8-K/A

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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                               Amendment No. 1 to
                                    FORM 8-K

                                 CURRENT REPORT
     Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

         Date of Report (Date of earliest event reported) August 3, 2007

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

          Delaware                     001-32587                20-2726770
          --------                     ---------                ----------
(State or other jurisdiction          (Commission              (IRS Employer
      of incorporation)               File Number)           Identification No.)

One Park Place, Suite 450, Annapolis, Maryland                           21401
- ----------------------------------------------                           -----
   (Address of principal executive offices)                           (Zip Code)

        Registrant's telephone number including area code: (410) 269-2600


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

         Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:

|_|   Written communications pursuant to Rule 425 under the Securities Act (17
      CFR 230 .425)

|_|   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
      240.14a-12)

|_|   Pre-commencement communications pursuant to Rule 14d-2(b) under the
      Exchange Act (17 CFR 240.14d-2(b))

|_|   Pre-commencement communications pursuant to Rule 13e-4(c) under the
      Exchange Act (17 CFR 240.13e-4(c))

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                                EXPLANATORY NOTE

      This Amendment No.1 to PharmAthene's Current Report on Form 8-K originally
filed with the Securities and Exchange Commission on August 9, 2007 (the "Form
8-K") amends and restates the Form 8-K in its entirety (i) to report Former
PharmAthene's (as defined herein) quarterly financial results and information
for the quarter ended June 30, 2007, and (ii) to correct certain information
contained in the Form 8-K including, without limitation, correcting the
beneficial ownership of certain stockholders set forth under the section
entitled Security Ownership of Certain Beneficial Owners and Management.

Item 1.01 Entry into a Material Definitive Agreement.

      On August 3, 2007, Healthcare Acquisition Corp. ("HAQ" or the "Company")
consummated a merger pursuant to the Agreement and Plan of Merger, dated as of
January 19, 2007 (the "Merger Agreement"), by and among HAQ, PAI Acquisition
Corp., a wholly-owned subsidiary of HAQ ("Merger Sub"), and PharmAthene, Inc.
("Former PharmAthene"). Pursuant to the Merger Agreement, Merger Sub was merged
(the "Merger") with and into Former PharmAthene. Immediately following the
Merger HAQ changed its name from Healthcare Acquisition Corp. to "PharmAthene,
Inc." and Former PharmAthene, which became a wholly-owned subsidiary of HAQ,
changed its name to "PharmAthene U.S. Corporation."

      As a condition to the Merger, the Company entered into a registration
rights agreement with the security holders of Former PharmAthene upon the
consummation of the Merger. Reference is made to our disclosure set forth under
Item 2.01 of this Current Report on Form 8-K concerning the Company's entry into
the Registration Rights Agreement (defined below).

      As a condition to the Merger, the Company entered into a an escrow
agreement with the combined company and Continental Stock Transfer and Trust
Company, as escrow agent, upon the consummation of the Merger. Reference is made
to our disclosure set forth under Item 2.01 of this Current Report on Form 8-K
concerning the Company's entry into the Escrow Agreement (defined below).

      As a condition to the Merger, the Company entered into a note exchange
agreement with each of the noteholders of Former PharmAthene upon the
consummation of the Merger. Reference is made to our disclosure set forth under
Item 2.01 of this Current Report on Form 8-K concerning the Company's entry into
the Note Exchange Agreement (defined below).

      As a condition to the Merger, each of the stockholders, noteholders and
holders of options or warrants to purchase not less than 100,000 shares of
common stock of Former PharmAthene executed a lock-up agreement upon the
consummation of the Merger. Reference is made to our disclosure set forth under
Item 2.01 of this Current Report on Form 8-K concerning the Lock-Up Agreements
(defined below).

      The description of the Registration Rights Agreement, the Escrow
Agreement, the Note Exchange Agreement and the Lock-up Agreements do not purport
to be complete and are qualified in their entirety by reference to the full text
of such documents which are filed as exhibits to this Current Report on Form
8-K.

      As a consequence of the Merger, the Company succeeded to a number of
additional material definitive agreements entered into by Former PharmAthene.
Each of these agreements has either been filed herewith or will be filed as an
amendment or with the Company's Quarterly Report on Form 10-Q.

Item 2.01 Completion of Acquisition or Disposition of Assets.

Completion of the PharmAthene Merger

      On August 3, 2007, the Company consummated the Merger pursuant to the
Merger Agreement, by and among HAQ, Merger Sub and Former PharmAthene. Pursuant
to the Merger Agreement, Merger Sub was merged with and into Former PharmAthene.
Immediately following the Merger, the Company changed its name from Healthcare
Acquisition Corp. to "PharmAthene, Inc." and Former PharmAthene, which became a
wholly-owned subsidiary of the Company, changed its name to "PharmAthene U.S.
Corporation."

      The Company is headquartered in Annapolis, Maryland. As consideration for
the Merger, the Company paid stockholders, optionholders, warrantholders and
noteholders of Former PharmAthene (the "PharmAthene Security Holders") the
following consideration:


                                       1


      (i) an aggregate of 12,500,000 shares of common stock of the Company (the
"Stock Consideration"), subject to possible upward adjustment if the number of
shares electing conversion equals or exceeds 5% of the Company's outstanding
common stock prior to the Merger (the "Adjustment"); and

      (ii) $12,500,000 in 8% convertible notes (the "Convertible Notes") issued
by the Company (the "Note Consideration");

      In addition, the PharmAthene Security Holders may receive up to
$10,000,000 in milestone payments contingent upon certain conditions being met.
Recipients of the Stock Consideration have certain registration rights pursuant
to a Registration Rights Agreement, dated August 3, 2007, by and among the
Company and the PharmAthene Security Holders (the "Registration Rights
Agreement"). Additionally, each of the stockholders, noteholders and holders of
options or warrants to purchase not less than 100,000 shares of the common stock
Former PharmAthene have executed a lock-up agreement (the "Lock-up Agreement")
which provides that such person shall not sell, pledge, transfer, assign or
engage in any hedging transaction with respect to the Company's common stock
issued to such stockholders as part of the Merger Consideration except in
accordance with the following schedule: 50% of the Stock Consideration shall be
released from the lock-up commencing six months following the effective time of
the Merger and all remaining Stock Consideration shall be released from the
lock-up twelve months following the effective time. The Note Consideration was
allocated among the PharmAthene noteholders pursuant to a Note Exchange
Agreement, dated August 3, 2007, by and among HAQ, PharmAthene and the
PharmAthene noteholders (the "Note Exchange Agreement"). A portion of the Stock
Consideration, in the aggregate amount of 1,375,000 shares of the Company's
common stock, will be placed in escrow to be held for a period of one year for
indemnification claims pursuant to an Escrow Agreement, dated August 3, 2007, by
and among HAQ, PharmAthene and Continental Stock Transfer & Trust Company, as
escrow agent (the "Escrow Agreement"). Based upon the total number of shares
electing conversion being in excess of 5% of the Company's outstanding common
stock prior to the Merger, the Stock Consideration has been adjusted upwards by
300,688 shares issuable to the stockholders of Former PharmAthene.

      The cash for the payment to the Company's stockholders electing conversion
and to Former PharmAthene stockholders receiving cash in lieu of fractional
shares resulting from the Merger was funded with cash held in the Company's
trust account established in connection with its initial public offering. At the
Special Meeting of Stockholders held on August 2, 2007, and adjourned to August
3, 2007, 1,807,475 shares of the Company's common stock were both voted against
the proposal relating to the Merger and elected to convert such shares (the
"Conversion Shares") into a pro rata portion of the trust account maintained by
the Company.

      Prior to the Merger, HAQ was a blank check company with no operations,
formed as a vehicle for an acquisition of an operating business in the
healthcare industry. The following information is provided about the business
and securities of the post-Merger combined company reflecting the consummation
of the Merger.

Business

      The business of the Company is described in our Definitive Proxy
Statement, filed with the Securities and Exchange Commission ("SEC") on July 16,
2007 (the "Definitive Proxy Statement"), in the section entitled "Information
About PharmAthene" beginning on page 115 and is incorporated herein by
reference.

Risk Factors

Risks Related to the Business of the Company

It is expected that the Company will incur net losses and negative cash flow for
the foreseeable future and we cannot guarantee that we will achieve
profitability and our business, results of operations, and financial condition
may be materially adversely affected.

      The Company has incurred significant losses since it commenced operations.
For the year ended December 31, 2006, the Company incurred an operating loss of
approximately $14.5 million. The pro forma combined accumulated deficit of the
combined company is approximately $68.6 million at December 31, 2006. For the
six months ended June 30, 2007, the Company incurred an operating loss of
approximately $7.3 million and the pro forma combined accumulated deficit of the
combined company is approximately $79.3 million at June 30, 2007. The Company's
losses to date have resulted principally from research and development costs
related to the development of its product candidates and general and
administrative costs related to its operations.

It is expected that the Company will incur substantial losses for the
foreseeable future as a result of increases in its research and development
costs, including costs associated with conducting preclinical testing, clinical
trials and regulatory compliance activities.


                                       2


      The Company's likelihood for achieving profitability will depend on
numerous factors, including success in:

      o     developing and testing new product candidates;

      o     carrying out the combined company's intellectual property strategy;

      o     establishing the combined company's competitive position;

      o     pursuing third-party collaborations;

      o     acquiring or in-licensing products;

      o     receiving regulatory approvals;

      o     manufacturing and marketing products; and

      o     continuing to receive government funding and identifying new
            government funding opportunities.

      Many of these factors will depend on circumstances beyond the Company's
control. We cannot guarantee that we will achieve sufficient revenues for
profitability. Even if we do achieve profitability, we cannot guarantee that we
can sustain or increase profitability on a quarterly or annual basis in the
future. If revenues grow slower than we anticipate, or if operating expenses
exceed our expectations or cannot be adjusted accordingly, then our business,
results of operations, financial condition and cash flows will be materially and
adversely affected. Because our strategy might include acquisitions of other
businesses, acquisition expenses and any cash used to make these acquisitions
will reduce our available cash.

The Company is in various stages of product development and there can be no
assurance of successful commercialization.

      The Company has not commercialized any products or recognized any revenues
from product sales. In general, the Company's research and development programs
are at early stages. To obtain FDA approval for the Company's biological warfare
defense products under current FDA regulations, the Company will be required to
perform two animal model studies for efficacy and provide animal and human
safety data. The Company's other products will be subject to the relevant
approval guidelines under FDA requirements which include a number of phases of
testing in humans. Even if the Company initially receives positive pre-clinical
or clinical results, such results may not be indicative of similar results that
could be anticipated in the later stages of drug development, such as additional
pre-clinical testing or human clinical trials.

      Other than the Valortim(TM) product candidate, the research and
development program for the Company is at an early stage. Other drug candidates
developed by the combined company will require significant additional research
and development efforts, including extensive pre-clinical and clinical testing
and regulatory approval, prior to commercial sale. We cannot be sure that the
Company's approach to drug discovery will be effective or will result in the
development of any drug. The Company does not expect that any drugs resulting
from the research and development efforts of the Company will be commercially
available for several years, if at all. Even if the Company succeeds in
developing and commercializing its product candidates, it may never generate
sufficient or sustainable revenues to enable it to be profitable. Furthermore,
even if the product candidates of the Company are successful when tested in
animals, such success would not be a guarantee of the effectiveness and safety
of such product candidates in humans. The Company's first product, its Dominate
Negative Inhibitor ("DNI"), was demonstrated to be effective in animal testing,
but was determined to be unsafe for humans following clinical trials in human
subjects. The DNI program was subsequently terminated. There can be no
assurances that one or more of the Company's future product candidates would not
similarly fail to meet safety standards in human testing, even if those product
candidates were found to be effective in animal studies. There can be no
assurances that any such product candidates will prove to be effective in
humans.

Most of the Company's immediately foreseeable future revenues are contingent
upon grants and contracts from the U.S. government and collaborative and license
agreements and the Company may not achieve sufficient revenues from these
agreements to attain profitability.

      Until and unless the Company successfully markets a product, its ability
to generate revenues will largely depend on its ability to enter into additional
collaborative agreements, strategic alliances, research grants, contracts and
license agreements with third parties, including, without limitation, the U.S.
government and branches and agencies thereof, and maintain the agreements it
currently has in place. Substantially all of the revenue of the Company for the
years ended December 31, 2006, 2005 and 2004, respectively, were derived from
revenues related to grants, contracts and license agreements.


                                       3


      In addition, the Company's business plan calls for significant payments
from milestone based collaborative agreements. The Company may not earn
significant milestone payments under its existing collaborative agreements until
its collaborators have advanced products into clinical testing, which may not
occur for many years, if at all.

      The Company has a material agreement with Medarex, Inc., to develop
Valortim(TM), its fully human monoclonal antibody product designed to protect
against and treat inhalation anthrax. Under the agreement with Medarex, the
Company will be entitled to a variable percentage of profits derived from sales
of Valortim(TM), depending, in part, on the amount of its investment. In
addition, the Company has entered into licensing and research and development
agreements with a number of other parties and collaborators.

The Company may need additional capital in the future. If additional capital is
not available or not available on acceptable terms, the Company may be forced to
delay or curtail the development of its product candidates.

      The Company's requirements for additional capital may be substantial and
will depend on many other factors, including:

      o     continued funding by the Department of Defense and other branches
            and agencies of the U.S. Government;

      o     payments received under present or future collaborative partner
            agreements;

      o     continued progress of research and development of the Company's
            products;

      o     The Company's ability to license compounds or products from others;

      o     costs associated with protecting the Company's intellectual property
            rights;

      o     development of marketing and sales capabilities; and

      o     market acceptance of the Company's products.

      To the extent the Company's capital resources are insufficient to meet
future capital requirements, it will have to raise additional funds to continue
the development of its product candidates. We cannot assure you that funds will
be available on favorable terms, if at all. To the extent the Company raises
additional capital through the sale of securities, the issuance of those
securities could result in dilution which may be substantial to the Company's
stockholders. In addition, if the Company incurs debt financing, a substantial
portion of its operating cash flow may be dedicated to the payment of principal
and interest on such indebtedness, thus limiting funds available for the
Company's business activities. If adequate funds are not available, the Company
may be required to curtail significantly its development and commercialization
activities.

Biodefense treatment and drug development is an expensive and uncertain process,
and delay or failure can occur at any stage of the Company's development
process.

      To develop and commercialize biodefense treatment and drug candidates, the
Company must provide the FDA and foreign regulatory authorities with clinical
data that demonstrates adequate safety and immune response. This involves
engaging in clinical trials, which is a lengthy and expensive process, the
outcome of which is uncertain. Because humans are not normally exposed to
anthrax, nerve agents, smallpox or to other lethal biotoxins or chemical agents,
statistically significant effectiveness of the Company's biodefense product
candidates cannot be demonstrated in humans, but instead must be demonstrated,
in part, by utilizing animal models before they can be approved for commercial
sale. Delays in obtaining results can occur for a variety of reasons such as
slower than anticipated enrollment by volunteers in the trials, adverse events
related to the products and unsatisfactory results of any trial. Any delay or
adverse clinical event arising during any of its clinical trials could force the
Company to abandon a product altogether or to conduct additional clinical trials
in order to obtain approval from the FDA and other regulatory bodies. The
Company's development costs will increase substantially if it experiences
material delays in any clinical trials or if it needs to conduct more or larger
trials than planned. Additionally, few facilities in the U.S. have the
capability of testing animals with anthrax or nerve agent exposure. The Company
may not be able to secure clinical contracts to conduct the testing in a
predictable timeframe or at all. Further, if delays are significant, or if any
of the Company's products do not prove to be safe or effective or do not receive
required regulatory approvals, and the Company will be unable to recognize
revenues from the sale of products, the commercial prospects for its product
candidates will be adversely affected.

Even if the Company completes the development of its nerve agent countermeasure
and anthrax treatment product, if the Company fails to obtain contracts to
supply products to the U.S. government or the U.S. government does not purchase
sufficient quantities of its products, the Company may be unable to generate
sufficient revenues to continue operations.


                                       4


      The U.S. government has undertaken commitments to help secure improved
countermeasures against bioterrorism including the stockpiling of treatments and
vaccines for anthrax through a program known as the Strategic National
Stockpile. However, the process of obtaining government contracts is lengthy and
uncertain and the Company will have to compete with other companies for each
contract. There can be no assurances that the Company will be awarded any
contracts to supply the U.S. government with its products as such awards may be
made, in whole or in part, to the Company's competitors. If the U.S. government
makes significant future contract awards for the supply of its emergency
stockpile to the Company's competitors, the Company's business will be harmed
and it is unlikely that the Company will ultimately be able to commercialize
that particular treatment or product.

      Further, changes in government budgets and agendas may result in a
decreased and de-prioritized emphasis on procuring the biodefense products the
Company will develop. In addition, government contracts typically contain
provisions that permit cancellation in the event that funds become unavailable
to the governmental agency. If the U.S. government makes significant future
contract awards to the Company's competitors at the exclusion of the Company or
otherwise fails to purchase the Company's products, it is unlikely that the
Company will ultimately be able to commercialize that particular treatment or
product or that it will be able to generate sufficient revenues to continue
operations.

U.S. government agencies have special contracting requirements, which give them
the ability to unilaterally control its contracts with the Company.

      The Company anticipates that its primary sales will be to the U.S.
government. U.S. government contracts typically contain unfavorable termination
provisions and are subject to audit and modification by the government at its
sole discretion, which will subject the Company to additional risks. These risks
include the ability of the U.S. government to unilaterally:

      o     suspend or prevent the Company for a set period of time from
            receiving new contracts or extending existing contracts based on
            violations or suspected violations of laws or regulations;

      o     terminate the Company's contracts;

      o     reduce the scope and value of the Company's contracts;

      o     audit and object to the Company's contract-related costs and fees,
            including allocated indirect costs;

      o     control and potentially prohibit the export of the Company's
            products; and

      o     change certain terms and conditions in the Company's contracts.

      The U.S. government will be able to terminate any of its contracts with
the Company either for its convenience or if the Company defaults by failing to
perform in accordance with the contract schedule and terms. Termination for
convenience provisions would generally enable the Company to recover only the
Company's costs incurred or committed, and settlement expenses and profit on the
work completed prior to termination. Termination for default provisions do not
permit these recoveries and would make the Company liable for excess costs
incurred by the U.S. government in procuring undelivered items from another
source.

The Company may fail to fully realize the potential of Valortim(TM) and of its
co-development arrangement with its partner in the development of Valortim(TM)
which would have an adverse affect upon its business.

      The Company and its development partner have completed the first Phase I
clinical trial for Valortim(TM) without any reported adverse reactions. However,
before it may begin selling any doses of Valortim(TM), it will need to conduct a
more comprehensive Phase I trial to a significantly larger group of subjects.
The Company will be required to expend a significant amount to scale up
manufacturing capability through a contract manufacturer in order to conduct the
more extensive Phase I clinical trial. The Company does not expect to commence
this trial until 2008. If the Company's contract manufacturer is unable to
produce sufficient quantities at a reasonable cost, then the Company will be
unable to commence the necessary clinical trials necessary to begin marketing
Valortim(TM). Even after the Company expends the sufficient funds to complete
the development of Valortim(TM) and when and if it enters into an agreement to
market Valortim(TM) to the U.S, government, it will be required to share any and
all profits from the sale of products with its partner in accordance with a
pre-determined formula.

If the Company cannot enter into new licensing arrangements, its ability to
develop a diverse product portfolio could be limited and its ability to compete
would be harmed.

      A component of the Company's business strategy will be in-licensing
compounds and products developed by other pharmaceutical and biotechnology
companies or academic research laboratories that may be marketed and developed
or improved upon using the Company's novel technologies. Competition for
promising compounds or products can be intense. If the Company is not able to
identify new licensing opportunities or enter into other licensing arrangements
on acceptable terms, it may be unable to develop a diverse portfolio of
products.


                                       5


The Company will face competition from several companies with greater financial,
personnel and research and development resources. Its commercial opportunities
may be reduced or eliminated if its competitors are more successful in the
development and marketing of their products.

      The biopharmaceutical industry is characterized by rapid and significant
technological change. The Company's success will depend on its ability to
develop and apply its technologies in the design and development of its product
candidates and to establish and maintain a market for its product candidates.
There also are many companies, both public and private, including major
pharmaceutical and chemical companies, specialized biotechnology firms,
universities and other research institutions engaged in developing
pharmaceutical and biotechnology products. Many of these companies have
substantially greater financial, technical, research and development, and human
resources than those of the Company. Competitors may develop products or other
technologies that are more effective than any that are being developed by the
Company or may obtain FDA approval for products more rapidly. If the Company
commences commercial sales of products, it still must compete in the
manufacturing and marketing of such products, areas in which it has limited
experience. Many of these companies also have manufacturing facilities and
established marketing capabilities that would enable such companies to market
competing products through existing channels of distribution. The Company's
commercial opportunities will be reduced or eliminated if its competitors
develop and market products for any of the harmful effects that it targets that:

      o     are more effective;

      o     have fewer or less severe adverse side effects;

      o     are more adaptable to various modes of dosing;

      o     are easier to administer; or

      o     are less expensive than the products or product candidates the
            Company will be developing.

      Even if the Company is successful in developing effective products, and
obtains FDA and other regulatory approvals necessary for commercializing them,
its products may not compete effectively with other successful products. The
Company's competitors may succeed in developing and marketing products either
that are more effective than those that it may develop, alone or with its
collaborators, making its products obsolete, or that are marketed before any
products that the Company develops are marketed.

      Companies that are developing products that would compete with the
Company's products include: VaxGen, Inc., which is developing vaccines against
anthrax and smallpox; Avant Immunotherapeutics, Inc., which has vaccine programs
for agents of biological warfare, including plague and anthrax; Human Genome
Sciences, Inc., Elusys Therapeutics, Inc. and AVANIR Pharmaceuticals, Inc., all
of which are developing monoclonal antibodies as anthrax treatments. Other
competitors of the Company include: Emergent Biosolutions Inc., Merck & Co.,
Inc., Bio Sante Pharmaceuticals, Inc., Dynport Vaccine Company, LLC ("DVC") and
Ligocyte Pharmaceuticals, Inc.

Political or social factors may delay or impair the Company's ability to market
its products and its business may be materially adversely affected.

      Products developed to treat diseases caused by, or to combat the threat
of, bioterrorism will be subject to changing political and social environments.
The political and social responses to bioterrorism have been unpredictable.
Political or social pressures may delay or cause resistance to bringing the
Company's products to market or limit pricing of its products, which would harm
the Company's business.

The U.S. government's determination to award any contracts to the Company may be
challenged by an interested party, such as another bidder, at the General
Accounting Office or in federal court. If such a challenge is successful, a
contract may be terminated.

      The laws and regulations governing the procurement of goods and services
by the U.S. government provide procedures by which other bidders and other
interested parties may challenge the award of a government contract. In the
event that the Company is awarded a government contract, such protests could be
filed even if there are not any valid legal grounds on which to base the
protest. If any such protests are filed, the government agency may decide to
suspend the Company's performance under the contract while such protests are
being considered by the General Accounting Office or the applicable federal
court, thus potentially delaying delivery of goods and services and payment. In
addition, the Company could be forced to expend considerable funds to defend any
potential award. If a protest is successful, the government may be ordered to
terminate the Company's contract at its convenience and reselect bids. The
government could even be directed to award a potential contract to one of the
other bidders.


                                       6


Legal and Regulatory Risks of Development Stage Biotechnology Companies

The Company's commercial success will be affected significantly by its ability
to obtain protection for its proprietary technology and that of its licensors
and collaborators and not infringe the patents and proprietary rights of third
parties.

      The patent position of biotechnology firms generally is highly uncertain
and involves complex legal and factual questions. To date, no consistent policy
has emerged regarding the breadth of claims allowed in biotechnology patents.
The Company currently holds two U.S. patents and has five U.S. patent
applications pending. In addition, it has rights under numerous other patents
and patent applications pursuant to exclusive and non-exclusive license
arrangements with licensors and collaborators. However, there can be no
assurance that patent applications owned or licensed by the Company will result
in patents being issued or that the patents, existing or issued in the future,
will afford protection against competitors with similar technology. Any
conflicts resulting from third-party patent applications and patents could
significantly reduce the coverage of the patents owned, optioned by or licensed
to the Company or its collaborators and limit the ability of the Company or that
of its collaborators to obtain meaningful patent protection.

      Further, the commercial success of the Company will depend significantly
on its ability to operate without infringing the patents and proprietary rights
of third parties. The Company is aware of one U.S. patent covering recombinant
production of an antibody, which, it has been argued, covers any reproduction of
an antibody, as well as another U.S. patent application with claims over
pegylated butyrylcholinesterase.

      Although the Company believes that neither Valortim(TM), which is a
monoclonal antibody and uses recombinant reproduction of antibodies, nor
Protexia(R), which uses pegylated butyrylcholinesterase technology, infringes on
any valid claims of such patents, the Company cannot provide any assurances that
if a legal action based on either of these two patents were to be brought
against the Company or its distributors, licensees or collaborators, that the
Company or its distributors, licensees or collaborators would prevail or that
the Company would have sufficient funds or resources to defend such claims. If
patents are issued to third parties that contain competitive or conflicting
claims, the Company, its licensors or collaborators may be legally prohibited
from researching, developing or commercializing potential products or be
required to obtain licenses to these patents or to develop or obtain alternative
technology. The Company, its licensors and/or its collaborators may be legally
prohibited from using patented technology, may not be able to obtain any license
to the patents and technologies of third parties on acceptable terms, if at all,
or may not be able to obtain or develop alternative technologies.

      The costs associated with establishing the validity of patents, of
defending against patent infringement claims of others and of asserting
infringement claims against others is expensive and time consuming, even if the
outcome is favorable. An outcome of any patent prosecution or litigation that is
unfavorable to the Company or one of its licensors or collaborators may have a
material adverse effect on the Company.

Any inability to protect the Company's intellectual property could harm its
competitive position and adversely affect its business.

      The Company's success will depend, in part, on its ability to obtain
patents and maintain adequate protection of other intellectual property for its
technologies and products in the U.S. and other countries. If the Company does
not adequately protect its intellectual property, competitors may be able to use
its technologies and erode or negate its competitive advantages. Further, the
laws of some foreign countries will not protect the Company's proprietary rights
to the same extent as the laws of the U.S., and the Company may encounter
significant problems in protecting its proprietary rights in these foreign
countries.

      The patent positions of pharmaceutical and biotechnology companies,
including the Company's patent positions, involve complex legal and factual
questions and, therefore, validity and enforceability cannot be predicted with
certainty. Patents may be challenged, deemed unenforceable, invalidated or
circumvented. The Company will be able to protect its proprietary rights from
unauthorized use by third parties only to the extent that it covers its
proprietary technologies with valid and enforceable patents or that it
effectively maintains such proprietary technologies as trade secrets. The
Company will apply for patents covering its technologies and product candidates
as it deems appropriate. The Company may fail to apply for patents on important
technologies or products in a timely fashion, or at all, and in any event, the
applications the Company files may be challenged and may not result in issued
patents. Any future patents the Company obtains may not be sufficiently broad to
prevent others from practicing its technologies or from developing competing
products. Furthermore, others may independently develop similar or alternative
technologies or design around the Company's patented technologies. In addition,
if challenged, the Company's patents may be declared invalid. Even if valid, the
Company's patents may fail to provide it with any competitive advantages.


                                       7


      The Company will rely upon trade secrets protection for its confidential
and proprietary information. The Company has taken measures to protect its
proprietary information; however, these measures may not provide adequate
protection to the Company. The Company has sought to protect their proprietary
information by entering into confidentiality agreements with employees,
collaborators and consultants. Nevertheless, employees, collaborators or
consultants may still disclose the companies' proprietary information, and the
Company may not be able to meaningfully protect its trade secrets. In addition,
others may independently develop substantially equivalent proprietary
information or techniques or otherwise gain access to the Company's trade
secrets.

The Company's use of hazardous materials and chemicals require it to comply with
regulatory requirements which may result in significant costs and expose it to
potential liabilities.

      The Company's research and development involves the controlled use of
hazardous materials and chemicals. The Company will be subject to federal,
state, local and foreign laws governing the use, manufacture, storage, handling
and disposal of such materials. The Company will not be able to eliminate the
risk of accidental contamination or injury from these materials. In the event of
such an accident, the Company could be held liable for significant damages or
fines, and these damages could exceed its resources and any applicable insurance
coverage. In addition, the Company may be required to incur significant costs to
comply with regulatory requirements in the future.

The Company may become subject to product liability claims, which could reduce
demand for its product candidates or result in damages that exceed its insurance
coverage.

      The Company will face an inherent risk of exposure to product liability
suits in connection with its products being tested in human clinical trials or
sold commercially. The Company may become subject to a product liability suit if
any product it develops causes injury, or if treated individuals subsequently
become infected or otherwise suffer adverse effects from its products.
Regardless of merit or eventual outcome, product liability claims may result in
decreased demand for a product, injury to the Company's reputation, withdrawal
of clinical trial volunteers and loss of revenues.

      If a product liability claim is brought against the Company, the cost of
defending the claim could be significant and any adverse determination may
result in liabilities in excess of its insurance coverage. Additionally, the
Company will be applying for indemnification under the Support Anti-terrorism by
Fostering Effective Technologies Act of 2002 which preempts and modifies tort
laws so as to limit the claims and damages potentially faced by companies who
provide certain "qualified" anti-terrorism products. However, the Company cannot
be certain that it will be able to obtain or maintain adequate insurance
coverage on acceptable terms, if at all.

Legislation limiting or restricting liability for medical products used to fight
bioterrorism is new, and the Company cannot be certain that any such protection
will apply to its products and, therefore, the Company could become subject to
product liability suits and other third party claims if such protections do not
apply.

      The Public Readiness and Emergency Preparedness Act ("Public Readiness
Act") was signed into law in December 2005 and creates general immunity for
manufacturers of countermeasures, including security countermeasures (as defined
in Section 319F-2(c)(1)(B)), when the Secretary of Defense issues a declaration
for their manufacture, administration or use. The declaration is meant to
provide general immunity from all claims under state or federal law for loss
arising out of the administration or use of a covered countermeasure.
Manufacturers are excluded from this protection in cases of willful misconduct.

      Upon a declaration by the Secretary of Health and Human Services, a
compensation fund is created to provide "timely, uniform, and adequate
compensation to eligible individuals for covered injuries directly caused by the
administration or use of a covered countermeasure." The "covered injuries" to
which the program applies are defined as serious physical injuries or death.
Individuals are permitted to bring a willful misconduct action against a
manufacturer only after they have exhausted their remedies under the
compensation program. A willful misconduct action could be brought against us if
an individual(s) has exhausted their remedies under the compensation program
which thereby could expose us to liability. the Company may become subject to
standard product liability suits and other third party claims if products it
develops which fall outside of the Public Readiness Act cause injury or if
treated individuals subsequently become infected or otherwise suffer adverse
effects from such products.

The Company may be subject to claims that it or its employees wrongfully used or
disclosed alleged trade secrets of the employees' former employers. Such
litigation could result in substantial costs and be a distraction to the
Company's management.


                                       8


      As is commonplace in the biotechnology industry, the Company employs
individuals who were previously employed at other biotechnology or
pharmaceutical companies, including their competitors or potential competitors.
Although no claims against the Company are currently pending, the Company may be
subject to claims that these employees or it have inadvertently or otherwise
used or disclosed trade secrets or other proprietary information of their former
employers. Litigation may be necessary to defend against these claims. Even if
the Company is successful in defending against these claims, litigation could
result in substantial costs and be a distraction to management.

If the Company experiences delays in obtaining regulatory approvals, or is
unable to obtain or maintain regulatory approvals, it may be unable to
commercialize any products.

      The Company will need to conduct a substantial amount of additional
research and development before any U.S. or foreign regulatory authority will
approve any of its products. In addition, the Company's product candidates will
be subject to extensive and rigorous domestic government regulation. Results of
the Company's research and development activities may indicate that its
potential products are unsafe or ineffective. In this case, regulatory
authorities will not approve them. Even if approved, the Company's products may
not be commercially successful. If the Company fails to develop and
commercialize its products, it may be forced to curtail or cease operations.

      In addition, the commencement and rate of completion of clinical trials
for the Company's products may be delayed by many factors, including:

      o     lack of efficacy during the clinical trials in animals;

      o     unsatisfactory results of any clinical trial;

      o     unforeseen safety issues;

      o     slower than expected rate of patient recruitment; or

      o     government or regulatory delays.

      Delays in obtaining regulatory approvals may:

      o     adversely affect the commercialization of any products that the
            Company or its collaborative partners develop;

      o     impose costly procedures on the Company or its collaborative
            partners;

      o     diminish any competitive advantages that the Company or its
            collaborative partners may attain; and

      o     adversely affect the Company's receipt of revenues or royalties.

      The results from preclinical testing and early clinical trials are often
not predictive of results obtained in later clinical trials. Although a new
product may show promising results in initial clinical trials, it may
subsequently prove unfeasible or impossible to generate sufficient safety and
efficacy data to obtain necessary regulatory approvals. Data obtained from
preclinical and clinical studies are susceptible to varying interpretations,
which may delay, limit or prevent regulatory approval. In addition, the Company
may encounter regulatory delays or rejections as a result of many factors,
including results that do not support its claims, perceived defects in the
design of clinical trials and changes in regulatory policy during the period of
product development. The Company's business, financial condition, prospects and
results of operations may be materially adversely affected by any delays in, or
termination of, its clinical trials or a determination by the FDA that the
results of the Company's trials are inadequate to justify regulatory approval.

      Any required approvals, once obtained, may be withdrawn. Further, if the
companies fail to comply with applicable FDA and other regulatory requirements
at any stage during the regulatory process, it may encounter difficulties
including:

      o     delays in clinical trials or commercialization;

      o     product recalls or seizures;

      o     suspension of production and/or distribution;

      o     withdrawals of previously approved marketing applications; and

      o     fines, civil penalties and criminal prosecutions.


                                       9


      The Company's collaborative partners may not be able to conduct clinical
testing or obtain necessary approvals from the FDA or other regulatory
authorities for any product candidates. If the Company fails to obtain required
governmental approvals, it or its collaborative partners will experience delays
in, or be precluded from, marketing products developed through it or, as
applicable, their research.

      The Company and its contract manufacturers will also be required to comply
with the applicable FDA good manufacturing practice regulations. Good
manufacturing practice regulations include requirements relating to quality
control and quality assurance as well as the corresponding maintenance of
records and documentation. Manufacturing facilities are subject to inspection by
the FDA. These facilities must be approved before the Company will be able to
use them in commercial manufacturing of their products. The Company and its
contract manufacturers may not be able to comply with the applicable good
manufacturing practice requirements and other FDA regulatory requirements. If
the Company and its contract manufacturers fail to comply, they could be subject
to fines or other sanctions, or be precluded from marketing their products.

The Company may be required to perform additional clinical trials or change the
labeling of its products if it or others identify side effects after its
products are on the market, which could harm sales of the affected products.

      If the Company or others identify side effects after any of its products
are on the market, or if manufacturing problems occur:

      o     regulatory approval may be withdrawn;

      o     reformulation of the affected products, additional clinical trials,
            or changes in labeling of the Company's products may be required;

      o     changes to or re-approvals of the Company's manufacturing facilities
            may be required;

      o     sales of the affected products may drop significantly;

      o     the Company's reputation in the marketplace may suffer; and

      o     lawsuits, including class action suits, may be brought against the
            Company.

      Any of the above occurrences could harm or prevent sales of the affected
products or could increase the costs and expenses of commercializing and
marketing these products.

