Document:

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                                                                     Exhibit 4.1

                                  BLUEFLY, INC.
                             1997 STOCK OPTION PLAN

SECTION 1. PURPOSE

     The purposes of this Bluefly, Inc. 1997 Stock Option Plan (the "Plan") are
to encourage selected employees, consultants and directors of Bluefly, Inc.
(together with any successor thereto, the "Company' ) and its Affiliates (as
defined below) to acquire a proprietary interest in the growth and performance
of the Company, to generate an increased incentive to contribute to the
Company's future success and prosperity, thus enhancing the value of the Company
for the benefit of its shareholders, and to enhance the ability of the Company
and its Affiliates to attract and retain qualified individuals upon whom, in
large measure, the sustained progress, growth, and profitability of the Company
depend.

SECTION 2. DEFINITIONS

     As used in the Plan, the following terms shall have the meanings set forth
below:

     (a) "Affiliate" shall mean any entity that, directly or through one or more
intermediaries, is controlled by, controls or is under common control with the
Company.

     (b) "Board" shall mean the Board of Directors of the Company.

     (c) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.

     (d) "Committee" shall mean a committee of the Board designated by the Board
to administer the Plan and composed of not less than two directors, each of whom
is both a non-employee director within the meaning of Rule 16b-3 and an "outside
director" as that term is defined for purposes of Section 162(m) of the Code.

     (e) "Consultant" shall mean any Person who contracts to provide services to
the Company as an independent contractor.

     (f) "Fair Market Value" shall mean, with respect to Shares or other
securities (i) the closing price per Share of the Shares on the principal
exchange on which the Shares are then trading, if any, on such date, or, if the
Shares were not traded on such date, then on the next preceding trading day
during which a sale occurred; or (ii) if the Shares are not traded on an
exchange but are quoted on NASDAQ or a successor quotation system, (1) the last
sales price (if

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the Shares are then listed as a National Market Issue under the NASDAQ National
Market System) or (2) the mean between the closing representative bid and asked
prices (in all other cases) for the Shares on such date as reported by NASDAQ or
such successor quotation system; or (iii) if the Shares are not publicly traded
on an exchange and not quoted on NASDAQ or a successor quotation system, the
mean between the closing bid and asked prices for the Shares on such date as
determined in good faith by the Committee; or (iv) if the provisions of clauses
(i), (ii) and (iii) shall not be applicable, the fair market value established
by the Committee acting in good faith.

     (g) "Incentive Stock Option" shall mean an option granted under Section 6
of the Plan that meets the requirements of Section 422 of the Code or any
successor provision thereto.

     (h) "Key Employee" shall mean any officer, director or other employee who
is a regular full-time employee of the Company or its present and future
Affiliates.

     (i) "Non-Employee Director" shall mean each member of the Board who is not
an employee of the Company or any Affiliate.

     (j) "Non-Qualified Stock Option" shall mean an option granted under the
Plan that is not an Incentive Stock Option.

     (k) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.

     (1) "Option Agreement" shall mean a written agreement, contract, or other
instrument or document evidencing an Option granted under the Plan.

     (m) "Participant" shall mean a Key Employee, Consultant or Non-Employee
Director who has been granted an Option under the Plan.

     (n) "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, or
government or political subdivision thereof.

     (o) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended, or
any successor rule or regulation thereto.

     (p) "Shares" shall mean the common stock of the Company, $.01 par value,
and such other securities or property as may become the subject of Options
pursuant to an adjustment made under Section 4(b) of the Plan.

     (q) "Ten Percent Shareholder" shall mean a Person, who together with his or
her spouse, children and trusts and custodial accounts for their benefit,
immediately at the time of the grant of an Option and assuming its immediate
exercise, would beneficially own, within the

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meaning of Section 424(d) of the Code, Shares possessing more than ten percent
(10%) of the total combined voting power of all of the outstanding capital stock
of the Company.

SECTION 3. ADMINISTRATION

     (a) Generally. The Plan shall be administered by the Committee. Unless
otherwise expressly provided in the Plan, all designations, determinations,
interpretations and other decisions under or with respect to the Plan or any
Option shall be within the sole discretion of the Committee, may be made at any
time, and shall be final, conclusive, and binding upon all Persons, including
the Company, any Affiliate, any Participant, any holder or beneficiary of any
Option, any shareholder of the Company or any Affiliate, and any employee of the
Company or of any Affiliate.

     (b) Powers. Subject to the terms of the Plan and applicable law and except
as provided in Section 7 hereof, the Committee shall have full power and
authority to: (i) designate Participants; (ii) determine the type or types of
Options to be granted to each Participant under the Plan; (iii) determine the
number of Shares to be covered by Options; (iv) determine the terms and
conditions of any Option; (v) determine whether, to what extent, and under what
circumstances Options may be settled or exercised in cash, Shares, other
Options, or other property, or canceled, forfeited, or suspended, and the method
or methods by which Options may be settled, exercised, canceled, forfeited, or
suspended; (vi) interpret and administer the Plan and any instruments or
agreements relating to, or Options granted under, the Plan; (vii) establish,
amend, suspend, or waive such rules and regulations and appoint such agents as
it shall deem appropriate for the proper administration of the Plan; and (viii)
make any other determination and take any other action that the Committee deems
necessary or desirable for the administration of the Plan.

     (c) Reliance, Indemnification. The Committee may employ attorneys,
consultants, accountants or other persons and the Committee, the Company and its
officers and directors shall be entitled to rely upon the advice, opinions or
valuations of any such persons. No member of the Committee shall be personally
liable for any action, determination or interpretation taken or made in good
faith with respect to the Plan, or Options granted thereunder and all members of
the Committee shall be fully indemnified and protected by the Company in respect
of any such action, determination or interpretation.

SECTION 4. SHARES AVAILABLE FOR OPTIONS

     (a) Shares Available. Subject to adjustment as provided in Section 4(b):

         (i) Limitation on Number of Shares. Options issuable under the Plan are
     limited such that the maximum aggregate number of Shares which may issued
     to Key Employees, Consultants and Non-Employee Directors pursuant to, or by
     reason of, Options is 5,400,000. No Participant shall be granted in any one
     fiscal year Options to

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     purchase more than 1,000,000 Shares. To the extent that an Option granted
     to a Participant ceases to remain outstanding by reason of termination of
     rights granted thereunder, forfeiture or otherwise, the Shares subject to
     such Option shall again become available for award under the Plan;
     provided, however, that in the case of the cancellation or termination of
     an Option in the same fiscal year that such Option was granted, both the
     canceled Option and the newly granted Option shall be counted in
     determining whether the recipient has received the maximum number of such
     Options under the Plan for such fiscal year.

         (ii) Accounting for Awards. For purposes of this Section 4, the number
     of Shares covered by an Option to (A) a Key Employee or Consultant or (B) a
     Non-Employee Director shall be counted on the date of grant of such Option
     against the aggregate number of Shares available for granting Options under
     the Plan to (x) Key Employees and Consultants or (y) Non-Employee
     Directors, respectively.

         (iii) Sources of Shares Deliverable Under Options. Any Shares delivered
     pursuant to an Option may consist, in whole or in part, of authorized and
     unissued Shares or of treasury Shares.

     (b) Adjustments. In the event that the Committee shall determine that any
(i) subdivision or consolidation of Shares, (ii) dividend or other distribution
(in the form of Shares), (iii) recapitalization or other capital adjustment of
the Company or (iv) merger, consolidation or other reorganization of the Company
or other rights to purchase Shares or other securities of the Company, or other
similar corporate transaction or event (of a type described in Treasury
Regulation Section 1.162-27(e)(2)(iii)(C)), affects the Shares such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Committee shall, in such manner as it
may deem necessary to prevent dilution or enlargement of the benefits or
potential benefits intended to be made under the Plan, adjust any or all of (x)
the number and type of Shares which thereafter may be made the subject of
Options, (y) the number and type of Shares subject to outstanding Options, and
(z) the grant, purchase, or exercise price with respect to an Option or, if
deemed appropriate, make provision for a cash payment to the holder of an
outstanding Option, provided, however, in each case, that (i) with respect to
Incentive Stock Options no such adjustment shall be authorized to the extent
that such adjustment would cause the Plan to violate Section 422 of the Code or
any successor provision thereto; (ii) each such adjustment shall be made in such
manner as not to constitute a cancellation and reissuance of a Non-Qualified
Stock Option for purposes of Section 162(m) of the Code, or the regulations
promulgated thereunder, to the extent that such reissuance would result in the
grant of such Options in excess of the maximum permitted to be granted to any
Participant in any fiscal year; and (iii) the number of Shares subject to any
Option denominated in Shares shall always be a whole number.

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SECTION 5. ELIGIBILITY

     Options may be granted only to Key Employees, Consultants and Non-Employee
Directors; provided, however, that Incentive Stock Options may be granted only
to Key Employees. In determining the Persons to whom Options shall be granted
and the number of Shares to be covered by each Option, the Committee shall take
into account the nature of the Person's duties, such Person's present and
potential contributions to the success of the Company and such other factors as
it shall deem relevant in connection with accomplishing the purposes of the
Plan. A Key Employee or Consultant who has been granted an Option or Options
under the Plan may be granted an additional Option or Options, subject to such
limitations as may be imposed by the Code on the grant of incentive Stock
Options.

SECTION 6. OPTION

     The Committee is hereby authorized to grant Options to Participants upon
the following terms and the conditions (except to the extent otherwise provided
in Section 7) and with such additional terms and conditions, in either case not
inconsistent with the provisions of the Plan, as the Committee shall determine:

         (a) Exercise Price. The purchase price per Share purchasable under
     Incentive Stock Options shall not be less than 100% of the Fair Market
     Value of a Share on the date of grant; provided that the purchase price per
     Share purchasable under Incentive Stock Options granted to Ten Percent
     Shareholders shall be not less than 110% of the Fair Market Value of a
     Share on the date of grant. The purchase price per Share purchasable under
     Non-Qualified Stock Options shall be the price determined by the Committee.

         (b) Option Term. The term of each Non-Qualified Stock Option shall be
     fixed by the Committee. The term of each Incentive Stock Option shall in no
     event be more than 10 years from the date of grant, or in the case of an
     Incentive Stock Option granted to a Ten Percent Shareholder, 5 years from
     the date of grant.

