------------------------------------------------------------------------------------------------------------------
Group A Streptococcal             Blake et al.       NVX & Rockefeller  5,866,135            February 2, 1999      Patent
Polysaccharide Immunogenic                           University
Compositions and Methods
------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level         Blake, et al.      NVX                5,879,686            March 9, 1999         Patent
Expression, Purification and                         (co-exclusive
Refolding of the Outer Membrane                      license with PMC)
Group B Porin Proteins from
Neisseria Meningitidis
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
U.S. PATENT APPLICATIONS
------------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                     <C>           <C>                <C>                  <C>
Method for the High Level                Tai, et al.             NVX           08/096,181         July 23, 1993        Application
Expression, Purification and
Refolding of the Outer Membrane
Protein P2 from Haemophilus Type b
------------------------------------------------------------------------------------------------------------------------------------
Method for the High Level                Tai, et al.             NVX           08/449,358          May 24, 1995        Application
Expression, Purification and
Refolding of the Outer Membrane
Protein P2 from Haemophilus Type b
------------------------------------------------------------------------------------------------------------------------------------
Antigenic Group B Streptococcus         Michon, et al.           NVX           08/481,883          June 7, 1995        Application
Type II and Type III
Polysaccharide Fragments Having a
2,5-Anhydro-D-Mannose Terminal
Structure and Conjugate Vaccine
Thereof
------------------------------------------------------------------------------------------------------------------------------------
Direct Methods for Molar-Mass          Michon, D'Ambra           NVX           08/753,242       November 22, 1996      Application
Determination of Fragments of
Haemophilus Type b Capsular
Polysaccharides and Vaccine
Preparation
------------------------------------------------------------------------------------------------------------------------------------
Cloning of Non-IgA FC Binding             Tai, Blake             NVX           08/923,992       September 5, 1997      Application
Forms of the Group B Streptococcal
Beta Antigens
------------------------------------------------------------------------------------------------------------------------------------
Antigenic Group B Streptococcus         Michon, et al.           NVX           09/025,225       February 18, 1998      Application
Type II and Type III
Polysaccharide Fragments Having a
2,5-Anhydro-D-Mannose Terminal
Structure and Conjugate Vaccine
Thereof
------------------------------------------------------------------------------------------------------------------------------------

<PAGE>

------------------------------------------------------------------------------------------------------------------------------------
Immunogenic Conjugates Comprising       Blake, et al.            NVX           09/118/180         July 17, 1998        Application
A Group B Meningococcal Porin and
an H. Influenzae Polysaccharide
------------------------------------------------------------------------------------------------------------------------------------
Modified Immunogenic Pneumolysin       Minetti, et al.           NVX           09/120,044         July 21, 1998        Application
Compositions as Vaccines
------------------------------------------------------------------------------------------------------------------------------------
Group A Streptococcal                    Blake et al.           NVX &          09/207,188        December 8, 1998      Application
Polysaccharide Immunogenic                                   Rockefeller
Compositions and Methods                                     University
------------------------------------------------------------------------------------------------------------------------------------
Procedures for the Extraction and       Michon, Blake            NVX           09/221,620       December 23, 1998      Application
Isolation of Bacterial Capsular
Polysaccharides for Use as
Vaccines or Linked to Proteins as
Conjugate Vaccines
------------------------------------------------------------------------------------------------------------------------------------
Gram Positive Bacterial Antigens       Long-Rowe, Blake          NVX           09/399,220       September 17, 1999     Application
and Methods of Purification of the
Streptococcal C-Beta Protein
------------------------------------------------------------------------------------------------------------------------------------
Immunogenic Polysaccharide-Protein      Michon et al.            NVX           09/376,911        August 18, 1999       Application
Conjugate Useful as a Vaccine
Produced Via Conjugation Through a
CZ-3 N-Acyl Portion F A
Polysaccharide
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

                                      A-1.

<PAGE>

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------------
                                                                 SCHEDULE B
---------------------------------------------------------------------------------------------------------------------------
                                                         U.S. TRADEMARKS OF ASSIGNOR
---------------------------------------------------------------------------------------------------------------------------
MARK                               STATUS              APPL NO./     APPL./REGIS. DATE        OWNER OF RECORD
                                                       REGIS. NO.
---------------------------------------------------------------------------------------------------------------------------
     REGISTERED U.S. TRADEMARKS
---------------------------------------------------------------------------------------------------------------------------
<S>                                <C>                 <C>           <C>                      <C>
Globe Design                       Registered          1,932,111     October 31, 1995         North American Vaccine, Inc.
---------------------------------------------------------------------------------------------------------------------------
AMVAX                              Registered          1,967,632     April 16, 1996           North American Vaccine, Inc.
---------------------------------------------------------------------------------------------------------------------------
TRINAVACEL                         Registered          2,101,121     September 30, 1997       American Vaccine Corporation
---------------------------------------------------------------------------------------------------------------------------
TRIVAX                             Registered          2,118,360     December 2, 1997         American Vaccine Corporation
---------------------------------------------------------------------------------------------------------------------------
NAVA                               Registered          2,267,812     August 3, 1999           American Vaccine Corporation
---------------------------------------------------------------------------------------------------------------------------
     PENDING U.S. TRADEMARK APPLICATIONS
---------------------------------------------------------------------------------------------------------------------------
THE IMPORTANCE OF OUR WORK         Pending             75/190,826    October 29, 1996         American Vaccine Corporation
GROWS BIGGER EVERY DAY
---------------------------------------------------------------------------------------------------------------------------
NEISVAC-C                          Pending             Not Avail.    August 26, 1999          American Vaccine Corporation
---------------------------------------------------------------------------------------------------------------------------
NEISIVA                            Pending             Not Avail.    August 26, 1999          American Vaccine Corporation
---------------------------------------------------------------------------------------------------------------------------
MENCIVA                            Pending             Not Avail.    August 26, 1999          American Vaccine Corporation
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       B-1