Risks Related to Our Common Stock

If our existing stockholders exercise their registration rights, it may have an
adverse effect on the market price of our common stock.

      Our initial stockholders are entitled to require us to register the resale
of their shares of common stock at any time after the date on which their shares
are released from escrow, which, except in limited circumstances, will not be
before July 29, 2008. If our existing stockholders exercise their registration
rights with respect to all of their shares of common stock, then there will be
an additional 2,250,000 shares of common stock eligible for trading in the
public market. The presence of this additional number of shares of common stock
eligible for trading in the public market may have an adverse effect on the
market price of our common stock.

The American Stock Exchange may delist our securities from trading which could
limit investors' ability to make transactions in our securities and subject us
to additional trading restrictions.

      Our common stock and warrants are listed on the AMEX, a national
securities exchange. We cannot assure you that our securities will continue to
be listed on the AMEX. If the AMEX delists our securities from trading on its
exchange and we are not able to list our securities on another exchange or to
have them quoted on Nasdaq, our securities could be quoted on the OTC Bulletin
Board, or "pink sheets". As a result, we could face significant material adverse
consequences including:

      o     a limited availability of market quotations for our securities;

      o     a determination that our common stock is a "penny stock" which will
            require brokers trading in our common stock to adhere to more
            stringent rules and possibly resulting in a reduced level of trading
            activity in the secondary trading market for our securities;

      o     a limited amount of news and analyst coverage for our company; and

      o     a decreased ability to issue additional securities or obtain
            additional financing in the future.


                                       10


      The National Securities Markets Improvement Act of 1996, which is a
federal statute, prevents or preempts the states from regulating the sale of
certain securities, which are referred to as "covered securities". Since we are
listed on the AMEX, our securities are covered securities. Although the states
are preempted from regulating the sale of our securities, the federal statute
does allow the states to investigate companies if there is a suspicion of fraud,
and if there is a finding of fraudulent activity, then the states can regulate
or bar the sale of covered securities in a particular case. While we are not
aware of a state having used these powers to prohibit or restrict the sale of
securities issued by blank check companies generally, certain state securities
regulators view blank check companies unfavorably and might use these powers, or
threaten to use these powers, to hinder the sale of securities of blank check
companies in their states.

Risks Related to the Merger and our Prior Status as a Special Purpose
Acquisition Company

In connection with the previously announced proceedings initiated in Delaware
Chancery Court, the Court determined on August 27, 2007 that the Merger between
Former PharmAthene and Healthcare Acquisition Corp. had been validly approved
and authorized in full compliance with the company's charter and Delaware
corporate law. As is generally the case with decisions of the Court of Chancery,
the decision is subject to appeal for 30 days in accordance with Delaware law.
The following risks are applicable if the Delaware Chancery Court's
determination is reversed on appeal.

If an appellate court reverses on appeal the Delaware Chancery Court's
determination and determines that the Merger was not validly approved, the
Company will be forced to abandon the Merger with Former PharmAthene and will
seek to liquidate.

      In any liquidation, the net proceeds of the Company's IPO that were held
in the trust account, plus any interest earned thereon, would have to be
distributed on a prorate basis to the holders of the Company's common stock
issued in the IPO. However, following the determination of the Delaware Court of
Chancery that the Merger was validly consummated, the Company instructed the
trustee to transfer the $58,906,655 remaining in the trust to the Company. If
the Company had liquidated its assets for distribution to all stockholders, the
per share liquidation would have been approximately $69 million which had been
deposited in the trust account at the time of the IPO, plus interest accrued
thereon until the date of any liquidation; as of June 30, 2007, there was
approximately $6.20 per share available in the trust account for distribution to
the stockholders (excluding accrued interest). On August 14, 2007, distribution
of $7.71 per share was made to the holders of 1,786,175 shares who voted against
the Merger and elected to convert their shares. In addition, there would be no
distribution with respect to the Company's outstanding warrants and,
accordingly, the warrants would expire worthless.


                                       11


If the decision of the Delaware Chancery Court is reversed on appeal and the
Merger is not consummated, the Company will be forced to dissolve and liquidate.
In such event, it is more likely than not that the amount distributed to our
stockholders will be less than the approximately $6.20 per share that otherwise
would have been available.

Our stockholders may be held liable for claims against the Company by third
parties to the extent of distributions received by them.

      Under the Delaware General Corporation Law, stockholders may be held
liable for claims by third parties against a corporation to the extent of
distributions received by them in a dissolution. If in fact there is a
determination on appeal that the Merger was not validly consummated and the
Company were required to liquidate and we complied with certain procedures set
forth in Section 280 of the Delaware General Corporation Law intended to ensure
that we make reasonable provision for all claims against us, including a 60-day
notice period during which any third-party claims can be brought against us, a
90-day period during which we may reject any claims brought, and an additional
150-day waiting period before any liquidating distributions are made to
stockholders, any liability of a stockholder with respect to a liquidating
distribution would be limited to the lesser of such stockholder's pro rata share
of the claim or the amount distributed to the stockholder, and any liability of
the stockholder would be barred after the third anniversary of the dissolution.
However, it would be our intention to make liquidating distributions to our
stockholders as soon as reasonably possible after dissolution and, therefore, we
do not intend to comply with those procedures. As such, our stockholders could
potentially be liable for any claims to the extent of distributions received by
them in a dissolution and any such liability of our stockholders will likely
extend beyond the third anniversary of such dissolution. Accordingly, we cannot
assure you that third parties will not seek to recover from our public
stockholders amounts owed to them by us.

Under Delaware law, our dissolution would require the approval of the holders of
a majority of our outstanding stock, without which we would not be able to
dissolve and liquidate and distribute our assets to our public stockholders.
Therefore, there may be a considerable delay before any distribution of our
assets.

      Pursuant to Delaware law, our dissolution requires the affirmative vote of
stockholders owning a majority of our then outstanding common stock. Soliciting
the vote of our stockholders will require the preparation of preliminary and
definitive proxy statements, which will need to be filed with the Securities and
Exchange Commission and could be subject to their review. This process could
take a substantial amount of time ranging from 40 days to several months.


                                       12


If third parties bring claims against us or if Former PharmAthene has breached
any of its representations, warranties or covenants set forth in the Merger
Agreement, we may not be adequately indemnified for any losses arising
therefrom.

      Although the Merger Agreement provides that the stockholders of Former
PharmAthene will indemnify us for losses arising from a breach of the
representations, warranties and covenants by Former PharmAthene set forth in the
Merger Agreement, such indemnification is limited both in the aggregate and the
deductible and is subject to other limitations. In addition, the survival period
for any claims under the Merger Agreement is limited to claims arising within
the twelve months immediately following the effective time of the Merger.
Accordingly, we will be prevented from seeking indemnification for any claims
above the aggregate threshold or arising after the applicable survival period.

If the Merger's benefits do not meet the expectations of financial or industry
analysts, the market price of the Company's common stock may decline.

      The market price of the Company's common stock may decline as a result of
the Merger if:

      o     the Company does not achieve the perceived benefits of the Merger as
            rapidly as, or to the extent anticipated by, financial or industry
            analysts; or

      o     the effect of the Merger on the Company's financial results is not
            consistent with the expectations of financial or industry analysts.

      Accordingly, investors may experience a loss as a result of a decreasing
stock price and the Company may not be able to raise future capital, if
necessary, in the equity markets.

If an appellate court reverses on appeal the Delaware Chancery Court's
determination and holds that we did not consummate the Merger and must dissolve,
payments from the trust account to our public stockholders may be delayed.

      We currently believe that any plan of dissolution and liquidation
subsequent to the expiration of the 24 month deadline would proceed in
approximately the following manner:

      o     our Board of Directors will, consistent with Delaware law and its
            obligations described in our amended and restated certificate of
            incorporation to dissolve, prior to the passing of such deadline,
            convene and adopt a specific plan of dissolution and liquidation,
            which it will then vote to recommend to our stockholders; at such
            time it will also cause to be prepared a preliminary proxy statement
            setting out such plan of dissolution and liquidation as well as the
            board's recommendation of such plan;

      o     soon after such deadline, we would file our preliminary proxy
            statement with the Securities and Exchange Commission;

      o     if the Securities and Exchange Commission does not review the
            preliminary proxy statement, then, approximately 10 days following
            the passing of such deadline, we will mail the proxy statements to
            our stockholders, and approximately 30 days following the passing of
            such deadline we will convene a meeting of our stockholders, at
            which they will either approve or reject our plan of dissolution and
            liquidation; and


                                       13


      o     if the Securities and Exchange Commission does review the
            preliminary proxy statement, we currently estimate that we will
            receive their comments approximately 45 days following the passing
            of such deadline. We will mail the proxy statements to our
            stockholders following the conclusion of the comment and review
            process (the length of which we cannot predict with any certainty,
            and which may be substantial) and we will convene a meeting of our
            stockholders at which they will either approve or reject our plan of
            dissolution and liquidation.

      In the event we seek stockholder approval for a plan of dissolution and
liquidation and do not obtain such approval, we will nonetheless continue to
pursue stockholder approval for our dissolution. Pursuant to the terms of our
amended and restated certificate of incorporation, our powers following the
expiration of the permitted time periods for consummating a business combination
will automatically thereafter be limited to acts and activities relating to
dissolving and winding up our affairs, including liquidation. The funds held in
our trust account may not be distributed except upon our dissolution and, unless
and until such approval is obtained from our stockholders, the funds held in our
trust account will not be released. Consequently, holders of a majority of our
outstanding stock must approve our dissolution in order to receive the funds
held in our trust account and the funds will not be available for any other
corporate purpose.

      The procedures required for us to liquidate under the Delaware law, or a
vote to reject any plan of dissolution and liquidation by our stockholders, may
result in substantial delays in the liquidation of our trust account to our
public stockholders as part of our plan of dissolution and liquidation.

If an appellate court reverses on appeal the Delaware Chancery Court's
determination and holds that the Merger was invalid, we will dissolve and
liquidate.

      If an appellate court reverses on appeal the Delaware Chancery Court's
determination and holds that we did not validly complete the Merger on or before
August 3, 2007, we will dissolve and liquidate pursuant to the provisions of our
certificate of incorporation and Delaware law. We view this obligation to
dissolve and liquidate as an obligation to our public stockholders and neither
we nor our Board of Directors will take any action to amend or waive any
provision of our amended and restated certificate of incorporation to allow us
to survive for a longer period of time if it does not appear we will be able to
consummate the Merger. We will be required to obtain stockholder approval of a
plan of dissolution under Delaware law. Upon approval of our plan of
dissolution, we will distribute, assuming satisfaction of our creditors, to all
of our public stockholders, in proportion to their respective equity interest,
an aggregate sum equal to the amount in the trust account (net of taxes
payable). Our initial stockholders have waived their rights to participate in
any liquidation distribution with respect to their initial shares and have
agreed to vote in favor of any plan of dissolution and distribution which we
will present to our stockholders for vote. There will be no distribution from
the trust account with respect to our warrants which will expire worthless. We
will pay the costs of our dissolution and liquidation of the trust account from
our remaining assets outside of the trust fund, and we estimate such costs to be
between $50,000 and $75,000.

      Because we entered into a definitive agreement to complete a business
combination prior to the expiration of 18 months after the consummation of our
IPO, we had an additional six months in which to complete the Merger with Former
PharmAthene. If an appellate court reverses on appeal the Delaware Chancery
Court's determination and holds that we did not validly complete the Merger on
or before August 3, 2007, our purpose and powers will be limited to dissolving,
liquidating and winding up. Since the funds held in trust have been distributed
to the Company for use as operating capital, there can be no assurance that if a
court so ruled there would be sufficient funds to distribute to stockholders
equal to the pre-merger liquidation value per share.


                                       14


Registration Statement Relating to the Warrants

      Under the terms of the warrant agreement (the "Warrant Agreement")
relating to the Company's outstanding redeemable warrants ("Warrants"), the
Warrants become exercisable to purchase one share of common stock at a price of
$6.00 per share upon the completion of the Merger until July 27, 2009. However,
the Company's final prospectus relating to its IPO indicated (i) that no Warrant
would be exercisable unless at the time of exercise a prospectus relating to the
common stock issuable upon exercise of the Warrant is current and the common
stock has been registered under the Securities Act of 1933 or qualified or
deemed to be exempt under the securities laws of the state of residence of the
holder of the Warrant and (ii) that the Warrant may be deprived of any value and
the market for the Warrant may be limited if the prospectus relating to the
common stock issuable upon the exercise of the Warrant is not current or if the
common stock is not qualified or exempt from qualification in the jurisdictions
in which the holder of the Warrant resides. The Warrant Agreement was
subsequently amended to clarify that the registered holders do not have the
right to receive a net cash settlement in the event the Company does not
maintain a current prospectus relating to the common stock issuable upon
exercise of the Warrants at the time such Warrants are exercisable. Although the
Company intends to file a registration statement with the SEC covering the sale
of the shares issuable upon exercise of the Warrants, no such registration
statement has been filed as yet. Accordingly, the Warrants may not be exercised
currently and will not be exercisable until a registration statement is filed by
the Company and declared effective by the SEC. Furthermore, if there is a
determination that the Merger was not duly consummated which could result if the
decision of the Delaware Chancery Court is reversed on appeal, the Warrants
could expire without ever being exercisable.

Financial Information

      Reference is made to the disclosure set forth under Item 9.01 of this
Current Report on Form 8-K concerning the financial information of the Company.

         Management's Discussion and Analysis of Financial Condition and
                              Results of Operations

      The following discussion should be read in conjunction with the
consolidated financial statements for the Company which present the results of
operations of the Company for the three and six month periods ended June 30,
2007 and 2006 as well as the financial positions at June 30, 2007 and December
31, 2006. In addition to historical information, the following discussion may
contain forward looking information that involves risks and uncertainties. All
amounts presented, except share data, are rounded to the nearest thousand
dollars.

Overview

      The Company is a biodefense company engaged in the business of discovery
and development of novel human therapeutics and prophylactics for the treatment
and prevention of morbidity and mortality from exposure to biological and
chemical weapons. Additionally, the Company collaborates with other
pharmaceutical companies to support clinical development of product candidates.
The Company has two products currently under development. Valortim(TM), a fully
human monoclonal antibody (an identical population of highly specific antibodies
produced from a single clone) for the prevention and treatment of anthrax
infection and Protexia(R), mimics a natural bioscavenger for the treatment or
prevention of nerve agent poisoning by organophosphate compounds which include
nerve gases and pesticides.

      The Company's lead product candidate, Valortim(TM), is a fully human
monoclonal antibody designed to protect against and treat inhalation anthrax
infection, the most lethal form of illness in humans caused by the Bacillus
anthracis bacterium. The Company is co-developing Valortim(TM) with Medarex,
Inc., a biopharmaceutical company that specializes in developing fully human
antibody-based therapeutic products and will share with Medarex any profits
derived from sales of Valortim(TM). Preclinical trials on animal models have
demonstrated Valortim(TM) to be highly efficacious as both a prophylaxis and a
therapeutic for inhalation anthrax infection. The Company and Medarex have
completed dosing of healthy volunteers in a Phase I open-label, dose-escalation
clinical trial to evaluate the safety, tolerability, immunogenicity (the ability
of an antigen to elicit an immune response), and pharmacokinetics (the study of
absorption, metabolism and action of drugs) of a single dose of Valortim(TM)
administered intravenously or intramuscularly. No drug-related serious adverse
events have been reported. Final results from the Phase I trial were presented
at the Infectious Disease Society of America meeting in October 2006.
Valortim(TM) has been granted Fast Track Status by the U.S. Food and Drug
Administration (the "FDA"), which may permit the Company to submit portions of a
Biologics License Application ("BLA") or efficacy supplement before the complete
BLA is submitted. This may expedite the review process but requires that the FDA
have sufficient resources to allow early review of the portions submitted. In
addition, Valortim(TM) has been granted orphan drug status for the treatment of
inhalational anthrax.

      Protexia(R), the Company's second product candidate, is a recombinant form
(that is, produced using genetic engineering technology) of human
butyrylcholinesterase, a naturally occurring enzyme ("BChE"), for use in the


                                       15


prophylaxis and treatment of organophosphate chemical nerve agent poisoning.
Preclinical trials on animal models have demonstrated that Protexia(R) is highly
efficacious both prophylactically and therapeutically for chemical nerve agent
poisoning. The Company plans to continue preclinical animal studies of
Protexia(R) throughout 2006 and 2007 and file an Investigational New Drug
application ("IND") with the FDA in 2008. The procurement process for the
scale-up development and sale of Protexia(R) is already underway with the U.S.
Department of Defense (the "DoD"), the department tasked with purchasing
biodefense countermeasures for military use. The DoD requested competitive bids
in a Request for Proposal (an "RFP") for a recombinant form of BChE drug for the
prophylaxis treatment of chemical nerve agent poisoning, which the Company
submitted in November 2005. In September 2006, the Company was awarded a
contract by the DoD for the advanced development of Protexia(R) and procurement
of an initial 90,000 doses for approximately $35 million. If all options and
extensions of this contract are exercised, the contract could amount to up to
$213 million in revenues.

      In compiling its business plan and cost and revenue projections for the
future, the Company has considered various factors, relating to potential sales
of Valortim(TM) and Protexia(R) In order to market commercially its products,
the Company must receive final approval from the FDA. The Company currently
estimates that it will not have an FDA approved product until at least 2012.
Nevertheless, the Company believes that it may commence sales of Valortim(TM)
and Protexia(R) in 2008 and 2009. The United States Strategic National Stockpile
("SNS") is able to purchase products from companies prior to the receipt of FDA
approval for Emergency Use Authorization ("EUA"). The Company is aware that,
under certain conditions, the SNS currently buys a significant amount of product
from companies that do not have an FDA-approved product. The Company analyzed
the United States Government's demand for its products based upon published
reports. It also analyzed available information regarding its competitors'
projects and determined the level of orders that could be received from the
United States Government. The Company estimated what portion of such orders it
could receive and of such orders what portion the Company could deliver in each
of 2008 and 2009 and the price per treatment delivered. The Company also
considered delivery of a limited number of orders internationally. Much like the
Valortim(TM) analysis, the Company performed a similar evaluation and analysis
of the market for Protexia(R). To this end, the Company projected the delivery,
beginning in 2009, of Protexia(R) domestically to SNS and internationally.
Accordingly, the Company believes it can meet projections for sales in 2009 of
Valortim(TM) and Protexia (R).

      Prior to the Merger, the Company has financed its operations since
inception in March 2001 primarily through the issuance of equity securities,
convertible notes, and proceeds from loans or other borrowings. In addition to
the trust funds obtained in the Merger, any, or all, of these financing vehicles
or others may be utilized to fund its future capital requirements.

Recent Events

      On August 3, 2007, the Company consummated a merger in accordance with the
Merger Agreement pursuant to which HAQ's wholly-owned subsidiary, PAI
Acquisition Corp., was merged with and into Former PharmAthene. Immediately
following the Merger, HAQ changed its name from Healthcare Acquisition Corp. to
"PharmAthene, Inc." and Former PharmAthene, which became a wholly-owned
subsidiary of HAQ, changed its name to "PharmAthene U.S. Corporation."

      The financial information disclosed in this Current Report on Form 8-K
presents the historical financial results and information of Former PharmAthene,
as the financial acquirer in the Merger, for the quarter ended June 30, 2007.

      As consideration for the Merger, the Company paid stockholders,
optionholders, warrantholders and noteholders of Former PharmAthene (the
"PharmAthene Security Holders") the following consideration:

            (i) an aggregate of 12,500,000 shares of common stock of the Company
at closing (the "Stock Consideration") plus 300,688 shares in adjustment (the
"Adjustment") calculated on the basis of the number of shares electing
conversion in excess of 5% of the Company's outstanding common stock prior to
the Merger; and

            (ii) $12,500,000 in 8% convertible notes (the "Convertible Notes")
issued by the Company (the "Note Consideration");

      In addition, the PharmAthene Security Holders could receive up to $10
million in milestone payments contingent upon the Company entering into a
contract prior to December 31, 2007 for the sale of Valortim(TM) to the U.S.
government for more than $150 million in anticipated revenue; the payments will
be equal to 10% of the actual collections from the sale of Valortim(TM) up to
$10 million.

      Recipients of the Stock Consideration have certain registration rights
pursuant to a Registration Rights Agreement, dated August 3, 2007, by and among
the Company and the PharmAthene Security Holders (the "Registration Rights
Agreement"). Additionally, each of the stockholders, noteholders and holders of
options or warrants to purchase not less than 100,000 shares of the common stock
Former PharmAthene have executed a lock-up agreement (the "Lock-up Agreement")
that such person shall not sell, pledge, transfer, assign or engage in any
hedging transaction with respect to the Company's common stock issued to such


                                       16


stockholders as part of the Merger Consideration except in accordance with the
following schedule: 50% of the Stock Consideration shall be released from the
lock-up commencing six months following the effective time of the Merger and all
remaining Stock Consideration shall be released from the lock-up twelve months
following the effective time. The Note Consideration was allocated among the
PharmAthene noteholders pursuant to a Note Exchange Agreement, dated August 3,
2007, by and among HAQ, PharmAthene and the PharmAthene noteholders (the "Note
Exchange Agreement"). A portion of the Stock Consideration , in the aggregate
amount of 1,375,000 shares of the Company's common stock, has been placed in
escrow to be held for a period of one year for indemnification claims pursuant
to an Escrow Agreement, dated August 3, 2007, by and among HAQ, PharmAthene and
Continental Stock Transfer & Trust Company, as escrow agent (the "Escrow
Agreement"). Based upon the total number of shares electing conversion being in
excess of 5% of the Company's outstanding common stock prior to the Merger, the
Stock Consideration was adjusted upwards by 300,688 shares issuable to
stockholders of Former PharmAthene.

      The Note Consideration issued in exchange for Former PharmAthene's $11.8
million outstanding secured convertible notes will mature in 24 months. These
convertible notes will be convertible at the option of the holders into common
stock at $10.00 per share and may be redeemed by the Company without penalty
after 12 months.

      On March 30, 2007, the Company entered into a $10 million credit facility
with Silicon Valley Bank and Oxford Finance Corporation. Under the credit
facility, the Company borrowed $10 million which loan bears interest at the rate
of 11.5% per annum. Pursuant to the terms of the loan and security agreement
evidencing the credit facility, the Company will make monthly payments of
interest only through September 30, 2007 and, thereafter, will make monthly
payments of principal and interest over the remaining 30-month term of the loan.
The loan is secured by a security interest on all of the Company's and
PharmAthene Canada's assets other than certain intellectual property. The
Company may not repay the loan for the first six months but, thereafter, may
prepay provided it pays certain prepayment fees. In connection with the credit
facility, the Company issued to Silicon Valley Bank and Oxford Financial
Corporation warrants to purchase an aggregate of 438,453 shares of Former
PharmAthene Series C Preferred Stock through March 30, 2017 at an exercise price
of $0.91 per share which, as a consequence of the Merger, converted into a
warrant to purchase 100,778 shares of the Company's common stock at an exercise
price of $4.06 per share.

      Results of Operations

      Revenue

      The Company recognized revenues of $2.3 million for the three months ended
June 30, 2007. For the six months ended June 30, 2007 and 2006, the Company
recognized revenues of $5.3 million and $186,400, respectively. These revenues
consist primarily of contract and grant funding from the U.S. government for the
development of pharmaceutical products for Protexia(R), one of the Company's two
drugs. Other non-grant related revenue of $7,000 and $7,700 was recognized in
the first quarters of fiscal years 2007 and 2006, respectively.

      Contract and Grant Revenue

      During the three and six months ended June 30, 2007 and 2006, contract and
grant revenues recognized related to U.S. government awarded contracts and
grants as follows:

            o     With the March 2005 acquisition of substantially all of the
                  assets and liabilities of Nexia Biotechnologies Ltd. (the
                  "Nexia Acquisition"), the Company was assigned the rights to
                  receive the fixed price grant with the U.S. Army Medical
                  Research and Material Command Center to fund preclinical
                  studies for the Protexia(R) compound. This grant was awarded
                  for approximately $2.7 million for the period from April 2003
                  through September 2006.

            o     In September 2006, the DoD U.S. Army Space and Missile Command
                  awarded the Company a multi-year contract for advanced
                  development of the Company's broad spectrum chemical nerve
                  agent prophylaxis and therapy, Protexia(R). The contract for
                  advanced development and procurement of an initial 90,000
                  doses of Protexia(R) is for approximately $35 million. If all
                  options and extensions of this contract are exercised, the
                  contract could amount to up to $213 million in revenues.

            o     In October 2006, the National Institutes of Health (NIH)
                  Countermeasures Against Chemical Threats, (Counter ACT)
                  Research Network awarded a $1.7 million grant to support
                  continued development of the Company's broad spectrum chemical
                  nerve agent therapy, Protexia(R). Counter ACT's program goal
                  is to develop novel therapeutic agents for use in a mass
                  civilian terrorist attack.

      During the three and six months ended June 30, 2007, the Company
recognized $2.3 million and $5.2 million, respectively, in revenue related to
advanced development work funded through the DoD U.S. Army Space and Missile
Command contract awarded in September 2006. Additionally, approximately $32,500
and $119,400 of revenue was recognized for the same periods, respectively,
related to the development grant work under the NIH Counter ACT program.


                                       17


      During the three months ended June 30, 2006, the Company recognized
$178,700 in grant revenue related to the firm fixed price grant with the U.S.
Army Medical Research and Material Command Center to fund preclinical studies
for the Protexia(R) compound. Work under this grant was completed in March 2006,
with no additional grant funding for the remainder of the year.

      Other Revenue

      In connection with the Nexia Acquisition, the Company acquired property
and equipment, including farm facilities. Other income primarily results from
the leasing of farm facilities that the Company is currently not utilizing.

      Research and Development Expenses

      The Company's research and development expenses were $4.0 million and $1.4
million for the three months ended June 30, 2007 and 2006, respectively. For the
six months ended June 30, 2007 and 2006, the Company recognized research and
development expenses of $7.1 million and $3.2 million, respectively. These
expenses resulted from research and development activities related to programs
for ValortimTM, for protection against and treatment of inhalation anthrax, and
for Protexia(R), for treatment of nerve agent poisoning. The Company incurred
both direct and indirect expenses. Direct expenses included salaries and other
costs of personnel, raw materials and supplies. The Company may also incur
third-party costs related to these projects, such as contract research,
consulting and clinical development costs for individual projects.

      Research and development expenses for the three and six months ended June
30, 2007 and 2006, respectively, was attributable to research programs as
follows:



                                    Three months ended June 30,    Six months ended June 30,
                                    ---------------------------    -------------------------
                                       2007             2006          2007           2006
                                    ----------       ----------    ----------     ----------
                                                                      
Valortim(TM)                        $1,040,800       $  135,200    $1,517,800     $  656,900
Protexia(R)                          2,444,700        1,218,000     4,586,600      2,446,900
Internal research and development      509,500           30,700       982,600         62,200
                                    ----------       ----------    ----------     ----------
Total R&D expenses                  $3,995,000       $1,383,900    $7,087,000     $3,166,000
                                    ==========       ==========    ==========     ==========


      Research and development expense increased $2.6 million for the three
months ended June 30, 2007 as compared to the three months ended June 30, 2006
primarily as a result of increased process development and manufacturing
activities related to Protexia(R) and Valortim(TM) of $2.0 million and
additional personnel related expenses of approximately $428,600. The increase in
research and development costs of $3.9 million from the six months ended June
30, 2006 as compared to the six months ended June 30, 2007 resulted from
increased process development and manufacturing activities related to
Protexia(R) and Valortim(TM) of $3.7 million and additional personnel related
expenses of approximately $444,200. This increase is partially offset by reduced
clinical fees of $273,100 related to the clinical trial program for Valortim(TM)
which was initiated in fiscal year 2005 in collaboration with Medarex.

      Protexia(R) is the Company's drug candidate for use as a countermeasure
against nerve agent bioterrorist attacks and was acquired in March 2005. For the
three and six months ended June 30, 2007, the Company expended approximately
$1.8 million and $3.5 million, respectively, primarily on process development
and manufacturing activities. Additionally, approximately $692,700 million and
$1.0 million was spent on internal human resources for the same periods,
respectively. For the three and six months ended June 30, 2006, the Company
spent approximately $862,700 and $1.6 million on internal human resources on the
Protexia(R) development program. Additionally, $355,300 and $880,100 was
incurred as related to pre-clinical testing and manufacturing. From inception of
the Protexia(R) development program to date, the Company has expended a total of
$12 million related to the Protexia(R) program.

      Valortim(TM) is the Company's drug candidate for use as a countermeasure
against anthrax associated bioterrorist attacks. For the three and six months
ended June 30, 2007, the Company spent approximately $1.0 million and $1.5
million, respectively, on process and clinical development with the remaining
expenditure related to internal resources. For the three and six months ended
June 30, 2006, the Company spent $135,200 and $656,900 on clinical development
with the remaining expense related to internal resources. From inception of the
Valortim(TM) development program to date, the Company has expended a total of $5
million related to the Valortim(TM) development program.


                                       18


      Internal research and development costs include activities related to the
development of future programs.

      General and Administrative Expenses

      General and administrative functions for the Company include executive
management, finance and administration, government affairs and regulations,
corporate development, human resources, legal, and compliance. For each
function, the Company may incur direct expenses such as salaries, supplies and
third-party consulting and other external costs. Indirect costs such as
facilities, utilities and other administrative overhead are also included in
general and administrative expenses.

      Expenses associated with general and administrative functions for the
Company were $3.0 million and $1.5 million for the three months ended June 30,
2007 and 2006, respectively. General and administrative expenses increased $1.5
million from the three months ended June 30, 2006 as compared to the three
months ended June 30, 2007 primarily due to increased employee costs of $668,700
and related increased travel activities of $139,700, and $655,100 in additional
consulting and legal costs associated with transactional, proposal and
compliance related activities.

      Expenses associated with general and administrative functions for the
Company were $5.5 million and $2.9 million for the six months ended June 30,
2007 and 2006, respectively. General and administrative expenses increased $2.6
million from the six months ended June 30, 2006 as compared to the six months
ended June 30, 2007 primarily due to $1.1 million in additional consulting and
legal costs associated with transactional, proposal and compliance related
activities, increased employee costs of $1.0 million and related increased
travel activities of $158,000, and increased building operation costs of
$123,000 associated with the increased headcount, primarily in the United
States.

      Depreciation and Intangible Amortization

      Depreciation and intangible amortization expense was $162,200 and $118,800
for the three months ended June 30, 2007 and 2006, respectively. For the six
months ended June 30, 2007 and 2006, deprecation and intangible amortization
expense was $309,300 and $255,200, respectively. Depreciation expense for the
three months ended June 30, 2007 and 2006 of $128,000 and $80,100, respectively,
and for the six months ended June 30, 2007 and 2006 of $240,000 and $184,400,
respectively resulted primarily from building, leasehold improvements and lab
equipment acquired through the Nexia Acquisition during the first quarter of
2005. Amortization expense recorded the three months ended June 30, 2007 and
2006 of $34,200 and $38,700, respectively, and for the six months ended June 30,
2007 and 2006 of $69,300 and $70,800, respectively, related to patents acquired
in the Nexia Acquisition.

      Other Income and Expenses

      Other income and expenses consists primarily of income on the Company's
investments, interest expense on the Company's debt and other financial
obligations and the change in market value of its derivative financial
instruments. For the three months ended June 30, 2007 and 2006, the Company's
interest income was $93,600 and $34,500, respectively. The Company's interest
income was $149,200 and $106,700 for the six months ended June 30, 2007 and
2006, respectively. The increase in interest income for the three and six months
ended June 30, 2007 as compared to the same period in 2006 resulted from higher
average investment balances throughout fiscal year 2007 primarily resulting from
financing activities.

      The Company incurred interest expense of $529,500 for the three months
ended June 30, 2007 and 2006, respectively. For the six months ended June 30,
2007 and 2006, the Company incurred $771,300 and $100 of interest expense,
respectively. During the second and third quarters of fiscal year 2006, the
Company entered into $11.8 million 8% convertible notes. The Company has
recognized $238,000 and $473,300, respectively, in interest expense related to
these notes for the three and six months ended June 30, 2007. On March 30, 2007,
the Company entered into a $10 million credit facility. Approximately $297,900
in interest expense has been recognized at June 30, 2007.

      For the three months ended June 30, 2007 and 2006, the Company incurred
expenses of $14,500 and $11,400, respectively, related to the change in market
value of its derivative instruments, which consist of 5,699,895 warrants to
purchase Series C Preferred Stock of Former PharmAthene at an exercise price of
$0.91 per share. For the six months ended June 30, 2007 and 2006, the Company
recognized expenses of $6,800 and $365,300, respectively, related to the change
in market value of these warrants. The fair values of these warrants are
estimated on a quarterly basis using the Black-Scholes valuation model.


                                       19


      Liquidity and Capital Resources

      Overview

      The Company's primary cash requirements are to fund its research and
development programs and to fund general corporate overhead. Its cash
requirements could change materially as a result of changes in its business and
strategy. These changes could arise from the Company's management team's
evaluation of its business strategy, the progress of its research and
development activities and clinical programs, licensing activities,
acquisitions, divestitures or other corporate developments.

      The Company has financed its operations since inception in March 2001
primarily through the issuance of equity securities in addition to convertible
notes, and proceeds from loans or other borrowings. In addition to the use of
the trust funds obtained in the Merger, any combination of, or all of, these
financing vehicles or others may be utilized to fund its future capital
requirements. In evaluating alternative sources of financing, the Company
considers, among other things, the dilutive impact, if any, on its stockholders,
the ability to leverage stockholder returns through debt financing, the
particular terms and conditions of each alternative financing arrangement and
its ability to service its obligations under such financing arrangements.

      The Company's Consolidated Financial Statements have been prepared on a
basis which assumes that it will continue as a going concern and which
contemplates the realization of assets and the satisfaction of liabilities and
commitments in the normal course of business. The Company has incurred
cumulative net losses and expects to incur additional losses to perform further
research and development activities. The Company does not have commercial
products and has limited capital resources. Its plans with regard to these
matters include continued development of its products as well as seeking
additional research support funds and financial arrangements. Although the
Company continues to pursue these plans, there is no assurance that it will be
successful in obtaining sufficient financing on commercially reasonable terms or
that it will be able to secure financing through government contracts and
grants.

      The Company has developed a plan to reduce its operating expenses in the
event that sufficient funds are not available, or if it is not able to obtain
anticipated government contracts and grants. If the Company is unable to raise
adequate capital or achieve profitability, future operations will need to be
scaled back or discontinued. Continuance of the Company as a going concern is
dependent upon, among other things, the success of the Company's research and
development programs and its ability to obtain adequate financing. The Company's
Consolidated Financial Statements do not include any adjustments relating to
recoverability of the carrying amount of recorded assets and liabilities that
might result from the outcome of these uncertainties.

      Sources and Uses of Cash

      Cash and cash equivalents for the Company were $7.1 million and $5.1
million at June 30, 2007 and December 31, 2006, respectively. The $2.0 million
increase in cash and cash equivalents from December 31, 2006 was primarily
attributable to the March 2007 $10 million debt financing partially offset by
the funding of operations for six months ended June 30, 2007.