         (c) Time and Method of Exercise. The Committee shall determine the time
     or times at which an Option may be exercised in whole or in part, and the
     method or methods by which, and the form or forms in which, payment of the
     option price with respect thereto may be made or deemed to have been made
     (including, without limitation, (i) cash, Shares, outstanding Options or
     other consideration, or any combination thereof, having a Fair Market Value
     on the exercise date equal to the relevant option price and (ii) a
     broker-assisted cashless exercise program established by the Committee),
     provided in each case that such methods avoid "short-swing" profits to the
     Participant under Section 16(b) of the Securities Exchange Act of 1934, as
     amended. The payment of the exercise price of an Option may be made in a
     single payment or transfer, in installments, or on a deferred basis, in
     each case in accordance with rules and procedures established by the
     Committee.

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         (d) Early Termination. The unexercised portion of any Option granted to
     a Key Employee or Consultant under the Plan will generally be terminated
     (i) thirty (30) days after the date on which the Key Employee's employment
     is terminated or the period of the Consultant's services ceases, as the
     case may be, for any reason other than (A) Cause (as defined below), (B)
     retirement or mental or physical disability, or (C) death; (ii) immediately
     upon the termination of the Key Employee's employment for Cause; (iii) in
     the case of any Incentive Stock Option, three months after the date on
     which the Key Employee's employment is terminated by reason of retirement
     or one year after the Key Employee's employment is terminated by reason of
     mental or physical disability, or in the case of any Non-Qualified Stock
     Option, three months after the date on which the Key Employee's employment
     is terminated or the period of the Consultant's services ceases, as the
     case may be, by reason of retirement or mental or physical disability, or
     in the discretion of the Committee up to one year after the date on which
     the Key Employee's employment is terminated or the period of the
     Consultant's services ceases, as the case may be, by reason of retirement
     or mental or physical disability; or (iv)(A) 12 months after the date on
     which the Key Employee's employment is terminated or the period of the
     Consultant's services ceases, as the case may be, by reason of the death of
     the Key Employee or the Consultant, as the case may be, or (B) three months
     after the date on which the Key Employee or the Consultant, as the case may
     be, shall die if such death shall occur during the three-month period
     following the termination of the Key Employee's employment or the cessation
     of the Consultant's services, as the case may be, by reason of retirement
     or mental or physical disability. The term "Cause," as used herein, shall
     mean (w) the Key Employee's willful misconduct or fraud in the performance
     of his duties under such Key Employee's employment arrangement with the
     Company, (x) the continued failure or refusal of the Key Employee
     (following written notice thereof) to carry out any reasonable request of
     the Board for the provision of services under such Key Employee's
     employment arrangement with the Company, (y) the material breach by the Key
     Employee of his employment arrangement with the Company or (z) the entering
     of a plea of guilty or nolo contendere to or the conviction of the Key
     Employee for a felony or any other criminal act involving moral turpitude,
     dishonesty, theft or unethical business conduct. For purposes of this
     paragraph (d), no act shall be considered willful unless done or omitted to
     be done not in good faith and without reasonable belief that such action or
     omission was in the best interest of the Company.

         (e) Incentive Stock Options. All terms of any Incentive Stock Option
     granted under the Plan shall comply in all respects with the provisions of
     Section 422 of the Code, or any successor provision thereto, and any
     regulations promulgated thereunder.

         (f) No Cash Consideration for Awards. Awards shall be granted for no
     cash consideration or such minimal cash consideration as may be required by
     applicable law.

         (g) Limits on Transfer of Options. Subject to Code Section 422, no
     Option and no right under any such Option, shall be assignable, alienable,
     saleable, or

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     transferable by a Participant otherwise than by will or by the laws of
     descent and distribution; provided, however, that, if so determined by the
     Committee, a Participant may, in the manner established by the Committee,
     designate a beneficiary or beneficiaries to exercise the rights of the
     Participant, and to receive any property distributable, with respect to any
     Option upon the death of the Participant. Each Option, and each right under
     any such Option, shall be exercisable during the Participant's lifetime,
     only by the Participant or, if permissible under applicable law with
     respect to any Option that is not an Incentive Stock Option, by the
     Participant's guardian or legal representative. No Option and no right
     under any such Option, may be pledged, alienated, attached, or otherwise
     encumbered, and any purported pledge, alienation, attachment, or
     encumbrance thereof shall be void and unenforceable against the Company or
     any Affiliate.

         (h) Term of Options. Except as set forth in Section 6(b) and Section 7,
     the term of each Option shall be for such period as may be determined by
     the Committee.

         (i) Share Certificates. All certificates for Shares or other securities
     of the Company delivered under the Plan pursuant to any Option or the
     exercise thereof shall be subject to such stop transfer orders and other
     restrictions as the Committee may deem advisable under the Plan or the
     rules, regulations, and other restrictions of the Securities and Exchange
     Commission, any stock exchange upon which such Shares or other securities
     are then listed, and any applicable Federal or state securities laws, and
     the Committee may cause a legend or legends to be put on any such
     certificates to make appropriate reference to such restrictions.

SECTION 7. OPTIONS AWARDED TO NON-EMPLOYEE DIRECTORS

     Each Non-Employee Director who was a member of the Board on the Effective
Date (defined hereafter) shall automatically be granted on such date a
Non-Qualified Stock Option to purchase 5,000 Shares, subject to all of the
provisions of the Plan. Each person who is either elected or appointed a
Non-Employee Director, and who has not previously received a grant of
Non-Qualified Stock Options pursuant to the Plan, shall automatically be granted
a Non-Qualified Stock Option to purchase 3,750 Shares on the date of their
appointment or election, subject to the provisions of the Plan. In addition,
each Non-Employee Director who is a member of the Board on April 30 of a year
during the term of the Plan beginning in calendar year 1998 shall automatically
be granted a Non-Qualified Stock Option to purchase 3,750 Shares on May 1of the
following year. All Options granted to Non-Employee Directors pursuant to the
Plan shall (a) be (in the case of a grant under this Section 7) at an exercise
price per Share equal to 100% of the Fair Market Value of a Share on the date of
the grant; (b) have (in the case of a grant under this Section 7) a term of 10
years; (c) terminate (i) thirty (30) days after termination of a Non-Employee
Director's service as a director of the Company for any reason other than
retirement or mental or physical disability or death, (ii) thirty (30) days
after the date the Non-

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Employee Director ceases to serve as a director of the Company due to retirement
or physical or mental disability, or in the discretion of the Committee up to
one year after the date the Non-Employee Director ceases to serve as a director
of the Company due to retirement or physical or mental disability or (iii)(A) 12
months after the date the Non-Employee Director ceases to serve as a director
due to the death of the Non-Employee Director or (B) three months after the
death of the Non-Employee Director if such death shall occur during the three
month period following the date the Non-Employee Director ceased to serve as a
director of the Company due to physical or mental disability; and (d) be
otherwise on the same terms and conditions as all other Options granted pursuant
to the Plan.

SECTION 8. AMENDMENT AND TERMINATION

     Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Option Agreement or in the Plan:

     (a) Amendments to the Plan. The Plan may be wholly or partially amended or
otherwise modified, suspended or terminated at any time or from time to time by
the Board, but no amendment without the approval of the shareholders of the
Company shall be made if shareholder approval would be required under Section
162(m) of the Code, Section 422 of the Code, Rule 16b-3 or any other law or rule
of any governmental authority, stock exchange or other self-regulatory
organization to which the Company is subject. Neither the amendment, suspension
or termination of the Plan shall, without the consent of the holder of such
Option, alter or impair any rights or obligations under any Option theretofore
granted.

     (b) Adjustments of Options Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee shall be authorized to make adjustments in
the terms and conditions of, and the criteria included in, Options in
recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 4(b) hereof) affecting the Company, any
Affiliate, or the financial statements of the Company or any Affiliate or of
changes in applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to prevent
enlargement of the benefits or potential benefits to be made available under the
Plan.

     (c) Correction of Defects, Omissions, and Inconsistencies. The Committee
may correct any defect, supply any omission or reconcile any inconsistency in
the Plan or any Option in the manner and to the extent it shall deem desirable
to carry the Plan into effect.

SECTION 9. ELECTION TO HAVE SHARES WITHHELD

     (a) In combination with or in substitution for cash withholding or any
other legal method of satisfying federal and state withholding tax liability, a
Participant may elect to have Shares withheld by the Company or to have Shares
sold in a broker-assisted transaction in order to satisfy federal and state
withholding tax liability (a "share withholding election"), provided (i) the
Committee shall have adopted procedures providing for a withholding election;
and (ii) the share withholding election is made on or prior to the date on which
the amount of withholding

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tax liability is determined (the "Tax Date"). If a Participant elects within
thirty (30) days of the date of exercise to be subject to withholding tax on the
exercise date pursuant to the provisions of Section 83(b) of the Code, then the
share withholding election may be made during such thirty (30) day period.
Notwithstanding the foregoing, a holder whose transactions in Common Stock are
subject to Section 16(b) of the Securities Exchange Act of 1934, as amended, may
make a share withholding election only if the following additional conditions
are met: (i) the share withholding election is made no sooner than six (6)
months after the date of grant of the Option, except, however, such six (6)
month condition shall not apply if the Participant's death or disability (as
shall be determined by the Committee) occurs within such six (6) month period;
and (ii) the share withholding election is made (x) at least six (6) months
prior to the Tax Date, or (y) during the period beginning on the third business
day following the date of release of the Company's quarterly or annual financial
results and ending on the twelfth business day following such date.

     (b) A share withholding election shall be deemed made when written notice
of such election, signed by the Participant, has been hand delivered or
transmitted by registered or certified mail to the Secretary of the Company at
its then principal office. Delivery of said notice shall constitute an
irrevocable election to have Shares withheld.

     (c) If a Participant has made a share withholding election pursuant to this
Section 9, and (i) within thirty (30) days of the date of exercise of the
Option, the Participant elects pursuant to the provisions of Section 83(b) of
the Code to be subject to withholding tax on the date of exercise of the Option,
then such Participant will be unconditionally obligated to immediately tender
back to the Company the number of Shares having an aggregate fair market value
(as determined in good faith by the Committee), equal to the amount of tax
required to be withheld plus cash for any fractional amount, together with
written notice to the Company informing the Company of the Participant's
election pursuant to Section 83(b) of the Code; or (ii) if the Participant has
not made an election pursuant to the provisions of Section 83(b) of the Code,
then on the Tax Date, such Participant will be unconditionally obligated to
tender back to the Company the number of Shares having an aggregate fair market
value (as determined in good faith by the Committee), equal to the amount of tax
required to be withheld plus cash for any fractional amount.

SECTION 10. VESTING LIMITATION ON INCENTIVE STOCK OPTIONS

     The Fair Market Value of Shares subject to Incentive Stock Options
(determined as of the date such Incentive Stock Options are granted) exercisable
for the first time by any individual during any calendar year shall in no event
exceed $100,000.