      Operating Activities

      Net cash used in operating activities was $6.3 million and $6.0 million
for the six months ending June 30, 2007 and 2006, respectively. The 2007 cash
used in operations results primarily from a net loss after the effect of
non-cash adjustments of $7.7 million and an increase in accounts receivable of
$1.0 million partially offset by decrease in prepaid and other assets of
$545,600 and an increase in accrued expenses and accounts payable of $2.0
million. Accounts receivable increased due to contract award receivables due
from the DoD related to the advanced development of Protexia(R). Prepaid and
other current assets decreased primarily as a result of the use of funds for
development activity related to the Company's collaboration with Medarex on the
ValortimTM program. Prepaid expenses fluctuate from period to period depending
on the timing and level of preparation and initiation of research and
development activity and clinical trials. Accounts payable and accrued expenses
increased due to increased development activities and compliance related
activities.

      The 2006 cash used in operations results primarily from a net loss after
the effect of non-cash adjustments of $5.6 million. Non-cash adjustments for the
six months ending June 30, 2006 included a $365,300 charge related to the change
in market value of derivative financial instruments.

      Investing Activities

      Net cash used in investing activities was $491,400 for the first half of
fiscal year 2007 compared to $3.4 million for the first half of fiscal year
2006. All investing activities in 2007, and $424,800 of investing activities for
the period ended June 30, 2006, related to the purchase of property and
equipment. The Company finances capital expenditures primarily through direct
purchases utilizing the Company's existing cash.


                                       20


      In March 2006 in connection with the SIGA Merger Agreement, the Company
entered into a Bridge Note Purchase Agreement with SIGA providing SIGA with
interim financing, subject to the execution of a definitive merger agreement
through a bridge loan. Through June 30, 2006, the Company funded $3.0 million of
this interim financing.

      Financing Activities

      Net cash provided by financing activities was $8.7 million for the period
ending June 30, 2007. The 2007 cash provided in financing results from a $10
million credit facility partially offset by $1.3 million in financing costs
related to merger and financing activities. On March 30, 2007, the Company
entered into a $10.0 million credit facility with Silicon Valley Bank and Oxford
Finance Corporation. Under the credit facility, the Company borrowed $10 million
which loan bears interest at the rate of 11.5% per annum. Pursuant to the terms
of the loan and security agreement evidencing the credit facility, the Company
will make monthly payments of interest only through September 30, 2007 and,
thereafter, will make monthly payments of principal and interest over the
remaining 30-month term of the loan. The loan is secured by a security interest
on all of the Company's and PharmAthene Canada's assets other than certain
intellectual property. In addition, in the event that the Delaware Chancery
Court's determination is reversed on appeal and the Merger was not consummated
by August 3, 2007, the Company has agreed to provide the lenders with a mortgage
on its Canadian real estate. The Company may not repay the loan for the first
six months but, thereafter, may prepay provided it pays certain prepayment fees.
In connection with the credit facility, the Company issued to Silicon Valley
Bank and Oxford Financial Corporation warrants to purchase an aggregate of
438,453 shares of the Former PharmAthene's Series C Preferred Stock through
March 30, 2017 at an exercise price of $0.91 per share which, as a consequence
of the Merger, converted into 100,778 shares of the Company's common stock at an
exercise price of $4.06 per share.

      Future Cash Needs

      The Company has financed its operations since inception in March 2001
primarily through the issuance of equity securities, convertible notes, and
proceeds from loans or other borrowings. Any, or all, of these financing
vehicles or others may be utilized to fund the Company's future capital
requirements.

      The Company's future capital requirements and liquidity will depend on
many factors, including but not limited to, the progress of its research and
development programs; the progress of pre-clinical and clinical testing; the
time and cost involved in obtaining regulatory approval; the cost of filing,
prosecuting, defending and enforcing any patent claims and other intellectual
property rights; the changes in its existing research relationships, competing
technological and marketing developments; its ability to establish collaborative
arrangements and to enter into licensing agreements and contractual arrangements
with others; and any future change in its business strategy.

      The Company expects to fund its development activities for Protexia(R)
primarily using the funds available from its contract with the DoD. Under the
agreement, the DoD has agreed to fund up to $35 million of development costs as
incurred over a three year period. The Company believes this funding will be
sufficient to complete the development of Protexia(R). In connection with its
collaboration with Medarex for the development of Valortim, the Company has
expended $2 million of its own funds and Medarex has received $7.2 million in
grants from the United States Government. The Company believes that the
remaining costs for this development program will be financed through additional
grants to the Company (not Medarex) anticipated to be received from the United
States Government and from the Company's available cash which, if the Merger is
not consummated, would be drawn from the Company's credit facility and/or
additional issuances of securities. If the merger is consummated, the post
merger companies will have up to $68 million less any conversion from the trust
and any expenses of the merger.

      The Company has incurred cumulative net losses and expects to incur
additional losses to perform further research and development activities. It
does not have commercial products and has limited capital resources. The
Company's plans with regard to these matters include continued development of
its product candidates as well as seeking additional research support funds and
financial arrangements through a combination of collaborative agreements,
strategic alliances, research grants, equity and debt financing. Although the
Company continues to pursue these plans, there is no assurance that it will be
successful in obtaining sufficient financing on commercially reasonable terms or
that the Company will be able to secure financing from anticipated government
contracts and grants. The Company has developed a plan to reduce its operating
expenses in the event that sufficient funds are not available, or if it is not
able to obtain anticipated government contracts and grants. If the Company is
unable to raise adequate capital or achieve profitability, future operations
will need to be scaled back or discontinued.

      Off-Balance Sheet Arrangements

      The only off-balance sheet arrangements which the Company has entered into
are its facility and equipment operating lease agreements. The Company's
obligations under these agreements are presented in this section under
"Contractual Obligations."


                                       21


Critical Accounting Policies

      Estimates

      The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires the Company to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. The Company bases its estimates and assumptions on historical
experience and various other factors that are believed to be reasonable under
the circumstances. Actual results could differ from our estimates and
assumptions. The Company believes the following critical accounting policies,
among others, affect our more significant estimates and assumptions and require
the use of complex judgment in their application.

      Adoption of FASB 123R regarding share-based payments

      On December 13, 2004, the FASB issued FAS 123R, which requires that all
share-based payments to employees, including grants of employee stock options,
be recognized in the income statement based on their grant date fair values for
interim or annual periods beginning after June 15, 2005. Costs of all
Share-based payments will be recognized over the requisite service period that
an employee must provide to earn the award (i.e. usually the vesting period) and
charged to the operating expense associated with that employee. The Company
adopted FAS 123R on January 1, 2006 using the "modified prospective" method.
Because the Company does not have history as a publicly held company, it has
based such measurements as volatility on publicly held companies similar to the
Company.

      Revenue Recognition

      The Company recognizes revenue when all terms and conditions of the
agreements have been met including persuasive evidence of an arrangement,
services have been rendered, price is fixed or determinable, and collectibility
is reasonably assured. For reimbursable cost research grants, the Company
recognizes revenue as costs are incurred and appropriate regulatory approvals
have been obtained or approval criteria are met for invoicing the related
government agency.

      All of the grant revenue the Company recognized historically was received
under a cost reimbursement grant from the U.S. government to fund the
development of pharmaceutical products for biodefense applications In addition,
reimbursed costs are subject to review and adjustment by the granting agency. As
the Company develops experience with contracting authorities and as its incurred
cost submissions are reviewed and approved by the responsible government
authorities, estimates of the assumptions related to these uncertainties may
change.

      Research and Development Expenses

      Research and development costs include salaries, facilities expense,
overhead expenses, material and supplies, pre-clinical expense, clinical trials
and related clinical manufacturing expenses, stock based compensation expense,
contract services and other outside services. Such costs are charged to expense
as incurred.

      Intangible Assets

      When the Company acquires development products, it allocates the purchase
price, including expenses and assumed liabilities, to tangible and intangible
assets. The portion allocated to intangible assets may be allocated to
trademarks, patents and other intangibles using the assistance of valuation
experts. The Company estimates the useful lives of the assets by considering the
remaining life of the patents, estimated future introductions of competing
products, and other related factors.

      Because of the nature of pharmaceutical research, and particularly because
of the difficulties associated with efficacy studies in humans related to the
bioterrorist products with which the Company works and the government's related
funding provisions, factors that drive the estimate of the life of the asset are
often more uncertain than other non-bioterrorist pharmaceutical research. On an
annual basis, the Company assesses recoverability of intangibles from future
operations, using undiscounted future cash flows derived from the intangible
assets.

      Any impairment would be recognized in operating results to the extent the
carrying value exceeds the fair value, which is determined based on the net
present value of estimated future cash flows; in certain situations, where the
carrying value is dependent upon the outcome of a single study and that study is
unsuccessful, that impairment may be significant in amount and immediate in
timing.


                                       22


      Consolidation of PharmAthene Canada, Inc.

      The FASB has issued FASB Interpretation No. 46R, Consolidation of Variable
Interest Entities ("FIN 46R"), which expands consolidated financial statements
to include variable interest entities. Variable interest entities are to be
consolidated by the company which is considered to be the primary beneficiary of
the entity, even if such company does not have majority control. Under FIN 46R,
the Company has been deemed the primary beneficiary of PharmAthene Canada, Inc.,
a variable interest entity. Accordingly, the financial results of PharmAthene
Canada, Inc. have been consolidated with the the Company financial statements as
of its date of inception.

      Contractual Obligations

      The following are contractual commitments at June 30, 2007 associated with
leases, research and development arrangements, collaborative development
obligations and long term debt:



                                                       Less than                                    More than
Contractual Obligations(1)                Total         1 Year        1-3 Years      3-5 Years       5 years
                                                                                    

Operating facility leases              $ 4,700,400    $   581,000    $ 1,044,600    $   814,500    $ 2,260,300
Tenant improvements                        474,406        474,406             --             --             --
HAQ Merger related costs                 1,763,000      1,763,000             --             --             --
Research and development agreements     17,830,600     17,830,600             --
Notes payable, including interest       24,431,300     16,748,500      7,682,800             --             --
Total contractual obligations          $49,199,706    $37,397,506    $ 8,727,400    $   814,500    $ 2,260,300


(1)   This table does not include any royalty payments of future sales of
      products subject to license agreements the Company have entered into in
      relation to its in-licensed technology, as the timing and likelihood of
      such payments are not known. Additionally, the table does not include
      obligations to taxing authorities due to the uncertainty surrounding the
      ultimate settlement of amounts and timing of these obligations.

Properties

      Former PharmAthene recently has relocated its corporate headquarters
which, nevertheless, remain in Annapolis, Maryland and are occupied pursuant to
lease. The Company has assumed this facility as its corporate headquarters.

Security Ownership of Certain Beneficial Owners and Management

      The following table sets forth information, as of August 9, 2007, based on
information obtained from the persons named below, with respect to the
beneficial ownership of shares of the Company's common stock by (i) each person
known by us to be the owner of more than 5% of our outstanding shares of the
Company's common stock, (ii) each director and executive officer and (iii) all
directors and executive officers as a group. Except as indicated in the
footnotes to the table, the persons named in the table have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them.



                                                                Amount and Nature of
Name and Address of Beneficial Owner(1)                         Beneficial Ownership      Percent of Class(2)
- ------------------------------------------------------------    --------------------      -------------------
                                                                                          
David P. Wright(3)(4)                                                   210,552                     *
John Pappajohn(3)(5)                                                    793,124                  3.57%
James H. Cavanaugh, Ph.D(3)(6)                                        3,500,301                 15.72%
Steven St. Peter, M.D.(3)(7)                                                276                     *
Elizabeth Czerepak(3)(8)                                              1,574,469                  7.05%
Joel McCleary(3)(9)                                                     106,006                     *
John Gill(3)(10)                                                          1,510                     *
Christopher C. Camut(3)(11)                                                   0                     *
Eric Richman(3)(12)                                                      37,488                     *
Wayne Morges(3)(13)                                                      11,363                     *
Valerie Riddle(3)(14)                                                    31,387                     *
Francesca Cook(3)(15)                                                    19,436                     *
Funds affiliated with Bear Stearns Health
Innoventures Management, LLC(16)                                      1,574,469                  7.05%
Funds affiliated with MPM Capital L.P.(17)                            3,960,396                 17.56%
HealthCare Ventures VII, L.P.(18)                                     3,498,748                 15.71%
Nexia Biotechnologies Ltd.(19)                                        1,715,974                  7.77%
All directors and executive officers as a group (12) persons          6,285,912                 26.93%



                                       23


(1)   Includes shares of common stock issuable upon exercise of warrants, which
      are beneficially owned by certain of the persons named in the above table,
      that became exercisable upon consummation of the Merger on August 3, 2007.
      Unless otherwise indicated, the business address of each of the
      individuals is One Park Place, Suite 450, Annapolis, MD 21401. Beneficial
      ownership is determined in accordance with the rules and regulations of
      the Securities and Exchange Commission. In computing the number of shares
      beneficially owned by a person and the percentage ownership of that
      person, shares of common stock subject to options held by that person that
      are currently exercisable or exercisable within 60 days of the date hereof
      are deemed outstanding. Such shares, however, are not deemed outstanding
      for the purposes of computing the percentage ownership of any other
      person. Except as indicated in the footnotes to the following table or
      pursuant to applicable community property laws, each stockholder named in
      the table has sole voting and investment power with respect to the shares
      set forth opposite such stockholder's name.

(2)   Percent of class is based on 22,087,121 shares of common stock issued and
      outstanding as of August 9, 2007, after the consummation of the Merger,
      which gives effect to the reduction in outstanding shares resulting from
      the redemption of 1,786,175 shares of common stock held by persons voting
      against the Merger and demanding conversion of their shares into a pro
      rata portion of the trust account, and the issuance of 300,688 shares to
      the stockholders of Former PharmAthene resulting from an upward adjustment
      of the stock consideration payable in connection with the Merger based on
      the number of shares electing redemption.

(3)   The person listed is an officer and/or director of the Company.

(4)   Includes (i) 103,417 shares of common stock issuable within 60 days upon
      exercise of options and (ii) 5,320 shares of common stock issuable upon
      conversion of Convertible Notes. Does not include 22,598 shares of common
      stock issuable upon exercise of options that are not exercisable, 780,000
      shares of common stock issuable upon the exercise of stock options or
      100,000 shares under a restricted stock award, which were granted to Mr.
      Wright on August 30, 2007 pursuant to his employment agreement with the
      Company.

(5)   Includes 141,960 shares of our common stock issuable upon the exercise of
      warrants.

(6)   Dr. Cavanaugh is a general partner of HealthCare Partners VII, L.P., which
      is the general partner of HealthCare Ventures VII, L.P. In such capacity
      he may be deemed to share voting and investment power with respect to
      3,498,748 shares of our common stock held by HealthCare Ventures VII, L.P.
      Dr. Cavanaugh disclaims beneficial ownership of the shares reported except
      to the extent of his proportionate pecuniary interest therein. Dr.
      Cavanaugh's beneficially owned shares also includes options to purchase
      1,553 shares of our common stock (representing the portion of an option to
      purchase a total of 2,759 shares of common stock that is currently
      exercisable or will become exercisable within 60 days of the date of this
      report). Dr. Cavanaugh's address is c/o Healthcare Ventures VII, L.P., 44
      Nassau Street, Princeton, New Jersey 08542.

(7)   Consists of options to purchase 276 shares of our common stock
      (representing the portion of an option to purchase a total of 1,104 shares
      of our common stock that is currently exercisable or will become
      exercisable within 60 days of the date of this report).

(8)   Elizabeth Czerepak is a managing partner of Bear Stearns Health
      Innoventures Management, LLC, which is the sole general partner of Bear
      Stearns Health Innoventures, L.P., Bear Stearns Health Innoventures
      Offshore, L.P., BX, L.P. and Bear Stearns Health Innoventures Employee
      Fund, L.P., and BSHI Members, LLC co-invests with these funds. The shares
      reported are directly owned by Bear Stearns Health Innoventures, L.P.,
      Bear Stearns Health Innoventures Offshore, L.P., BX, L.P., Bear Stearns
      Health Innoventures Employee Fund, L.P. and BSHI Members, LLC. In her
      capacity as a managing partner of Bear Stearns Health Innoventures
      Management, LLC, Ms. Czerepak may be deemed to share voting and investment
      power with respect to 1,574,469 shares of common stock beneficially owned
      by these funds. Ms. Czerepak disclaims beneficial ownership of these
      shares except to the extent of her proportionate pecuniary interest
      therein. See Footnote 16 below. Ms. Czerepak's address is c/o Bear Stearns
      Health Innoventures Management, LLC, 383 Madison Avenue, New York, NY
      10179.


                                       24


(9)   Includes (i) options to purchase 1,923 shares of our common stock
      (representing the portion of an option to purchase a total of 2,759 shares
      of common stock that is currently exercisable or will become exercisable
      within 60 days of this report), and (ii) 2,673 shares of common stock
      issuable upon conversion of Convertible Notes.

(10)  Consists of options to purchase 1,510 shares of common stock (representing
      the portion of an option to purchase a total of 2,759 shares of common
      stock that is currently exercisable or will become exercisable within 60
      days of this report).

(11)  Mr. Camut holds options to purchase 44,172 shares of common stock, which
      vest 25% annually from January 4, 2007.

(12)  Consists of options to purchase 36,764 shares of common stock
      (representing the portion of an option to purchase a total of 52,473
      shares of common stock that is currently exercisable or will become
      exercisable within 60 days of this report) and 814 shares of common stock
      issuable upon conversion of Convertible Notes.

(13)  Consists of options to purchase 11,363 shares of common stock
      (representing the portion of an option to purchase a total of 23,432
      shares of common stock that is currently exercisable or will become
      exercisable within 60 days of this report).

(14)  Includes options to purchase 22,566 (representing the portion of an option
      to purchase a total of 31,068 shares of common stock that is currently
      exercisable or will become exercisable within 60 days of this report).

(15)  Includes options to purchase 14,335 shares of common stock (representing
      the portion of an option to purchase a total of 22,547 shares of common
      stock that is currently exercisable or will become exercisable within 60
      days of this report).

(16)  Consists of 1,320,087 shares of common stock held by Bear Stearns Health
      Innoventures, L.P., Bear Stearns Health Innoventures Offshore, L.P., BX,
      L.P., Bear Stearns Health Innoventures Employee Fund, L.P. and BSHI
      Members, LLC, and 254,106 shares of common stock issuable upon the
      conversion of Convertible Notes in the principal amount of $2,541,079.27.
      Also includes options to purchase 276 shares of our common stock
      (representing the portion of an option to purchase a total of 1,104 shares
      of our common stock that is currently exercisable or will become
      exercisable within 60 days of this report) originally granted to Elizabeth
      Czerepak and assigned by her to these funds. Ms. Czerepak is a managing
      partner of Bear Stearns Health Innoventures Management, LLC, which is the
      sole general partner of Bear Stearns Health Innoventures, L.P., Bear
      Stearns Health Innoventures Offshore, L.P., BX, L.P. and Bear Stearns
      Health Innoventures Employee Fund, L.P., and BSHI Members, LLC co-invests
      with these funds. Elizabeth Czerepak disclaims beneficial ownership of
      these shares except to the extent of her proportionate pecuniary interest
      therein. The address for the Bear Stearns funds is 383 Madison Avenue, New
      York, New York, 10179. See Note (9).

(17)  Consists of 3,489,443 shares of common stock held by MPM BioVentures
      III-QP, L.P., MPM BioVentures III GmbH & Co. Beteiligungs KG, MPM
      BioVentures III, L.P., MPM BioVentures III Parallel Fund, L.P. and MPM
      Asset Management Investors 2004 BVIII LLC, and 470,953 shares of common
      stock issuable upon conversion of Convertible Notes in the principal
      amount of $4,709,553.61. MPM BioVentures III GP, L.P. and MPM BioVentures
      III LLC are the direct and indirect general partners of MPM BioVentures
      III-QP, L.P., MPM BioVentures III GmbH & Co. Beteiligungs KG, MPM
      BioVentures III, L.P. and MPM BioVentures III Parallel Fund, L.P. The
      members of MPM BioVentures III LLC and MPM Asset Management Investors 2004
      BVIII LLC are Luke Evnin, Ansbert Gadicke, Nicholas Galakatos, Dennis
      Henner, Nicholas Simon III, Michael Steinmetz and Kurt Wheeler, who
      disclaim beneficial ownership of these shares except to the extent of
      their proportionate pecuniary interest therein. Dr. St. Peter is
      affiliated with the MPM Funds. The address for the MPM Funds is The John
      Hancock Tower, 200 Clarendon Street, 54th floor, Boston, MA, 02116.

(18)  Consists of 3,317,243 shares of common stock and 181,505 shares of common
      stock issuable upon conversion of Convertible Notes in the principal
      amount of $1,815,056.92. Dr. Cavanaugh is a general partner of HealthCare
      Partners VII, L.P., which is the general partner of HealthCare Ventures
      VII, L.P. In such capacity he may be deemed to share voting and investment
      power with respect to these shares. Dr. Cavanaugh disclaims beneficial
      ownership of these shares except to the extent of his proportionate
      pecuniary interest therein. The address for Healthcare Ventures VII, L.P.
      is 44 Nassau Street, Princeton, New Jersey 08542.

(19)  The address for Nexia Biotechnologies Ltd. is 70 St. George's Crescent,
      Edmonton, Alberta T5N 3M7.

      At the effective time of the Merger, all of the shares of common stock
outstanding prior to the effective date of its IPO (all of which are owned by
our directors and officers) which were placed into escrow with Continental Stock
Transfer & Trust Company, as escrow agent, on July 28, 2005, are now subject to
release. Upon such release from escrow, the certificates representing such
shares currently in escrow may be replaced by certificates representing the
shares of the renamed entity.


                                       25


      During the escrow period, the holders of these shares were not able to
sell or transfer their securities, except to their spouses and children or
trusts established for their benefit, but retained all other rights as our
stockholders, including, without limitation, the right to vote their shares of
common stock and the right to receive cash dividends, if declared. If dividends
were declared and payable in shares of common stock, such dividends would have
also been placed in escrow. If the decision of the Delaware Chancery Court is
reversed on appeal determining that the Merger was not validly consummated and,
as a result, the Company is liquidated, none of HAQ's original stockholders
owning shares of our common stock prior to its IPO will receive any portion of
the liquidation proceeds with respect to common stock owned by them prior to the
date of the IPO.

Directors and Executive Officers

      Information regarding the Company's directors and executive officers is
set forth in the Definitive Proxy Statement, beginning on page 144 and is
incorporated herein by reference.

Executive Compensation

      Information regarding the Company's executive compensation is set forth in
the Definitive Proxy Statement, beginning on page 147 and is incorporated herein
by reference.

Certain Relationships and Related Transactions, and Director Independence

      Information regarding related party transactions and director independence
are described in the Definitive Proxy Statement, on page 151 and is incorporated
herein by reference.

      In addition, on August 2, 2007, prior to the consummation of the Merger,
each of John Pappajohn and Derace Schaffer purchased 100,000 shares of common
stock of HAQ and Matthew Kinley purchased 50,000 shares of common stock of HAQ.
In addition, Healthcare Ventures VII, L.P. and funds affiliated with MPM Capital
L.P. each purchased 125,000 shares of common stock of HAQ. On August 3, 2007,
prior to the consummation of the Merger, each of John Pappajohn and David Wright
purchased 100,000 shares and 50,000 shares, respectively, of common stock of HAQ
and Healthcare Ventures VII, L.P. and funds affiliated with MPM Capital L.P.
each purchased an additional 125,000 shares of common stock of HAQ.

      Also, as previously disclosed, HAQ, its principal stockholders and its
advisors had been contacted by third party investors (collectively, the "New
Investors") indicating to HAQ an interest in making an investment in HAQ through
the purchase of a significant number of shares of common stock in privately
negotiated transactions with existing stockholders of HAQ but required that, in
connection with the purchases, they receive additional shares of HAQ's common
stock from the founding stockholders of HAQ and from certain stockholders of
Former PharmAthene receiving shares of HAQ common stock as a result of the
Merger.

      HAQ's principal stockholders and management team entered into agreements
to provide the New Investors with these additional shares contingent upon the
approval and consummation of the Merger and advised the New Investors that they
were required to obtain the right to vote the shares to be purchased and vote
any shares so purchased in favor of the proposals before the Special Meeting of
Stockholders or obtain from the sellers of such shares a vote in favor of the
proposals. The New Investors purchased, in the aggregate, 2,429,360 shares of
common stock of HAQ. The purchase option agreements entered into by John
Pappajohn, Derace L. Schaffer M.D., Edward B. Berger, Wayne A. Schellhammer and
Matthew Kinley, the founders of HAQ and its executive officers and directors
prior to the Merger (collectively, the "HAQ Insiders"), and the New Investors
granting the New Investors options to acquire up to 1,266,752 shares of HAQ
common stock in the aggregate (which amount subject to reduction pro rata to the
extent that less than 2,800,000 shares of common stock of HAQ was purchased by
the New Investors); since only 2,429,360 shares of common stock were purchased
by the New Investors in the aggregate, 1,099,070 shares are subject to option.
The options were purchased for an aggregate purchase price of $100 and the
exercise price per share is $.0001 per share. The options are not exercisable
until the underlying shares are released from the escrow arrangement with
Continental Stock Transfer & Trust Company to which the HAQ Insiders are subject
which expired upon consummation of the Merger. The HAQ Insiders entered into the
escrow arrangement for all of their pre IPO shares in connection with the
initial public offering by HAQ which was completed on July 28, 2005. The HAQ
Insiders own an aggregate of 2,250,000 shares being held in escrow and own
additional shares purchased pursuant to Rule 10b5-1 plans and purchased in the
transactions described above which are not included in the escrow and were not
sold to the New Investors. The option agreements also provide that neither the
HAQ Insiders nor the New Investors may sell, transfer, pledge, assign or
otherwise dispose of the options or the HAQ shares of common stock underlying
the options while such options are subject to the escrow agreement and while the
options remain exercisable. The options are exercisable commencing upon the date
that the pre IPO shares are released from the escrow agreement and have a term
of one year from such date.


                                       26


      The HAQ Insiders are entitled to certain registration rights for their IPO
Shares, as described in HAQ's prospectus from its IPO and in the Definitive
Proxy Statement. These rights provide that the holders of the majority of these
pre IPO shares will be entitled to require HAQ, on up to two occasions, to
register these shares. The holders of the majority of these shares may elect to
exercise these registration rights at any time after the date on which the
shares of common stock are released from the escrow. In addition, the HAQ
insiders have certain "piggy-back" registration rights on registration
statements filed subsequent to the date on which these shares of common stock
are released from escrow. HAQ will bear the expenses incurred in connection with
the filing of any such registration statements. The New Investors, as assignees
of the HAQ Insiders of the pre IPO Shares, are entitled to these registration
rights.

      Pursuant to an assignment agreement, Healthcare Ventures VII, L.P, funds
affiliated with MPM Capital L.P. and funds affiliated with Bear Stearns Health
Innoventures Management, LLC, all of which were stockholders of Former
PharmAthene, agreed to assign to the New Investors an aggregate of up to 479,252
shares that would otherwise be received by them as part of the Merger. Under the
terms of the Merger Agreement, the number of shares issuable to the stockholders
of Former PharmAthene could be adjusted upward by up to 337,500 shares of HAQ
common stock (the "Adjustment Shares") in the event that stockholders of HAQ
holding in excess of 5% of the IPO shares of HAQ vote against the Merger and
seek to convert their shares. The total number of Adjustment Shares has now been
computed to be 197,844 shares. These stockholders of Former PharmAthene assigned
their right to receive their pro rata portion of these Adjustment Shares (an
aggregate of 300,688 shares) to the New Investors, as well as an additional
217,548 shares issuable to them, in the aggregate, under the Merger Agreement.
The New Investors are entitled, as assignees of these Former PharmAthene
stockholders, to the registration rights being granted to such stockholders
under the terms of the Merger Agreement as described in the Definitive Proxy
Statement. The effectiveness of the assignment is contingent upon, among other
things, the consummation of the Merger. The New Investors entered into lock up
agreements in form substantially similar to that executed by all other Former
PharmAthene stockholders in connection with the Merger.

      HAQ has agreed that if the shares held by the New Investors may not be
sold without registration under the Securities Act of 1933, the Company would
provide registration rights to the New Investors upon substantially the same
terms as provided to the Former PharmAthene stockholders under the terms of the
Merger Agreement.

      Information regarding beneficial ownership of shares of the Company's
common stock by each person known by us to be the owner of more than 5% of our
outstanding shares of the Company's common stock and each director and executive
officer is provided above under the caption Security Ownership of Certain
Beneficial Owners and Management.

Legal Proceedings

      The Company's legal proceedings are described in the Definitive Proxy
Statement, on page 131 and is incorporated herein by reference.

Price Range of Securities and Dividends

      The price range and dividends of the Company's securities are set forth in
the Definitive Proxy Statement, on page 30 and is incorporated herein by
reference.

Description of Securities

      The description of the Company's securities is set forth in the Definitive
Proxy Statement, on page 159 under the caption "Description of Securities." and
is incorporated herein by reference.

Indemnification of Directors and Officers

      A description of the indemnification provisions relating to the Company's
directors and officers is set forth in Part II of the Company's registration
statement on Form S-1, as amended, filed with the SEC on July 27, 2005, under
Item 14 and is incorporated herein by reference.

Financial Statements and Supplementary Data

      Reference is made to the disclosure set forth under Item 9.01 of this
Current Report on Form 8-K concerning the financial statements and supplementary
data of the Company, which is incorporated herein by reference.


                                       27


Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure

      Reference is made to the Current Report on Form 8-K filed September 16,
2007 concerning the termination of the engagement of LWBJ, LLP, as our
independent registered public accountants and engagement of Ernst & Young LLP to
replace LWBJ on September 10, 2007, which is incorporated herein by reference.

Financial Statements and Exhibits

      Reference is made to the disclosure set forth under Item 9.01 of this
Current Report on Form 8-K concerning the financial information of the Company,
which is incorporated herein by reference.

Item 3.02 Unregistered Sales of Equity Securities.

      Reference is made to our disclosure set forth under Item 2.01 of this
Current Report on Form 8-K concerning the Merger Consideration.

Item 3.03 Material Modification to Rights of Security Holders.

Amendment to and the Restatement of the Certificate of Incorporation

      On August 3, 2007, we amended and restated our certificate of
incorporation. The amendment and restatement is described in Proposal 2 of the
Definitive Proxy Statement, on pages 94 through 97, and is incorporated herein
by reference.

      The amended and restated certificate of incorporation is filed as Exhibit
3.1 to this Form 8-K.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
          Appointment of Certain Officers; Compensatory Arrangements of Certain
          Officers.

Departure of Directors or Certain Officers

      On August 3, 2007, John Pappajohn resigned from his position as Secretary,
Derace M. Schaffer, MD, resigned from his position as Vice Chairman and Chief
Executive Officer and Director, Matthew P. Kinley resigned from his positions as
President, Treasurer and Director, Edward Berger resigned from his position as
Director and Wayne Schellhammer resigned from his position as Director. John
Pappajohn will remain Chairman of the Board.

Election of Directors and Appointment of Certain Officers

      At a meeting of the Board of Directors held on August 6, 2007, our Board
of Directors designated David Wright, James H. Cavanaugh, Ph.D., Elizabeth
Czerepak, Steven St. Peter, M.D., Joel McCleary, and John Gill to serve as
Directors. The executive backgrounds of each of such designees is set forth in
the Definitive Proxy Statement beginning on page 144 and is incorporated herein
by reference.

      In addition, the following persons, officers of the former PharmAthene,
were appointed to the executive offices indicated opposite their respective
names:

David P. Wright               President and Chief Executive Officer
Christopher C. Camut          Chief Financial Officer
Valerie Riddle, MD            Vice President, Medical Director
Eric Richman                  Senior Vice President,
                                Business Development and Strategic Planning
Francesca Cook                Vice President, Policy and Government Affairs
Wayne Morges                  Vice President Regulatory Affairs and Quality


                                       28


2007 Long-Term Incentive Plan

      On August 3, 2007, our stockholders approved the Company's 2007 Long Term
Incentive Plan (the "Incentive Plan"). The incentive plan became effective as of
the closing of the Merger. A description of the stock plan is set forth in the
Definitive Proxy Statement, on pages 97 through 103, and is incorporated herein
by reference. Pursuant to the terms of the Merger Agreement, all outstanding
options to purchase common stock of Former PharmAthene, whether vested or
unvested, were assumed by the Company upon the same terms and conditions
existing as to such options except that each such option was converted into an
option to purchase a specified number of shares of common stock of the Company
at a per-share exercise price calculated by dividing the exercise price per
share of the common stock of Former PharmAthene at which each such option was
exercisable prior to the Merger by an agreed-upon exchange ratio as specified in
the Merger Agreement. All of such options, as converted, are assumed under the
Incentive Plan and the Company has reserved for issuance under the Incentive
Plan a sufficient number of shares of common stock of the Company for delivery
upon the exercise of options so assumed.

      In connection with the Merger, the Company entered into an employment
agreement with David P. Wright regarding his employment as President and Chief
Executive Officer of the Company. Pursuant to Mr. Wright's employment agreement,
effective August 3, 2007 upon consummation of the Merger, on August 30, 2007,
the Compensation Committee granted to Mr. Wright a stock option to purchase
780,000 shares of the Company's common stock pursuant to the Incentive Plan at
an exercise price of $5.36, which is equal to the fair market value of a share
of the Company's common stock on the date of the grant as determined in
accordance with applicable law and regulations by the closing price of the
Company's common stock on August 30, 2007 and a restricted stock award of
100,000 shares of the Company's common stock. The option has a term of ten (10)
years and both the option and the restricted stock award, subject to possible
acceleration of vesting, will vest over a 5 year period with 25% vesting on the
first anniversary of the grant date and the remainder vesting monthly on a
pro-rata basis over the succeeding 48 months following the first anniversary
date. A description of Mr. Wright's employment agreement is set forth in the
Definitive Proxy Statement, on page 150 and is incorporated herein by reference.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year.

      Reference is made to our disclosure set forth under Item 3.03 of this
Current Report on Form 8-K concerning the amendment to the Company's Certificate
of Incorporation.

Item 5.06 Change in Shell Company Status.

      Upon the closing of the Merger, the Company ceased to be a shell company.
The material terms of the transaction pursuant to which our wholly-owned
subsidiary merged with and into PharmAthene and PharmAthene became our
wholly-owned subsidiary are described in Proposal 1 of the Definitive Proxy
Statement, on pages 57 through 93, which is incorporated herein by reference.

Item 8.01 Other Events.

      On August 6, 2007, the Company issued a press release with respect to the
completion of its previously announced merger with Former PharmAthene. A copy of
the Company's press release is attached as Exhibit 99.1.

      On August 28, 2007, the Company issued a press release announcing that, in
connection with the previously announced proceedings initiated in Delaware
Chancery Court, the Court determined on August 27, 2007 that the Merger had been
validly approved and authorized in full compliance with the Company's charter
and Delaware corporate law. As is generally the case with decisions of the Court
of Chancery, this decision will be subject to appeal for 30 days in accordance
with Delaware law.

Item 9.01 Financial Statements and Exhibits

(a) Financial Statements of businesses acquired

      The financial statements and selected financial information of the Company
for the years ended December 31, 2006, 2005 and 2004, and for the quarter ended
March 31, 2007 were included in the Definitive Proxy statement in the sections
entitled "Selected Historical Financial Information," and "Index to Financial
Statements" beginning on pages 24 and F-1, respectively, and are incorporated
herein by reference.

      Filed herewith are the unaudited financial statements as of June 30, 2007
and for the three and six month periods ended June 30, 2007 and 2006.


                                       29


(b) Pro forma financial information

      The pro forma financial information of the Company as of June 30, 2007 was
included in the Definitive Proxy statement in the section entitled "Pro Forma
Capitalization of Combined Company" beginning on page 29 and is incorporated
herein by reference.

      Filed herewith in Note 13 of the Notes to Condensed Consolidated Financial
Statements for the quarter ended June 30, 2007 are the pro forma combined
financial statements of the Company as of June 30, 2007.

(d) Exhibits

NO.         DESCRIPTION
- ------      --------------------------------------------------------------------

2.1         Agreement and Plan of Merger dated January 19, 2007 by and among
            Healthcare Acquisition Corp., PAI Acquisition Corp., and
            PharmAthene, Inc. (7)

3.1         Amended and Restated Certificate of Incorporation. (9)

3.2         By-laws. (1)

4.1         Specimen Unit Certificate. (1)

4.2         Specimen Common Stock Certificate. *

4.3         Specimen Warrant Certificate. (1)

4.4         Form of Warrant Agreement between Continental Stock Transfer & Trust
            Company and the Registrant. (3)

4.5         Form of Note Exchange Agreement. (7)

4.6         Form of 8% Convertible Note of Healthcare Acquisition Corp. (7)

4.7         Amendment to Unit Purchase Option. (8)

4.8         Warrant Clarification Agreement. (8)

10.1.1      Letter Agreement among the Registrant, Maxim Group LLC and John
            Pappajohn. (2)

10.1.2      Letter Agreement among the Registrant, Maxim Group LLC and Derace L.
            Schaffer, M.D. (2)

10.1.3      Letter Agreement among the Registrant, Maxim Group LLC and Matthew
            P. Kinley. (2)

10.1.4      Restated Letter Agreement among the Registrant, Maxim Group LLC and
            Edward B. Berger. (3)

10.1.5      Letter Agreement among the Registrant, Maxim Group LLC and Wayne A.
            Schellhammer. (3)

10.2        Form of Investment Management Trust Agreement between Continental
            Stock Transfer & Trust Company and the Registrant. (3)

10.2.1      Amendment No. 1 to of Investment Management Trust Agreement between
            Continental Stock Transfer & Trust Company and the Registrant. (5)

10.3        Form of Stock Escrow Agreement between the Registrant, Continental
            Stock Transfer & Trust Company and the Initial Stockholders. (3)


                                       30


10.4        Form of Registration Rights Agreement among the Registrant and the
            Initial Stockholders. (4)

10.5.1      Office Services Agreement by and between the Registrant and Equity
            Dynamics, Inc. (1)

10.5.2      Office Services Agreement by and between the Registrant and The Lan
            Group. (1)

10.6.1      Promissory Note, dated April 28, 2005, issued to John Pappajohn, in
            the amount of $70,000. (1)

10.6.2      Promissory Note, dated April 28, 2005, issued to Derace L. Schaffer,
            M.D., in the amount of $70,000. (1)

10.6.3      Promissory Note, dated April 28, 2005, issued to Matthew P. Kinley,
            in the amount of $35,000. (1)

10.6.4      Promissory Note, dated July 26, 2005, issued to John Pappajohn, in
            the amount of $30,000. (4)

10.6.5      Promissory Note, dated July 26, 2005, issued to Derace L. Schaffer,
            M.D., in the amount of $30,000. (4)

10.6.6      Promissory Note, dated July 26, 2005, issued to Matthew P. Kinley,
            in the amount of $15,000. (4)

10.7        Form of Unit Option Purchase Agreement between the Registrant and
            Maxim Group LLC. (3)

10.8        Form of Warrant Purchase Agreement by and between the Registrant,
            John Pappajohn and Maxim Group LLC. (2)

10.9        Form of Registration Rights Agreement to be entered into by
            Healthcare Acquisition Corp. and the former stockholders and note
            holders of PharmAthene, Inc. (7)

10.10       Stock Escrow Agreement, dated August 3, 2007, by and among the
            Registrant, a representative of the former stockholders and option
            holders of PharmAthene, Inc. and Continental Stock Transfer and
            Trust Company. (9)

10.11       Advisory Agreement. (8)

10.12       2007 Long-Term Incentive Compensation Plan. (9)

10.13       Employment Agreement, dated August 3, 2007, between the Registrant
            and David P. Wright. (9)

10.14       Employment Agreement, dated December 22, 2006, between the
            Registrant and Christopher C. Camut. *

10.15       Employment Agreement, dated November 3, 2003, between the Registrant
            and Francesca Marie Cook. *

10.16       Employment Agreement, dated November 3, 2003, between the Registrant
            and Eric Ian Richman. *

10.17       Employment Agreement, dated November 3, 2003, between the Registrant
            and Valerie Riddle. *

10.18       Employment Agreement, dated September 30, 2005, between the
            Registrant and Wayne Morges. *

10.19       Loan and Security Agreement, dated March 30, 2007, by and among the
            Company, Silicon Valley Bank, Oxford Finance Corporation, and other
            lenders listed on Schedule 1.1 thereof. *

10.20       U.S. Army Space & Missile Defense Command - "Development and
            Licensure of Bioscavanger Increment II (Recombinant Drug Candidate)"
            Award/Contract No. W9113M-06-C-0189, dated September 22, 2006, by
            and between the Company and the U.S. Army Space & Missile Defense
            Command. *+


                                       31


10.21       Cooperative Research and Development Agreement, dated September 12,
            2006, by and between the Company and the U.S. Army Medical Research
            Institute of Infectious Diseases. *+

10.22       Center for Scientific Review, National Institute of Health, Research
            Project Cooperative Agreement, Notice of Grant Award No. 1 U01
            NS058207-01, dated September 30, 2006, awarded to the Company. *+

10.23       Collaboration Agreement, dated November 29, 2004, by and between the
            Company and Medarex, Inc. *+

10.24       License Agreement, dated August 8, 2006, by and between the Company
            and Nektar Therapeutics AL, Corporation. *+

10.25       Services Agreement, dated March 2, 2007, by and between the Company
            and GTC Biotherapeutics, Inc. *+

10.26       License Agreement, dated March 12, 2007, by and between the Company
            and GTC Biotherapeutics, Inc. *+

10.27       Biopharmaceutical Development and Manufacturing Services Agreement,
            dated June 15, 2007, by and between the Company and Laureate Pharma,
            Inc. *+

10.28       Office Lease, dated September 14, 2006, by and between the Company
            and Park Place Trust, as amended by First Amendment to Office Lease,
            dated January 22, 2007. *+

14          Code of Ethics. (3)

21          Subsidiaries. (9)

99.1        Press Release, dated August 6, 2007, announcing the consummation of
            the merger. (9)

            1.    Incorporated by reference to the Registration Statement on
                  Form S-1 of the Registrant filed on May 6, 2005.

            2.    Incorporated by reference to the Registration Statement on
                  Form S-1/A of the Registrant filed on June 10, 2005.

            3.    Incorporated by reference to the Registration Statement on
                  Form S-1/A of the Registrant filed on July 12, 2005.

            4.    Incorporated by reference to the Registration Statement on
                  Form S-1/A of the Registrant filed on July 27, 2005.

            5.    Incorporated by reference to the Quarterly Report on Form 10-Q
                  filed by the Registrant on November 14, 2005.

            6.    Incorporated by reference to the Annual Report on Form 10-K
                  filed by the Registrant on March 31, 2006.

            7.    Incorporated by reference to the Current Report on Form 8-K
                  filed by the Registrant on January 22, 2007.

            8.    Incorporated by reference to the Current Report on Form 8-K
                  filed by the Registrant on January 25, 2007.

            9.    Incorporated by reference to the Current Report on Form 8-K
                  filed by the Registrant on August 9, 2007.

*     filed herewith

+     Certain confidential portions of this exhibit have been omitted and filed
      separately with the Securities and Exchange Commission pursuant to a
      request for confidential treatment under Rule 24b-2 of the Securities
      Exchange Act of 1934.


                                       32


                                   SIGNATURES

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

                                           PHARMATHENE, INC.
                                           (registrant)


September 24, 2007                     By: /s/ David Wright
                                           -------------------------------------
                                           David Wright
                                           President and Chief Executive Officer


                                       33


                                  Exhibit Index

NO.         DESCRIPTION
- ------      --------------------------------------------------------------------

2.1         Agreement and Plan of Merger dated January 19, 2007 by and among
            Healthcare Acquisition Corp., PAI Acquisition Corp., and
            PharmAthene, Inc. (7)

3.1         Amended and Restated Certificate of Incorporation. (9)

3.2         By-laws. (1)

4.1         Specimen Unit Certificate. (1)

4.2         Specimen Common Stock Certificate. *

4.3         Specimen Warrant Certificate. (1)

4.4         Form of Warrant Agreement between Continental Stock Transfer & Trust
            Company and the Registrant. (3)

4.5         Form of Note Exchange Agreement. (7)

4.6         Form of 8% Convertible Note of Healthcare Acquisition Corp. (7)

4.7         Amendment to Unit Purchase Option. (8)

4.8         Warrant Clarification Agreement. (8)

10.1.1      Letter Agreement among the Registrant, Maxim Group LLC and John
            Pappajohn. (2)

10.1.2      Letter Agreement among the Registrant, Maxim Group LLC and Derace L.
            Schaffer, M.D. (2)

10.1.3      Letter Agreement among the Registrant, Maxim Group LLC and Matthew
            P. Kinley. (2)

10.1.4      Restated Letter Agreement among the Registrant, Maxim Group LLC and
            Edward B. Berger. (3)

10.1.5      Letter Agreement among the Registrant, Maxim Group LLC and Wayne A.
            Schellhammer. (3)

10.2        Form of Investment Management Trust Agreement between Continental
            Stock Transfer & Trust Company and the Registrant. (3)

10.2.1      Amendment No. 1 to of Investment Management Trust Agreement between
            Continental Stock Transfer & Trust Company and the Registrant. (5)

10.3        Form of Stock Escrow Agreement between the Registrant, Continental
            Stock Transfer & Trust Company and the Initial Stockholders. (3)

10.4        Form of Registration Rights Agreement among the Registrant and the
            Initial Stockholders. (4)

10.5.1      Office Services Agreement by and between the Registrant and Equity
            Dynamics, Inc. (1)

10.5.2      Office Services Agreement by and between the Registrant and The Lan
            Group. (1)


                                       34


10.6.1      Promissory Note, dated April 28, 2005, issued to John Pappajohn, in
            the amount of $70,000. (1)

10.6.2      Promissory Note, dated April 28, 2005, issued to Derace L. Schaffer,
            M.D., in the amount of $70,000. (1)

10.6.3      Promissory Note, dated April 28, 2005, issued to Matthew P. Kinley,
            in the amount of $35,000. (1)

10.6.4      Promissory Note, dated July 26, 2005, issued to John Pappajohn, in
            the amount of $30,000. (4)

10.6.5      Promissory Note, dated July 26, 2005, issued to Derace L. Schaffer,
            M.D., in the amount of $30,000. (4)

10.6.6      Promissory Note, dated July 26, 2005, issued to Matthew P. Kinley,
            in the amount of $15,000. (4)

10.7        Form of Unit Option Purchase Agreement between the Registrant and
            Maxim Group LLC. (3)

10.8        Form of Warrant Purchase Agreement by and between the Registrant,
            John Pappajohn and Maxim Group LLC. (2)

10.9        Form of Registration Rights Agreement to be entered into by
            Healthcare Acquisition Corp. and the former stockholders and note
            holders of PharmAthene, Inc. (7)

10.10       Stock Escrow Agreement, dated August 3, 2007, by and among the
            Registrant, a representative of the former stockholders and option
            holders of PharmAthene, Inc. and Continental Stock Transfer and
            Trust Company. (9)

10.11       Advisory Agreement. (8)

10.12       2007 Long-Term Incentive Compensation Plan. (9)

10.13       Employment Agreement, dated August 3, 2007, between the Registrant
            and David P. Wright. (9)

10.14       Employment Agreement, dated December 22, 2006, between the
            Registrant and Christopher C. Camut. *

10.15       Employment Agreement, dated November 3, 2003, between the Registrant
            and Francesca Marie Cook. *

10.16       Employment Agreement, dated November 3, 2003, between the Registrant
            and Eric Ian Richman. *

10.17       Employment Agreement, dated November 3, 2003, between the Registrant
            and Valerie Riddle. *

10.18       Employment Agreement, dated September 30, 2005, between the
            Registrant and Wayne Morges. *

10.19       Loan and Security Agreement, dated March 30, 2007, by and among the
            Company, Silicon Valley Bank, Oxford Finance Corporation, and other
            lenders listed on Schedule 1.1 thereof. *

10.20       U.S. Army Space & Missile Defense Command - "Development and
            Licensure of Bioscavanger Increment II (Recombinant Drug Candidate)"
            Award/Contract No. W9113M-06-C-0189, dated September 22, 2006, by
            and between the Company and the U.S. Army Space & Missile Defense
            Command. *+

10.21       Cooperative Research and Development Agreement, dated September 12,
            2006, by and between the Company and the U.S. Army Medical Research
            Institute of Infectious Diseases. *+

10.22       Center for Scientific Review, National Institute of Health, Research
            Project Cooperative Agreement, Notice of Grant Award No. 1 U01
            NS058207-01, dated September 30, 2006, awarded to the Company. *+


                                       35


10.23       Collaboration Agreement, dated November 29, 2004, by and between the
            Company and Medarex, Inc. *+

10.24       License Agreement, dated August 8, 2006, by and between the Company
            and Nektar Therapeutics AL, Corporation. *+

10.25       Services Agreement, dated March 2, 2007, by and between the Company
            and GTC Biotherapeutics, Inc. *+

10.26       License Agreement, dated March 12, 2007, by and between the Company
            and GTC Biotherapeutics, Inc. *+

10.27       Biopharmaceutical Development and Manufacturing Services Agreement,
            dated June 15, 2007, by and between the Company and Laureate Pharma,
            Inc. *+

10.28       Office Lease, dated September 14, 2006, by and between the Company
            and Park Place Trust, as amended by First Amendment to Office Lease,
            dated January 22, 2007. *+

14          Code of Ethics. (3)

21          Subsidiaries. (9)

99.1        Press Release, dated August 6, 2007, announcing the consummation of
            the merger. (9)

            1.    Incorporated by reference to the Registration Statement on
                  Form S-1 of the Registrant filed on May 6, 2005.

            2.    Incorporated by reference to the Registration Statement on
                  Form S-1/A of the Registrant filed on June 10, 2005.

            3.    Incorporated by reference to the Registration Statement on
                  Form S-1/A of the Registrant filed on July 12, 2005.

            4.    Incorporated by reference to the Registration Statement on
                  Form S-1/A of the Registrant filed on July 27, 2005.

            5.    Incorporated by reference to the Quarterly Report on Form 10-Q
                  filed by the Registrant on November 14, 2005.

            6.    Incorporated by reference to the Annual Report on Form 10-K
                  filed by the Registrant on March 31, 2006.

            7.    Incorporated by reference to the Current Report on Form 8-K
                  filed by the Registrant on January 22, 2007.

            8.    Incorporated by reference to the Current Report on Form 8-K
                  filed by the Registrant on January 25, 2007.

            9.    Incorporated by reference to the Current Report on Form 8-K
                  filed by the Registrant on August 9, 2007.

*     filed herewith

+     Certain confidential portions of this exhibit have been omitted and filed
      separately with the Securities and Exchange Commission pursuant to a
      request for confidential treatment under Rule 24b-2 of the Securities
      Exchange Act of 1934.


                                       36


                                PharmAthene, Inc.

         Index to Consolidated Financial Statements as of June 30, 2007

                                                                            Page
                                                                            ----
Consolidated Balance Sheets                                                 F-1
Consolidated Statements of Operations                                       F-2
Consolidated Statements of Cash Flows                                       F-3
Notes to Consolidated Financial Statements                                  F-4


                                        i


                           Consolidated Balance Sheets



                                                                                                       June 30,        December 31
                                                                                                         2007             2006
                                                                                                     -----------------------------
Assets                                                                                                (Unaudited)
                                                                                                                
Current assets:
   Cash and cash equivalents                                                                         $  7,061,358     $  5,112,212
   Accounts receivable                                                                                  2,542,453        1,455,538
   Prepaid expenses                                                                                       270,486          877,621
   Other current assets                                                                                   146,972          104,772
                                                                                                     -----------------------------
Total current assets                                                                                   10,021,269        7,550,143

Property and equipment, net                                                                             5,998,669        5,230,212
Patents, net                                                                                            1,299,034        1,246,236
Other long term assets                                                                                    214,187          153,336
Deferred costs                                                                                          1,877,185          587,577
                                                                                                     -----------------------------
Total assets                                                                                         $ 19,410,344     $ 14,767,504
                                                                                                     =============================
Liabilities, convertible redeemable preferred stock, and stockholders' deficit
Current liabilities:
   Accounts payable                                                                                  $    736,777     $    839,120
   Accrued expenses and other liabilities                                                               3,587,031        1,587,017
   Notes payable                                                                                       11,768,089       11,768,089
   Current portion of long term debt                                                                    2,000,000               --
                                                                                                     -----------------------------
Total current liabilities                                                                              18,091,897       14,194,226

Warrants to purchase Series C convertible redeemable preferred stock                                    2,631,511        2,423,370
Long term debt                                                                                          7,797,576               --
                                                                                                     -----------------------------
Total liabilities                                                                                      28,520,984       16,617,596

Minority interest - Series C convertible redeemable preferred stock of
  PharmAthene Canada, Inc., $0.001 par value; unlimited shares authorized;
  2,591,654 issued and outstanding; liquidation
  preference in the aggregate of $2,719,178                                                             2,704,022        2,545,785

Series A convertible redeemable preferred stock, $0.001 par value; 16,442,000 shares authorized,
  issued and outstanding; liquidation preference in the aggregate of $19,355,388                       19,964,317       19,130,916
Series B convertible redeemable preferred stock, $0.001 par value; 65,768,001 shares authorized;
  30,448,147 issued and outstanding; liquidation preference in the aggregate of $33,010,797            33,313,524       31,780,064
Series C convertible redeemable preferred stock, $0.001 par value; 22,799,574 shares authorized;
  14,946,479 issued and outstanding; liquidation preference in the aggregate of $15,681,930            15,436,384       14,480,946
Stockholders' deficit:
   Common stock, $0.001 par value; 147,089,104 shares authorized; 12,484,722 at June 30, 2007 and
     12,483,472 at December 31, 2006 shares issued and outstanding                                         12,485           12,483
   Additional paid-in capital                                                                                  --               --
   Accumulated other comprehensive income                                                                 791,888           63,954
   Accumulated deficit                                                                                (81,333,260)     (69,864,240)
                                                                                                     -----------------------------
Total stockholders' deficit                                                                           (80,528,887)     (69,787,803)
                                                                                                     -----------------------------
Total liabilities, convertible redeemable preferred stock, and stockholders' deficit                 $ 19,410,344     $ 14,767,504
                                                                                                     =============================


      See accompanying notes


                                      F-1


                                PharmAthene, Inc.

                      Consolidated Statements of Operations

                                   (Unaudited)



                                                                             Three Months                       Six Months
                                                                            Ended June 30,                    Ended June 30,
                                                                    ---------------------------------------------------------------
                                                                        2007             2006             2007             2006
                                                                    ---------------------------------------------------------------
                                                                                                           
Contract and grant revenue                                          $  2,339,427     $         --     $  5,301,186     $    178,701
Other revenue                                                                 --               --            7,000            7,741
                                                                    ---------------------------------------------------------------
                                                                       2,339,427               --        5,308,186          186,442
Operating expenses:
   Research and development                                            3,995,359        1,383,921        7,086,963        3,165,960
   General and administrative                                          2,974,426        1,460,029        5,454,251        2,948,171
   Depreciation and amortization                                         162,160          118,827          309,293          255,163
                                                                    ---------------------------------------------------------------
Total operating expenses                                               7,131,945        2,962,777       12,850,507        6,369,294

Loss from operations                                                  (4,792,518)      (2,962,777)      (7,542,321)      (6,182,852)

Other income (expense):
   Interest income                                                        93,597           34,468          149,213          106,726
   Interest expense                                                     (529,492)              (8)        (771,273)             (69)
   Change in market value of derivative instruments                      (14,455)         (11,430)          (6,829)        (365,264)
                                                                    ---------------------------------------------------------------
Total other income (expense)                                            (450,350)          23,030         (628,889)        (258,607)
                                                                    ---------------------------------------------------------------

Net loss                                                              (5,242,868)      (2,939,746)      (8,171,210)      (6,441,459)

Accretion of redeemable convertible preferred
  stock to redemptive value                                           (1,748,261)      (1,643,708)      (3,480,536)      (3,272,579)
                                                                    ---------------------------------------------------------------
Net loss attributable to common shareholders                        $ (6,991,129)    $ (4,583,454)    $(11,651,746)    $ (9,714,038)
                                                                    ===============================================================

Basic and diluted net loss per share                                $      (0.56)    $      (0.42)    $      (0.93)    $      (0.89)
                                                                    ===============================================================

Weighted average shares used in calculation of basic and diluted
  net loss per share                                                  12,484,722       10,942,906       12,484,273       10,942,906
                                                                    ===============================================================


      See accompanying notes.


                                      F-2


                                PharmAthene, Inc.

                      Consolidated Statements of Cash Flows

                                   (Unaudited)



                                                                                 Six months ended June 30,
                                                                                   2007             2006
                                                                               -----------------------------
                                                                                          

Operating activities
Net loss                                                                       $ (8,171,210)    $ (6,441,459)
Adjustments to reconcile net loss to net cash used in operating activities:
   Change in market value of derivative instruments                                   5,717          365,264
   Depreciation and amortization                                                    309,293          255,163
   Compensatory option expense                                                      181,477          177,919
   Changes in operating assets and liabilities:
      Accounts receivable                                                        (1,017,290)         (94,831)
      Prepaid expenses and other current assets                                     545,594         (215,348)
      Other assets                                                                  (60,850)              --
      Accounts payable                                                              (76,489)          98,724
      Accrued expenses                                                            1,965,589         (118,707)
                                                                               -----------------------------
Net cash used in operating activities                                            (6,318,169)      (5,973,275)

Investing activities

Purchase of property and equipment                                                 (491,434)        (424,777)
Issuance of note receivable                                                              --       (3,000,000)
                                                                               -----------------------------
Net cash used in investing activities                                              (491,434)      (3,424,777)

Financing activities

Proceeds from stock options exercised                                                 1,250               --
Proceeds from issuance of note payable                                                   --        9,735,414
Proceeds from bank loan                                                          10,000,000               --
Financing costs                                                                  (1,289,608)              --
                                                                               -----------------------------
Net cash provided by financing activities                                         8,711,642        9,735,414

Effects of exchange rates on cash                                                    47,107           55,357
                                                                               -----------------------------

(Decrease) increase in cash and cash equivalents                                  1,949,146          392,719
Cash and cash equivalents, at beginning of year                                   5,112,212        7,938,116
                                                                               -----------------------------
Cash and cash equivalents, at end of year                                      $  7,061,358     $  8,330,835
                                                                               =============================


      See accompanying notes.


                                      F-3


                                PharmAthene, Inc.

              Notes to Condensed Consolidated Financial Statements

                                  June 30, 2007

1. Business Operations

      PharmAthene, Inc. (the "Company") was incorporated on March 13, 2001
(inception), under the laws of the State of Delaware. The Company is a
biopharmaceutical company focused on developing anti-infectives for biodefense
applications. The Company has generated an accumulated deficit of $81,333,260
since inception. The Company anticipates incurring additional losses until such
time, if ever, as it can generate significant sales of its products currently in
development. Substantial additional financing will be needed by the Company to
fund its operations and to commercially develop its products. There is no
assurance that such financing will be available when needed.

      The Company is subject to those risks associated with any
biopharmaceutical company that has substantial expenditures for research and
development. There can be no assurance that the Company's research and
development projects will be successful, that products developed will obtain
necessary regulatory approval, or that any approved product will be commercially
viable. In addition, the Company operates in an environment of rapid
technological change and is largely dependent on the services of its employees
and consultants.

      The Company has incurred cumulative net losses and expects to incur
additional losses to perform further research and development activities. The
Company does not have commercial products and has limited capital resources.
Management's plans with regard to these matters included continued development
of its products as well as seeking additional research support funds and
financial arrangements. Although, management continues to pursue these plans,
there is no assurance that the Company will be successful in obtaining
sufficient financing on commercial reasonable terms or that the Company will be
able to secure financing from anticipated government contracts and grants.

2. Summary of Significant Accounting Policies

      Basis of Presentation

      The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles in the
United States.

      It is the opinion of management, that the unaudited interim financial
statements reflect all adjustments, which include all normal recurring
adjustments necessary to fairly present the Company's consolidated financial
position at June 30, 2007, and its consolidated results of operations and cash
flows for the three and six months ended June 30, 2007 and 2006, in conformity
with accounting principles generally accepted in the United States. Accounting
measurements at interim dates inherently involve greater reliance on estimates
than at year-end. The results of operations for the quarterly and six month
periods ended June 30, 2007 are not necessarily indicative of results that can
be expected for the fiscal year ending December 31, 2007. These financial
statements should be read in conjunction with the company's audited financial
statements as of December 31, 2006 and 2005, and for each of the three years in
the period ended December 31, 2006 that are included in the Definitive Proxy
Statement that was filed by Healthcare Acquisition Corp on July 16, 2007.

      The accompanying financial statements do not give effect to the merger of
the Company and Healthcare Acquisition Corp.

Principles of Consolidation

      The consolidated financial statements include the accounts of the Company
and its subsidiary, PharmAthene Canada, Inc., which was formed in March of 2005.
All significant intercompany transactions and balances have been eliminated.

      The FASB has issued Financial Accounting Standards Board Interpretation
(FIN) No. 46 (revised December 2003), Consolidation of Variable Interest
Entities, (FIN 46R). FIN 46R expands consolidated financial statements to
include certain variable interest entities (VIEs). VIEs are to be consolidated
by the company which is considered to be the primary beneficiary of that entity,
even if the company does not have majority control. FIN 46R is immediately
effective for VIEs created after January 31, 2003, and is effective for the
Company in 2005 for VIEs created prior to February 1, 2003. The Company's
subsidiary, PharmAthene Canada, Inc., is a VIE and the Company is the primary
beneficiary.

      Therefore, the Company has consolidated PharmAthene Canada, Inc. as of its
date of inception.


                                      F-4


2. Summary of Significant Accounting Policies (continued)

Use of Estimates

      The preparation of financial statements in conformity with generally
accepted accounting principles in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

Comprehensive Loss

      The Company reports comprehensive income (loss) in accordance with the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 130,
Reporting Comprehensive Income. Comprehensive income (loss) includes all changes
in equity for cumulative translation adjustments resulting from the
consolidation of foreign subsidiaries as the financial statements of the
subsidiary located outside of the United States are measured using the local
currency as the functional currency. Assets and liabilities of these
subsidiaries are translated at the rates of exchange at the balance sheet date.
The resultant translation adjustments are included in accumulated other
comprehensive income (loss), a separate component of stockholders' equity.
Comprehensive loss for each of the three month periods ended June 30, 2007 and
2006 was approximately $4,569,752 and $2,690,486, respectively. Comprehensive
loss for each of the six month periods ended June 30, 2007 and 2006 was
approximately $7,443,275 and $6,204,095, respectively.

Cash and Cash Equivalents

      The Company considers all highly liquid investments with maturities of
three months or less when purchased to be cash equivalents. Cash and cash
equivalents, which consist of a short-term money market account with a bank, are
stated at cost, which approximates market value.

Accounts Receivable

      Through its inception to date, substantially all of PharmAthene's accounts
receivable have been associated with U.S. government contracts and grants or
with the receipt of Quebec provincial or Canadian Federal credits for internally
and externally generated research and development expenditures. Amounts invoiced
or recorded as billed under these programs but not yet collected are reported as
outstanding accounts receivable.

      While the Company has a policy to provide an allowance for any amount of
accounts receivable which it determines to be uncollectible and the Company will
write off any uncollectible account when the likelihood of that account's
collection is determined to be not probable, the Company has not historically
found it necessary to record any write-offs of accounts receivable or to record
an allowance for uncollectible accounts. At June 30, 2007, the Company's
accounts receivable balance included approximately $1.7 million, including
unbilled receivables of approximately $860,000, related to U.S government
contracts. The remaining receivables balance resulted from Quebec provincial or
Canadian Federal credits for internally and externally generated research and
development expenditures.

Property and Equipment

      Property and equipment consist of land, building and leasehold
improvements, laboratory, computer, farm and office equipment and furniture and
are recorded at cost. Property and equipment are depreciated using the
straight-line method over the estimated useful lives of the respective assets as
follows:

                                                           Estimated Useful Life
                         Asset Category                         ( in years)
- --------------------------------------------------------------------------------

Building and leasehold improvements                                 4 - 20
Laboratory equipment                                                     7
Furniture, farm and office equipment                                 5 - 7
Computer equipment                                                       3


                                      F-5


2. Summary of Significant Accounting Policies (continued)

Intangible Assets

      Intangible assets consist of patents and are being amortized using the
straight-line method over an 11 year period. The intangible assets are reviewed
for impairment when circumstances indicate that the carrying amount of an asset
may not be recoverable. Impairment is considered to have occurred if expected
future undiscounted cash flows are insufficient to recover the carrying value of
the asset. If impaired, the asset's carrying value is reduced to fair value.

Impairment of Long-Lived Assets

      In accordance with Statement of Financial Accounting Standards No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived
assets such as property, plant, and equipment, and purchased intangibles subject
to amortization, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to estimated undiscounted future
cash flows expected to be generated by the asset. If the carrying amount of an
asset exceeds its estimated future cash flows, then an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the asset. Assets to be disposed of would be separately presented
in the balance sheets and reported at the lower of the carrying amount or fair
value, less costs to sell, and are no longer depreciated. The assets and
liabilities of a disposed group classified as held-for-sale would be presented
separately in the appropriate asset and liability sections of the balance
sheets. As of June 30, 2007, management believes that no revision of the
remaining useful lives or write-down of long-lived assets is required.

Revenue Recognition

Grant Revenue

      Revenues to date have been generated under grants and, accordingly, the
Company recognizes revenue in accordance with the SEC's Staff Accounting
Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements, as amended
by SAB No. 104, Revenue Recognition, and Emerging Issues Task Force (EITF) No.
00-21, Revenue Arrangements with Multiple Deliverables. Specifically, the
Company recognizes revenue when all terms and conditions of the agreements have
been met including persuasive evidence of an arrangement, services have been
rendered, price is fixed or determinable, and collectibility is reasonably
assured. For reimbursable cost research grants, the Company recognizes revenue
as costs are incurred and appropriate regulatory approvals have been obtained or
approval criteria are met for invoicing the related government agency.

      In September 2006, the Company was awarded a multi-year cost reimbursement
contract valued at up to $213 million from the Department of Defense Army Space
and Missile Command for advanced development of the Company's broad spectrum
chemical nerve agent prophylaxis, Protexia(R). The Department of Defense has
allocated $34.7 million for the initial stage of development, including
manufacturing process development, preclinical and toxicity testing activities,
of this contract. The Company recognized $2.3 million and $5.2 million of
revenue on this contract for the three and six month periods ended June 30,
2007.

Research and Development

      Research and development costs include salaries, facilities expense,
overhead expenses, material and supplies, pre-clinical expense, clinical trials
and related clinical manufacturing expenses, stock based compensation expense,
contract services and other outside services. Such costs are charged to expense
as incurred.

Stock Compensation

      On January 1, 2006, the Company adopted the fair value recognition
provisions of statement of Financial Accounting Standards No. 123 (Revised
2004), Share-Based Payment ("SFAS No. 123R") using the modified prospective
method to record compensation expense for all share-based payments to employees,
including grants of employee stock options. The fair value of each option grant
is estimated on the date of grant using the Black-Scholes option-pricing model
based on the selected inputs. Option valuation models, including the
Black-Scholes option-pricing model, require the input of subjective assumptions,
and changes in the assumptions could materially affect the grant date value of
the award. These assumptions include the risk-free rate of interest, expected
dividend yield, expected volatility and the expected life of the award. The
resulting compensation expense is recognized ratably over the requisite service
period, the "vesting period", that an employee must provide to earn the award.


                                      F-6


      Employee share-based compensation expense recognized in the three and six
months ended June 30, 2007 and 2006 was calculated based on awards ultimately
expected to vest and has been reduced for estimated forfeitures at a rate of
11.9 percent, based on the Company's historical option cancellations. SFAS No.
123R requires forfeitures to be estimated at the time of grant and revised, if

2. Summary of Significant Accounting Policies (continued)

Stock Compensation (continued)

necessary, in subsequent periods if actual forfeitures differ from those
estimates.

      Share-based compensation expense recognized under SFAS No. 123R for the
three and six months ended June 30, 2007 and 2006 was:



                                                                    Three Months             Six Months
                                                                   Ended June 30,          Ended June 30,
                                                                --------------------    --------------------
                                                                  2007        2006        2007        2006
                                                                --------    --------    --------    --------
                                                                                        
Research and development                                        $ 33,627    $ 30,699    $ 64,172    $ 62,248
- ------------------------------------------------------------    --------    --------    --------    --------
General and administrative                                        57,090      62,382     117,305     115,671
- ------------------------------------------------------------    --------    --------    --------    --------
Total share-based compensation expense                          $ 90,717    $ 93,081    $181,477    $177,919
- ------------------------------------------------------------    --------    --------    --------    --------


      The fair value for the 2007 and 2006 awards were estimated at the date of
grant using the Black-Scholes option-pricing model using the following
assumptions:

                                                            Three and Six Months
                                                               Ended June 30,
                                                             2007          2006
                                                            --------------------

Weighted average volatility                                  72.0%         72.0%
Risk-free interest rate                                      4.89%         5.13%
Expected annual dividend yield                                 --            --
Expected weighted average life, in years                      9.8           9.7

The valuation assumptions were determined as follows:

      o     Weighted average volatility: We determine the expected volatility by
            using an average historical volatility from comparable public
            companies with an expected term consistent with ours.

      o     Risk-free interest rater: The yield on zero-coupon US Treasury
            securities for a period that is commensurate with the expected term
            of the award.

      o     Expected annual dividend yield: The estimate for annual dividends is
            zero because we have not historically paid a dividend and do not
            intend to do so in the foreseeable future.

      o     Expected life: The expected term of the awards represents the period
            of time that the awards are expected to be outstanding. We use
            historical data and expectations for future to estimate employee
            exercise and post-vest termination behavior and therefore do not
            stratify employees into multiple groups.

Basic and Diluted Net Loss Per Share

      The Company applies Statement of Financial Accounting Standards No. 128,
Earnings per Share, which establishes standards for computing and presenting
earnings per share. Basic net loss per share of common stock excludes dilution
for potential common stock issuances and is computed by dividing net loss by the
weighted-average number of shares outstanding for the period. Diluted net loss
per share reflects the potential dilution that could occur if securities were
exercised into common stock. However, for all periods presented, diluted net
loss per share is the same as basic net loss attributable to common shareholders
per share as the inclusion of weighted average shares of common stock issuable
upon the exercise of stock options and warrants would be anti-dilutive.
Securities outstanding in the amount of 106,473,800 and 106,718,900 shares for
the three months and six months ended June 30, 2007 and 2006, respectively, were
excluded from the calculation of diluted net loss per share since their
inclusion would be anti-dilutive.