SECTION 11. GENERAL PROVISIONS

     (a) No Rights to Awards. No Key Employee or Consultant shall have any claim
to be granted any Option under the Plan, and there is no obligation for
uniformity of treatment of Key

<PAGE>

Employees or Consultants or holders or beneficiaries of Options under the Plan.
The terms and conditions of Options need not be the same with respect to each
recipient.

     (b) No Limit on Other Plans. Nothing contained in the Plan shall prevent
the Company or any Affiliate from adopting or continuing in effect other or
additional compensation arrangements and such arrangements may be either
generally applicable or applicable only in specific cases.

     (c) No Right to Employment. The grant of an Option shall not be construed
as giving a Participant the right to be retained in the employ of the Company or
any Affiliate. Further, the Company or an Affiliate may at any time dismiss a
Participant from employment, free from any liability, or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Option
Agreement.

     (d) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of New York and applicable Federal law.

<PAGE>

     (e) Severability. If any provision of the Plan or any Option is or becomes
or is deemed to be invalid, illegal, or unenforceable in any jurisdiction, or
would disqualify the Plan or any Option under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be construed or deemed amended without, in the
determination of the Committee, materially altering the intent of the Plan, such
provision shall be deemed void, stricken and the remainder of the Plan and any
such Option shall remain in full force and effect.

     (f) No Trust or Fund Created. Neither the Plan nor any Option shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Option, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.

     (g) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Option, and the Committee shall determine whether
cash, other securities, or other property shall be paid or transferred in lieu
of any fractional Shares or whether such fractional Shares or any rights thereto
shall be canceled, terminated, or otherwise eliminated.

     (h) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision hereof.

SECTION 12. DEDUCTIBILITY OF COMPENSATION

     Prior to the end of the "reliance period" as defined in Treasury Regulation
Section 1.162-27(f)(2), the Committee shall take such actions, if any, that it
deems necessary or appropriate so that the compensation element of Non-Qualified
Stock Options will qualify as "qualified performance-based compensation," within
the meaning of Treasury Regulation Section 1.162-27(e).

SECTION 13. EFFECTIVE DATE OF THE PLAN

     The Plan is effective as of the closing of the Company's initial public
offering (the "Effective Date").

SECTION 14. TERM OF THE PLAN

     The Plan shall continue until the earlier of (i) the date on which all
Options issuable hereunder have been issued, (ii) the termination of the Plan by
the Board or (iii) March 4, 2007. However, unless otherwise expressly provided
in the Plan or in an applicable Option Agreement, any Option theretofore granted
may extend beyond such date and the authority of the Committee to amend, alter,
adjust, suspend, discontinue, or terminate any such Option or to waive any
conditions or rights under any such Option, and the authority of the Board to
amend the Plan, shall extend beyond such date.<PAGE>   1
                                                                    Exhibit 10.1

================================================================================

                                    AGREEMENT

                                       FOR

                                PURCHASE AND SALE

                              OF ASSETS RELATING TO

                              AVC(TM) PRODUCT LINE

                                 BY AND BETWEEN

                                  NOVAVAX, INC.

                                       AND

                           KING PHARMACEUTICALS, INC.

================================================================================

<PAGE>   2

                                TABLE OF CONTENTS

ARTICLE 1 CONVEYANCE OF ASSETS; OTHER AGREEMENTS..........................1
   1.01     Assets to be Conveyed.........................................1
   1.02     Purchase Price................................................2
   1.03     Payment.......................................................2
   1.04     Existing Inventory of Products................................2
   1.05     Closing.......................................................2
   1.06     Delivery of Documents.........................................3
   1.07     Conveyance of Assets and Inventory............................3
   1.08     Scope of Novavax's Rights.....................................3
   1.09     Supply Agreement..............................................5
   1.10     Taxes.........................................................5
   1.11     Assumed Liabilities...........................................6
   1.12     Access to Information.........................................6

ARTICLE 2 ACCOUNTS RECEIVABLE AND RETURNED GOODS..........................6
   2.01     Pre-closing Accounts Receivable...............................6
   2.02     Post-closing Accounts Receivable..............................6
   2.03     Returned Goods................................................7
   2.04     Contingent Payment............................................7

ARTICLE 3 REGULATORY MATTERS..............................................8
   3.01     Filings With FDA Regarding Transfer of NDAs...................8
   3.02     Responsibility for the Products...............................8
   3.03     FDA Annual Reports and Adverse Event Report...................9
   3.04     Regulatory and Medical Affairs................................9
   3.05     Rebates for Amounts Paid Under Government Programs............9
   3.06     Non-territory New Drug Applications and Sales.................9

ARTICLE 4 REPRESENTATIONS AND WARRANTIES.................................10
   4.01     Representations and Warranties of King.......................10
   4.02     Representations and Warranties of Novavax....................13
   4.03     Survival of Representations and Warranties...................15
   4.04     Certain Limitations..........................................15

ARTICLE 5 INDEMNIFICATION................................................15
   5.01     Indemnification by King......................................15
   5.02     Indemnification by Novavax...................................16
   5.03     Payments.....................................................17
   5.04     Conduct of Litigation........................................17

ARTICLE 6 MISCELLANEOUS..................................................18
   6.01     Entire Agreement.............................................18
   6.02     Counterparts.................................................18
   6.03     Brokerage and Other Commissions..............................18

<PAGE>   3

   6.04     Notices......................................................18
   6.05     Assignment...................................................19
   6.06     Governing Law................................................20
   6.07     Headings.....................................................20
   6.08     Expenses.....................................................20
   6.09     Successors and Assigns.......................................20
   6.10     Agreement to Take Necessary and Desirable Actions............20
   6.11     No Implied Waiver............................................20
   6.12     Force Majeure................................................20
   6.13     Confidentiality..............................................21
   6.14     Relationship.................................................21
   6.15     Severability.................................................21
   6.16     Press Release................................................21
   6.17     Affiliates...................................................21
   6.18     Waiver of Bulk Sales.........................................22
   6.19     Exhibits and Schedules.......................................22
   6.20     Interpretation...............................................22

SCHEDULES
---------

Schedule 1        List of Products
Schedule 1.01(a)  Tradenames
Schedule 1.01(b)  Description of Know-How
Schedule 1.01(c)  Regulatory Approvals and Filings
Schedule 1.03     Wiring Instructions to King Pharmaceuticals, Inc.
Schedule 1.04     Inventory and Expiration Dates
Schedule 1.07     Liens, Claims, Charges, Encumbrances and Restrictions on the
                  Assets and the Inventory
Schedule 4.01(k)  Form 483s, Warning Letters, Etc.
Schedule 4.01(n)  Suppliers

EXHIBITS
--------

Exhibit A - Bill of Sale

<PAGE>   4
                                    AGREEMENT

         THIS AGREEMENT, is dated and entered into as of January 8, 2001 (this
"Agreement"), between NOVAVAX, INC., a corporation organized and existing under
the laws of the State of Delaware, having a principal place of business at 8320
Guilford Road, Columbia MD 21046 ("NOVAVAX") and KING PHARMACEUTICALS, INC., a
corporation organized and existing under the laws of the State of Tennessee,
having a principal place of business at 501 Fifth Street, Bristol, Tennessee
37620 ("KING").

                              W I T N E S S E T H:

         WHEREAS, KING desires to sell to NOVAVAX, and NOVAVAX desires to
purchase from KING, certain assets relating to KING's pharmaceutical products in
the Territory (as hereinafter defined) marketed under the tradename AVC(TM)
listed on SCHEDULE 1 attached hereto (collectively, the "Product" or
"Products"), on the terms and subject to the conditions hereinafter set forth;

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby mutually acknowledged, KING and NOVAVAX
hereby covenant, contract, and agree as follows:

                                   ARTICLE 1

                     CONVEYANCE OF ASSETS; OTHER AGREEMENTS

         1.01 ASSETS TO BE CONVEYED.

         On the Closing Date (as defined below), and subject to the terms and
conditions of this Agreement (including, without limitation, the provisions of
SECTION 1.08 hereof), KING will sell, assign, convey, transfer, and deliver to
NOVAVAX, and NOVAVAX will purchase and accept from KING, the following:

         (a) All of KING's right, title, and interest in the United States of
America, its territories and possessions (the "Territory"), in and to the
tradename set forth on SCHEDULE 1.01(a) attached hereto (the "Tradename"),
together with the goodwill of the business symbolized by the Tradename in the
Territory;

         (b) The know-how set forth on SCHEDULE 1.01(b) attached hereto relating
to the production, manufacturing, packaging, release, validation, and stability
of the Products for use by NOVAVAX in the Territory (the "Know-How");

         (c) Subject to the provisions of SECTION 3.06 hereof, all of KING's
right, title, and interest in the Territory in and to the new drug application
for the Product set forth on SCHEDULE 1.01(c) attached hereto (the "NDA"),
including supplements, records, and reports that are required to be kept under
21 C.F.R. ss. 314.81 (or under any comparable regulation applicable

<PAGE>   5

to an abbreviated antibiotic drug application), whether issued or pending
together with correspondence to or from the United States Food and Drug
Administration (the "FDA") which relates exclusively to the Product; and

         (d) The tradedress, if any, associated with the Products in the
Territory, excluding any corporate or division name of KING or any of its
Affiliates (as defined below), any logo of KING or its Affiliates, and any
tradename (other than the Tradename) of KING or any of its Affiliates (the
"Tradedress").

         All of the assets described in Sections 1.01(a) - (d) are hereinafter
sometimes referred to collectively as the "Assets."

         1.02 PURCHASE PRICE.

         The purchase price for the Assets (the "Purchase Price") shall be Three
Million Three Hundred Thirty-Two Thousand Dollars ($3,332,000).

         1.03 PAYMENT.

         The Purchase Price shall be paid to KING by NOVAVAX by wire transfer of
immediately available funds to the account specified in SCHEDULE 1.03 attached
hereto at the Closing (as defined below).

         1.04 EXISTING INVENTORY OF PRODUCTS.

         On the Closing Date, KING will sell, assign, convey, and transfer to
NOVAVAX, and NOVAVAX will purchase and accept from KING, all of KING's finished
goods inventory of the Products with expiration dates more than nine (9) months
from the Closing Date, as set forth on SCHEDULE 1.04 attached hereto (the
"Inventory"). The purchase price for the Inventory shall be equal to the book
value of the Inventory as of the Closing Date, as reflected on KING's books and
records, and shall be paid by NOVAVAX to KING ten (10) days after the Closing by
wire transfer of immediately available funds to the account specified in
SCHEDULE 1.03. KING will complete shipping of the Inventory within ten (10)
business days after the Closing Date. All Inventory will be shipped at NOVAVAX's
expense to NOVAVAX's facilities in Maryland Heights, Missouri or such other
locations as the parties may mutually agree via a carrier designated by NOVAVAX.
KING shall bear the risk of loss to the Inventory until the Inventory has been
delivered to the carrier designated by NOVAVAX. Thereafter NOVAVAX shall bear
the risk of loss to the Inventory. KING will provide to NOVAVAX within ten (10)
days of shipment of the Inventory, KING's standard certificate of analysis for
each batch of Product shipped.