                                      F-7


2. Summary of Significant Accounting Policies (continued)

Basic and Diluted Net Loss Per Share (continued)

      The following table provides a reconciliation of the numerators and
denominators used in computing basic and diluted net loss per share:



                                                                       Three months ended                 Six months ended
                                                                            June 30,                          June 30,
                                                                      2007             2006             2007             2006
                                                                  ---------------------------------------------------------------
                                                                                                         

Numerator:
   Net loss                                                       $ (5,242,868)    $ (2,939,746)    $ (8,171,210)    $ (6,441,459)

   Dividends on and accretion of convertible preferred stock        (1,748,261)      (1,643,708)      (3,480,536)      (3,272,579)
                                                                  ---------------------------------------------------------------
Net loss available to common stockholders                         $ (6,991,129)    $ (4,583,454)    $(11,651,746)    $ (9,714,038)
                                                                  ===============================================================
Denominator:
   Weighted-average shares of common stock outstanding - basic
     and diluted                                                  $ 12,484,722     $ 10,942,906     $ 12,484,273     $ 10,942,906


Income Taxes

      The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes ("SFAS
109"), which requires that deferred tax assets and liabilities be recognized
using enacted tax rates for the effect of temporary differences between the book
and tax bases of recorded assets and liabilities. SFAS 109 also requires that
deferred tax assets be reduced by a valuation allowance if it is more likely
than not that some portion of the deferred tax asset will not be realized. In
evaluating the need for a valuation allowance, the Company takes into account
various factors, including the expected level of future taxable income and
available tax planning strategies. If actual results differ from the assumptions
made in the evaluation of the Company's valuation allowance, the Company records
a change in valuation allowance through income tax expense in the period such
determination is made.

      The Company adopted the provisions of Financials Accounting Standards
Board ("FASB") Interpretation No. 48, Accounting for Uncertainty in Income
Taxes- and Interpretation of FASB Statement No. 109 ("FIN 48") on January 1,
2007. No adjustments were required to financial statements amounts as a result
of adopting FIN 48. As of December 31, 2006, the Company had recognized a
valuation allowance to the full extent of its deferred tax assets since the
likelihood of realization of the benefit cannot be determined. The Company
believes that any of its uncertain tax positions would not result in adjustments
to its effective income tax rate because likely corresponding adjustments to
deferred tax assets would be offset by adjustments to recorded valuation
allowances. We file a U.S. federal income tax return as well as returns for
various state and foreign jurisdictions. The Company's income taxes have not
been examined by any tax jurisdiction since its inception. Accordingly, all
income tax returns filed the by the Company are subject to examination by taxing
jurisdictions.

      The Company policy is to recognize interest and penalties accrued on any
unrecognized tax benefits as a component of tax expense. As of the date of
adoption of FIN 48, we did not have interest or penalties accrued for any
unrecognized tax benefits and there was no significant interest expense
recognized during the current year.

Fair Value of Financial Instruments

      The Company's financial instruments include primarily cash and cash
equivalents, accounts receivable and other current assets, accounts payable,
accrued and other liabilities, and long-term debt. Due to the short-term nature
of the cash and cash equivalents, accounts receivable and other current assets,
accounts payable and accrued and other liabilities, the carrying amounts of
these assets and liabilities approximate their fair value. The fair value of the
Company's long term debt approximates fair value, based on current incremental
borrowing rates of the Company.


                                      F-8


2. Summary of Significant Accounting Policies (continued)

Reclassifications

      Certain prior year amounts in the consolidated financial statements have
been reclassified to conform to the current year presentation.

Recent Accounting Pronouncements

      In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities--Including an Amendment of FASB
Statement No. 115 ("SFAS No. 159"). SFAS No. 159 permits entities to choose to
measure many financial instruments and certain other items at fair value. The
objective is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions. The provisions of SFAS No. 159 are effective for fiscal
years beginning after November 15, 2007. The Company has not yet determined the
impact of adoption of this statement on its financial statements.

3. Property and Equipment

Property and equipment consisted of the following:

                                                    June 30,       December 31,
                                                      2007            2006
                                                   ---------------------------

Land                                               $   519,211     $   471,536
Building and leasehold improvements                  4,982,990       4,188,746
Furniture, farm and office equipment                    91,146          83,293
Laboratory equipment                                   899,581         797,653
Computer equipment                                     501,824         372,055
                                                   ---------------------------
                                                     6,994,752       5,913,283
Less accumulated depreciation                         (996,083)       (683,071)
                                                   ---------------------------
Property and equipment, net                        $ 5,998,669     $ 5,230,212
                                                   ===========================

      Depreciation expense for the three months ended June 30, 2007 and 2006 was
$127,948 and $80,062, respectively. Depreciation expense for the six months
ended June 30, 2007 and 2006 was $239,994 and $184,421, respectively.

4. Patents

      In conjunction with the Nexia Asset Purchase, the Company recorded
intangible assets related to patents of $1,407,000 with a useful life of 11
years. The gross carrying value and accumulated amortization, adjusted based on
current foreign currency rates, was $1,632,800 and $333,766, respectively, at
June 30, 2007. The gross carrying value and accumulated amortization, adjusted
based on current foreign currency rates, was $1,481,952 and $235,716,
respectively, at December 31, 2006. For the three months ended June 30, 2007 and
2006, the Company has recorded amortization expense of $34,212 and $38,765,
respectively. For the six months ended June, 2007 and 2006, the Company has
recorded amortization expense of $69,299 and $70,742, respectively. Amortization
expense related to the above intellectual property is expected to be
approximately $127,910 per year for the next five years.

5.    Preferred Stock

Series A Convertible Redeemable Preferred Stock

      The Series A Preferred Stock bears a cumulative dividend rate of 8% per
annum. Accrued and unpaid dividends for Series A Preferred Stock at June 30,
2007 and December 31, 2006 totaled $5,123,508 and $4,355,388, respectively.

      Each share of the Series A Preferred Stock is convertible into shares of
common stock at the then-applicable conversion rate, as defined, at any time and
at the option of the holder. The shares of Series A Preferred Stock are
currently convertible into 16,442,000 common shares. The conversion rate is


                                      F-9


5.    Preferred Stock (continued)

Series A Convertible Redeemable Preferred Stock (continued)

subject to adjustment for certain defined equity transactions. At June 30, 2007
and December 31, 2006, the Company has reserved 16,442,000 shares of common
stock for the potential conversion. The Series A Preferred Stock will
automatically convert into common stock at the then-applicable conversion rate
in the event of an initial public offering of the Company's common stock
resulting in aggregate proceeds to the Company of $50 million and a price per
share of at least $2.74.

      The Series A Preferred Stock has a liquidation preference in an amount
equal to the redefined original purchase price of $0.91 per share plus
accumulated but unpaid dividends, whether or not declared, in the event of a
liquidation, dissolution, winding-up, sale, or merger. This liquidation
preference is junior to the Series B Convertible Redeemable Preferred Stock (the
Series B Preferred Stock) and the Series C Preferred Stock, and senior to the
common stock.

      The Company recorded the Series A Preferred Stock at its fair value on the
date of issuance of approximately $15,000,000, less issuance costs of $105,502.
The issuance costs are accreted to the carrying value of the preferred stock up
to the earliest redemption period using the effective interest method. The
Company has classi?ed the Series A Preferred Stock outside of permanent equity
as a result of certain redemption features. Because the Series A Preferred Stock
contains contingently adjustable conversion ratios, the Company evaluated the
Series A Preferred Stock for potential bene?cial conversion features under EITF
98-5, Accounting for Convertible Securities with Bene?cial Conversion Features
or Contingently Adjustable Conversion Ratios, and EITF 00-27, Application of
Issue No. 98-5 to Certain Convertible Instruments. The contingently adjustable
conversion ratio changed with the issuance of Series B Preferred Stock causing
the Company to re-evaluate the potential beneficial conversion feature. In both
cases, based on the fact that the adjusted implied conversion price of the
Series A Preferred Stock exceeded the fair value of the common stock into which
the Series A Preferred Stock converts, no bene?cial conversion feature was
deemed to exist. The implied conversion price was calculated by dividing the
fair value of the Series A Preferred Stock, net of the fair value allocated to
the warrants issued to the holders of Series A Preferred Stock in conjunction
with the Series B Preferred Stock offering, by the adjusted number of common
shares into which the Series A Preferred Stock converts.

      In conjunction with the Series B Preferred Stock financing, the Series A
Preferred stockholders were granted 5,400,000 contingent warrants to purchase
common stock for $0.01. The Company deemed 1,620,000 warrants to be probable of
issuance. Accordingly, 1,620,000 warrants were valued using the Black-Scholes
model and were recorded as a $201,746 discount to the Series A Preferred Stock.
This discount is being accreted through the period up to the first redemption
date using the effective interest method. The fair value of the warrants were
estimated at the date of grant using the Black-Scholes model assuming a
weighted-average volatility of approximately 60%, a risk free interest rate of
4.3%, a dividend yield of 0% and a weighted-average expected life of the warrant
of 8.8 years.

      Commencing September 11, 2008, the holder of the Series A Preferred Stock
may require the Company to redeem the Series A Preferred Stock then outstanding
for an amount equal to the original purchase price plus any unpaid dividends,
whether or not declared. The right of redemption is junior to the Series B
Preferred Stock and Series C Preferred Stock redemption rights.

      The holder of the Series A Preferred Stock is entitled to the number of
votes equal to the number of common shares into which its shares are
convertible.

Series B Convertible Redeemable Preferred Stock

      In October 2004, the Company sold 30,448,147 shares of Series B Preferred
Stock to the Series A Preferred Stock investor and four additional investors at
a price of approximately $0.91 per share for net proceeds of $27,570,490.
Purchasers of the Series B Preferred Stock also received warrants to purchase
common stock as described in Note 9.

      The Series B Preferred Stock bears a cumulative dividend rate of 8% per
annum. Accrued and unpaid dividends for Series B Preferred Stock at June 30,
2007 and December 31, 2006 totaled $6,541,924 and $5,232,953, respectively.

      Each share of the Series B Preferred Stock is convertible into shares of
common stock at the then-applicable conversion rate, as defined, at any time and
at the option of the holder. The initial conversion rate is one common share for
each preferred share, which is subject to adjustment for certain defined equity
transactions. At June 30, 2007 and December 31, 2006, the Company has reserved
65,768,001 shares of common stock for the potential conversion. The Series B
Preferred Stock will automatically convert into common stock at the
then-applicable conversion rate in the event of an initial public offering of
the Company's common stock resulting in aggregate proceeds to the Company of $50
million and a price per share of at least $2.74.

      The Series B Preferred Stock has a liquidation preference in an amount
equal to the original purchase price per share plus accumulated but unpaid
dividends, whether or not declared, in the event of a liquidation, dissolution,
winding-up, sale, or merger. This liquidation preference is senior to the Series
A Preferred Stock and the common stock and equal to the liquidation preference
of the


                                      F-10


5.    Preferred Stock (continued)

Series B Convertible Redeemable Preferred Stock (continued)

Series C Preferred Stock.

      The Company recorded the Series B Preferred Stock at its fair value on the
date of issuance of approximately $27,777,778, less the fair value assigned to
warrants of $3,332,589, less issuance costs of $207,288. The issuance costs are
accreted to the carrying value of the preferred stock up to the earliest
redemption period using the effective interest method. The Company has classi?ed
the Series B Preferred Stock outside of permanent equity as a result of certain
redemption features. Because detachable warrants were granted with the financing
and the Series B Preferred Stock contains contingently adjustable conversion
ratios, the Company evaluated the Series B Preferred Stock for potential
bene?cial conversion features under EITF 98-5, Accounting for Convertible
Securities with Bene?cial Conversion Features or Contingently Adjustable
Conversion Ratios, and EITF 00-27, Application of Issue No. 98-5 to Certain
Convertible Instruments. Based on the fact that the adjusted implied conversion
price of the Series B Preferred Stock exceeded the fair value of the common
stock into which the Series B Preferred Stock converts, no beneficial conversion
feature was deemed to exist. The implied conversion price was calculated by
dividing the fair value of the Series B Preferred Stock, net of the fair value
of the warrants, by the number of common shares into which the Series B
Preferred Stock converts.

      In conjunction with the Series B financing, the Series B Preferred
stockholders were granted 15,400,000 contingent warrants to purchase common
stock for $0.01. The Company deemed 10,780,000 warrants to be probable of
issuance. Accordingly, 10,780,000 warrants were valued using the Black-Scholes
model and were recorded as a $2,034,335 discount to the Series B Preferred
Stock. This discount is being accreted through the period up to the first
redemption date using the effective interest method. The fair value of the
warrants were estimated at the date of grant using the Black-Scholes model
assuming a weighted-average volatility of approximately 60%, a risk free
interest rate of 4.3%, a dividend yield of 0% and a weighted-average expected
life of the warrant of 8.8 years.

      Commencing October 7, 2009, the holders of the Series B Preferred Stock
may require the Company to redeem the Series B Preferred Stock then outstanding
for an amount equal to the original purchase price plus any unpaid dividends,
whether or not declared, and in preference to the Series A Preferred Stock
liquidation rights.

      The holders of the Series B Preferred Stock are entitled to the number of
votes equal to the number of common shares into which its shares are
convertible.

      In conjunction with this financing, the conversion price of the investor's
Series A Preferred Stock was adjusted in accordance with the terms of the Series
A Preferred Stock, which resulted in the Series A Preferred Stock being
convertible into an additional 2,672,770 shares, or a total of 16,442,000
shares, of the Company's common stock.

Series C Convertible Redeemable Preferred Stock

      Contemporaneously with the consummation of the Nexia asset acquisition
transaction, the Company sold 7,480,978 shares of Series C Preferred Stock to
investors at a price of approximately $0.91 per share for net proceeds of
$6,824,896. Included in these proceeds were two Canadian investors, who
previously invested in Nexia, who purchased an aggregate of 3,370,479 shares of
Series C Preferred Stock for net proceeds of $3,074,880. Those proceeds were
used to partially fund the acquisition of the Nexia assets. In addition, the
Company issued to such investors (i) warrants to acquire 2,244,296 shares of
Series C Preferred Stock, which are exercisable at approximately $0.91 per share
and which expire on March 10, 2008, and (ii) warrants to acquire 1,346,630
common shares, which are exercisable at $0.01 per share, subject to reduction if
certain business milestones are met by the Company, as specified in the warrants
and which expire in October 2014.

      The Series C Preferred Stock bears a cumulative dividend rate of 8% per
annum. Accrued and unpaid dividends for Series C Preferred Stock at June 30,
2007 and December 31, 2006 total $2,668,377 and $2,046,257, respectively.

      Each share of the Series C Preferred Stock is convertible into shares of
common stock at the then-applicable conversion rate, as defined, at any time and
at the option of the holder. The initial conversion rate is one common share for
each preferred share, which is subject to adjustment for certain defined equity
transactions. At March 31, 2007 and December 31, 2006, the Company has reserved
22,799,574 shares of common stock for the potential conversion. The Series C
Preferred Stock will automatically convert into common stock at the
then-applicable conversion rate in the event of an initial public offering of
the Company's common stock resulting in aggregate proceeds to the Company of $50
million and a price per share of at least $2.74.


                                      F-11


5.    Preferred Stock (continued)

Series C Convertible Redeemable Preferred Stock (continued)

      The Series C Preferred Stock has a liquidation preference in an amount
equal to the original purchase price per share plus accumulated but unpaid
dividends, whether or not declared, in the event of a liquidation, dissolution,
winding-up, sale, or merger. This liquidation preference is senior to the Series
A Preferred Stock and the common stock and equal to the liquidation preference
of the Series B Preferred Stock.

      The Company recorded the Series C Preferred Stock at its fair value on the
date of issuance of approximately $13,261,481, less the fair value assigned to
warrants of $2,408,024 and issuance costs of $330,495. The discount on the
Series C Preferred Stock from the value assigned to the warrants and issuance
costs is accreted to the carrying value of the preferred stock up to the
earliest redemption period using the effective interest method. The Company has
classi?ed the Series C Preferred Stock outside of permanent equity as a result
of certain redemption features. Because detachable warrants were granted with
the financing and the Series C Preferred Stock contains contingently adjustable
conversion ratios, the Company evaluated the Series C Preferred Stock for
potential bene?cial conversion features under EITF 98-5, Accounting for
Convertible Securities with Bene?cial Conversion Features or Contingently
Adjustable Conversion Ratios, and EITF 00-27, Application of Issue No. 98-5 to
Certain Convertible Instruments. Based on the fact that the adjusted implied
conversion price of the Series C Preferred Stock exceeded the fair value of the
common stock into which the Series C Preferred Stock converts, no beneficial
conversion feature was deemed to exist. The implied conversion price was
calculated by dividing the fair value of the Series C Preferred Stock, net of
the fair value of the warrants, by the number of common shares into which the
Series C Preferred Stock converts.

      In conjunction with the Series C Preferred Stock financing, the Series C
Preferred stockholders were granted 4,483,946 warrants to purchase preferred
stock for $0.91. These warrants were valued using the Black-Scholes model and
were recorded as a $2,072,965 discount to the Series C Preferred Stock. This
discount is being marked to market on a quarterly basis. The fair value of the
warrants were estimated at the date of grant using the Black-Scholes model
assuming a weighted-average volatility of approximately 60%, a risk free
interest rate of 3.9%, a dividend yield of 0% and a weighted-average expected
life of the warrant of 3.0 years.

      In conjunction with the Series C Preferred Stock financing, the Series C
Preferred stockholders were granted 2,690,420 contingent warrants to purchase
common stock for $0.01. The Company deemed 1,614,225 warrants to be probably of
issuance. Accordingly, 1,614,225 warrants were valued using the Black-Scholes
model and were recorded as a $285,546 discount to the Series C Preferred Stock.
This discount is being accreted through the period up to the first redemption
date using the effective interest method. The fair value of the warrants were
estimated at the date of grant using the Black-Scholes model assuming a
weighted-average volatility of approximately 60%, a risk free interest rate of
4.5%, a dividend yield of 0% and a weighted-average expected life of the warrant
of 9.6 years.

      Commencing October 7, 2009, the holders of the Series C Preferred Stock
may require the Company to redeem the Series C Preferred Stock then outstanding
for an amount equal to the original purchase price plus any unpaid dividends,
whether or not declared, and in preference to the Series A Preferred Stock
liquidation rights.

      The holders of the Series C Preferred Stock are entitled to the number of
votes equal to the number of common shares into which its shares are
convertible.

6.    Minority Interest - Series C Convertible Redeemable Preferred Stock of
      PharmAthene Canada, Inc.

      Through its ownership of 100% of the common stock in PharmAthene Canada,
Inc., the Company controls all of the voting stock of PharmAthene Canada, Inc.
and considers itself to be the majority interest primary beneficiary of
PharmAthene Canada, Inc., a variable interest entity. In March 2005, a Canadian
investor purchased 2,591,654 shares of Series C Convertible Preferred Stock of
PharmAthene Canada, Inc. for net proceeds of $2,364,366. The shares of Series C
Convertible Preferred Stock of PharmAthene Canada, Inc. are convertible at the
discretion of the investors into an equal number of shares of Series C Preferred
Stock of the Company. In addition, the Company issued to such investors (i)
warrants to acquire 777,496 Series C Preferred Stock of PharmAthene Canada, Inc.
(also convertible into Series C Preferred Stock of the Company) exercisable at
approximately $0.91 per share, which expire on March 10, 2008, and (ii) warrants
to acquire 466,498 common shares of PharmAthene Canada, Inc. exercisable at
$0.01 per share, convertible into shares of common stock of the Company on a
1-for-1 basis, subject to reduction if certain business milestones are met by
the Company, as specified in the warrants and which expire in October 2014.

      In conjunction with the Series C financing, the Series C Preferred Stock
of PharmAthene Canada, Inc. stockholders were granted 777,496 warrants to
purchase preferred stock for $0.91. These warrants were valued using the
Black-Scholes model and were recorded as a $265,513 discount to the Series C
Preferred Stock of PharmAthene Canada, Inc. This discount is being accreted
through the


                                      F-12


6.    Minority Interest - Series C Convertible Redeemable Preferred Stock of
      PharmAthene Canada, Inc. (continued)

period up to the first redemption date using the effective interest method. The
fair value of the warrants were estimated at the date of grant using the
Black-Scholes model assuming a weighted-average volatility of approximately 60%,
a risk free interest rate of 3.9%, a dividend yield of 0% and a weighted-average
expected life of the warrant of 3.0 years.

      In conjunction with the Series C financing, the Series C Preferred Stock
of PharmAthene Canada, Inc. stockholders were granted 466,498 contingent
warrants to purchase common stock for $0.01. The Company deemed 279,894 warrants
to be probable of issuance. Accordingly, 279,894 warrants were valued using the
Black-Scholes model and were recorded as a $49,512 discount to the Series C
Preferred Stock of PharmAthene Canada, Inc. This discount is being accreted
through the period up to the first redemption date using the effective interest
method. The fair value of the warrants were estimated at the date of grant using
the Black-Scholes model assuming a weighted-average volatility of approximately
60%, a risk free interest rate of 4.5%, a dividend yield of 0% and a
weighted-average expected life of the warrant of 9.6 years.

      The Series C Convertible Preferred Stock of PharmAthene Canada, Inc. bears
a cumulative dividend rate of 8% per annum. Accrued and unpaid dividend for the
Series C Convertible Preferred Stock of PharmAthene Canada, Inc. at June 30,
2007 and December 31, 2006 total $462,685 and $354,812, respectively.

      The holders of Series C Convertible Preferred Stock of PharmAthene Canada,
Inc. have no voting rights.

7.    Stockholders' Deficit

Common Stock

      In conjunction with the Series A Preferred Stock closing, the common
stockholders agreed to certain limitations on their rights to sell their stock.
Further, the common stockholders agreed that 5,370,000 shares of common stock
would be subject to a right of repurchase by the Company and the Series A
Preferred Stock investor in the event of a termination of the relationship
between the Company and the Series A Preferred Stock investor. The repurchase
price will be either cost or fair market value, depending on the termination
event. The number of shares subject to the repurchase right decreased by 41.67%
on December 11, 2004, and further decreases by 8.33% quarterly thereafter until
September 11, 2006. As of March 31, 2007, no shares remained subject to the
right of repurchase.

2002 Long-Term Incentive Plan

      The Company adopted the 2002 Long-Term Incentive Plan (the Plan) to
provide an incentive to eligible employees, consultants, and officers. The Plan
provides for the granting of stock options, restricted common stock, and stock
appreciation rights. As of June 30, 2007, the Company had reserved 10,919,372
shares of common stock for distribution under the Plan, of which 259,696 remain
available for future grants. Stock options granted under the Plan may be either
incentive stock options, as defined by the Internal Revenue Code, or
non-qualified stock options. The Board of Directors determines who will receive
options, the vesting period which is generally four years, and the exercise
price. Options may have a maximum term of no more than 10 years.


                                      F-13


7. Stockholders' Deficit (continued)

2002 Long-Term Incentive Plan (continued)

The following table summarizes the activity of the Company's stock option plan:

                                  Shares     Weighted-Average   Weighted-Average
                                              Exercise Price    Contractual Term
                                ------------------------------------------------

Outstanding, January 1, 2005     3,434,626      $    0.16
   Granted                       5,497,677           0.21
   Exercised                       202,906           0.13
  Forfeited                        743,394           0.19
                                 ---------
Outstanding, December 31, 2005   7,986,003      $    0.19
                                 =========
Exercisable, December 31, 2005   2,405,369      $    0.18
                                 =========

Outstanding, January 1, 2006     7,986,003      $    0.19
   Granted                       1,631,676           0.21
   Exercised                     1,340,566           0.18
   Forfeited                       770,059           0.21
                                 ---------
Outstanding, December 31, 2006   7,507,054      $    0.20
                                 =========
Exercisable, December 31, 2006   3,844,376      $    0.19

Outstanding, January 1, 2007     7,507,054      $    0.20           7.7 years
   Granted                       2,052,346           0.21
   Exercised                         1,250           0.21
   Forfeited                       457,196           0.21
                                 ---------
Outstanding, June 30, 2007       9,100,954      $    0.20           6.7 years
                                 =========
Exercisable, June 30, 2007       4,148,761      $    0.19           7.3 years
                                 =========

Vested, June 30, 2007            4,148,761

      In 2004 and 2005, the Company granted options to non-employees to purchase
up to 200,000 and 125,000 shares, respectively, of the Company's common stock at
exercise prices of $0.16 and $0.21 per share, respectively. The 2004 and 2005
options vest over four years. Stock-based compensation expense recorded for the
three months and six months ended June 30, 2007 and 2006 was $1,162 and $2,324,
respectively.

Warrants

      In conjunction with the Series B Preferred Stock issuance in October 2004,
the Company issued warrants to purchase 15,400,000 shares of common stock at an
exercise price of $0.01 per share, subject to reduction if certain business
milestones are met by the Company, as specified in the warrants and expiring in
October 2014. As of December 31, 2004, milestones related to 1,540,000 shares of
common stock underlying of the warrants to purchase common stock were attained,
with the outstanding total of warrants reduced to 13,860,000. Following the
Nexia asset purchase in March 2005, an additional milestone related to 6,160,001
shares of common stock underlying of the warrants was achieved, and the total
warrants outstanding were further reduced to 7,699,999.

      In connection with a licensing agreement for rights to certain patents,
the Company issued warrants to purchase 200,000 shares of common stock at an
exercise price of $0.01 per share to a research company in January 2006. In
August 2006, the research company exercised the warrants for common stock. In
connection with the credit facility further discussed in Note 13, the Company
issued warrants to purchase an aggregate of 438,453 shares of PharmAthene Series
C Preferred Stock through March 30, 2017 at an exercise price of $0.91.


                                      F-14


7. Stockholders' Deficit (continued)

Warrants (continued)

      The following table summarizes the activity of the Company's warrants:



                                    Warrants for Shares of      Weighted-Average        Warrants for Shares      Weighted-Average
                                         Common Stock            Exercise Price          of Preferred Stock       Exercise Price
                                    ----------------------------------------------------------------------------------------------
                                    ----------------------------------------------------------------------------------------------
                                                                                                    
Outstanding at December 31, 2004                14,123,296                     0.01                       --                    --
Granted                                          3,156,918                     0.01                5,261,442                  0.91
Forfeited                                       (6,160,001)                    0.01                       --                    --
                                    ----------------------------------------------------------------------------------------------
Outstanding at December 31, 2005                11,120,213                     0.01                5,261,442                  0.91
Granted                                            200,000                     0.01                       --                    --
Exercised                                         (200,000)                    0.01                       --                    --
                                    ----------------------------------------------------------------------------------------------
Outstanding at December 31, 2006                11,120,213     $               0.01                5,261,442    $             0.91
                                    ----------------------------------------------------------------------------------------------
Granted                                                 --                       --                  438,453                  0.91
                                    ----------------------------------------------------------------------------------------------
Exercised                                               --                       --                       --                    --
                                    ----------------------------------------------------------------------------------------------
Outstanding at June 30, 2007                    11,120,213     $               0.01                5,699,895    $             0.91
                                    ----------------------------------------------------------------------------------------------

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


8. Commitments and Contingencies

Leases

      The Company leases offices in the United States under a month-to-month
operating lease agreement. In September 2006, the Company entered into a 10 year
office lease, which is anticipated to commence on July 1, 2007. Additionally,
following the Nexia asset purchase in March 2005, the Company entered into a two
year renewable lease agreement for office space in Canada. This lease is
renewable for an additional two years and provides for expansion into additional
facility space if available. Annual minimum payments are as follows:

            Remaining 2007                              $  281,300
            2008                                           372,700
            2009                                           383,900
            2010                                           395,400
            2011 and thereafter                          2,874,100
                                                        ----------
                                                        $4,307,400
                                                        ==========

      Total rent expense under operating lease agreements approximated $99,800
and $76,400 for the three months ended June 30, 2007 and 2006, respectively. For
the six months ended June 30, 2007 and 2006, total rent expense under operating
lease agreements approximated $179,400 and $151,400, respectively.

License Agreements

      In January 2006, the Company licensed certain patent rights from a
research company. The license agreement required a $50,000 up-front payment.
Additionally, payments within the agreement included a sublicense fee of 20% and
milestone payments of $25,000 upon the granting of a U.S. patent, $200,000 upon
the initiation of certain studies or trials, and $250,000 upon BLA approval.
Upon commercialization, the license agreement requires royalty payments equal to
a specified percentage of future sales of products for both government
procurement and commercial market sales subject to the license through the
expiration of the licensed patents. During 2006 and the first six months of
2007, the Company has expensed $50,000 and nil related to this agreement,
respectively.


                                      F-15


8. Commitments and Contingencies

License Agreements (continued)

      In August 2006, the Company entered into a research and licensing
agreement allowing for the licensing of certain patent rights. The agreement
includes research expense reimbursement payments and certain development
milestone payments. Upon commercialization, the license agreement requires
royalty payments equal to a specified percentage of future sales of products for
both government procurement and commercial market sales subject to the license
through the expiration of the licensed patents. During 2006 and the first six
months of 2007, the Company expensed $50,000 and nil related to this agreement,
respectively.

      Through the Nexia acquisition, the Company acquired a license agreement
originally executed in September 2004 for the rights to certain technologies.
This agreement included an option to license product processing technology
necessary to perform development of Protexia(R) as required under its government
contract with the Department of Defense.

      The Company executed a new licensing agreement with the development
company on March 2, 2007 which results in a license to all technology provided
under the original agreement including the necessary purification technology
previously included in an option and access to additional information and
technology deemed to be essential for development of Protexia(R) and performance
under the Department of Defense contract. Under the new agreement, the Company
must pay $200,000 over a period of six years with $100,000 due in the first
year. This expense is eligible for reimbursement by the US government under the
contract with the Department of Defense.

9. Related Party Transactions

      The Company leases its office space from an entity that is affiliated with
the organization to which the Company issued warrants for 263,296 shares of
common stock in August 2003 (see Note 7). The Company paid $50,212 and $27,846
in rent expense related to this operating lease for the three months ended June
30, 2007 and 2006, respectively. For the six months ended June 30, 2007 and
2006, the Company paid $83,343 and $55,692, respectively. Subsequent to June 30,
2007, the Company relocated to its new office space and the lease with the
affiliate entity was terminated.

      As further disclosed in footnote 11, several directors and officers of the
Company participated in the Convertible 8% Bridge Notes for approximately
$190,000 in the second and third quarters of 2006.

      As further disclosed in footnote 13, the Company completed its reverse
merger with Healthcare Acquisition Corp ("HAQ") on August 3, 2007. Prior to this
merger, a director of HAQ loaned approximately $85,000 to HAQ to fund the
renewal of the directors and officers insurance which expired in July.

10. Medarex Collaboration

      In November 2004, the Company and Medarex, Inc. entered into a
collaboration agreement under which the companies plan to develop and
commercialize MDX-1303, a fully human monoclonal antibody targeting the Bacillus
anthracis protective antigen. MDX-1303 was developed by Medarex using its
UltiMAb Human Antibody Development System(R), and this antibody is currently in
preclinical development by Medarex for use against human anthrax infection.

      Under the terms of the agreement, Medarex and PharmAthene have agreed
jointly to continue to investigate the potential for MDX-1303 to be used as a
therapeutic for individuals with active disease as well as for prophylactic
treatment of individuals exposed to anthrax. In December 2004, Medarex received
a deposit from PharmAthene against potential future development activities for
MDX-1303, against which Medarex must submit reports of the use of costs as they
are incurred in order to take draw downs against the deposit. If the project is
terminated or if development activities for MDX-1303 by Medarex are completed
prior to exhaustion of the deposit, amounts remaining under the deposit are to
be returned to PharmAthene. For the three months ended June, 2007 and 2006,
PharmAthene recorded the use of these funds for development activities for
MDX-1303 as Research and Development operating expenses of $230,927 and
$135,256, respectively. For the six months ended June, 2007 and 2006,
PharmAthene recorded the use of these funds for development activities for
MDX-1303 as Research and Development operating expenses of $419,510 and
$609,095, respectively. This deposit was fully utilized by June 30, 2007 and as
of December 31, 2006 approximately $0.4 million of this deposit remained.
PharmAthene is fully responsible for funding all future research and development
activities that are not supported by government funds. The companies will share
profits according to a pre-agreed allocation percentage.

11. Convertible 8% Notes

      In June 2006, certain of the Company's investors in the Series B Preferred
Stock and the Series C Preferred Stock among others and the Company entered into
an agreement providing for the issuance of $9.8 million in convertible notes
(the "Bridge Notes "). The


                                      F-16


11. Convertible 8% Notes (continued)

Bridge Notes are convertible (i) if the closing of the merger does not occur,
into Series B redeemable convertible preferred stock at $0.91 per share plus an
equal number of common shares (ii) upon the closing of the merger with SIGA and
a contingent financing with gross proceeds in excess of $25 million, into the
same securities sold in such financing, at a 10% price discount, or (iii) upon a
separate financing into such financing securities at a 25% price discount and an
equal number of common shares. The Company may have a future beneficial
conversion feature based upon the pricing of future financings. Accordingly, the
Company will assess whether a beneficial conversion feature exists when the
contingent event occurs and record the amount, if any, at that time.

      In August 2006, the investor in Series C Convertible Preferred Stock of
PharmAthene Canada, Inc. and the Company purchased an additional $2.0 million of
Bridge Notes.

      The Company has recognized interest expense related to the Bridge Notes of
approximately $237,980 and $473,340 for the three and six month periods ending
June 30, 2007.

12. $10 million Debt Financing

      On March 30, 2007, the Company entered into a $10 million credit facility
with Silicon Valley Bank and Oxford Finance Corporation. Under the credit
facility the Company borrowed $10 million, which bears interest at the rate of
11.5%. Pursuant to the terms of the loan and security agreement evidencing the
credit facility, the Company will make monthly payments of interest only through
September 30, 2007 and, thereafter, will make monthly payments of principal and
interest over the remaining 30 months of the loan. The loan is secured by a
security interest on all of the Company's assets other than certain intellectual
property. The Company may not repay the loan for the first six months but
thereafter may prepay provided it pays certain prepayment fees. In connection
with the credit facility, the Company issued to Silicon Valley Bank and Oxford
Financial Corporation warrants to purchase an aggregate of 438,453 shares of
PharmAthene Series C Preferred Stock through March 30, 2017 at an exercise price
of $0.91. The Company has recognized interest expense of approximately $6,400
and $297,860 for the three and six month periods ending June 30, 2007.

13. Subsequent Event

      On August 3, 2007, the company consummated a merger (the "Merger")
pursuant to an Agreement and Plan of Merger, dated as of January 19, 2007 (the
"Merger Agreement"), by and among the Company ("Former PharmAthene"), Healthcare
Acquisition Corp. ("HAQ") and PAI Acquisition Corp., a wholly-owned subsidiary
of HAQ ("Merger Sub"). Pursuant to the Merger Agreement, Merger Sub was merged
with and into the Company. Immediately following the Merger, HAQ changed its
name from Healthcare Acquisition Corp. to "PharmAthene, Inc." and the Company,
which became a wholly-owned subsidiary of HAQ, changed its name to "PharmAthene
U.S. Corporation." HAQ also changed its ticker symbol on the American Stock
Exchange to "PIP".

      Pursuant to the terms of the Merger Agreement, HAQ, now renamed
PharmAthene, Inc. ("PharmAthene"), issued 12,025,452 new shares of common stock
to the stockholders of Former PharmAthene and Former PharmAthene's $11.8 million
of outstanding secured convertible notes were exchanged for $12.5 million of new
unsecured 8% convertible notes maturing in 24 months. These convertible notes
are convertible at the option of the holders into common stock at $10.00 per
share and may be redeemed by the Company without penalty after 12 months. In the
event that PharmAthene enters into a contract prior to December 31, 2007 for the
sale of Valortim(TM) with the U.S. government for more than $150 million in
anticipated revenue, the stockholders of Former PharmAthene will be eligible for
additional cash payments, not to exceed $10 million, equal to 10% of the actual
collections from the sale of Valortim(TM). Also pursuant to the Merger
Agreement, PharmAthene assumed all of Former PharmAthene's stock options and
warrants that were not cancelled as part of the Merger. Immediately following
the closing of the Merger, the Former PharmAthene stockholders, option holders
and warrant holders held approximately 54% of the common stock of PharmAthene on
a fully diluted basis and former stockholders, option holders and warrant
holders of HAQ prior to the merger owned approximately 46% of PharmAthene on a
fully-diluted basis after the Merger. In addition, upon consummation of the
Merger, the business of Former PharmAthene became the sole business of
PharmAthene.