         1.05 CLOSING.

         The closing of the transactions provided for in this Agreement (the
"Closing") shall take place on January 8, 2001, or on such other date as KING
and NOVAVAX may agree in writing

                                       2
<PAGE>   6

(the "Closing Date"), at the offices of Hogan & Hartson L.L.P., 8300 Greensboro
Drive, Suite 1100, McLean, Virginia 22102.

         1.06 DELIVERY OF DOCUMENTS.

         (a) Subject to the terms and conditions of this Agreement, KING will
deliver to NOVAVAX at the Closing (unless otherwise specified):

                  (i) An executed irrevocable bill of sale in the form of
EXHIBIT A hereto (the "Bill of Sale");

                  (ii) Copies of the materials comprising the Know-How described
on SCHEDULE 1.01(B), all in accordance with a time frame and in a manner
reasonably acceptable to the parties, but in no event later than thirty (30)
business days after the Closing Date;

                  (iv) A complete copy of the NDA and other materials described
in Section 1.01(c), all in accordance with a time frame and in a manner
reasonably acceptable to the parties, but in no event later than thirty (30)
business days after the Closing Date;

                  (v) A copy of the information required by the FDA pursuant to
21 C.F.R. ss. 314.72 to effect transfer of the NDA from KING to NOVAVAX;

                  (vi) An executed copy of the Supply Agreement (as defined
below); and

                  (vii) A copy of the FDA Annual Reports and Adverse Event
Report (both as defined below).

         (b) Subject to the terms and conditions of this Agreement, NOVAVAX will
deliver to KING at the Closing:

                  (i) The Purchase Price; and

                  (ii) A copy of the information required by the FDA pursuant to
21 C.F.R. ss. 314.72 to effect transfer of the NDA from KING to NOVAVAX.

         1.07 CONVEYANCE OF ASSETS AND INVENTORY.

         KING agrees to transfer and convey the Assets and the Inventory to
NOVAVAX free and clear of all liens, claims, charges, encumbrances, or
restrictions, except as specifically described on SCHEDULE 1.07 attached hereto.

         1.08 SCOPE OF NOVAVAX'S RIGHTS.

         (A) NOVAVAX hereby acknowledges and agrees that, notwithstanding
anything to the contrary set forth in this Agreement: (i) KING shall at all
times be permitted to, and shall retain all know-how and other rights necessary
to enable KING to, manufacture and market in and outside the Territory, and sell
and distribute outside the Territory, the Products and any one

                                       3
<PAGE>   7

or more pharmaceutical products that are equivalent or substantially equivalent
to the Products; (ii) KING shall retain all know-how and rights necessary for
KING to manufacture, market, sell and distribute all pharmaceutical products
other than the Products; (iii) KING and its Affiliates shall at all times be
permitted to, and shall retain all know-how and other rights necessary to enable
KING to, ship, deliver and distribute the Products to other parties within the
Territory for purposes of having such other parties distribute the Products
outside the Territory; (iv) neither NOVAVAX nor its Affiliates shall interfere
with, or have the right to prohibit, the development, manufacture, sale, or
distribution of the Products outside the Territory; (v) NOVAVAX will acquire no
right, title, or interest whatsoever in any property or assets of KING or any of
KING's Affiliates except as expressly set forth in this Agreement, including no
right, title, or interest to any property or assets outside the Territory; (vi)
neither NOVAVAX nor its Affiliates shall use or disclose the Know-How outside of
the Territory; (vii) neither NOVAVAX nor its Affiliates shall manufacture,
market, distribute, or sell any of the Products outside of the Territory or
knowingly cause the Products to be manufactured, marketed, distributed, or sold
outside the Territory; and (viii) neither NOVAVAX nor its Affiliates shall
market, distribute or sell any of the Products inside the Territory to any
person or entity which it knows or has any reason to suspect will market, sell
or distribute the Product outside the Territory.

         (b) NOVAVAX acknowledges and agrees that KING and its Affiliates shall
be entitled to use the Tradename and the Know-How after Closing to the extent
necessary to fulfill KING's obligations hereunder, under the Supply Agreement,
under applicable laws or regulations and in connection with the exercise of the
rights reserved by KING and its Affiliates described in SECTION 1.08(a).

         (c) KING acknowledges and agrees that: (i) for a period of five (5)
years from the Closing Date, except as provided in the Supply Agreement and
except in connection with the exercise of the rights reserved by KING and its
Affiliates described in SECTION 1.08(a), KING shall not, and shall not permit
any of its Affiliates to, sell, produce, manufacture, market, or distribute in
the Territory any identical product ("Identical Products") or any Products; (ii)
other than for purposes of sales of Products or Identical Products outside the
Territory neither KING nor its Affiliates shall knowingly cause the Products or
any Identical Products to be manufactured, marketed, distributed, or sold inside
the Territory to any person or entity other than NOVAVAX or its Affiliates; and
(iii) other than for purposes of sales of Products or Identical Products outside
the Territory, KING agrees that neither KING nor its Affiliates shall use or
disclose the Know-How inside the Territory. This Section 1.08(c) shall not apply
to any products produced, sold, manufactured, marketed, or distributed by any
business (or any portion thereof), person, or group of persons, which is
acquired by, or which acquires, or which forms a merger with KING or any of its
Affiliates (whether through the formation of a new holding company or
otherwise), in a single transaction or a series of related transactions provided
that such business, person or group of persons sold, manufactured, marketed, or
distributed such products prior to such merger or acquisition.

         (d) Nothing in this Section 1.08 shall prohibit (i) the provision by
KING or any of its Affiliates of assistance to the purchaser of any
manufacturing facility previously owned by KING or any of its Affiliates that is
of the type of assistance that is customarily provided by sellers of

                                       4
<PAGE>   8

manufacturing facilities to purchasers of such facilities and that relates
solely to manufacturing; or (ii) the manufacture by KING or any of its
Affiliates of any Identical Products in the Territory for sale or distribution
outside the Territory.

         (e) The parties acknowledge that the Inventory purchased under this
Agreement and the Products to be supplied under the Supply Agreement may contain
packaging and labeling with the names, logos, and trademarks of KING and its
Affiliates (the "KING Packaging Materials"). NOVAVAX may distribute such
Inventory and Products with the KING Packaging Materials; however, NOVAVAX shall
not, and shall have no right to, use such names, logos, or tradenames for any
other purpose and NOVAVAX shall acquire no right, title, or interest in or to
such names, logos, and tradenames.

         (f) Notwithstanding Section 1.08(e) above, (i) NOVAVAX shall use
commercially reasonable efforts to make all necessary arrangements as soon as
possible so that NOVAVAX will ship all Products (other than the Inventory)
without the use of any KING Packaging Materials, including obtaining all
necessary packaging and labeling materials to do so and related regulatory
approvals and, in any event, by March 31, 2001, NOVAVAX shall distribute all
such Products without the use of any KING Packaging Materials, (ii) if any
changes of packaging and labeling described in this subsection (f) render
obsolete or unusable any packaging or labeling materials or components acquired
by KING for the Products, then NOVAVAX shall purchase from KING at KING's
Acquisition Cost (as defined in the Supply Agreement) all such packaging and
labeling materials or components rendered obsolete or unusable, and (iii)
NOVAVAX will purchase, at its expense, all tooling and/or equipment necessary to
package and label the Products without KING Packaging Materials as contemplated
by this subsection (f), except the tools, dies, molds, and the like used
exclusively in the manufacture of the Products, if any, referenced in Section
1.11 of this Agreement.

         1.09 SUPPLY AGREEMENT.

         Contemporaneously with the execution of this Agreement, KING and
NOVAVAX are entering into a supply agreement (the "Supply Agreement") under
which KING agrees to supply, and NOVAVAX agrees to purchase, the AVC(TM) Cream
Product referenced on SCHEDULE 1 at a purchase price equal to 110% of KING's
Cost of Product (as defined in the Supply Agreement), and on the additional
terms and conditions more specifically described therein, and which provides for
certain other matters. The Supply Agreement shall not govern the AVC(TM)
Suppositories referenced on SCHEDULE 1, which may be manufactured and supplied
for NOVAVAX by R.P. Scherer or another third party.

         1.10 TAXES.

         NOVAVAX shall be responsible for and shall promptly pay all federal,
state, and local transfer, sales, and other taxes, if any, levied or imposed as
a result of the transactions contemplated by this Agreement, excluding any tax
payable on any income or gain of KING.

                                       5
<PAGE>   9

         1.11 ASSUMED LIABILITIES.

         NOVAVAX shall not assume or become liable for any obligation or
liability of KING pertaining to the Assets or the Products, of any nature
whatsoever, fixed or contingent, that arose prior to the Closing Date, including
without limitation any undisclosed liabilities, any obligations pursuant to
product warranties or product liabilities arising from Products manufactured or
shipped prior to the Closing, and any tax liabilities arising from the conduct
of business of KING prior to the Closing or imposed upon KING as a result of the
transfer of Assets hereunder.

         1.12 ACCESS TO INFORMATION.

         For a period of four (4) years after the Closing, KING agrees to
cooperate with NOVAVAX and to grant to NOVAVAX and its employees, attorneys,
accountants, officers, representatives, and agents, during normal business hours
and upon ten (10) days' advance notice, reasonable access to KING's management
personnel and to the records relating to the Products (including, without
limitation, the NDA) and to permit copying at NOVAVAX's expense of documents
relating to the Assets for the purposes of (i) any financial reporting or tax
matters (including, without limitation, any financial and tax audits, tax
contests, tax examination, preparation of any NOVAVAX tax returns or financial
records) relating to the Products; (ii) any claims or litigation involving
NOVAVAX and the Assets relating to the Products; (iii) any investigation of
NOVAVAX being conducted by any federal, state, or local governmental authority
relating to the Products; (iv) any matter relating to any indemnification or
representation or warranty or any other term of this Agreement; or (v) any
similar or related matter. KING shall maintain all such records and documents in
the United States and shall not destroy or dispose of any such records and
documents without the prior written consent of NOVAVAX. NOVAVAX shall use its
reasonable efforts to ensure that its access to and requests for records and
documents pursuant to this Section are conducted so as not to interfere with the
normal and ordinary operation of KING's business. NOVAVAX acknowledges that the
records and documents made available to NOVAVAX by KING shall be governed by the
Disclosure Agreement (as defined in Section 6.13 hereto).

                                    ARTICLE 2

                     ACCOUNTS RECEIVABLE AND RETURNED GOODS

         2.01 PRE-CLOSING ACCOUNTS RECEIVABLE.

         KING and NOVAVAX agree that any accounts receivable or invoices arising
out of sales of the Products by or on behalf of KING on or prior to 11:59 p.m.
(E.S.T.) on the Closing Date shall inure to the benefit of KING.

         2.02 POST-CLOSING ACCOUNTS RECEIVABLE.

         NOVAVAX and KING agree that any accounts receivable or invoices arising
out of sales of the Products by or on behalf of NOVAVAX after 11:59 p.m.
(E.S.T.) on the Closing Date shall inure to the benefit of NOVAVAX. Without
derogating from the foregoing, KING agrees

                                       6
<PAGE>   10

that it shall continue to take orders for the Products for ninety (90) days
following the Closing Date. Such orders shall be reported by KING to NOVAVAX
promptly after receipt and in no event more than two (2) business days after
such orders are received. KING and NOVAVAX agree to determine promptly after the
Closing a mutually agreeable reporting procedure to communicate the information
required by this Section 2.02.

         2.03 RETURNED GOODS.

         Except as otherwise expressly set forth below and subject to NOVAVAX's
timely compliance with its obligations set forth in this Section 2.03, KING and
NOVAVAX agree that during the six (6) month period immediately following the
Closing Date, KING shall be responsible for handling returns of all Products
that were sold by KING prior to the Closing Date and that are returned by
customers for credit for other KING products after the Closing Date. KING shall
handle such returns during such period in accordance with its then applicable
returned goods policy. NOVAVAX agrees to provide KING with any information
reasonably requested by KING from time to time regarding NOVAVAX's selling
prices for the Products in order to assist KING in its determination of the
reimbursement prices for returned Products. Such information shall be provided
by NOVAVAX to KING promptly, and in any event within ten (10) days after KING's
written request therefor. In the event that during such six (6) month period any
returns are delivered to NOVAVAX, such returns shall be shipped by NOVAVAX to
KING and KING shall reimburse NOVAVAX for the shipping costs incurred.

         2.04 CONTINGENT PAYMENT.

         Two Million Dollars ($2,000,000) of the Purchase Price shall be
received by KING as contingent payment (the "Contingent Payment") pending
confirmation of aggregate, consolidated Net Sales (as defined below) of the
Products in each of the calendar years 2001 through 2004 totaling not less than
Eight Hundred Fifty Thousand Dollars ($850,000) per calendar year (for each of
the relevant calendar years, the "Sales Target"), and such Contingent Payment
shall be subject to pro rata reduction for Net Sales of Products below the Sales
Target for each of the relevant calendar years. Notwithstanding the foregoing,
the full Purchase Price, including the Contingent Payment, shall be retained by
KING with no refund of the Contingent Payment if NOVAVAX fails to use
commercially reasonable efforts to promote and sell the Products. If the
immediately preceding sentence does not apply, then KING shall pay to NOVAVAX,
within thirty (30) days after receiving from NOVAVAX's chief financial officer a
certificate as to the aforesaid Net Sales during the applicable calendar years,
a payment in the amount of twenty-five percent (25%) of the Contingent Payment
if the Sales Target for a particular calendar year is not achieved, or such
portion of such twenty-five percent (25%) of the Contingent Payment as shall
reflect a pro rata reduction for consolidated Net Sales of Products during each
of the relevant calendar years of less than the Sales Target for such calendar
year. For purposes of this Agreement, Net Sales shall mean all gross revenue
actually received by a party from sales of the Products, less (a) credits for
refunds and returns, including returns for stock balancing purposes, (b) sales,
use and similar taxes billed by such party to its customers and required to be
paid to the appropriate taxing authorities by such party; (c) discounts,
allowances and commissions paid or

                                       7
<PAGE>   11

allowed by a party on sales of the Products, and (d) amounts paid by such party
and billed through to such party's customers for insurance, shipping and similar
charges.

                                    ARTICLE 3

                               REGULATORY MATTERS

         3.01 FILINGS WITH FDA REGARDING TRANSFER OF NDAS.

         At the Closing, the parties shall file with the FDA the information
required pursuant to 21 C.F.R. ss. 314.72, or any successor regulation thereto,
regarding the transfer of the NDAs from KING to NOVAVAX. KING shall file the
information required of a former owner, and NOVAVAX shall file the information
required of a new owner. The parties also agree to use their reasonable best
efforts to take any and all other actions required by the FDA, or other
necessary governmental agencies, if any, to effect the transfer of the NDA from
KING to NOVAVAX. KING may retain an archival copy of the NDA, including
supplements and records that are required to be kept under 21 C.F.R. ss. 314.81,
and KING shall treat such archived copies as Confidential Information (as
defined in the Supply Agreement) of NOVAVAX and disclosure of such information
shall be governed by the Supply Agreement.

         3.02 RESPONSIBILITY FOR THE PRODUCTS.

         (a) After the Closing and in the Territory, NOVAVAX shall assume all
regulatory responsibilities permitted by applicable laws and regulations to be
assumed by NOVAVAX, reporting and otherwise, in connection with the Products and
the NDA including, but not limited to, responsibility for reporting any adverse
drug experiences in connection with the Products, and responsibility for
compliance with all laws and regulations, including the Prescription Drug
Marketing Act of 1987, as the same may be amended from time to time.

         (b) NOVAVAX and its Affiliates agree promptly to submit to KING all
adverse drug experience information or customer complaints brought to the
attention of NOVAVAX or its Affiliates in respect of the Products, as well as
any material events and matters concerning or affecting the safety or efficacy
of the Products. KING and its Affiliates agree promptly to submit to NOVAVAX all
adverse drug experience information or customer complaints brought to the
attention of KING or its Affiliates in respect of the Products, as well as any
material events and matters concerning or affecting the safety or efficacy of
the Products. NOVAVAX and KING agree to determine promptly after Closing a
mutually agreeable reporting procedure to communicate the information required
by this Section 3.02(b).

          (c) After the Closing, NOVAVAX shall assume all responsibility for any
and all FDA fee obligations for holders or owners of approved New Drug
Applications and approved, marketed prescription drug products relating to the
Products, including, but not limited to, those defined under the Prescription
Drug User Fee Act of 1992, as the same may be amended from time to time.

                                       8
<PAGE>   12

         (d) Promptly after the Closing, NOVAVAX shall submit a "Changes Being
Effected in Thirty Days" filing ("CBE 30") with the FDA to request FDA
permission for KING to manufacture and distribute the Products at its facility
in Bristol, Tennessee, or at the facility of one of its Affiliates. KING shall
provide NOVAVAX with all information necessary to submit such CBE 30.

         (e) Promptly after the Closing, NOVAVAX shall take all actions
necessary or required under applicable laws, rules, and regulations, to reflect
that the Assets are owned by NOVAVAX and that NOVAVAX has responsibility
therefor.

         (f) After the Closing, KING shall direct all complaints or inquiries
concerning the Products in the Territory to NOVAVAX to the attention of Medical
Affairs Department, at facsimile number (301) 854-3902.

         3.03 FDA ANNUAL REPORTS AND ADVERSE EVENT REPORT.

         At the Closing, KING shall provide NOVAVAX with (i) a copy of the
annual reports provided by KING to the FDA for the calendar years 1999 and 2000
(the "FDA Annual Reports") and (ii) a report listing in reasonable detail any
and all adverse drug experiences and/or customer complaints brought to the
attention of KING or its Affiliates in respect of the Products during the twelve
(12) month period prior to the Closing Date, as well as any material events and
matters concerning or affecting the safety or efficacy of the Products known to
KING or its Affiliates prior to the Closing Date (the "Adverse Events Report").

         3.04 REGULATORY AND MEDICAL AFFAIRS.

         Upon the reasonable request of NOVAVAX, KING agrees to provide NOVAVAX
with services relating to medical and regulatory affairs concerning the
Products, at NOVAVAX's expense, for six (6) months following the Closing Date,
the cost and nature of which shall be mutually agreed upon by the parties.

         3.05 REBATES FOR AMOUNTS PAID UNDER GOVERNMENT PROGRAMS.

         NOVAVAX shall reimburse KING for all rebates KING is obligated to pay
pursuant to any government rebate program for amounts charged to KING's NDC
codes for the Products with respect to sales of the Products from one hundred
twenty (120) days after the Closing Date. All payments due under this Section
3.05 shall be made promptly to KING upon submission to NOVAVAX of invoices that
describe the requested payments in reasonable detail. NOVAVAX shall obtain new
NDC codes for the Products as soon as practicable after the Closing Date. In the
event NOVAVAX disputes an amount owed under a government rebate program, KING
shall provide to NOVAVAX copies of any documents and records evidencing original
rebate claims and any resubmissions of such claims and data relating to unit
rebate calculations in order to enable NOVAVAX to resolve such disputed amount.

                                       9
<PAGE>   13

         3.06 NON-TERRITORY NEW DRUG APPLICATIONS AND SALES.

         After the Closing, NOVAVAX agrees to cooperate with KING and permit
KING to use the NDA to the extent necessary, useful or helpful in support of (a)
any new drug applications or similar regulatory filings made by KING and/or its
Affiliates outside the Territory and (ii) and sales by KING and its Affiliates
of the Products outside the Territory.

                                    ARTICLE 4

                         REPRESENTATIONS AND WARRANTIES

         4.01 REPRESENTATIONS AND WARRANTIES OF KING.

         KING makes the following representations and warranties. The phrase "to
the knowledge of KING" or any substantially equivalent phrase, as used in this
Article 4, shall mean to the actual knowledge of officers and directors of KING
after reasonable inquiry.

         (a) ORGANIZATION AND STANDING. KING is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Tennessee.

         (b) POWER AND AUTHORITY. KING has all requisite corporate power and
authority to execute, deliver, and perform this Agreement and the other
agreements and instruments to be executed and delivered by it pursuant hereto
and to consummate the transactions contemplated herein and therein. The
execution, delivery, and performance of this Agreement and of the other
agreements and instruments to be executed and delivered by KING pursuant hereto
do not, and the consummation of the transactions contemplated hereby and thereby
and compliance with the terms, conditions and provisions hereof and thereof will
not, violate or conflict with any provisions of KING's Articles of
Incorporation, Bylaws, any law or regulation applicable to KING, or any
agreement, mortgage, lease, instrument, order, judgment, or decree to which KING
is a party or by which KING is bound or constitute a default thereunder or
result in the creation or acceleration of any lien, charge, security interest,
or other encumbrance of any nature whatsoever on the Assets.