      The Merger is being accounted for as a reverse acquisition and
recapitalization of Former PharmAthene for financial accounting purposes.
Consequently, the assets and liabilities and the historical operations that will
be reflected in the financial statements prior to the Merger will be those of
Former PharmAthene and will be recorded at the historical cost basis of Former
PharmAthene, and the consolidated financial statements after consummation of the
Merger will include the assets and liabilities of HAQ and Former PharmAthene,
historical operations of Former PharmAthene and operations of HAQ from the
closing date of the Merger.


                                      F-17


13. Subsequent Event (continued)

      At the special meeting of the stockholders of HAQ held on August 2, 2007
and adjourned to August 3, 2007 to approve the Merger, the number of shares
requesting conversion was initially misreported. Following the misreporting,
certain officers, directors and current stockholders of HAQ and certain
stockholders of Former PharmAthene, purchased an aggregate of 400,000 additional
shares of HAQ's common stock. These shares were voted in favor of the Merger,
pursuant to negotiated terms, thereby reducing the number of conversion
elections and allowing for the approval of the Merger.

      On August 13, 2007, a suit was filed in the Delaware Chancery Court to
affirm the validity of the Merger. On August 27, 2007, the Delaware Chancery
Court determined that the Merger had been validly approved and authorized in
full compliance with the Company's charter and Delaware corporate law. As with
decisions of the Delaware Chancery Court, generally, the decision is subject to
appeal for a period of thirty days.

Unaudited Pro Forma Condensed Combined Consolidated Financial Information as of
June 30, 2007

      The following unaudited pro forma condensed combined consolidated
financial statements give effect to the reverse merger transaction with HAQ and
Former PharmAthene, which was completed on August 3, 2007. For accounting
purposes, the transaction is considered a "reverse merger" under which
PharmAthene is considered to be acquiring HAQ. The 11,650,000 shares of HAQ
common stock outstanding are considered as the basis for determining the
consideration in the reverse merger transaction. The following unaudited pro
forma condensed combined consolidated financial statements are based on the
historical financial statements of Former PharmAthene and HAQ. The pro forma
adjustments are described in the accompanying notes presented below.

      The unaudited pro forma condensed combined consolidated balance sheet as
of June 30, 2007 gives effect to the Merger as if it had occurred on June 30,
2007. The pro forma condensed combined consolidated balance sheet is based on
the historical balance sheet of HAQ as of June 30, 2007 and the historical
balance sheet of Former PharmAthene as of June 30, 2007. The unaudited pro forma
condensed combined consolidated statement of operations for the six months ended
June 30, 2007 is based on historical results of operations of HAQ and Former
PharmAthene for the six months ended June 30, 2007 and gives effect to the
Merger as if it had occurred on January 1, 2007 (the first day of year 2007 for
PharmAthene). The unaudited pro forma condensed combined consolidated statement
of operations for the fiscal year ended December 31, 2006 is based on the
historical results of operations of HAQ and Former PharmAthene for the year
ended December 31, 2006 and gives effect to the Merger as if it had occurred on
January 1, 2006 (the first day of fiscal year 2006 for PharmAthene).

      For purposes of these unaudited pro forma condensed combined financial
statments, Former PharmAthene has made a preliminary valuation of the fair value
of the net assets acquired. A final determination of these estimated fair values
will be made on the acquisition date, and will be based on the actual net assets
of HAQ that exist as of such date. The actual amounts recorded as of the
completion of the merger may differ materially from the information presented in
these unaudited pro forma condensed combined financial statements.


                                      F-18


        Unaudited Pro Forma Condensed Combined Consolidated Balance Sheet
                               As of June 30, 2007



                                                Historical         Historical       Pro Forma             Pro Forma
                                                PharmAthene           HAQ          Adjustments            Combined
                                               -------------     -------------    -------------         -------------
                                                                                            
Cash and cash equivalents                      $   7,061,358     $      98,371    $  (3,947,000)  4c    $   3,212,729
Cash held in trust                                        --        72,283,499      (13,775,248)  4g       58,508,251
Accounts receivable, net                           2,542,453                --               --             2,542,453
Prepaid expenses                                     270,486            20,066               --               290,552
Other assets                                         146,972                --               --               146,972
Total current assets                              10,021,269        72,401,936      (17,722,248)           64,700,957
Property and equipment, net                        5,998,669                --               --             5,998,669
Patents, net                                       1,229,034                --               --             1,229,034
Other long term assets                               214,187                --               --               214,187
Deferred financing costs                           1,877,185           543,889               --             2,421,074
Total assets                                   $  19,410,344     $  72,945,825    $ (17,722,248)        $  74,633,921
                                               =============     =============    =============         =============
Current liabilities:

Accounts payable                               $     736,777     $     402,476    $          --         $   1,139,253
Accrued expenses and other current
liabilities                                        3,587,031           198,345          (45,227)  4e,h      3,740,150
Deferred revenue                                          --           870,664          870,664
Notes payable                                     13,768,089                --          731,911   4a       14,500,000
Total current liabilities                         18,091,897         1,471,485          686,684            20,250,066
Warrants to purchase Series C convertible
  redeemable preferred stock                       2,631,511                --       (2,631,511)  4b               --
Long term debt                                     7,797,576                --               --             7,797,576
Total liabilities                                 28,520,984         1,471,485       (1,944,827)           28,047,643
Common stock, subject to possible
redemption 1,879,060 shares, at
conversion value                                          --        13,578,807      (13,578,807)  4g               --
Minority Interest - Series C convertible
  redeemable preferred stock of PHTN
  Canada, par value $0.001 per share;
  unlimited shares authorized                      2,704,022                --       (2,704,022)  4d               --
Series A convertible redeemable preferred
  stock, par value $0.001 per share;
  authorized 16,442,000 shares                    19,964,317                --      (19,964,317)  4d               --
Series B convertible redeemable preferred
  stock, par value $0.001 per share;
  authorized 30,448,147 shares                    33,313,524                --      (33,313,524)  4d               --
Series C convertible redeemable preferred
  stock, par value $0.001 per share;
  authorized 22,799,574 shares                    15,436,384                --      (15,436,384)  4d               --


                                      F-19


Stockholders' equity:
Common stock, par value $0.001 per share;
  authorized 147,089,104 shares, 12,484,722
  issued and outstanding                              12,485                --          (12,485)  4d               --
Preferred stock $0.0001 par value;
  authorized 1,000,000; none issued and
  outstanding                                             --                --               --                    --
Common stock - $0.0001 par value;
  authorized 100,000,000 shares; 23,572,614
  shares issued and outstanding (which
  includes 1,879,060 subject to possible
  conversion)                                             --             1,165            1,192   4d            2,357
Additional paid-in capital                                --        55,818,948       18,242,102   4f       74,061,050
Accumulated other comprehensive loss                 791,888                --               --               791,888
Retained Earnings (Accumulated deficit)          (81,333,260)        2,075,420       50,988,823   4g      (28,269,017)
Total stockholders' equity                       (80,528,887)       57,895,533       69,219,632            46,586,278
Total liabilities, convertible redeemable
  preferred stock and stockholders' deficit    $  19,410,344     $  72,945,825    $ (17,722,248)        $  74,633,922
                                               =============     =============    =============         =============


 See accompanying notes to unaudited pro forma condensed combined consolidated
                             financial statements.

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


                                      F-20


       Unaudited Pro Forma Condensed Consolidated Statement of Operations
                     For the Six Months Ended June 30, 2007



                                                          Historical         Historical       Pro Forma            Pro Forma
                                                          PharmAthene           HAQ          Adjustments           Combined
                                                         -------------     -------------     -------------       -------------
                                                                                                     
Revenues:
Grant Revenue                                            $   5,301,186     $          --                         $   5,301,186
Other Revenue                                                    7,000                --                                 7,000
Total Revenues                                               5,308,186                --                --           5,308,186
Costs and expenses:
Research and Development                                     7,086,963                --                             7,086,963
General and Administrative                                   5,454,251           272,772                             5,727,023
Depreciation & Amortization                                    309,293                --                               309,293
Total costs and expenses                                    12,850,507           272,772                            13,123,279
Operating loss ..                                           (7,542,321)         (272,772)                           (7,815,093)
Other income (expense):

Interest Income                                                149,213         1,126,451                             1,275,664
Change in market value of derivative instruments                (6,829)               --             6,829   4j             --
Interest Expense                                              (771,273)               --           (26,661)  4e       (797,934)
Total other income (loss)                                     (628,889)        1,126,451           (19,832)            477,730
Income (loss) before taxes                                  (8,171,210)          853,679           (19,832)         (7,337,363)
                                                         =============     =============     =============       =============
Provision for taxes                                                 --           (71,888)           71,888   4h             --
Net income (loss)                                           (8,171,210)          781,791            52,056          (7,337,363)
Accretion of redeemable convertible preferred stock
to redemptive value                                         (3,480,536)               --         3,480,536   4i             --
Net income (loss) attributable to common stockholders    $ (11,651,746)    $     781,791     $   3,532,592       $  (7,337,363)
Weighted average shares
outstanding                                                 12,484,273        11,650,000                     4d     23,572,608
Net income (loss) per share                              $       (0.93)    $        0.07                         $       (0.31)


  See accompanying notes to unaudited pro forma condensed combined consolidated
                              financial statements.

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


                                      F-21


       Unaudited Pro Forma Condensed Consolidated Statement of Operations

                      For the Year Ended December 31, 2006



                                                  Historical         Historical       Pro Forma           Pro Forma
                                                  PharmAthene           HAQ          Adjustments          Combined
                                                 -------------     -------------     -------------      -------------
                                                                                            
Revenues:

Grant Revenue                                    $   1,641,822     $          --     $                  $   1,641,822
Other Revenue                                           21,484                --                               21,484
Total Revenues                                       1,663,306                --                --          1,663,306
Costs and expenses:
Research and Development                             7,140,337                --                            7,140,337
General and Administrative                           8,572,963           644,378                            9,217,341
Depreciation & Amortization                            483,646                --                              483,646
Acquired In-Process Research & Development                  --                --                                   --
Total costs and expenses                            16,196,946           644,378                --         16,841,324
Operating loss                                     (14,533,640)         (644,378)                         (15,178,018)
Other income (expense):

Interest Income                                        289,606         1,847,712                            2,137,318
Change in market value of derivative
instruments                                           (350,405)               --           350,405  4j             --
Interest Expense                                      (538,948)               --          (461,322) 4e     (1,000,270)
Total other income (loss)                             (599,747)        1,847,712          (110,917)         1,137,048
Income (loss) before taxes                         (15,133,387)        1,203,334          (110,917)       (14,040,971)
                                                 -------------     -------------     -------------      -------------
Provision for taxes                                         --          (187,000)          187,000  4h             --
Net income (loss)                                  (15,133,387)        1,016,334            76,083        (14,040,971)
                                                 =============     =============     =============      =============
Accretion of redeemable convertible preferred       (6,589,671)               --         6,589,671  4i             --
stock to redemptive value
Net income (loss) attributable to common
stockholders                                     $ (21,723,058)    $   1,016,334     $   6,665,754      $ (14,040,971)
                                                 =============     =============     =============      =============
Weighted average shares                             11,407,890        11,650,000                    4d     23,572,559
outstanding
Net income (loss) per share                      $       (1.90)    $        0.09                        $       (0.60)


  See accompanying notes to unaudited pro forma condensed combined consolidated
                              financial statements.

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


                                      F-22


                 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
                       CONSOLIDATED FINANCIAL INFORMATION

Note 1 -- Description of Transactions and Basis of Pro Forma Presentation

      On January 19, 2007, PharmAthene and HAQ entered into an Agreement and
Plan of Merger (the "Merger Agreement"). In connection with the proposed merger
(the "Merger"), HAQ will issue 12,500,000 shares of its common stock for all of
PharmAthene's outstanding shares of preferred stock and common stock, with
479,065 shares reserved for issuance upon the exercise of PharmAthene's common
stock options and common stock warrants. For accounting purposes, the
transaction is considered a "reverse merger" under which PharmAthene is
considered to be acquiring HAQ. The 11,650,000 shares of HAQ common stock
outstanding are considered as the basis for determining the consideration in the
reverse merger transaction. Based on the outstanding shares of PharmAthene
common stock on June 30, 2007, common stockholders of PharmAthene will exchange
their shares for 621,343 shares of HAQ common stock and preferred stockholders
of PharmAthene, Series C Convertible Preferred Stock warrant holders and common
stock warrant holders will exchange their shares for 11,413,745 shares of HAQ
common stock.

      In addition, each PharmAthene stock option that is outstanding on the
closing date will be converted to HAQ options by multiplying the PharmAthene
options in accordance with agreed upon amounts. The new exercise price will also
be determined by multiplying the old exercise price by the same ratio. Each of
these options will be subject to the same terms and conditions that were in
effect for the related PharmAthene option.

      At the effective time of the Merger, all options to purchase shares of
PharmAthene stock then outstanding under the PharmAthene, Inc. 2002 Long-Term
Incentive Plan (as amended, the "PharmAthene Plan") or issued under any other
agreement, whether vested or unvested, shall be assumed by HAQ. The per-share
exercise price for the shares of HAQ common stock issuable upon exercise of such
assumed outstanding PharmAthene option will be equal to the quotient determined
by dividing the exercise price per share of PharmAthene common stock at which
such outstanding PharmAthene option was exercisable immediately prior to the
closing of the Merger by the share exchange ratio, and rounding the resulting
exercise price up to the nearest whole cent. PharmAthene has, as of the date
hereof, options and warrants to acquire 8,894,982 shares of its common stock.
The share exchange ratio for the options is .0539 to one. As a consequence, HAQ
shall grant 479,015 options and common stock warrants with an average exercise
price of $3.91 per share in exchange for all of the PharmAthene options and
common stock warrants assumed by HAQ.

Note 2 -- Preliminary Merger Purchase Price

      The unaudited pro forma condensed combined consolidated financial
statements reflect the Merger of PharmAthene with HAQ as a reverse merger
wherein PharmAthene is deemed to be the acquiring entity from an accounting
perspective. For accounting purposes, the transaction is being treated as an
acquisition of assets and not a business combination because HAQ did not meet
the definition of a business under EITF 98-3, Determination Whether a
Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business.
Accordingly, the transaction has been treated as a capital transaction whereby
PharmAthene is issuing stock for the net monetary assets of HAQ, accompanied by
a recapitalization. PharmAthene has recorded the purchase price as the net
assets acquired with the offsetting credit to equity.

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


                                      F-23


                 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
                       CONSOLIDATED FINANCIAL INFORMATION

Note 3 -- Preliminary Merger Purchase Allocation

      Based on PharmAthene's preliminary valuation of the fair value of the net
assets acquired, the preliminary purchase price is as follows:

                                                        Initial Fair Value
                                                        ------------------
      Tangible assets acquired                          $      72,945,825
      Liabilities assumed                                      (1,471,485)
      Net assets acquired                               $      71,474,340
                                                        ==================

      The final determination of the purchase price allocation will be based on
the fair values of the assets and the fair value of the liabilities assumed at
the effective date of the Merger. The purchase price will remain preliminary
until PharmAthene is able to finalize its valuation of the fair value of the
assets and liabilities acquired. The final determination of purchase price
allocation will be completed as soon as practical after the effective date of
the Merger. The final amounts allocated to assets and liabilities could differ
significantly from the amounts presented in the unaudited pro forma condensed
combined consolidated balance sheet and related notes.

Note 4 -- Pro Forma Adjustments

      (a)   To record the conversion of the PharmAthene $11.8 million 8%
            convertible notes to the newly issued HAQ $12.5 million in 8%
            convertible notes with a 24 month maturity

      (b)   To record the cancellation of PharmAthene warrants convertible into
            Series C convertible redeemable preferred stock

      (c)   To record merger-related transaction fees of approximately $4.0
            million

      (d)   To record the exchange of PharmAthene classes of equity for HAQ
            common stock (See Note 1) and to record issuance of shares to HAQ
            HAQ



      Shares                                                PharmAthene Shares Prior to Merger         Common Stock
      --------------------------------------------------  ------------------------------------    -------------------
                                                                                              
      PharmAthene common stock                                               12,484,722 shares         621,343 shares
      PharmAthene Preferred stock                                            61,836,626 shares      10,720,218 shares
      Series C Exchangeable stock                                             2,591,654 shares         581,047 shares
                                                          ------------------------------------    -------------------
      Total                                                                  76,913,002 shares      11,922,608 shares


                                                                                         For the Six          For the Twelve
                                                                                         Months Ended          Months Ended
                                                                                        June 30, 2007        December 31, 2006
                                                                                        -------------      -------------------
                                                                                                              
      HAQ weighted average shares outstanding                                              11,650,000               11,650,000
      Issuance of shares in exchange for PharmAthene preferred and common stock            11,922,608               11,922,559
                                                                                        -------------      -------------------
      Total weighted average shares outstanding                                            23,572,608               23,572,559


      (e)   To record interest expense on the $12.5 million 8% convertible notes
            payable assuming a 24 month maturity and additional $26,662 for the
            six months ended June 30, 2007 and $461,323 for the twelve months
            ended December 31, 2006, respectively

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


                                      F-24


                 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
                       CONSOLIDATED FINANCIAL INFORMATION

Note 4 -- Pro Forma Adjustments - (continued)


(f)   Pro forma adjustments to additional paid in capital are an aggregate of the following

                                                                                                
      To transfer HAQ paid in capital to retained earnings                                         $       (55,818,948)
      To record the cancellation of derivative instruments                                                   2,631,511
      To record the exchange of PharmAthene preferred and common stock for HAQ common stock                 71,429,539
                                                                                                   -------------------
                                                                                                   $        18,242,102
(g)   Pro forma adjustments to accumulated deficit are an aggregate of the following

      To record the transfer of HAQ capital to retained earnings                                   $        55,818,948
      To record the transfer of redeemable common stock to retained earnings                                13,578,807
      To record transaction costs                                                                           (3,947,000)
      To record additional debt placement with the issuance of $12.5 million 8% convertible notes             (731,911)
      To record additional debt interest                                                                       (26,661)
      To record elimination of HAQ historic tax provision                                                       71,888
      To record purchase of common stock of stockholders not in favor
      of the Merger, includes interest income earned                                                       (13,775,248)
                                                                                                   $        50,988,823
                                                                                                   -------------------


(h)   To record the elimination of historical HAQ tax provision of $71,888 and
      $187,000 for the six months ended June 30, 2007 and the twelve months
      ended December 31, 2006, respectively

(i)   To record the elimination of historical PharmAthene accretion of
      redeemable convertible preferred stock

(j)   To record elimination of historical PharmAthene change in market value of
      derivative instruments


                                      F-25

EX-4.2

Exhibit 4.2

EX-10.14

                                                                   Exhibit 10.14

Employee Name:             Camut         Christopher        C.
                -----------------------------------------------------
                           Last             First           Middle

                              EMPLOYMENT AGREEMENT

      THIS EMPLOYMENT AGREEMENT ("Agreement"), dated as of December 22, 2006,
("Execution Date") is made by and between PharmAthene, Inc., a Delaware
corporation ("Company"), and the individual identified herein ("Employee").
Company and Employee may each be referred as a "Party" and collectively as the
"Parties" to this Agreement. The Parties hereby agree as follows:

                                   BASIC TERMS

1. Employment. Company hereby employs Employee, and Employee hereby accepts
Employment by Company. Employee shall initially serve as
Vice President and Chief Financial Officer of Company.
- ------------------------------------------
             Title of Employee

2. Commencement Date. January 4, 2007 ("Commencement Date").

3. Term. Employee's employment with Company shall begin on the Commencement Date
and shall end as provided in this Agreement. The period from the Commencement
Date to the effective date of termination of this Agreement is called the
"Term".

4. At Will Employment. Employee's employment with Company is at-will, meaning
that either Employee or Company may terminate Employee's employment at any time,
with or without cause, for any or no reason.

5. Duties. Employee shall have such powers and duties as are assigned or
delegated to Employee by Company. Employee will devote his entire business time,
attention, skill, and energy exclusively to the business of Company, will use
his best efforts to promote the success of Company's business, and will
cooperate fully with the Board of Directors in the advancement of the best
interests of Company.

6. Salary. Employee shall be paid an annual salary of $237,500, subject to
adjustment as provided below ("Salary"). The Salary is payable in equal periodic
installments according to Company's customary payroll practices, but no less
frequently than monthly. The Salary will be reviewed by Company not less
frequently than annually, and may be adjusted upward or downward in the sole
discretion of Company.

7. Benefits. Employee shall, during the Term, be permitted to participate in
such pension, profit-sharing, bonus, life insurance, hospitalization, major
medical, and other Company employee benefit plans that may be in effect from
time to time, to the extent Employee is eligible under the terms of those plans
(collectively, "Benefits"). Company reserves the right to modify, suspend or
discontinue any and all such Benefits at any time without recourse by Employee,
provided that any such modification, suspension or discontinuance shall also
apply generally to other employees of Company.

8. Leave; Holidays. Employee will be entitled to four (4) weeks paid vacation
each fiscal year in accordance with Company's vacation policies in effect for
its employees from time to time. Vacation must be taken by Employee at such time
or times as approved by Company. Employee will also be entitled to the paid
holidays and other paid leave set forth in Company's policies. Vacation days and
holidays during any fiscal year that are not used by Employee during such fiscal
year will be subject to any vacation days and holiday policy that Company may
have in place from time to time.

9. Standard Terms and Conditions. THE STANDARD TERMS AND CONDITIONS ATTACHED
HERETO AS EXHIBIT 1 SET FORTH CERTAIN DEFINITIONS TO CAPITALIZED TERMS,
EMPLOYEE'S REQUIREMENT TO PROVIDE ELIGIBILITY DOCUMENTS, AND OTHER IMPORTANT
PROVISIONS OF THIS AGREEMENT. SUCH STANDARD TERMS AND CONDITIONS AND ANY
EXHIBITS, APPENDIXES, SCHEDULES, RIDERS OR ADDENDA HERETO ARE INCORPORATED
HEREIN AND MADE A PART HEREOF BY THIS REFERENCE.



Employee Name:             Camut         Christopher        C.
                -----------------------------------------------------
                           Last             First           Middle

10. Additional Provisions. The following provisions also apply to this Agreement
(if blank, then there are NONE):

      (a) Stock Options. Employee shall be granted a total of 800,000 stock
options upon the Commencement Date, and such options shall be issued according
to Company's stock option plan with Company as approved and voted on by the
Board of Directors. These options will vest, subject to any stock option
agreement between Company and Employee, 25% after one year following the
Commencement Date ("First Anniversary Date"), and the remainder to vest on a
pro-rata monthly basis over the next 36 months following the First Anniversary
Date such that 100% of all such options shall be vested after four years from
the Commencement Date. Employee will be eligible to receive further stock
options, if any, as may be granted pursuant to any stock option plan the Board
of Directors may have adopted from time to time.

      (b) Cash Incentive. Employee will be eligible to participate in the cash
incentive program as approved by the Board of Directors from time to time, with
actual payment amount determined based upon Employee performance, as determined
at the sole discretion of the Company, and with the approval of the Board of
Directors, as a percentage of Employee's Salary, with your initial incentive to
be up to 30% of the then Salary. The minimum cash incentive for the first year
of employment will be $40,000, to be paid the first calendar quarter of 2008,
concurrent with other annual corporate cash incentive payments.

      (c) Severance. Subject to clauses (i) and (ii) below, Employee shall be
granted a severance of Twelve (12) months ("Severance Period") of Employee's
then current salary upon termination of employment, payable on a pro rata basis
over the Severance Period beginning the first day of the first full calendar
month following the effective date of Employee's termination, and payable in
consideration for and only after Employee executes a Separation Agreement and
General Release under terms specified by Company.

      (i) Employee shall not receive severance if Employee voluntarily resigns
employment.

      (ii) Employee shall not receive severance if Employee is terminated for:
(1) failure to perform his or her obligations or duties, or (2) any dishonesty
detrimental to Company, or other act or omission by Employee detrimental to
Company's business, financial condition, reputation or good will, or damaging to
its relationships with its employees, business partners, or other third parties,
including, without limitation: (A) any habitual use of alcohol or illegal drugs
such as to interfere with the performance of Employee's obligations hereunder;
and (B) any conviction of a felony or of any crime involving fraud,
embezzlement, misappropriation, or theft.

BY EXECUTING THIS AGREEMENT BELOW, THE PARTIES INDICATE THAT THEY HAVE READ AND
UNDERSTOOD ALL TERMS AND CONDITIONS HEREOF AND AGREE TO BE BOUND LEGALLY BY
THEM, ALL AS OF THE EXECUTION DATE.

COMPANY                                         EMPLOYEE

PHARMATHENE, INC.

By:                                             /s/ Christopher C. Camut
    -----------------------------               --------------------------------
Name: David P. Wright                           Name: Christopher C. Camut
Title: President & CEO
175 Admiral Cochrane Drive, Suite 400
Annapolis, MD 21401
Telephone: 410-571-8920                         Telephone:
Facsimile: 410-571-8927                         Facsimile:
E-mail:                                         E-mail:

ATTACHMENTS

Exhibit 1                              -      Standard Terms and Conditions
Schedule 2(d) to Exhibit 1             -      Prior Works Or Inventions

                                     2 of 7


Employee Name:             Camut         Christopher        C.
                -----------------------------------------------------
                           Last             First           Middle

                                    EXHIBIT 1

                          STANDARD TERMS AND CONDITIONS

1. Tax Matters; Expense Reimbursement. Payments to Employee of all compensation
contemplated under this Agreement shall be subject to all applicable legal
requirements with respect to the withholding of taxes. Employee shall be
entitled to reimbursement by Company for all direct out-of-pocket expenditures
made by him or her on Company's behalf in the performance of his or her services
under this Agreement, subject to any reasonable record keeping, reporting and
other requirements imposed from time to time by Company.

2. Confidentiality.

      (a) Obligations. Employee shall preserve and protect the confidentiality
of Confidential Information both during and after his or her employment with or
by Company. In addition, Employee shall not to, at any time during the Term or
thereafter, (i) disclose or disseminate Confidential Information to any third
party, including without limitation employees or consultants of Company without
a legitimate business need to know, (ii) remove Confidential Information from
Company's premises or make copies of Confidential Information, except as
required to perform Employee's job, or (iii) use Confidential Information for
Employee's own benefit or for the benefit of any third party. Employee shall
also take all actions necessary to avoid unauthorized disclosure and otherwise
to maintain the confidential or proprietary nature of such Confidential
Information. If Employee is not certain whether or not information is
confidential, Employee will treat that information as Confidential Information
until Employee has verification from Company's Personnel Officer that the
information is not Confidential Information.

      (b) Exceptions. The obligations in this Exhibit 1 - Section 2 do not apply
to any information that Employee can establish (i) has become publicly known
without a breach of this Agreement by Employee or a third party's breach of an
agreement to maintain the confidentiality of the information or (ii) was
developed by Employee prior to the Execution Date, and prior to the date any
earlier Confidentiality Agreement of the Company was signed, if the date of
development can be established by documentary evidence.

      (c) Former Employer Information. Employee will not, during the Term, (i)
improperly use or disclose any proprietary information or trade secrets of any
former or current employer or any other person or entity or (ii) bring onto the
premises of Company any unpublished document or proprietary information
belonging to any such employer, person or entity unless consented to in writing
by such employer, person or entity.

      (d) Inventions and Works Retained and Licensed. Employee attaches hereto,
as "Schedule 2(d) to Exhibit 1: Prior Works and Inventions", a list describing
all Inventions, original works of authorship, developments, improvements, and
trade secrets which were made by Employee prior to his or her employment with or
by Company (collectively "Prior Works or Inventions"), which belong to Employee,
which relate to Company's business, products, or research and development, and
which are not assigned to Company hereunder, or, if no such list is attached or
such list is blank, Employee represents that there are no such Prior Works or
Inventions. If, in the course of employment with or by Company, Employee
incorporates into a Company product, process or machine a Prior Work or
Invention owned by Employee or in which Employee has an interest, Company is
hereby granted and shall have a nonexclusive, royalty-free, assignable,
irrevocable, perpetual, worldwide license to make, have made, modify, use and
sell such Prior Work or Invention as part of or in connection with such product,
process or machine.

      (e) Ownership of Works. Company owns all right, title and interest,
including without limitation trade secrets, patents and copyrights, in the
following works that Employee creates, makes, conceives or reduces to practice,
solely or jointly (i) works that are created using Company's facilities,
supplies, information, trade secrets or time, (ii) works that relate directly or
indirectly to or arise out of the actual or proposed business of Company,
including, without limitation the research and development activities of
Company, (iii) works that relate directly or indirectly to or arise out of any
task assigned to Employee or work Employee performs for Company or (iv) works
that are based on Confidential Information (collectively "Works"). Because these
Works will inevitably be based upon or somehow involve Company's business,
products, services or methodologies, Employee agrees that the Works will belong
to the Company even if Employee creates, makes, conceives or reduces them to
practice on his or her own time, using his or her own equipment, on Company's
premises or elsewhere or after termination of Employee's employment with or by
Company. The Works belonging to Company, include, without limitation program
code and documentation. Employee will promptly provide full written disclosure
to an officer of Company of any Works Employee creates, makes, conceives or
reduces to practice, solely or jointly. To the extent that the Works do not
qualify as works made for hire under U.S. copyright law, Employee irrevocably
assigns to Company the ownership of, and all rights of copyright in, the Works.
Company will have the right to hold in its own name all rights in the Works,
including without limitation all rights of copyright, trade secrets and
trademark. Employee also waives all claims to moral rights in any Works.
Employee acknowledges and agrees that any and all patents, patent applications
or other intellectual property rights relating to the Works are to be the
exclusive property of Company.

      (f) Inventions; Ownership. (i) Employee shall irrevocably assign to
Company Employee's entire right, title and interest in any Invention. Employee
will promptly make full written disclosure to an officer of Company of any
Inventions Employee creates, makes, conceives or reduces to practice, solely or
jointly. Employee also waives all claims to moral rights in any Inventions.
Employee acknowledges and agrees that any and all patents, patent applications
or other intellectual property rights relating to the Inventions are the
exclusive property of Company.

      (ii) Employee shall cooperate fully with Company, both during and after
Employee's employment with or by Company, with respect to the procurement,
maintenance and enforcement of copyrights, patents and other intellectual
property rights (both in the United States and foreign countries) relating to
Works and/or Inventions. Employee shall execute and deliver all papers,
including, without limitation, copyright applications, patent applications,
declarations, oaths, formal assignments, assignments of priority rights, and
powers of attorney, which Company may deem necessary or desirable to protect its
rights and interests in any Works and/or Inventions, and if Company is unable,
after reasonable effort, to secure Employee's signature on any such papers, any
executive officer of Company shall be entitled to execute any such papers as
Employee's agent and attorney-in-fact. Employee hereby irrevocably designates
and appoints each executive officer of Company as Employee's agent and attorney-


                                     3 of 7


Employee Name:             Camut         Christopher        C.
                -----------------------------------------------------
                           Last             First           Middle

in-fact to execute any such papers on Employee's behalf, and to take any and all
actions as Company may deem necessary or desirable to protect its rights and
interests in any Works and/or Inventions, under the conditions described in the
preceding sentence.

      (g) Maintenance of Records. Employee shall keep and maintain adequate and
current written records of all Works and Inventions made by Employee (solely or
jointly with others) during the Term with or by Company. The records will be in
the form of notes, sketches, drawings, and any other format that may be
specified by Company. The records will be available to and remain the sole
property of Company at all times.

      (h) Return of Confidential Information. Employee shall return to Company
all Confidential Information in Employee's possession, custody or control
immediately upon Employee's termination from Company, or earlier if Company
requests.

      (i) Notification of New Employer. In the event Employee leaves the employ
of Company or ceases to serve as a consultant to Company, Employee hereby grants
consent to notification by Company to Employee's new employer about Employee's
rights and obligations under this Agreement.

3. Noncompetition; Non-solicitation of Employees.

      (a) Noncompetition. (i) Company is engaged an a unique and specialized
industry, and faces competition on a worldwide basis. Employee, through his or
her association with Company as an employee or consultant, will acquire a
considerable amount of knowledge and goodwill with respect to the business of
Company, which knowledge and goodwill are extremely valuable to Company and
which would be extremely detrimental to Company if used by Employee to compete
with Company. It is, therefore, understood and agreed by Employee and Company
that, because of the nature of the business Company, it is necessary to afford
fair protection to Company from such competition by Employee. Consequently,
while Employee is employed with or by Company and for a period of 12 months
after termination of such employment (for any reason whatsoever, whether
voluntary or involuntarily), Employee will not, whether alone or as a partner,
officer, director, consultant, agent, employee or stockholder of any company or
their commercial enterprise, directly or indirectly engage in any business or
other activity anywhere in the world which is competitive with, or render
services to any firm or business organization which competes with, Company in
the business of research, discovery and/or development of human therapeutics and
vaccines for infectious diseases that are being actively researched, discovered
or developed by Company at the time of termination of such employment. The
foregoing prohibition shall not prevent Employee's employment or engagement
after termination if such employment or engagement, in any capacity, does not
involve work or matters related to the business of research, discovery and/or
development of human therapeutics and vaccines for infectious diseases that are
being actively researched, discovered or developed by Company at the time of
termination of Employee's employment.

      (ii) Nothing in Exhibit 1 - Section 3, however, will prevent Employee from
engaging in additional activities in connection with personal investments and
community affairs that are not inconsistent with Employee's duties under this
Agreement. Employee shall be permitted to own securities of a public company not
in excess of five percent (5%) of any class of such securities and to own stock
partnership interests or other securities of any entity not in excess of five
percent (5%) of any class of such securities and such ownership shall not be
considered to be competition with Company.

      (b) Reasonableness. Company and Employee agree and acknowledge that the
noncompetition clause described in Exhibit 1 - Section 3(a) above is made in
consideration of substantial compensation payable under this Agreement. In
consequence of this Company and Employee agree and acknowledge that the
duration, scope, and geographic area included in such covenant not to compete
are fair, reasonable, necessary, and appropriate, and will not prevent Employee
from engaging in profitable business activities or employment.

      (c) Non-Solicitation. During and for 12 months after termination of
Employee's employment for any reason, Employee shall not, directly or indirectly
solicit, recruit or hire any employee of Company to work for a third party which
competes with Company in the business of research, discovery and/or development
of human therapeutics and vaccines for infectious diseases that are being
actively researched, discovered or developed by Company at the time of
termination, or engage in any activity that would cause any employee to violate
any agreement with Company.

4. Representations and Warranties. Employee represents and warrants that (a)
Employee is able to perform the duties of his or her position, (b) the execution
and delivery of this Agreement, and the performance of Employee's duties and
obligations hereunder, will not, with or without the giving of notice or the
passage of time, or both, (i) conflict with, result in the breach of any
provisions of or the termination of, or constitute a default under, any
agreements or understandings between Employee and other persons or companies, or
(ii) violate any judgment, writ, injunction, or order of any court, arbitrator,
or governmental agency applicable to Employee, and (c) all information provided
by Employee to Company is true and accurate.