         (c) CORPORATE ACTION; BINDING EFFECT. KING has duly and properly taken
all action required by law, its Articles of Incorporation, its Bylaws, or
otherwise, to authorize the execution, delivery, and performance by it of this
Agreement, the Bill of Sale and the Supply Agreement (collectively, the Bill of
Sale and the Supply Agreement are referred to herein as the "Collateral
Agreements"), and the other instruments to be executed and delivered by it
pursuant hereto and the consummation of transactions contemplated hereby and
thereby. This Agreement has been duly executed and delivered by KING and
constitutes, and the Collateral Agreements and the other instruments
contemplated hereby and thereby when duly executed and delivered by KING will
constitute, legal, valid, and binding obligations of KING enforceable against it
in accordance with their respective terms, except as enforcement may be affected
by bankruptcy, insolvency, or other similar laws relating to or affecting
generally the enforcement of creditors' rights and by general principles of
equity.

                                       10
<PAGE>   14

         (d) CONSENTS. No consent or approval of, or filing with or notice to,
any federal, state, or local governmental or regulatory authority, agency, or
department or any other person not a party to this Agreement is required or
necessary to be obtained by KING or on its behalf in connection with the
execution, delivery, and performance of this Agreement or the Collateral
Agreements or to consummate the transactions contemplated hereby or thereby,
except as contemplated by Section 3.01 hereof. No consent of any person who is a
party to a contract or other agreement with respect to the manufacturing and
sale of the Products is required to be obtained on the part of KING to
consummate the transactions contemplated by this Agreement or the Collateral
Agreements and to continue the manufacture and sale of the Products as
previously conducted by KING.

         (e) OWNERSHIP OF ASSETS. KING is the owner of, and as such has full
right, title and interest in and to, the Assets described in Sections 1.01(a),
1.01(c), and 1.01(d) and, to KING's knowledge, the Assets described in Section
1.01(b), free and clear of all liens, claims, charges, or encumbrances, except
for liens for taxes not yet due and payable and except as described on SCHEDULE
1.07 attached hereto.

         (f) LITIGATION OR DISPUTES. Except as disclosed in SCHEDULE 4.01(f)
attached hereto, there is no claim, outstanding commitment to any governmental
regulatory agency, action, suit, proceeding, investigation, or arbitration
pending or, to KING's knowledge, threatened against KING relating to the Assets
and, to KING's knowledge, no event has occurred nor does any condition exist on
the basis of which any such proceeding would reasonably be expected to be
instituted with any substantial chance of recovery, and KING is not in violation
of or in default with respect to any applicable law, rule, regulation, judgment,
order, writ, injunction, award, or decree of any arbitrator, court, or
administrative body, the result of any of which, either individually or
cumulatively, would have a materially adverse effect on the Assets in the
Territory or KING's compliance with and performance under the terms of this
Agreement or the Collateral Agreements.

         (g) TRADENAMES; INTELLECTUAL PROPERTY. SCHEDULE 1.01(a) attached hereto
is a true and correct list of all tradenames owned by KING and used by KING in
the manufacture, marketing, and sale of the Product in the Territory. There are
no registered trademarks used or held by KING for use in connection with or
otherwise necessary for the conduct of KING's business as now conducted for the
Products in the Territory. KING has good right to use the Know-How, Tradenames
and Tradedress in the Territory without infringing on the rights of any third
party. KING owns no patents necessary for the conduct of KING's business as now
conducted for the Products in the Territory. To KING's knowledge, KING is not
infringing on or violating in any material respect any patent, trademark,
service mark, tradename or copyright of any third party with respect to the
Assets, and KING has not received any notice of any claim that any of the Assets
infringe on any property rights of any other party. There is no claim, action,
suit, or proceeding, pending or, to KING's knowledge, threatened alleging that
the use by KING or its Affiliates of the Tradename, Tradedress or the Know-How
infringes any patents or other intellectual property rights of third parties.
KING has not executed or granted to any

                                       11
<PAGE>   15

Affiliate or any third party in the Territory any license, sublicense, or
contract covering the Know-How, the Tradedress or the Tradenames.

         (h) COMPLIANCE WITH LAW AND NECESSARY PERMITS. KING has conducted its
operations in connection with the manufacture and sale of the Products in
material compliance with all applicable federal, state, and local laws and
regulations, including FDA regulations, and KING has not received written notice
of a violation or alleged violation of any such law or regulation. KING
possesses all material approvals, consents, licenses, and permits ("Necessary
Permits") required for the conduct of its business as now conducted for the
Products or as will be necessary to perform its obligations under the Supply
Agreement. All such Necessary Permits possessed by KING are in full force and
effect and (i) to KING's knowledge no suspension or cancellation of any
Necessary Permit is threatened (ii) there is no reason to believe that on
expiration any Necessary Permit will not be renewed, and (iii) none of the
Necessary Permits will be materially adversely affected by the consummation of
the transactions contemplated by this Agreement and the Collateral Agreements.

         (i) WARRANTY AND DISCLAIMER OF WARRANTIES. KING warrants that the
Inventory was manufactured in accordance with the applicable specifications for
the Products and in accordance with current good manufacturing practices in
effect at the time of manufacture. KING further warrants that the Inventory,
when delivered to NOVAVAX, will not be (i) adulterated or misbranded by KING
within the meaning of the United States Federal Food, Drug and Cosmetic Act, as
amended (the "FD&C Act") or (ii) an article that may not be introduced into
interstate commerce under the provisions of Sections 404 or 505 of the FD&C Act.
Set forth on SCHEDULE 1.04 attached hereto is a list accurate in all material
respects of the expiration dates of the Inventory. WITH RESPECT TO THE
INVENTORY, KING MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED, AND SPECIFICALLY
MAKES NO WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS FOR ANY PARTICULAR
PURPOSE.

         (j) RECALLS OR WITHDRAWALS. During the period commencing on January 1,
2000, and ending on the date hereof, there have been no: (i) Products which have
been recalled or withdrawn by KING or its Affiliates in the Territory (whether
voluntarily or otherwise) or (ii) proceedings in the Territory brought against
KING or its Affiliates (whether such proceedings have since been completed or
remain pending) seeking the recall, withdrawal, or seizure of any of the
Products or seeking to enjoin KING or any of its Affiliates from distributing
such Products.

         (k) FACILITIES AND MANUFACTURING. Except as set forth on SCHEDULE
4.01(k) attached hereto, and only to the extent it could have a material adverse
effect on the Assets or KING's performance hereunder or under any of the
Collateral Agreements, during the period commencing on January 1, 2000, and
ending on the date hereof, with respect only to the Products, neither KING nor
its Affiliates have received or been subject to: (i) any FDA Form 483's relative
to the Products; (ii) any FDA Notices of Adverse Findings relative to the
Products; or (iii) warning letters or other correspondence from the FDA or any
other governmental officials or agencies concerning the Products in which the
FDA or other such governmental officials or

                                       12
<PAGE>   16

agencies asserted that or questioned whether the operations of KING were not in
compliance with applicable law, regulations, rules, or guidelines.

         (l) CONDUCT OF BUSINESS. Since January 1, 2000, KING has conducted its
business relating to the Products in the ordinary course of its business in all
material respects.

         (m) ABSENCE OF UNDISCLOSED LIABILITIES. To KING's knowledge, KING has
no liabilities with respect to the Products or the Assets of any nature, whether
accrued, absolute, contingent or otherwise, asserted or unasserted, known or
unknown, that will become the obligation of NOVAVAX as a consequence of the
transactions contemplated by this Agreement or the Collateral Agreements, except
for liabilities contemplated by the terms of this Agreement and the Collateral
Agreements.

         (n) SUPPLIERS. SCHEDULE 4.01(n) lists all suppliers to which KING made
payments during calendar year 2000, or expects to make payments in relation to
the Products during calendar year 2001, in excess of $5,000. KING has no
information which might reasonably indicate that any of the suppliers listed on
SCHEDULE 4.01(n) intend to cease selling to or dealing with KING or the
manufacturer of the Products, nor has any information been brought to KING's
attention which might reasonably lead it to believe any such supplier intends to
alter in any material respect the amount of such sales or the extent of dealings
in relation to the Products or would alter in any material respect such sales or
dealings in the event of the consummation of the transactions contemplated by
this Agreement or the Collateral Agreements; PROVIDED, HOWEVER, that NOVAVAX
acknowledges and agrees that there currently exists no agreement for the
manufacture or packaging of the AVC(TM) Suppositories referenced on SCHEDULE 1
and that there can be no assurances regarding the success or timeliness of the
filing of the CBE 30 or the FDA's response thereto, and that any inquiry or
request by the FDA related to the CBE 30 for the AVC(TM) Cream could cause a
delay or interruption of supply of the Products. Except as provided in the
immediately preceding sentence, KING has no information which might reasonably
indicate, nor has any information been brought to KING's attention which might
reasonably lead it to believe that any supplier will not be able to fulfill
outstanding or currently anticipated purchase orders placed by KING.

         4.02 REPRESENTATIONS AND WARRANTIES OF NOVAVAX.

         NOVAVAX represents and warrants to KING as follows:

         (a) ORGANIZATION AND STANDING. NOVAVAX is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.

         (b) POWER AND AUTHORITY. NOVAVAX has all requisite corporate power and
authority to execute, deliver, and perform this Agreement, and the other
agreements and instruments to be executed and delivered by it pursuant hereto
and to consummate the transactions contemplated herein and therein. The
execution, delivery, and performance of this Agreement by NOVAVAX do not, and
the consummation of the transactions contemplated hereby will not, violate any
provision of NOVAVAX's Certificate of Incorporation, Bylaws, any

                                       13
<PAGE>   17

law or regulation applicable to NOVAVAX, or any agreement, mortgage, lease,
instrument, order, judgment, or decree to which NOVAVAX is a party or by which
NOVAVAX is bound.

         (c) CORPORATE ACTION; BINDING EFFECT. NOVAVAX has duly and properly
taken all action required by law, its Certificate of Incorporation, its Bylaws,
or otherwise, to authorize the execution, delivery, and performance by it of
this Agreement and the other instruments to be executed by it pursuant hereto
and the consummation of the transactions contemplated hereby and thereby. This
Agreement has been duly executed and delivered by NOVAVAX and constitutes, and
the other instruments contemplated hereby when duly executed and delivered by
NOVAVAX will constitute, legal, valid, and binding obligations of NOVAVAX
enforceable against it in accordance with their respective terms, except as
enforcement may be affected by bankruptcy, insolvency, or other similar laws and
by general principles of equity.

         (d) ACCESS TO INFORMATION. For a period of four (4) years after the
Closing, NOVAVAX agrees to cooperate with KING and to grant to KING and its
employees, attorneys, accountants, officers, representatives, and agents, during
normal business hours and upon ten (10) days' advance notice, reasonable access
to NOVAVAX's management personnel and to the records relating to the Products
during the period the Assets were owned by KING (including, without limitation,
the NDA) and to permit copying at KING's expense of documents relating to the
Assets during the period the Assets were owned by KING for the purposes of (i)
any financial reporting or tax matters (including, without limitation, any
financial and tax audits, tax contests, tax examination, preparation of any KING
tax returns or financial records) relating to the Product; (ii) any claims or
litigation involving KING and the Assets relating to the Product; (iii) any
investigation of KING being conducted by any federal, state, or local
governmental authority relating to the Product; (iv) any matter relating to any
indemnification or representation or warranty or any other term of this
Agreement; or (v) any similar or related matter. NOVAVAX shall maintain all such
records and documents in the United States and shall not destroy or dispose of
any such records and documents without the prior written consent of KING. KING
shall use its reasonable efforts to ensure that its access to and requests for
records and documents pursuant to this Section are conducted so as not to
interfere with the normal and ordinary operation of NOVAVAX's business. KING
acknowledges that the records and documents made available to KING by NOVAVAX
shall be governed by the Confidentiality Agreement (as defined in Section 6.13
hereto). Any employees, attorneys, accountants, officers, representatives, or
agents of KING which access such information on KING's behalf pursuant to this
Section 4.02(d) shall be bound by obligations of confidentiality not to disclose
such information substantially similar in form and substance to the
confidentiality obligations of KING set forth in the Confidentiality Agreement.

         (e) CONSENTS. No consent or approval of, or filing with or notice to,
any federal, state, or local governmental or regulatory authority, agency, or
department or any other person not a party to this Agreement is required or
necessary to be obtained by NOVAVAX or on its behalf in connection with the
execution, delivery, and performance of this Agreement or to consummate the
transactions contemplated hereby, except as contemplated by Section 3.01 hereof.

                                       14
<PAGE>   18

         4.03 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.

         The representations, warranties, and indemnities of the parties hereto
contained in this Article 4 and in Article 5 shall survive the Closing Date for
a period equal to one (1) year, except that Section 4.01(e) (Ownership of
Assets) and indemnification with respect thereto shall survive the Closing Date
for a period equal to two (2) years.

         4.04 CERTAIN LIMITATIONS.

         (a) KING does not make any representation or warranty as to the
business prospects of the Products. NOVAVAX has conducted its own thorough due
diligence review and analysis, as it deemed necessary and appropriate of the
Assets and of the business prospects of the Products. NOVAVAX is not relying on
any representations or warranties from KING as to the business prospects of the
Products or any other representations or warranties, except as expressly set
forth herein.

         (b) NOVAVAX acknowledges and agrees that KING does not manufacture,
package or test the Products and is dependent upon third parties for
manufacturing, packaging and testing of the Products. NOVAVAX acknowledges and
agrees that KING does not guarantee or warrant that any such third party will
continue to manufacture, package or test the Products and/or supply the Products
to KING. NOVAVAX acknowledges and agrees that there is no guarantee of a
continued or uninterrupted supply of Products. NOVAVAX acknowledges and agrees
that it is purchasing the Products subject to the foregoing limitations. KING
and NOVAVAX agree to cooperate with each other in connection with the
negotiation of any manufacturing, packaging, testing or supply arrangements for
the Products.

         (c) NOVAVAX acknowledges and agrees that KING neither manufactures,
packages or tests nor has a contract with a third party to have manufactured,
packaged or tested the AVC(TM) Suppositories referenced in SCHEDULE 1. NOVAVAX
acknowledges and agrees that NOVAVAX shall be solely responsible for contracting
with R.P. Scherer or other third parties to obtain the manufacturing, packaging
and testing of such AVC(TM) Suppositories.

                                    ARTICLE 5

                                 INDEMNIFICATION

         5.01 INDEMNIFICATION BY KING.

         (a) KING shall indemnify, defend, and hold harmless NOVAVAX from and
against and compensate NOVAVAX for any and all demands, claims, actions, causes
of action, assessments, judgments, deficiencies, damage, loss, liability, and
expense of any nature whatsoever (including, without limitation, reasonable
attorneys' fees and expenses) (collectively, "Indemnified Amounts") arising out
of, in whole or in part, (i) any misrepresentation or breach of representation,
warranty, covenant, or agreement made or to be performed by KING or any
non-fulfillment of any obligation of KING pursuant to this Agreement or the
Collateral Agreements; (ii) any claim (including, without limitation, a claim
based on contract, warranty or tort) arising

                                       15
<PAGE>   19

out of the design, assembly, processing, manufacture, or sale of any Product
sold and/or manufactured on or prior to the Closing Date or any services
rendered by or on behalf of KING in respect of the Products on or prior to the
Closing Date; (iii) any federal, state, local or other tax liability, or any
assessment in the nature of any tax, including interest and penalties thereon,
with respect to any fiscal period of KING or portion thereof on or prior to the
Closing Date or arising out of the sale of the Products or the Assets on or
prior to Closing; (iv) the litigation, if any, disclosed on SCHEDULE 4.01(f)
hereto and all related proceedings; and (v) any liability not specifically and
expressly assumed by NOVAVAX, whether or not known or asserted at or prior to
Closing, relating to or arising from the ownership, control, manufacture or sale
of the Products or any of the Assets or any other state of facts which existed
at or prior to Closing.

         (b) In the event of indemnification by KING pursuant to Section
5.01(a)(i), KING shall not have any obligation to indemnify NOVAVAX from and
against any Indemnified Amounts: (i) until NOVAVAX has incurred Indemnified
Amounts in excess of a One Hundred Thousand Dollar ($100,000) threshold (after
which point KING will be obligated to indemnify NOVAVAX from and against all
Indemnified Amounts) or thereafter, and (ii) to the extent the Indemnified
Amounts NOVAVAX has incurred exceed a One Million Dollar ($1,000,000) aggregate
ceiling (after which point KING will have no obligation to indemnify NOVAVAX
from and against further such Indemnified Amounts).

         (c) KING shall not be liable under this Section 5.01 for any settlement
effected without its consent of any claim, litigation, or proceeding in respect
of which indemnity may be sought hereunder, which consent shall not unreasonably
be withheld.

         5.02 INDEMNIFICATION BY NOVAVAX.

         (a) NOVAVAX shall indemnify, defend, and hold harmless KING from and
against any and all Indemnified Amounts arising out of, in whole or in part, (i)
any misrepresentation or breach of representation, warranty, covenant, or
agreement made or to be performed by NOVAVAX or any non-fulfillment of any
obligation of NOVAVAX pursuant to this Agreement or the Collateral Agreements;
(ii) any claim (including, without limitation, a claim based on contract,
warranty or tort) arising out of the design, assembly, processing, manufacture,
or sale of any Product sold and/or manufactured after the Closing Date or any
services rendered by or on behalf of NOVAVAX in respect of the Products after
the Closing Date; (iii) any federal, state, local or other tax liability, or any
assessment in the nature of any tax, including interest and penalties thereon,
with respect to any fiscal period of NOVAVAX or portion thereof after the
Closing Date or arising out of the sale of the Products or the Assets after the
Closing Date; and (iv) any liability not specifically and expressly assumed by
KING, whether or not known or asserted after the Closing Date, relating to or
arising from the ownership, control, manufacture or sale of the Products or any
of the Assets or any other state of facts which existed after the Closing Date;
PROVIDED, HOWEVER, that NOVAVAX shall not have any obligation to indemnify KING
from and against any Indemnified Amounts: (i) until KING has incurred
Indemnified Amounts in excess of a One Hundred Thousand Dollar ($100,000)
threshold (after which point NOVAVAX will be obligated to indemnify KING from
and against all Indemnified Amounts) or thereafter, and (ii) to the extent the
Indemnified Amounts KING has incurred exceed a One

                                       16
<PAGE>   20

Million Dollar ($1,000,000) aggregate ceiling (after which point NOVAVAX will
have no obligation to indemnify KING from and against further such Indemnified
Amounts).

         (b) NOVAVAX shall not be liable under this Section 5.02 for any
settlement effected without its consent of any claim, litigation or proceeding
in respect of which indemnity may be sought hereunder, which consent shall not
unreasonably be withheld.

         5.03 PAYMENTS.

         All amounts payable under this Article 5 shall be paid promptly after
receipt by the indemnifying party of written notice from the indemnified party
stating that such Indemnified Amounts have been incurred, the amount thereof and
of the related indemnity payment and substantiation of such amount and such
indemnity payment; provided, however, any disputed amounts shall be due and
payable promptly after such amounts are finally determined to be owing by the
indemnifying party to the indemnified party.

         5.04 CONDUCT OF LITIGATION.

         Each party indemnified under the provisions of this Agreement, upon
receipt of written notice of any claim or the service of a summons or other
initial legal process upon it in any action instituted against it, in respect of
the agreements contained in this Agreement, shall promptly give written notice
of such claim, or the commencement of such action, or threat thereof, to the
party from whom indemnity shall be sought hereunder; PROVIDED, HOWEVER, that the
failure to provide such notice within a reasonable period of time shall not
relieve the indemnifying party of any of its obligations hereunder except to the
extent the indemnifying party is prejudiced by such failure. Each indemnifying
party shall be entitled at its own expense to participate in the defense of such
claim or action, or, if it shall elect, to assume such defense, in which event
such defense shall be conducted by counsel chosen by such indemnifying party,
which counsel may be any counsel reasonably satisfactory to the indemnified
party against whom such claim is asserted or who shall be the defendant in such
action, and such indemnified party shall bear all fees and expenses of any
additional counsel retained by it or them. The indemnifying party shall provide
the indemnified person with such additional information and opportunity for
consultation as may reasonably be requested by it. The indemnified person shall
render all assistance as the indemnifying party shall reasonably request in the
defense of any such action. Notwithstanding the foregoing, if the named parties
in such action (including impleaded parties) include the indemnified and the
indemnifying parties, and the indemnified party shall have been advised by
counsel that there may be a conflict between the positions of the indemnifying
party and the indemnified party in conducting the defense of such action or that
there are legal defenses available to such indemnified party different from or
in addition to those available to the indemnifying party, then counsel for the
indemnified party shall be entitled, if the indemnified party so elects, to
conduct the defense to the extent reasonably determined by such counsel to be
necessary to protect the interests of the indemnified party, at the expense of
the indemnifying party, if it is determined by agreement of the indemnifying
party and the indemnified party or by a court of competent jurisdiction that the
indemnified party is entitled to indemnification hereunder for the Indemnified
Amounts giving rise to such action. If the

                                       17
<PAGE>   21

indemnifying party shall elect not to assume the defense of such claim or
action, such indemnifying party shall reimburse such indemnified party for the
reasonable fees and expenses of any counsel retained by it, and shall be bound
by the results obtained by the indemnified party in respect of such claim or
action if it is determined by agreement of the indemnifying party and the
indemnified party or by a court of competent jurisdiction that the indemnified
party is entitled to indemnification hereunder for the Indemnified Amounts
giving rise to such action; PROVIDED, HOWEVER, that no such claim or action
shall be settled without the written consent of the indemnifying party, which
consent shall not be unreasonably withheld or delayed.