5. Severability. If any term or other provision of this Agreement is determined
by any arbitrator or court of competent jurisdiction to be invalid, illegal, or
unenforceable in whole or in part by reason of any applicable law or public
policy, and such determination becomes final and nonappealable, such term or
other provision shall remain in full force and effect to the fullest extent
permitted by Law, and all other terms and provisions shall remain in full force
and effect in their entirety. Without limiting the generality of the foregoing,
if the duration, scope, or area of restrictions set forth in Exhibit 1 - Section
3 are determined by arbitrator or any court of competent jurisdiction to be
invalid, illegal, or unenforceable in whole or in part by reason of any
applicable Law or public policy now or hereafter existing, such restrictions
shall be interpreted, modified, or rewritten to include as much of such
duration, scope or areas as will render such restrictions valid and enforceable.

6. Assignment. Employee shall not assign all or any part of Employee's rights or
delegate its obligations hereunder by operation of Law or otherwise without
Company's express written consent (which consent may be granted or withheld in
Company's sole and absolute discretion).

7. Entire Agreement; Amendment; Waivers.

      (a) Entire Agreement. This Agreement constitutes the entire Agreement
between the Parties with respect to the subject matter hereof, and supersedes
all previous agreements, understandings, commitments or representations
concerning the subject matter contained in this Agreement. Each Party
acknowledges that the other Party has not made any representations other than
those that are contained herein.


                                     4 of 7


Employee Name:             Camut         Christopher        C.
                -----------------------------------------------------
                           Last             First           Middle

      (b) Amendments; Waiver. Except for amendments or modifications in
accordance with certain provisions of this Agreement, this Agreement may not be
amended or modified in any way, except by a writing signed by an authorized
officer of Company and by Employee, and none of its provisions may be waived,
except by a written waiver signed by the waiving Party. No failure to act by
Company will waive any right contained in this Agreement. Any waiver by Company
must be in writing and signed by an officer of Company to be effective.

8. Successors and Assigns: No Third-Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the Parties and their respective
successors and permitted assigns. Nothing herein, whether express or implied, is
intended to or shall confer upon any other Person any legal or equitable right,
power, or remedy of any kind, nature, or description whatsoever under or by
reason hereof.

9. Dispute Resolution.

      (a) Arbitration. Any and all disputes or claims arising during the course
of employment, or arising out of the termination of employment, or arising in
the interpretation of this Agreement, between Employee and Company which cannot
be resolved through good faith negotiation, shall be resolved in accordance with
the provisions of this Section by mandatory arbitration, provided, however, that
the arbitration requirement shall not apply to Company seeking damages or
injunctive relief described in Exhibit 1 - Section 9(c), if such relief is
available under applicable law. Except as otherwise provided in this Agreement,
if any controversy should arise between the Parties in as a result of Employee's
employment relationship with Company, or the performance, interpretation or
application of this Agreement, either Party may serve upon the other a written
notice stating that such Party desires to have such controversy reviewed by a
board of three arbitrators and naming the person whom such Party has designated
to act as an arbitrator. Within 10 days after receipt of such notice, the other
Party shall designate an individual to act as arbitrator and shall notify the
Party requesting arbitration of such designation and the name of the individual
so designated. The two arbitrators so designated shall promptly select a third
arbitrator, and if they are not able to agree on such third arbitrator within 10
days, then either arbitrator, on 10 days notice in writing to the other, or both
arbitrators, shall apply to the American Arbitration Association to designate
and appoint such third arbitrator. If the Party upon whom a written request for
arbitration is served shall fail to designate its arbitrator within 10 days
after receipt of such notice, then the arbitrator designated by the Party
requesting arbitration shall act as the sole arbitrator and shall be deemed to
be the single, mutually approved arbitrator to resolve such controversy. All
documents, testimony, and records relating to any such arbitration will be
maintained in secrecy and will be available for inspection by Company, Employee
and their representative attorneys and experts, who will agree, in advance and
in writing, to receive and maintain all such information in secrecy, except as
may be limited by them in writing.

      (b) Binding Nature. The decision and award of a majority of the
arbitrators, or of such sole arbitrator, shall be binding upon both Employee and
Company and shall be enforceable in any court of competent jurisdiction. Such
decision and award may allocate the costs of such arbitration to one of the
Parties or disproportionately between the Parties. The arbitration shall be
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association.

      (c) Damages; Injunctive Relief. (i) Employee's obligations under this
Agreement have a unique and substantial value to Company and Employee remains
obligated even if he or she voluntarily or involuntarily leaves Company's
employment. Employee understands that if Employee violates this Agreement during
or after his or her employment Company may be able to recover monetary damages
from Employee and/or the other relief described below.

      (ii) A violation or even a threatened violation of this Agreement is
likely to result in irreparable harm to Company and monetary damages alone would
not completely compensate Company for the harm. Accordingly, Company may obtain
an injunction prohibiting Employee from violating Section 2 and Section 3 of
Exhibit 1 of this Agreement, an order requiring Employee to render specific
performance of the Agreement, and/or other appropriate equitable remedies.

      (iii) If an arbitrator or court determines that Employee has breached or
attempted or threatened to breach Section 2 or Section 3 of Exhibit 1 of this
Agreement, Employee acknowledges that such a breach would cause irreparable harm
to Company, and Employee consents to the granting of an injunction restraining
Employee from further breaches or attempted or threatened breaches of this
Agreement, compelling Employee to comply with this Agreement, and/or prescribing
other equitable remedies.

10. Governing Law. This Agreement, and any other disputes or claims arising out
of Employee's employment, including all arbitrated disputes, shall be governed
by, and construed and enforced in accordance with, the laws of the State of
Maryland, without regard to its conflict of laws provisions. Suit to enforce any
provision of this Agreement or to obtain any remedy with respect hereto may be
brought in a court of the State of Maryland for this purpose, Employee expressly
consents to the jurisdiction of said courts.

11. Notices. All notices and other communications from one Party to the other
shall be in writing and shall be deemed received upon (a) actual receipt when
personally delivered, (b) electronic confirmation of receipt if sent by
electronic mail, (c) electronic confirmation of receipt if sent by facsimile,
(d) expiration of the 5th business day after being deposited in the United
States mails, postage prepaid, certified or registered mail or (e) expiration of
one business day after being deposited during the regular business hours for
next-day delivery and prepaid for overnight delivery with a national overnight
courier company, addressed to the other Party as set forth on the signature
page. Each Party may change its address by giving the other Party notice thereof
in conformity with this Section.

12. Definitions. For purposes of this Agreement:

      (a) "Agreement" means the agreement, and each such exhibit, appendix,
schedule, rider or addendum attached thereto as they may be amended, restated,
supplemented or modified from time to time.

      (b) "Confidential Information" means confidential, proprietary or trade
secret information relating to Company's past, present or future (i) products,
processes, formulas, patterns, compositions, compounds, projects,
specifications, know how, research data, clinical data, personnel data,
compilations, programs, devices, methods, techniques, inventions, software, and


                                     5 of 7


Employee Name:             Camut         Christopher        C.
                -----------------------------------------------------
                           Last             First           Middle

improvements thereto, (ii) research and development activities, (iii) designs
and technical data, (iv) marketing or business development activities, including
without limitation prospective or actual bids or proposals, pricing information
and financial information, (v) customers or suppliers or (vi) other
administrative, management, planning, financial, marketing, purchasing or
manufacturing activities. All of this type of information, whether it belongs to
Company or was provided to Company by a third party with the understanding that
it be kept confidential, and any documents, diskettes or other storage media, or
other materials or items containing this type of information, are proprietary
and confidential to Company.

      (c) "Invention" means any invention, modification, design, program code,
software, documentation, formula, data, know how, technique, process, method,
device, discovery, improvement, developments, or works of authorship and all
related patents, patent applications, copyrights and copyright applications
whether patentable or not, created, made, conceived or reduced to practice,
solely or jointly by Employee whether or not during normal working hours or on
Employee's own time, using Employee's own equipment, on the premises of Company
or elsewhere, or after termination of Employee's employment with or by Company
that (i) is created using Company's facilities, supplies, information, trade
secrets or time, (ii) relates directly or indirectly to or arises out of the
actual or proposed business, including without limitation the research and
development activities, of Company, (iii) relates directly or indirectly to or
arises out of any task assigned to Employee or work Employee performs for
Company or (iv) is based on Confidential Information.

      (d) "Law" means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.

      (e) "Person" means any individual, partnership, firm, corporation, limited
liability company, joint venture, association, trust, unincorporated
organization, or other entity.

13. Indemnification. Employee shall indemnify and hold Company harmless from:

      (a) any and all damages, claims, costs and expenses based on, or arising
from, the breach of any agreement or understanding between Employee and another
person or company, and

      (b) Employee's use or disclosure of any Confidential Information or trade
secrets Employee obtained from sources other than Company.

14. Miscellaneous Provisions.

      (a) Construction. Each Party has participated equally in the preparation
and negotiation of this Agreement, and each Party hereby unconditionally and
irrevocably waives to the fullest extent permitted by law any rule of
interpretation or construction requiring that this Agreement be interpreted or
construed against the drafting Party.

      (b) Order of Precedence. In the event of any conflict between a provision
or provisions set forth under the Basic Terms heading in this Agreement and any
exhibit, appendix, schedule, rider or addendum, the provision or provisions set
forth under such Basic Terms shall control unless the exhibit, appendix,
schedule, rider or addendum specifically provides otherwise.

      (c) Headings. The descriptive headings contained herein are for
convenience of reference only and shall not affect in any way the meaning,
construction, or interpretation of any term or provision hereof.

      (d) Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties in separate counterparts, each of
which when executed shall be deemed an original, and all of which taken together
shall constitute one and the same Agreement with the same effect as if such
signatures were upon the same document. Delivery of an executed counterpart
hereof via facsimile shall be as effective as delivery of a manually executed
counterpart hereof.

      (e) Eligibility Documents. Employee shall provide Company with true and
correct documents ("Eligibility Documents") identifying Employee's eligibility
to work in the United States (see back of 1-9 form for list of acceptable
documents) on or before the Commencement Date. Employee will need these
documents to begin employment.


                                     6 of 7


Employee Name:             Camut         Christopher        C.
                -----------------------------------------------------
                           Last             First           Middle

                           SCHEDULE 2(d) TO EXHIBIT 1

                            PRIOR WORKS OR INVENTIONS

The following are Employee's Prior Works Or Inventions as defined in Section
3(d) of Exhibit 1 of this Agreement. If blank, then there are NONE.


                                     7 of 7

EX-10.15

                                                                   Exhibit 10.15

Employee Name:             Cook           Francesca         Marie
                -----------------------------------------------------
                           Last             First           Middle

                              EMPLOYMENT AGREEMENT

      THIS EMPLOYMENT AGREEMENT ("Agreement"), dated as of November 3, 2003,
("Execution Date") is made by and between PharmAthene, Inc., a Delaware
corporation ("Company"), and the individual identified herein ("Employee").
Company and Employee may each be referred as a "Party" and collectively as the
"Parties" to this Agreement. The Parties hereby agree as follows:

                                   BASIC TERMS

1. Employment. Company hereby employs Employee, and Employee hereby accepts
Employment by Company. Employee shall initially serve as
Vice President Policy & Government Affairs of Company.
- ------------------------------------------
             Title of Employee

2. Commencement Date. October 14, 2003 ("Commencement Date").

3. Term. Employee's employment with Company shall begin on the Commencement Date
and shall end as provided in this Agreement. The period from the Commencement
Date to the effective date of termination of this Agreement is called the
"Term".

4. At Will Employment. Employee's employment with Company is at-will, meaning
that either Employee or Company may terminate Employee's employment at any time,
with or without cause, for any or no reason.

5. Duties. Employee shall have such powers and duties as are assigned or
delegated to Employee by Company. Employee will devote his entire business time,
attention, skill, and energy exclusively to the business of Company, will use
his best efforts to promote the success of Company's business, and will
cooperate fully with the Board of Directors in the advancement of the best
interests of Company.

6. Salary. Employee shall be paid an annual salary of $150,000, subject to
adjustment as provided below ("Salary"). The Salary is payable in equal periodic
installments according to Company's customary payroll practices, but no less
frequently than monthly. The Salary will be reviewed by Company not less
frequently than annually, and may be adjusted upward or downward in the sole
discretion of Company.

7. Benefits. Employee shall, during the Term, be permitted to participate in
such pension, profit-sharing, bonus, life insurance, hospitalization, major
medical, and other Company employee benefit plans that may be in effect from
time to time, to the extent Employee is eligible under the terms of those plans
(collectively, "Benefits"). Company reserves the right to modify, suspend or
discontinue any and all such Benefits at any time without recourse by Employee,
provided that any such modification, suspension or discontinuance shall also
apply generally to other employees of Company.

8. Leave; Holidays. Employee will be entitled to 4 weeks paid vacation each
fiscal year in accordance with Company's vacation policies in effect for its
employees from time to time. Vacation must be taken by Employee at such time or
times as approved by Company. Employee will also be entitled to the paid
holidays and other paid leave set forth in Company's policies. Vacation days and
holidays during any fiscal year that are not used by Employee during such fiscal
year will be subject to any vacation days and holiday policy that Company may
have in place from time to time.

9. Standard Terms and Conditions. THE STANDARD TERMS AND CONDITIONS ATTACHED
HERETO AS EXHIBIT 1 SET FORTH CERTAIN DEFINITIONS TO CAPITALIZED TERMS,
EMPLOYEE'S REQUIREMENT TO PROVIDE ELIGIBILITY DOCUMENTS, AND OTHER IMPORTANT
PROVISIONS OF THIS AGREEMENT. SUCH STANDARD TERMS AND CONDITIONS AND ANY
EXHIBITS, APPENDIXES, SCHEDULES, RIDERS OR ADDENDA HERETO ARE INCORPORATED
HEREIN AND MADE A PART HEREOF BY THIS REFERENCE.



Employee Name:             Cook           Francesca         Marie
                -----------------------------------------------------
                           Last             First           Middle

10. Additional Provisions. The following provisions also apply to this Agreement
(if blank, then there are NONE):

      (a) Stock Options. Employee shall be granted a total of 100,000 stock
options upon the Commencement Date, and such options shall be issued according
to Company's stock option plan with Company as approved and voted on by the
Board of Directors. These options will vest, subject to any stock option
agreement between Company and Employee, 25% after one year following the
Commencement Date ("First Anniversary Date"), and the remainder to vest on a
pro-rata monthly basis over the next 36 months following the First Anniversary
Date such that 100% of all such options shall be vested after four years from
the Commencement Date. Employee will be eligible to receive further stock
options, if any, as may be granted pursuant to any stock option plan the Board
of Directors may have adopted from time to time.

      (b) Severance. Subject to clauses (i) and (ii) below, Employee shall be
granted a severance of 6 months ("Severance Period") of Employee's then current
salary upon termination of employment, payable on a pro rata basis over the
Severance Period beginning the first day of the first full calendar month
following the effective date of Employee's termination, and payable in
consideration for and only after Employee executes a Separation Agreement and
General Release under terms specified by Company.

      (i) Employee shall not receive severance if Employee voluntarily resigns
employment.

      (ii) Employee shall not receive severance if Employee is terminated for:
(1) failure to perform his or her obligations or duties, or (2) any dishonesty
detrimental to Company, or other act or omission by Employee detrimental to
Company's business, financial condition, reputation or good will, or damaging to
its relationships with its employees, business partners, or other third parties,
including, without limitation: (A) any habitual use of alcohol or illegal drugs
such as to interfere with the performance of Employee's obligations hereunder;
and (B) any conviction of a felony or of any crime involving fraud,
embezzlement, misappropriation, or theft.

BY EXECUTING THIS AGREEMENT BELOW, THE PARTIES INDICATE THAT THEY HAVE READ AND
UNDERSTOOD ALL TERMS AND CONDITIONS HEREOF AND AGREE TO BE BOUND LEGALLY BY
THEM, ALL AS OF THE EXECUTION DATE.

COMPANY                                         EMPLOYEE

PHARMATHENE, INC.

By: /s/ David P. Wright                         /s/ Francesca M. Cook
    ------------------------------------        --------------------------------
Name: David P. Wright                           Name: Francesca Cook
Title: President & CEO
175 Admiral Cochrane Drive, Suite 400
Annapolis, MD 21401
Telephone: 410-571-8920                         Telephone:
Facsimile: 410-571-8927                         Facsimile:
E-mail:                                         E-mail:

ATTACHMENTS

Exhibit 1                              -      Standard Terms and Conditions
Schedule 2(d) to Exhibit 1             -      Prior Works Or Inventions


                                     2 of 7


Employee Name:             Cook           Francesca         Marie
                -----------------------------------------------------
                           Last             First           Middle

                                    EXHIBIT 1

                          STANDARD TERMS AND CONDITIONS

1. Tax Matters; Expense Reimbursement. Payments to Employee of all compensation
contemplated under this Agreement shall be subject to all applicable legal
requirements with respect to the withholding of taxes. Employee shall be
entitled to reimbursement by Company for all direct out-of-pocket expenditures
made by him or her on Company's behalf in the performance of his or her services
under this Agreement, subject to any reasonable record keeping, reporting and
other requirements imposed from time to time by Company.

2. Confidentiality.

      (a) Obligations. Employee shall preserve and protect the confidentiality
of Confidential Information both during and after his or her employment with or
by Company. In addition, Employee shall not to, at any time during the Term or
thereafter, (i) disclose or disseminate Confidential Information to any third
party, including without limitation employees or consultants of Company without
a legitimate business need to know, (ii) remove Confidential Information from
Company's premises or make copies of Confidential Information, except as
required to perform Employee's job, or (iii) use Confidential Information for
Employee's own benefit or for the benefit of any third party. Employee shall
also take all actions necessary to avoid unauthorized disclosure and otherwise
to maintain the confidential or proprietary nature of such Confidential
Information. If Employee is not certain whether or not information is
confidential, Employee will treat that information as Confidential Information
until Employee has verification from Company's Personnel Officer that the
information is not Confidential Information.

      (b) Exceptions. The obligations in this Exhibit 1 - Section 2 do not apply
to any information that Employee can establish (i) has become publicly known
without a breach of this Agreement by Employee or a third party's breach of an
agreement to maintain the confidentiality of the information or (ii) was
developed by Employee prior to the Execution Date, and prior to the date any
earlier Confidentiality Agreement of the Company was signed, if the date of
development can be established by documentary evidence.

      (c) Former Employer Information. Employee will not, during the Term, (i)
improperly use or disclose any proprietary information or trade secrets of any
former or current employer or any other person or entity or (ii) bring onto the
premises of Company any unpublished document or proprietary information
belonging to any such employer, person or entity unless consented to in writing
by such employer, person or entity.

      (d) Inventions and Works Retained and Licensed. Employee attaches hereto,
as "Schedule 2(d) to Exhibit 1: Prior Works and Inventions", a list describing
all Inventions, original works of authorship, developments, improvements, and
trade secrets which were made by Employee prior to his or her employment with or
by Company (collectively "Prior Works or Inventions"), which belong to Employee,
which relate to Company's business, products, or research and development, and
which are not assigned to Company hereunder, or, if no such list is attached or
such list is blank, Employee represents that there are no such Prior Works or
Inventions. If, in the course of employment with or by Company, Employee
incorporates into a Company product, process or machine a Prior Work or
Invention owned by Employee or in which Employee has an interest, Company is
hereby granted and shall have a nonexclusive, royalty-free, assignable,
irrevocable, perpetual, worldwide license to make, have made, modify, use and
sell such Prior Work or Invention as part of or in connection with such product,
process or machine.

      (e) Ownership of Works. Company owns all right, title and interest,
including without limitation trade secrets, patents and copyrights, in the
following works that Employee creates, makes, conceives or reduces to practice,
solely or jointly (i) works that are created using Company's facilities,
supplies, information, trade secrets or time, (ii) works that relate directly or
indirectly to or arise out of the actual or proposed business of Company,
including, without limitation the research and development activities of
Company, (iii) works that relate directly or indirectly to or arise out of any
task assigned to Employee or work Employee performs for Company or (iv) works
that are based on Confidential Information (collectively "Works"). Because these
Works will inevitably be based upon or somehow involve Company's business,
products, services or methodologies, Employee agrees that the Works will belong
to the Company even if Employee creates, makes, conceives or reduces them to
practice on his or her own time, using his or her own equipment, on Company's
premises or elsewhere or after termination of Employee's employment with or by
Company. The Works belonging to Company, include, without limitation program
code and documentation. Employee will promptly provide full written disclosure
to an officer of Company of any Works Employee creates, makes, conceives or
reduces to practice, solely or jointly. To the extent that the Works do not
qualify as works made for hire under U.S. copyright law, Employee irrevocably
assigns to Company the ownership of, and all rights of copyright in, the Works.
Company will have the right to hold in its own name all rights in the Works,
including without limitation all rights of copyright, trade secrets and
trademark. Employee also waives all claims to moral rights in any Works.
Employee acknowledges and agrees that any and all patents, patent applications
or other intellectual property rights relating to the Works are to be the
exclusive property of Company.

      (f) Inventions; Ownership. (i) Employee shall irrevocably assign to
Company Employee's entire right, title and interest in any Invention. Employee
will promptly make full written disclosure to an officer of Company of any
Inventions Employee creates, makes, conceives or reduces to practice, solely or
jointly. Employee also waives all claims to moral rights in any Inventions.
Employee acknowledges and agrees that any and all patents, patent applications
or other intellectual property rights relating to the Inventions are the
exclusive property of Company.

      (ii) Employee shall cooperate fully with Company, both during and after
Employee's employment with or by Company, with respect to the procurement,
maintenance and enforcement of copyrights, patents and other intellectual
property rights (both in the United States and foreign countries) relating to
Works and/or Inventions. Employee shall execute and deliver all papers,
including, without limitation, copyright applications, patent applications,
declarations, oaths, formal assignments, assignments of priority rights, and
powers of attorney, which Company may deem necessary or desirable to protect its
rights and interests in any Works and/or Inventions, and if Company is unable,
after reasonable effort, to secure Employee's signature on any such papers, any
executive officer of Company shall be entitled to execute any such papers as
Employee's agent and attorney-in-fact. Employee hereby irrevocably designates
and appoints each executive officer of Company as Employee's agent and attorney-


                                     3 of 7


Employee Name:             Cook           Francesca         Marie
                -----------------------------------------------------
                           Last             First           Middle

in-fact to execute any such papers on Employee's behalf, and to take any and all
actions as Company may deem necessary or desirable to protect its rights and
interests in any Works and/or Inventions, under the conditions described in the
preceding sentence.

      (g) Maintenance of Records. Employee shall keep and maintain adequate and
current written records of all Works and Inventions made by Employee (solely or
jointly with others) during the Term with or by Company. The records will be in
the form of notes, sketches, drawings, and any other format that may be
specified by Company. The records will be available to and remain the sole
property of Company at all times.

      (h) Return of Confidential Information. Employee shall return to Company
all Confidential Information in Employee's possession, custody or control
immediately upon Employee's termination from Company, or earlier if Company
requests.

      (i) Notification of New Employer. In the event Employee leaves the employ
of Company or ceases to serve as a consultant to Company, Employee hereby grants
consent to notification by Company to Employee's new employer about Employee's
rights and obligations under this Agreement.

3. Noncompetition; Non-solicitation of Employees.

      (a) Noncompetition. (i) Company is engaged an a unique and specialized
industry, and faces competition on a worldwide basis. Employee, through his or
her association with Company as an employee or consultant, will acquire a
considerable amount of knowledge and goodwill with respect to the business of
Company, which knowledge and goodwill are extremely valuable to Company and
which would be extremely detrimental to Company if used by Employee to compete
with Company. It is, therefore, understood and agreed by Employee and Company
that, because of the nature of the business Company, it is necessary to afford
fair protection to Company from such competition by Employee. Consequently,
while Employee is employed with or by Company and for a period of 12 months
after termination of such employment (for any reason whatsoever, whether
voluntary or involuntarily), Employee will not, whether alone or as a partner,
officer, director, consultant, agent, employee or stockholder of any company or
their commercial enterprise, directly or indirectly engage in any business or
other activity anywhere in the world which is competitive with, or render
services to any firm or business organization which competes with, Company in
the business of research, discovery and/or development of human therapeutics and
vaccines for infectious diseases that are being actively researched, discovered
or developed by Company at the time of termination of such employment. The
foregoing prohibition shall not prevent Employee's employment or engagement
after termination if such employment or engagement, in any capacity, does not
involve work or matters related to the business of research, discovery and/or
development of human therapeutics and vaccines for infectious diseases that are
being actively researched, discovered or developed by Company at the time of
termination of Employee's employment.

      (ii) Nothing in Exhibit 1 - Section 3, however, will prevent Employee from
engaging in additional activities in connection with personal investments and
community affairs that are not inconsistent with Employee's duties under this
Agreement. Employee shall be permitted to own securities of a public company not
in excess of five percent (5%) of any class of such securities and to own stock
partnership interests or other securities of any entity not in excess of five
percent (5%) of any class of such securities and such ownership shall not be
considered to be competition with Company.

      (b) Reasonableness. Company and Employee agree and acknowledge that the
noncompetition clause described in Exhibit 1 - Section 3(a) above is made in
consideration of substantial compensation payable under this Agreement. In
consequence of this Company and Employee agree and acknowledge that the
duration, scope, and geographic area included in such covenant not to compete
are fair, reasonable, necessary, and appropriate, and will not prevent Employee
from engaging in profitable business activities or employment.

      (c) Non-Solicitation. During and for 12 months after termination of
Employee's employment for any reason, Employee shall not, directly or indirectly
solicit, recruit or hire any employee of Company to work for a third party which
competes with Company in the business of research, discovery and/or development
of human therapeutics and vaccines for infectious diseases that are being
actively researched, discovered or developed by Company at the time of
termination, or engage in any activity that would cause any employee to violate
any agreement with Company.

4. Representations and Warranties. Employee represents and warrants that (a)
Employee is able to perform the duties of his or her position, (b) the execution
and delivery of this Agreement, and the performance of Employee's duties and
obligations hereunder, will not, with or without the giving of notice or the
passage of time, or both, (i) conflict with, result in the breach of any
provisions of or the termination of, or constitute a default under, any
agreements or understandings between Employee and other persons or companies, or
(ii) violate any judgment, writ, injunction, or order of any court, arbitrator,
or governmental agency applicable to Employee, and (c) all information provided
by Employee to Company is true and accurate.

5. Severability. If any term or other provision of this Agreement is determined
by any arbitrator or court of competent jurisdiction to be invalid, illegal, or
unenforceable in whole or in part by reason of any applicable law or public
policy, and such determination becomes final and nonappealable, such term or
other provision shall remain in full force and effect to the fullest extent
permitted by Law, and all other terms and provisions shall remain in full force
and effect in their entirety. Without limiting the generality of the foregoing,
if the duration, scope, or area of restrictions set forth in Exhibit 1 - Section
3 are determined by arbitrator or any court of competent jurisdiction to be
invalid, illegal, or unenforceable in whole or in part by reason of any
applicable Law or public policy now or hereafter existing, such restrictions
shall be interpreted, modified, or rewritten to include as much of such
duration, scope or areas as will render such restrictions valid and enforceable.

6. Assignment. Employee shall not assign all or any part of Employee's rights or
delegate its obligations hereunder by operation of Law or otherwise without
Company's express written consent (which consent may be granted or withheld in
Company's sole and absolute discretion).

7. Entire Agreement; Amendment; Waivers.

      (a) Entire Agreement. This Agreement constitutes the entire Agreement
between the Parties with respect to the subject matter hereof, and supersedes
all previous agreements, understandings, commitments or representations
concerning the subject matter contained in this Agreement. Each Party
acknowledges that the other Party has not made any representations other than
those that are contained herein.


                                     4 of 7


Employee Name:             Cook           Francesca         Marie
                -----------------------------------------------------
                           Last             First           Middle

      (b) Amendments; Waiver. Except for amendments or modifications in
accordance with certain provisions of this Agreement, this Agreement may not be
amended or modified in any way, except by a writing signed by an authorized
officer of Company and by Employee, and none of its provisions may be waived,
except by a written waiver signed by the waiving Party. No failure to act by
Company will waive any right contained in this Agreement. Any waiver by Company
must be in writing and signed by an officer of Company to be effective.

8. Successors and Assigns: No Third-Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the Parties and their respective
successors and permitted assigns. Nothing herein, whether express or implied, is
intended to or shall confer upon any other Person any legal or equitable right,
power, or remedy of any kind, nature, or description whatsoever under or by
reason hereof.

9. Dispute Resolution.

      (a) Arbitration. Any and all disputes or claims arising during the course
of employment, or arising out of the termination of employment, or arising in
the interpretation of this Agreement, between Employee and Company which cannot
be resolved through good faith negotiation, shall be resolved in accordance with
the provisions of this Section by mandatory arbitration, provided, however, that
the arbitration requirement shall not apply to Company seeking damages or
injunctive relief described in Exhibit 1 - Section 9(c), if such relief is
available under applicable law. Except as otherwise provided in this Agreement,
if any controversy should arise between the Parties in as a result of Employee's
employment relationship with Company, or the performance, interpretation or
application of this Agreement, either Party may serve upon the other a written
notice stating that such Party desires to have such controversy reviewed by a
board of three arbitrators and naming the person whom such Party has designated
to act as an arbitrator. Within 10 days after receipt of such notice, the other
Party shall designate an individual to act as arbitrator and shall notify the
Party requesting arbitration of such designation and the name of the individual
so designated. The two arbitrators so designated shall promptly select a third
arbitrator, and if they are not able to agree on such third arbitrator within 10
days, then either arbitrator, on 10 days notice in writing to the other, or both
arbitrators, shall apply to the American Arbitration Association to designate
and appoint such third arbitrator. If the Party upon whom a written request for
arbitration is served shall fail to designate its arbitrator within 10 days
after receipt of such notice, then the arbitrator designated by the Party
requesting arbitration shall act as the sole arbitrator and shall be deemed to
be the single, mutually approved arbitrator to resolve such controversy. All
documents, testimony, and records relating to any such arbitration will be
maintained in secrecy and will be available for inspection by Company, Employee
and their representative attorneys and experts, who will agree, in advance and
in writing, to receive and maintain all such information in secrecy, except as
may be limited by them in writing.

      (b) Binding Nature. The decision and award of a majority of the
arbitrators, or of such sole arbitrator, shall be binding upon both Employee and
Company and shall be enforceable in any court of competent jurisdiction. Such
decision and award may allocate the costs of such arbitration to one of the
Parties or disproportionately between the Parties. The arbitration shall be
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association.

      (c) Damages; Injunctive Relief. (i) Employee's obligations under this
Agreement have a unique and substantial value to Company and Employee remains
obligated even if he or she voluntarily or involuntarily leaves Company's
employment. Employee understands that if Employee violates this Agreement during
or after his or her employment Company may be able to recover monetary damages
from Employee and/or the other relief described below.

      (ii) A violation or even a threatened violation of this Agreement is
likely to result in irreparable harm to Company and monetary damages alone would
not completely compensate Company for the harm. Accordingly, Company may obtain
an injunction prohibiting Employee from violating Section 2 and Section 3 of
Exhibit 1 of this Agreement, an order requiring Employee to render specific
performance of the Agreement, and/or other appropriate equitable remedies.

      (iii) If an arbitrator or court determines that Employee has breached or
attempted or threatened to breach Section 2 or Section 3 of Exhibit 1 of this
Agreement, Employee acknowledges that such a breach would cause irreparable harm
to Company, and Employee consents to the granting of an injunction restraining
Employee from further breaches or attempted or threatened breaches of this
Agreement, compelling Employee to comply with this Agreement, and/or prescribing
other equitable remedies.

10. Governing Law. This Agreement, and any other disputes or claims arising out
of Employee's employment, including all arbitrated disputes, shall be governed
by, and construed and enforced in accordance with, the laws of the State of
Maryland, without regard to its conflict of laws provisions. Suit to enforce any
provision of this Agreement or to obtain any remedy with respect hereto may be
brought in a court of the State of Maryland for this purpose, Employee expressly
consents to the jurisdiction of said courts.

11. Notices. All notices and other communications from one Party to the other
shall be in writing and shall be deemed received upon (a) actual receipt when
personally delivered, (b) electronic confirmation of receipt if sent by
electronic mail, (c) electronic confirmation of receipt if sent by facsimile,
(d) expiration of the 5th business day after being deposited in the United
States mails, postage prepaid, certified or registered mail or (e) expiration of
one business day after being deposited during the regular business hours for
next-day delivery and prepaid for overnight delivery with a national overnight
courier company, addressed to the other Party as set forth on the signature
page. Each Party may change its address by giving the other Party notice thereof
in conformity with this Section.

12. Definitions. For purposes of this Agreement:

      (a) "Agreement" means the agreement, and each such exhibit, appendix,
schedule, rider or addendum attached thereto as they may be amended, restated,
supplemented or modified from time to time.

      (b) "Confidential Information" means confidential, proprietary or trade
secret information relating to Company's past, present or future (i) products,
processes, formulas, patterns, compositions, compounds, projects,
specifications, know how, research data, clinical data, personnel data,
compilations, programs, devices, methods, techniques, inventions, software, and


                                     5 of 7


Employee Name:             Cook           Francesca         Marie
                -----------------------------------------------------
                           Last             First           Middle

improvements thereto, (ii) research and development activities, (iii) designs
and technical data, (iv) marketing or business development activities, including
without limitation prospective or actual bids or proposals, pricing information
and financial information, (v) customers or suppliers or (vi) other
administrative, management, planning, financial, marketing, purchasing or
manufacturing activities. All of this type of information, whether it belongs to
Company or was provided to Company by a third party with the understanding that
it be kept confidential, and any documents, diskettes or other storage media, or
other materials or items containing this type of information, are proprietary
and confidential to Company.

      (c) "Invention" means any invention, modification, design, program code,
software, documentation, formula, data, know how, technique, process, method,
device, discovery, improvement, developments, or works of authorship and all
related patents, patent applications, copyrights and copyright applications
whether patentable or not, created, made, conceived or reduced to practice,
solely or jointly by Employee whether or not during normal working hours or on
Employee's own time, using Employee's own equipment, on the premises of Company
or elsewhere, or after termination of Employee's employment with or by Company
that (i) is created using Company's facilities, supplies, information, trade
secrets or time, (ii) relates directly or indirectly to or arises out of the
actual or proposed business, including without limitation the research and
development activities, of Company, (iii) relates directly or indirectly to or
arises out of any task assigned to Employee or work Employee performs for
Company or (iv) is based on Confidential Information.

      (d) "Law" means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.

      (e) "Person" means any individual, partnership, firm, corporation, limited
liability company, joint venture, association, trust, unincorporated
organization, or other entity.

13. Indemnification. Employee shall indemnify and hold Company harmless from:

      (a) any and all damages, claims, costs and expenses based on, or arising
from, the breach of any agreement or understanding between Employee and another
person or company, and

      (b) Employee's use or disclosure of any Confidential Information or trade
secrets Employee obtained from sources other than Company.

14. Miscellaneous Provisions.

      (a) Construction. Each Party has participated equally in the preparation
and negotiation of this Agreement, and each Party hereby unconditionally and
irrevocably waives to the fullest extent permitted by law any rule of
interpretation or construction requiring that this Agreement be interpreted or
construed against the drafting Party.

      (b) Order of Precedence. In the event of any conflict between a provision
or provisions set forth under the Basic Terms heading in this Agreement and any
exhibit, appendix, schedule, rider or addendum, the provision or provisions set
forth under such Basic Terms shall control unless the exhibit, appendix,
schedule, rider or addendum specifically provides otherwise.