                                    ARTICLE 6

                                  MISCELLANEOUS

         6.01 ENTIRE AGREEMENT.

         This Agreement and the Collateral Agreements constitute the entire
agreement between KING and NOVAVAX with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and thereof.
This Agreement or any provision hereof cannot be amended, changed, supplemented,
or waived except in a writing signed by each of the parties hereto.

         6.02 COUNTERPARTS.

         This Agreement and any amendment or supplement hereto may be executed
in several counterparts, each of which shall be deemed to be an original, and
all of which taken together shall constitute one and the same instrument.

         6.03 BROKERAGE AND OTHER COMMISSIONS.

         KING and NOVAVAX each represent and warrant to the other that all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried on by each directly with the other without intervention of any
broker, finder, or other intermediary and that, subject to the provisions of
Article 5, each indemnifies the other and holds it harmless against any claim
against the other for brokerage or other commissions relating to this Agreement
or to the transactions contemplated hereby by any person claiming to have been
engaged as a broker or finder by the indemnifying party.

         6.04 NOTICES.

         All notices and other communications required or permitted under this
Agreement shall be in writing and shall be delivered personally or sent by: (a)
registered or certified mail, return receipt requested; (b) a
nationally-recognized courier service guaranteeing next-day delivery, charges
prepaid; or (c) facsimile (with the original promptly sent in any of the
foregoing manners). Any such notices shall be addressed to the receiving party
at such party's address set

                                       18
<PAGE>   22

forth below, or at such other address as may from time to time be furnished by
similar notice by either party.

         If to KING:       King Pharmaceuticals, Inc.
                           501 Fifth Street
                           Bristol, Tennessee 37620
                           Attn:  Chief Executive Officer
                           Facsimile: (423) 989-8006

                           With a copy to:

                           King Pharmaceuticals, Inc.
                           501 Fifth Street
                           Bristol, Tennessee  37620
                           Attention:  Legal Department
                           Facsimile:  (423) 989-6282

         If to NOVAVAX:    Novavax, Inc.
                           8320 Guilford Road
                           Columbia, Maryland 21046
                           Attention: Chief Executive Officer
                           Facsimile:  (301) 854-3902

                           With a copy to:

                           White & McDermott, P.C.
                           65 William Street
                           Wellesley, Massachusetts 02481
                           Attn:  David A. White
                           Facsimile:  (781) 237-8120

         Any such notice or communication shall be effective upon such personal
delivery or delivery to such courier, upon transmission by facsimile, or three
(3) days after it is sent by such registered or certified mail, as the case may
be. Copies shall be sent in the same manner as originals.

         6.05 ASSIGNMENT.

         Neither party may assign its rights or obligations under this Agreement
without the prior written consent of the other party; PROVIDED, HOWEVER, that
either party may assign its rights and obligations under this Agreement, without
the prior written consent of the other party, to an Affiliate. Any purported
assignment without a required consent shall be void. Any permitted assignee
shall assume all obligations of its assignor under this Agreement. No assignment
shall

                                       19
<PAGE>   23

relieve either party of its responsibility for the performance of any obligation
under this Agreement.

         6.06 GOVERNING LAW.

         THIS AGREEMENT SHALL BE CONSTRUED AND GOVERNED IN ALL RESPECTS UNDER
AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF.

         6.07 HEADINGS.

         The table of contents and all headings used in this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.

         6.08 EXPENSES.

         All legal and other costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses.

         6.09 SUCCESSORS AND ASSIGNS.

         This Agreement shall be binding upon and shall inure to the benefit of
the parties and their respective successors and permitted assigns.

         6.10 AGREEMENT TO TAKE NECESSARY AND DESIRABLE ACTIONS.

         KING and NOVAVAX each agree to execute and deliver such other
documents, certificates, agreements, and other writings and to take such other
actions as may be reasonably necessary in order to consummate or implement
expeditiously the transactions contemplated by this Agreement.

         6.11 NO IMPLIED WAIVER.

         No failure or delay on the part of the parties hereto to exercise any
right, power, or privilege hereunder or under any instrument executed pursuant
hereto shall operate as a waiver; nor shall any single or partial exercise of
any right, power, or privilege preclude any other or further exercise thereof or
the exercise of any other right, power, or privilege. All rights and remedies
granted herein shall be cumulative and in addition to other rights and remedies
to which the parties may be entitled at law or in equity.

         6.12 FORCE MAJEURE.

         Any delay in the performance of any of the obligations of either party
hereto (except the payment of money owed) shall not be considered a breach of
this Agreement and the time required for performance shall be extended for a
period equal to the period of such delay,

                                       20
<PAGE>   24

provided that such delay is due to: acts of God, weather, fire, explosion;
invasion, riot or other civil unrest; governmental laws, orders, restrictions,
actions, embargoes or blockades; national or regional emergency, injunction,
strikes, lock-outs, labor trouble or other industrial disturbances; inability to
obtain or interruption of materials, labor, containers, fuel or transportation;
or any other cause beyond the control of the affected party. The party so
affected shall give prompt notice to the other party of such cause and shall use
its reasonable efforts to relieve the effect of such cause as rapidly as
possible.

         6.13 CONFIDENTIALITY.

         KING and NOVAVAX have entered into a Confidentiality Agreement dated as
of September 1, 2000 (the "Confidentiality Agreement").

         6.14 RELATIONSHIP.

         Nothing in this Agreement shall be deemed to create an agency, joint
venture, amalgamation, partnership, or similar relationship between NOVAVAX and
KING.

         6.15 SEVERABILITY.

         In case any provision of this Agreement shall be held to be invalid,
illegal, or unenforceable, the validity, legality, or enforceability of the
remaining provisions hereof will not in any way be affected or impaired thereby.

         6.16 PRESS RELEASE.

         So long as this Agreement is in effect, neither of the parties hereto,
nor their Affiliates, shall issue or cause the dissemination of any press
release or other announcement with respect to this Agreement or the transactions
contemplated hereby without consulting with and obtaining the consent of the
other Party which shall not be unreasonably withheld; PROVIDED, HOWEVER, that
such consent shall not be required where such release or announcement is
required by applicable law or legal process.

         On the Closing Date, the parties shall issue a joint press release
regarding the sale of the Assets, and KING shall, in cooperation with NOVAVAX,
inform any customer who places a purchase order with KING for the Products that
the Assets have been sold to NOVAVAX. As soon as practicable after the Closing,
KING shall send to all of its current wholesalers and distributors a letter, in
form and substance mutually agreeable to KING and NOVAVAX, on KING letterhead
informing them of the sale of the Assets to NOVAVAX.

         6.17 AFFILIATES.

         As used in this Agreement, "Affiliate" shall mean any corporation or
non-corporate entity that controls, is controlled by, or is under common control
with the party. A corporation or non-corporate entity shall be regarded as in
control of another corporation if it owns or directly or indirectly controls at
least fifty percent (50%) of the voting stock of the other corporation or (a)

                                       21
<PAGE>   25

in the absence of the ownership of at least of fifty percent (50%) of the voting
stock of a corporation or (b) in the case of a non-corporate entity, the power
to direct or cause the direction of the management and policies of such
corporation or non-corporate entity, as applicable.

         6.18 WAIVER OF BULK SALES.

         KING and NOVAVAX waive compliance with any bulk sales law or similar
law in connection with the consummation of the transactions contemplated herein.

         6.19 EXHIBITS AND SCHEDULES.

         All Exhibits and Schedules referred to herein form an integral part of
this Agreement and are incorporated into this Agreement by reference.

         6.20 INTERPRETATION.

         The parties hereto acknowledge and agree that: (a) each party and its
representatives have reviewed and negotiated the terms and provisions of this
Agreement and have contributed to its revision; and (b) the terms and provisions
of this Agreement shall be construed fairly as to each party hereto and not in
favor of or against either party regardless of which party was generally
responsible for the preparation or drafting of this Agreement.

                            [SIGNATURE PAGE FOLLOWS]

                                       22
<PAGE>   26

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

                                NOVAVAX, INC.

                                By: /s/ John Spears
                                    --------------------------------------------
                                Name: John Spears
                                      ------------------------------------------
                                Title: President and CEO
                                      ------------------------------------------

                                KING PHARMACEUTICALS, INC.

                                By: /s/ R.C. Williams
                                    --------------------------------------------
                                Name: R.C. Williams
                                      ------------------------------------------
                                Title: Vice Chairman -- Strategic Planning
                                      ------------------------------------------

                                       23
<PAGE>   27
                                    EXHIBIT A

                                  BILL OF SALE

                                   (Attached)

<PAGE>   28

                            IRREVOCABLE BILL OF SALE

         KING PHARMACEUTICALS, INC., a Tennessee corporation having a principal
place of business at 501 Fifth Street, Bristol, Tennessee 37620 ("KING"), for
good and valuable consideration, the receipt and legal sufficiency of which
hereby expressly are acknowledged, does hereby irrevocably sell, convey, assign,
and transfer to NOVAVAX, INC., a Delaware corporation having a principal place
of business at 8320 Guilford Road, Columbia, Maryland 21046 ("NOVAVAX"), its
successors and assigns, right, title and interest, free and clear of all liens,
claims, charges, or encumbrances (except as described in Schedule 1.07 of the
Purchase Agreement referred to below), in and to the Tradename, the Know-How in
the Territory, the NDA in the Territory, the Tradedress in the Territory, and
the Inventory in the Territory, each as defined in the Agreement for Purchase
and Sale of Assets Relating to AVC(TM) dated as of January 8, 2001 between KING
and NOVAVAX (the "Purchase Agreement") and all pursuant to and on the terms and
conditions of the Purchase Agreement.

         IN WITNESS WHEREOF, KING has duly executed and delivered this
Irrevocable Bill of Sale as of January 8, 2001.

                                KING PHARMACEUTICALS, INC.

                                By:  /s/ R.C. Williams
                                    --------------------------------------------
                                Name:  R.C. Williams
                                      ------------------------------------------
                                Title: Vice Chairman - Strategic Planning
                                      ------------------------------------------

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