      (c) Headings. The descriptive headings contained herein are for
convenience of reference only and shall not affect in any way the meaning,
construction, or interpretation of any term or provision hereof.

      (d) Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties in separate counterparts, each of
which when executed shall be deemed an original, and all of which taken together
shall constitute one and the same Agreement with the same effect as if such
signatures were upon the same document. Delivery of an executed counterpart
hereof via facsimile shall be as effective as delivery of a manually executed
counterpart hereof.

      (e) Eligibility Documents. Employee shall provide Company with true and
correct documents ("Eligibility Documents") identifying Employee's eligibility
to work in the United States (see back of 1-9 form for list of acceptable
documents) on or before the Commencement Date. Employee will need these
documents to begin employment.


                                     6 of 7


Employee Name:             Cook           Francesca         Marie
                -----------------------------------------------------
                           Last             First           Middle

                           SCHEDULE 2(d) TO EXHIBIT 1

                            PRIOR WORKS OR INVENTIONS

The following are Employee's Prior Works Or Inventions as defined in Section
3(d) of Exhibit 1 of this Agreement. If blank, then there are NONE.


                                     7 of 7

EX-10.16

                                                                   Exhibit 10.16

Employee Name:             Richman          Eric             Ian
                -----------------------------------------------------
                           Last             First           Middle

                              EMPLOYMENT AGREEMENT

      THIS EMPLOYMENT AGREEMENT ("Agreement"), dated as of November 3, 2003,
("Execution Date") is made by and between PharmAthene, Inc., a Delaware
corporation ("Company"), and the individual identified herein ("Employee").
Company and Employee may each be referred as a "Party" and collectively as the
"Parties" to this Agreement. The Parties hereby agree as follows:

                                   BASIC TERMS

1. Employment. Company hereby employs Employee, and Employee hereby accepts
Employment by Company. Employee shall initially serve as
Vice President Business Development & Strategic Planning of Company.
- --------------------------------------------------------
                    Title of Employee

2. Commencement Date. November 17, 2003 ("Commencement Date").

3. Term. Employee's employment with Company shall begin on the Commencement Date
and shall end as provided in this Agreement. The period from the Commencement
Date to the effective date of termination of this Agreement is called the
"Term".

4. At Will Employment. Employee's employment with Company is at-will, meaning
that either Employee or Company may terminate Employee's employment at any time,
with or without cause, for any or no reason.

5. Duties. Employee shall have such powers and duties as are assigned or
delegated to Employee by Company. Employee will devote his entire business time,
attention, skill, and energy exclusively to the business of Company, will use
his best efforts to promote the success of Company's business, and will
cooperate fully with the Board of Directors in the advancement of the best
interests of Company.

6. Salary. Employee shall be paid an annual salary of $195,000, subject to
adjustment as provided below ("Salary"). The Salary is payable in equal periodic
installments according to Company's customary payroll practices, but no less
frequently than monthly. The Salary will be reviewed by Company not less
frequently than annually, and may be adjusted upward or downward in the sole
discretion of Company.

7. Benefits. Employee shall, during the Term, be permitted to participate in
such pension, profit-sharing, bonus, life insurance, hospitalization, major
medical, and other Company employee benefit plans that may be in effect from
time to time, to the extent Employee is eligible under the terms of those plans
(collectively, "Benefits"). Company reserves the right to modify, suspend or
discontinue any and all such Benefits at any time without recourse by Employee,
provided that any such modification, suspension or discontinuance shall also
apply generally to other employees of Company.

8. Leave; Holidays. Employee will be entitled to 4 weeks paid vacation each
fiscal year in accordance with Company's vacation policies in effect for its
employees from time to time. Vacation must be taken by Employee at such time or
times as approved by Company. Employee will also be entitled to the paid
holidays and other paid leave set forth in Company's policies. Vacation days and
holidays during any fiscal year that are not used by Employee during such fiscal
year will be subject to any vacation days and holiday policy that Company may
have in place from time to time.

9. Standard Terms and Conditions. THE STANDARD TERMS AND CONDITIONS ATTACHED
HERETO AS EXHIBIT 1 SET FORTH CERTAIN DEFINITIONS TO CAPITALIZED TERMS,
EMPLOYEE'S REQUIREMENT TO PROVIDE ELIGIBILITY DOCUMENTS, AND OTHER IMPORTANT
PROVISIONS OF THIS AGREEMENT. SUCH STANDARD TERMS AND CONDITIONS AND ANY
EXHIBITS, APPENDIXES, SCHEDULES, RIDERS OR ADDENDA HERETO ARE INCORPORATED
HEREIN AND MADE A PART HEREOF BY THIS REFERENCE.



Employee Name:             Richman          Eric             Ian
                -----------------------------------------------------
                           Last             First           Middle

10. Additional Provisions. The following provisions also apply to this Agreement
(if blank, then there are NONE):

      (a) Stock Options. Employee shall be granted a total of 518,660 stock
options upon the Commencement Date, and such options shall be issued according
to Company's stock option plan with Company as approved and voted on by the
Board of Directors. These options will vest, subject to any stock option
agreement between Company and Employee, 25% after one year following the
Commencement Date ("First Anniversary Date"), and the remainder to vest on a
pro-rata monthly basis over the next 36 months following the First Anniversary
Date such that 100% of all such options shall be vested after four years from
the Commencement Date. Employee will be eligible to receive further stock
options, if any, as may be granted pursuant to any stock option plan the Board
of Directors may have adopted from time to time.

      (b) Severance. Subject to clauses (i) and (ii) below, Employee shall be
granted a severance of 12 months ("Severance Period") of Employee's then current
salary upon termination of employment, payable on a pro rata basis over the
Severance Period beginning the first day of the first full calendar month
following the effective date of Employee's termination, and payable in
consideration for and only after Employee executes a Separation Agreement and
General Release under terms specified by Company.

      (i) Employee shall not receive severance if Employee voluntarily resigns
employment.

      (ii) Employee shall not receive severance if Employee is terminated for:
(1) failure to perform his or her obligations or duties, or (2) any dishonesty
detrimental to Company, or other act or omission by Employee detrimental to
Company's business, financial condition, reputation or good will, or damaging to
its relationships with its employees, business partners, or other third parties,
including, without limitation: (A) any habitual use of alcohol or illegal drugs
such as to interfere with the performance of Employee's obligations hereunder;
and (B) any conviction of a felony or of any crime involving fraud,
embezzlement, misappropriation, or theft.

BY EXECUTING THIS AGREEMENT BELOW, THE PARTIES INDICATE THAT THEY HAVE READ AND
UNDERSTOOD ALL TERMS AND CONDITIONS HEREOF AND AGREE TO BE BOUND LEGALLY BY
THEM, ALL AS OF THE EXECUTION DATE.

COMPANY                                         EMPLOYEE

PHARMATHENE, INC.

By: /s/ David P. Wright                         /s/ Eric Richman
    ------------------------------------        --------------------------------
Name: David P. Wright                           Name: Eric Richman
Title: President & CEO
175 Admiral Cochrane Drive, Suite 400
Annapolis, MD 21401
Telephone: 410-571-8920                         Telephone:
Facsimile: 410-571-8927                         Facsimile:
E-mail:                                         E-mail:

ATTACHMENTS

Exhibit 1                              -      Standard Terms and Conditions
Schedule 2(d) to Exhibit 1             -      Prior Works Or Inventions


                                     2 of 7


Employee Name:             Richman          Eric             Ian
                -----------------------------------------------------
                           Last             First           Middle

                                    EXHIBIT 1

                          STANDARD TERMS AND CONDITIONS

1. Tax Matters; Expense Reimbursement. Payments to Employee of all compensation
contemplated under this Agreement shall be subject to all applicable legal
requirements with respect to the withholding of taxes. Employee shall be
entitled to reimbursement by Company for all direct out-of-pocket expenditures
made by him or her on Company's behalf in the performance of his or her services
under this Agreement, subject to any reasonable record keeping, reporting and
other requirements imposed from time to time by Company.

2. Confidentiality.

      (a) Obligations. Employee shall preserve and protect the confidentiality
of Confidential Information both during and after his or her employment with or
by Company. In addition, Employee shall not to, at any time during the Term or
thereafter, (i) disclose or disseminate Confidential Information to any third
party, including without limitation employees or consultants of Company without
a legitimate business need to know, (ii) remove Confidential Information from
Company's premises or make copies of Confidential Information, except as
required to perform Employee's job, or (iii) use Confidential Information for
Employee's own benefit or for the benefit of any third party. Employee shall
also take all actions necessary to avoid unauthorized disclosure and otherwise
to maintain the confidential or proprietary nature of such Confidential
Information. If Employee is not certain whether or not information is
confidential, Employee will treat that information as Confidential Information
until Employee has verification from Company's Personnel Officer that the
information is not Confidential Information.

      (b) Exceptions. The obligations in this Exhibit 1 - Section 2 do not apply
to any information that Employee can establish (i) has become publicly known
without a breach of this Agreement by Employee or a third party's breach of an
agreement to maintain the confidentiality of the information or (ii) was
developed by Employee prior to the Execution Date, and prior to the date any
earlier Confidentiality Agreement of the Company was signed, if the date of
development can be established by documentary evidence.

      (c) Former Employer Information. Employee will not, during the Term, (i)
improperly use or disclose any proprietary information or trade secrets of any
former or current employer or any other person or entity or (ii) bring onto the
premises of Company any unpublished document or proprietary information
belonging to any such employer, person or entity unless consented to in writing
by such employer, person or entity.

      (d) Inventions and Works Retained and Licensed. Employee attaches hereto,
as "Schedule 2(d) to Exhibit 1: Prior Works and Inventions", a list describing
all Inventions, original works of authorship, developments, improvements, and
trade secrets which were made by Employee prior to his or her employment with or
by Company (collectively "Prior Works or Inventions"), which belong to Employee,
which relate to Company's business, products, or research and development, and
which are not assigned to Company hereunder, or, if no such list is attached or
such list is blank, Employee represents that there are no such Prior Works or
Inventions. If, in the course of employment with or by Company, Employee
incorporates into a Company product, process or machine a Prior Work or
Invention owned by Employee or in which Employee has an interest, Company is
hereby granted and shall have a nonexclusive, royalty-free, assignable,
irrevocable, perpetual, worldwide license to make, have made, modify, use and
sell such Prior Work or Invention as part of or in connection with such product,
process or machine.

      (e) Ownership of Works. Company owns all right, title and interest,
including without limitation trade secrets, patents and copyrights, in the
following works that Employee creates, makes, conceives or reduces to practice,
solely or jointly (i) works that are created using Company's facilities,
supplies, information, trade secrets or time, (ii) works that relate directly or
indirectly to or arise out of the actual or proposed business of Company,
including, without limitation the research and development activities of
Company, (iii) works that relate directly or indirectly to or arise out of any
task assigned to Employee or work Employee performs for Company or (iv) works
that are based on Confidential Information (collectively "Works"). Because these
Works will inevitably be based upon or somehow involve Company's business,
products, services or methodologies, Employee agrees that the Works will belong
to the Company even if Employee creates, makes, conceives or reduces them to
practice on his or her own time, using his or her own equipment, on Company's
premises or elsewhere or after termination of Employee's employment with or by
Company. The Works belonging to Company, include, without limitation program
code and documentation. Employee will promptly provide full written disclosure
to an officer of Company of any Works Employee creates, makes, conceives or
reduces to practice, solely or jointly. To the extent that the Works do not
qualify as works made for hire under U.S. copyright law, Employee irrevocably
assigns to Company the ownership of, and all rights of copyright in, the Works.
Company will have the right to hold in its own name all rights in the Works,
including without limitation all rights of copyright, trade secrets and
trademark. Employee also waives all claims to moral rights in any Works.
Employee acknowledges and agrees that any and all patents, patent applications
or other intellectual property rights relating to the Works are to be the
exclusive property of Company.

      (f) Inventions; Ownership. (i) Employee shall irrevocably assign to
Company Employee's entire right, title and interest in any Invention. Employee
will promptly make full written disclosure to an officer of Company of any
Inventions Employee creates, makes, conceives or reduces to practice, solely or
jointly. Employee also waives all claims to moral rights in any Inventions.
Employee acknowledges and agrees that any and all patents, patent applications
or other intellectual property rights relating to the Inventions are the
exclusive property of Company.

      (ii) Employee shall cooperate fully with Company, both during and after
Employee's employment with or by Company, with respect to the procurement,
maintenance and enforcement of copyrights, patents and other intellectual
property rights (both in the United States and foreign countries) relating to
Works and/or Inventions. Employee shall execute and deliver all papers,
including, without limitation, copyright applications, patent applications,
declarations, oaths, formal assignments, assignments of priority rights, and
powers of attorney, which Company may deem necessary or desirable to protect its
rights and interests in any Works and/or Inventions, and if Company is unable,
after reasonable effort, to secure Employee's signature on any such papers, any
executive officer of Company shall be entitled to execute any such papers as
Employee's agent and attorney-in-fact. Employee hereby irrevocably designates
and appoints each executive officer of Company as Employee's agent and attorney-


                                     3 of 7


Employee Name:             Richman          Eric             Ian
                -----------------------------------------------------
                           Last             First           Middle

in-fact to execute any such papers on Employee's behalf, and to take any and all
actions as Company may deem necessary or desirable to protect its rights and
interests in any Works and/or Inventions, under the conditions described in the
preceding sentence.

      (g) Maintenance of Records. Employee shall keep and maintain adequate and
current written records of all Works and Inventions made by Employee (solely or
jointly with others) during the Term with or by Company. The records will be in
the form of notes, sketches, drawings, and any other format that may be
specified by Company. The records will be available to and remain the sole
property of Company at all times.

      (h) Return of Confidential Information. Employee shall return to Company
all Confidential Information in Employee's possession, custody or control
immediately upon Employee's termination from Company, or earlier if Company
requests.

      (i) Notification of New Employer. In the event Employee leaves the employ
of Company or ceases to serve as a consultant to Company, Employee hereby grants
consent to notification by Company to Employee's new employer about Employee's
rights and obligations under this Agreement.

3. Noncompetition; Non-solicitation of Employees.

      (a) Noncompetition. (i) Company is engaged an a unique and specialized
industry, and faces competition on a worldwide basis. Employee, through his or
her association with Company as an employee or consultant, will acquire a
considerable amount of knowledge and goodwill with respect to the business of
Company, which knowledge and goodwill are extremely valuable to Company and
which would be extremely detrimental to Company if used by Employee to compete
with Company. It is, therefore, understood and agreed by Employee and Company
that, because of the nature of the business Company, it is necessary to afford
fair protection to Company from such competition by Employee. Consequently,
while Employee is employed with or by Company and for a period of 12 months
after termination of such employment (for any reason whatsoever, whether
voluntary or involuntarily), Employee will not, whether alone or as a partner,
officer, director, consultant, agent, employee or stockholder of any company or
their commercial enterprise, directly or indirectly engage in any business or
other activity anywhere in the world which is competitive with, or render
services to any firm or business organization which competes with, Company in
the business of research, discovery and/or development of human therapeutics and
vaccines for infectious diseases that are being actively researched, discovered
or developed by Company at the time of termination of such employment. The
foregoing prohibition shall not prevent Employee's employment or engagement
after termination if such employment or engagement, in any capacity, does not
involve work or matters related to the business of research, discovery and/or
development of human therapeutics and vaccines for infectious diseases that are
being actively researched, discovered or developed by Company at the time of
termination of Employee's employment.

      (ii) Nothing in Exhibit 1 - Section 3, however, will prevent Employee from
engaging in additional activities in connection with personal investments and
community affairs that are not inconsistent with Employee's duties under this
Agreement. Employee shall be permitted to own securities of a public company not
in excess of five percent (5%) of any class of such securities and to own stock
partnership interests or other securities of any entity not in excess of five
percent (5%) of any class of such securities and such ownership shall not be
considered to be competition with Company.

      (b) Reasonableness. Company and Employee agree and acknowledge that the
noncompetition clause described in Exhibit 1 - Section 3(a) above is made in
consideration of substantial compensation payable under this Agreement. In
consequence of this Company and Employee agree and acknowledge that the
duration, scope, and geographic area included in such covenant not to compete
are fair, reasonable, necessary, and appropriate, and will not prevent Employee
from engaging in profitable business activities or employment.

      (c) Non-Solicitation. During and for 12 months after termination of
Employee's employment for any reason, Employee shall not, directly or indirectly
solicit, recruit or hire any employee of Company to work for a third party which
competes with Company in the business of research, discovery and/or development
of human therapeutics and vaccines for infectious diseases that are being
actively researched, discovered or developed by Company at the time of
termination, or engage in any activity that would cause any employee to violate
any agreement with Company.

4. Representations and Warranties. Employee represents and warrants that (a)
Employee is able to perform the duties of his or her position, (b) the execution
and delivery of this Agreement, and the performance of Employee's duties and
obligations hereunder, will not, with or without the giving of notice or the
passage of time, or both, (i) conflict with, result in the breach of any
provisions of or the termination of, or constitute a default under, any
agreements or understandings between Employee and other persons or companies, or
(ii) violate any judgment, writ, injunction, or order of any court, arbitrator,
or governmental agency applicable to Employee, and (c) all information provided
by Employee to Company is true and accurate.

5. Severability. If any term or other provision of this Agreement is determined
by any arbitrator or court of competent jurisdiction to be invalid, illegal, or
unenforceable in whole or in part by reason of any applicable law or public
policy, and such determination becomes final and nonappealable, such term or
other provision shall remain in full force and effect to the fullest extent
permitted by Law, and all other terms and provisions shall remain in full force
and effect in their entirety. Without limiting the generality of the foregoing,
if the duration, scope, or area of restrictions set forth in Exhibit 1 - Section
3 are determined by arbitrator or any court of competent jurisdiction to be
invalid, illegal, or unenforceable in whole or in part by reason of any
applicable Law or public policy now or hereafter existing, such restrictions
shall be interpreted, modified, or rewritten to include as much of such
duration, scope or areas as will render such restrictions valid and enforceable.

6. Assignment. Employee shall not assign all or any part of Employee's rights or
delegate its obligations hereunder by operation of Law or otherwise without
Company's express written consent (which consent may be granted or withheld in
Company's sole and absolute discretion).

7. Entire Agreement; Amendment; Waivers.

      (a) Entire Agreement. This Agreement constitutes the entire Agreement
between the Parties with respect to the subject matter hereof, and supersedes
all previous agreements, understandings, commitments or representations
concerning the subject matter contained in this Agreement. Each Party
acknowledges that the other Party has not made any representations other than
those that are contained herein.


                                     4 of 7


Employee Name:             Richman          Eric             Ian
                -----------------------------------------------------
                           Last             First           Middle

      (b) Amendments; Waiver. Except for amendments or modifications in
accordance with certain provisions of this Agreement, this Agreement may not be
amended or modified in any way, except by a writing signed by an authorized
officer of Company and by Employee, and none of its provisions may be waived,
except by a written waiver signed by the waiving Party. No failure to act by
Company will waive any right contained in this Agreement. Any waiver by Company
must be in writing and signed by an officer of Company to be effective.

8. Successors and Assigns: No Third-Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the Parties and their respective
successors and permitted assigns. Nothing herein, whether express or implied, is
intended to or shall confer upon any other Person any legal or equitable right,
power, or remedy of any kind, nature, or description whatsoever under or by
reason hereof.

9. Dispute Resolution.

      (a) Arbitration. Any and all disputes or claims arising during the course
of employment, or arising out of the termination of employment, or arising in
the interpretation of this Agreement, between Employee and Company which cannot
be resolved through good faith negotiation, shall be resolved in accordance with
the provisions of this Section by mandatory arbitration, provided, however, that
the arbitration requirement shall not apply to Company seeking damages or
injunctive relief described in Exhibit 1 - Section 9(c), if such relief is
available under applicable law. Except as otherwise provided in this Agreement,
if any controversy should arise between the Parties in as a result of Employee's
employment relationship with Company, or the performance, interpretation or
application of this Agreement, either Party may serve upon the other a written
notice stating that such Party desires to have such controversy reviewed by a
board of three arbitrators and naming the person whom such Party has designated
to act as an arbitrator. Within 10 days after receipt of such notice, the other
Party shall designate an individual to act as arbitrator and shall notify the
Party requesting arbitration of such designation and the name of the individual
so designated. The two arbitrators so designated shall promptly select a third
arbitrator, and if they are not able to agree on such third arbitrator within 10
days, then either arbitrator, on 10 days notice in writing to the other, or both
arbitrators, shall apply to the American Arbitration Association to designate
and appoint such third arbitrator. If the Party upon whom a written request for
arbitration is served shall fail to designate its arbitrator within 10 days
after receipt of such notice, then the arbitrator designated by the Party
requesting arbitration shall act as the sole arbitrator and shall be deemed to
be the single, mutually approved arbitrator to resolve such controversy. All
documents, testimony, and records relating to any such arbitration will be
maintained in secrecy and will be available for inspection by Company, Employee
and their representative attorneys and experts, who will agree, in advance and
in writing, to receive and maintain all such information in secrecy, except as
may be limited by them in writing.

      (b) Binding Nature. The decision and award of a majority of the
arbitrators, or of such sole arbitrator, shall be binding upon both Employee and
Company and shall be enforceable in any court of competent jurisdiction. Such
decision and award may allocate the costs of such arbitration to one of the
Parties or disproportionately between the Parties. The arbitration shall be
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association.

      (c) Damages; Injunctive Relief. (i) Employee's obligations under this
Agreement have a unique and substantial value to Company and Employee remains
obligated even if he or she voluntarily or involuntarily leaves Company's
employment. Employee understands that if Employee violates this Agreement during
or after his or her employment Company may be able to recover monetary damages
from Employee and/or the other relief described below.

      (ii) A violation or even a threatened violation of this Agreement is
likely to result in irreparable harm to Company and monetary damages alone would
not completely compensate Company for the harm. Accordingly, Company may obtain
an injunction prohibiting Employee from violating Section 2 and Section 3 of
Exhibit 1 of this Agreement, an order requiring Employee to render specific
performance of the Agreement, and/or other appropriate equitable remedies.

      (iii) If an arbitrator or court determines that Employee has breached or
attempted or threatened to breach Section 2 or Section 3 of Exhibit 1 of this
Agreement, Employee acknowledges that such a breach would cause irreparable harm
to Company, and Employee consents to the granting of an injunction restraining
Employee from further breaches or attempted or threatened breaches of this
Agreement, compelling Employee to comply with this Agreement, and/or prescribing
other equitable remedies.

10. Governing Law. This Agreement, and any other disputes or claims arising out
of Employee's employment, including all arbitrated disputes, shall be governed
by, and construed and enforced in accordance with, the laws of the State of
Maryland, without regard to its conflict of laws provisions. Suit to enforce any
provision of this Agreement or to obtain any remedy with respect hereto may be
brought in a court of the State of Maryland for this purpose, Employee expressly
consents to the jurisdiction of said courts.

11. Notices. All notices and other communications from one Party to the other
shall be in writing and shall be deemed received upon (a) actual receipt when
personally delivered, (b) electronic confirmation of receipt if sent by
electronic mail, (c) electronic confirmation of receipt if sent by facsimile,
(d) expiration of the 5th business day after being deposited in the United
States mails, postage prepaid, certified or registered mail or (e) expiration of
one business day after being deposited during the regular business hours for
next-day delivery and prepaid for overnight delivery with a national overnight
courier company, addressed to the other Party as set forth on the signature
page. Each Party may change its address by giving the other Party notice thereof
in conformity with this Section.

12. Definitions. For purposes of this Agreement:

      (a) "Agreement" means the agreement, and each such exhibit, appendix,
schedule, rider or addendum attached thereto as they may be amended, restated,
supplemented or modified from time to time.

      (b) "Confidential Information" means confidential, proprietary or trade
secret information relating to Company's past, present or future (i) products,
processes, formulas, patterns, compositions, compounds, projects,
specifications, know how, research data, clinical data, personnel data,
compilations, programs, devices, methods, techniques, inventions, software, and


                                     5 of 7


Employee Name:             Richman          Eric             Ian
                -----------------------------------------------------
                           Last             First           Middle

improvements thereto, (ii) research and development activities, (iii) designs
and technical data, (iv) marketing or business development activities, including
without limitation prospective or actual bids or proposals, pricing information
and financial information, (v) customers or suppliers or (vi) other
administrative, management, planning, financial, marketing, purchasing or
manufacturing activities. All of this type of information, whether it belongs to
Company or was provided to Company by a third party with the understanding that
it be kept confidential, and any documents, diskettes or other storage media, or
other materials or items containing this type of information, are proprietary
and confidential to Company.

      (c) "Invention" means any invention, modification, design, program code,
software, documentation, formula, data, know how, technique, process, method,
device, discovery, improvement, developments, or works of authorship and all
related patents, patent applications, copyrights and copyright applications
whether patentable or not, created, made, conceived or reduced to practice,
solely or jointly by Employee whether or not during normal working hours or on
Employee's own time, using Employee's own equipment, on the premises of Company
or elsewhere, or after termination of Employee's employment with or by Company
that (i) is created using Company's facilities, supplies, information, trade
secrets or time, (ii) relates directly or indirectly to or arises out of the
actual or proposed business, including without limitation the research and
development activities, of Company, (iii) relates directly or indirectly to or
arises out of any task assigned to Employee or work Employee performs for
Company or (iv) is based on Confidential Information.

      (d) "Law" means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.

      (e) "Person" means any individual, partnership, firm, corporation, limited
liability company, joint venture, association, trust, unincorporated
organization, or other entity.

13. Indemnification. Employee shall indemnify and hold Company harmless from:

      (a) any and all damages, claims, costs and expenses based on, or arising
from, the breach of any agreement or understanding between Employee and another
person or company, and

      (b) Employee's use or disclosure of any Confidential Information or trade
secrets Employee obtained from sources other than Company.

14. Miscellaneous Provisions.

      (a) Construction. Each Party has participated equally in the preparation
and negotiation of this Agreement, and each Party hereby unconditionally and
irrevocably waives to the fullest extent permitted by law any rule of
interpretation or construction requiring that this Agreement be interpreted or
construed against the drafting Party.

      (b) Order of Precedence. In the event of any conflict between a provision
or provisions set forth under the Basic Terms heading in this Agreement and any
exhibit, appendix, schedule, rider or addendum, the provision or provisions set
forth under such Basic Terms shall control unless the exhibit, appendix,
schedule, rider or addendum specifically provides otherwise.

      (c) Headings. The descriptive headings contained herein are for
convenience of reference only and shall not affect in any way the meaning,
construction, or interpretation of any term or provision hereof.

      (d) Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties in separate counterparts, each of
which when executed shall be deemed an original, and all of which taken together
shall constitute one and the same Agreement with the same effect as if such
signatures were upon the same document. Delivery of an executed counterpart
hereof via facsimile shall be as effective as delivery of a manually executed
counterpart hereof.

      (e) Eligibility Documents. Employee shall provide Company with true and
correct documents ("Eligibility Documents") identifying Employee's eligibility
to work in the United States (see back of 1-9 form for list of acceptable
documents) on or before the Commencement Date. Employee will need these
documents to begin employment.


                                     6 of 7


Employee Name:             Richman          Eric             Ian
                -----------------------------------------------------
                           Last             First           Middle

                           SCHEDULE 2(d) TO EXHIBIT 1

                            PRIOR WORKS OR INVENTIONS

The following are Employee's Prior Works Or Inventions as defined in Section
3(d) of Exhibit 1 of this Agreement. If blank, then there are NONE.


                                     7 of 7

EX-10.17

                                                                   Exhibit 10.17

Employee Name:             Riddle          Valerie          Dean
                -----------------------------------------------------
                           Last             First           Middle

                              EMPLOYMENT AGREEMENT

      THIS EMPLOYMENT AGREEMENT ("Agreement"), dated as of November 3, 2003,
("Execution Date") is made by and between PharmAthene, Inc., a Delaware
corporation ("Company"), and the individual identified herein ("Employee").
Company and Employee may each be referred as a "Party" and collectively as the
"Parties" to this Agreement. The Parties hereby agree as follows:

                                   BASIC TERMS

1. Employment. Company hereby employs Employee, and Employee hereby accepts
Employment by Company. Employee shall initially serve as
Vice President Medical Director of Company.
- -------------------------------
       Title of Employee

2. Commencement Date. October 14, 2003 ("Commencement Date").

3. Term. Employee's employment with Company shall begin on the Commencement Date
and shall end as provided in this Agreement. The period from the Commencement
Date to the effective date of termination of this Agreement is called the
"Term".

4. At Will Employment. Employee's employment with Company is at-will, meaning
that either Employee or Company may terminate Employee's employment at any time,
with or without cause, for any or no reason.

5. Duties. Employee shall have such powers and duties as are assigned or
delegated to Employee by Company. Employee will devote his entire business time,
attention, skill, and energy exclusively to the business of Company, will use
his best efforts to promote the success of Company's business, and will
cooperate fully with the Board of Directors in the advancement of the best
interests of Company.

6. Salary. Employee shall be paid an annual salary of $225,000, subject to
adjustment as provided below ("Salary"). The Salary is payable in equal periodic
installments according to Company's customary payroll practices, but no less
frequently than monthly. The Salary will be reviewed by Company not less
frequently than annually, and may be adjusted upward or downward in the sole
discretion of Company.

7. Benefits. Employee shall, during the Term, be permitted to participate in
such pension, profit-sharing, bonus, life insurance, hospitalization, major
medical, and other Company employee benefit plans that may be in effect from
time to time, to the extent Employee is eligible under the terms of those plans
(collectively, "Benefits"). Company reserves the right to modify, suspend or
discontinue any and all such Benefits at any time without recourse by Employee,
provided that any such modification, suspension or discontinuance shall also
apply generally to other employees of Company.

8. Leave; Holidays. Employee will be entitled to 4 weeks paid vacation each
fiscal year in accordance with Company's vacation policies in effect for its
employees from time to time. Vacation must be taken by Employee at such time or
times as approved by Company. Employee will also be entitled to the paid
holidays and other paid leave set forth in Company's policies. Vacation days and
holidays during any fiscal year that are not used by Employee during such fiscal
year will be subject to any vacation days and holiday policy that Company may
have in place from time to time.

9. Standard Terms and Conditions. THE STANDARD TERMS AND CONDITIONS ATTACHED
HERETO AS EXHIBIT 1 SET FORTH CERTAIN DEFINITIONS TO CAPITALIZED TERMS,
EMPLOYEE'S REQUIREMENT TO PROVIDE ELIGIBILITY DOCUMENTS, AND OTHER IMPORTANT
PROVISIONS OF THIS AGREEMENT. SUCH STANDARD TERMS AND CONDITIONS AND ANY
EXHIBITS, APPENDIXES, SCHEDULES, RIDERS OR ADDENDA HERETO ARE INCORPORATED
HEREIN AND MADE A PART HEREOF BY THIS REFERENCE.



Employee Name:             Riddle          Valerie          Dean
                -----------------------------------------------------
                           Last             First           Middle

10. Additional Provisions. The following provisions also apply to this Agreement
(if blank, then there are NONE):

      (a) Stock Options. Employee shall be granted a total of 345,772 stock
options upon the Commencement Date, and such options shall be issued according
to Company's stock option plan with Company as approved and voted on by the
Board of Directors. These options will vest, subject to any stock option
agreement between Company and Employee, 25% after one year following the
Commencement Date ("First Anniversary Date"), and the remainder to vest on a
pro-rata monthly basis over the next 36 months following the First Anniversary
Date such that 100% of all such options shall be vested after four years from
the Commencement Date. Employee will be eligible to receive further stock
options, if any, as may be granted pursuant to any stock option plan the Board
of Directors may have adopted from time to time.

      (b) Severance. Subject to clauses (i) and (ii) below, Employee shall be
granted a severance of 12 months ("Severance Period") of Employee's then current
salary upon termination of employment, payable on a pro rata basis over the
Severance Period beginning the first day of the first full calendar month
following the effective date of Employee's termination, and payable in
consideration for and only after Employee executes a Separation Agreement and
General Release under terms specified by Company.

      (i) Employee shall not receive severance if Employee voluntarily resigns
employment.

      (ii) Employee shall not receive severance if Employee is terminated for:
(1) failure to perform his or her obligations or duties, or (2) any dishonesty
detrimental to Company, or other act or omission by Employee detrimental to
Company's business, financial condition, reputation or good will, or damaging to
its relationships with its employees, business partners, or other third parties,
including, without limitation: (A) any habitual use of alcohol or illegal drugs
such as to interfere with the performance of Employee's obligations hereunder;
and (B) any conviction of a felony or of any crime involving fraud,
embezzlement, misappropriation, or theft.

BY EXECUTING THIS AGREEMENT BELOW, THE PARTIES INDICATE THAT THEY HAVE READ AND
UNDERSTOOD ALL TERMS AND CONDITIONS HEREOF AND AGREE TO BE BOUND LEGALLY BY
THEM, ALL AS OF THE EXECUTION DATE.

COMPANY                                         EMPLOYEE

PHARMATHENE, INC.

By: /s/ David P. Wright                         /s/ Valerie Riddle
    ------------------------------------        --------------------------------
Name: David P. Wright                           Name: Valerie Riddle
Title: President & CEO                                Vice President/
                                                      Medical Director
175 Admiral Cochrane Drive, Suite 400
Annapolis, MD 21401
Telephone: 410-571-8920                         Telephone:
Facsimile: 410-571-8927                         Facsimile:
E-mail:                                         E-mail:

ATTACHMENTS

Exhibit 1                              -      Standard Terms and Conditions
Schedule 2(d) to Exhibit 1             -      Prior Works Or Inventions


                                     2 of 7


Employee Name:             Riddle          Valerie          Dean
                -----------------------------------------------------
                           Last             First           Middle

                                    EXHIBIT 1

                          STANDARD TERMS AND CONDITIONS

1. Tax Matters; Expense Reimbursement. Payments to Employee of all compensation
contemplated under this Agreement shall be subject to all applicable legal
requirements with respect to the withholding of taxes. Employee shall be
entitled to reimbursement by Company for all direct out-of-pocket expenditures
made by him or her on Company's behalf in the performance of his or her services
under this Agreement, subject to any reasonable record keeping, reporting and
other requirements imposed from time to time by Company.

2. Confidentiality.

      (a) Obligations. Employee shall preserve and protect the confidentiality
of Confidential Information both during and after his or her employment with or
by Company. In addition, Employee shall not to, at any time during the Term or
thereafter, (i) disclose or disseminate Confidential Information to any third
party, including without limitation employees or consultants of Company without
a legitimate business need to know, (ii) remove Confidential Information from
Company's premises or make copies of Confidential Information, except as
required to perform Employee's job, or (iii) use Confidential Information for
Employee's own benefit or for the benefit of any third party. Employee shall
also take all actions necessary to avoid unauthorized disclosure and otherwise
to maintain the confidential or proprietary nature of such Confidential
Information. If Employee is not certain whether or not information is
confidential, Employee will treat that information as Confidential Information
until Employee has verification from Company's Personnel Officer that the
information is not Confidential Information.

      (b) Exceptions. The obligations in this Exhibit 1 - Section 2 do not apply
to any information that Employee can establish (i) has become publicly known
without a breach of this Agreement by Employee or a third party's breach of an
agreement to maintain the confidentiality of the information or (ii) was
developed by Employee prior to the Execution Date, and prior to the date any
earlier Confidentiality Agreement of the Company was signed, if the date of
development can be established by documentary evidence.

      (c) Former Employer Information. Employee will not, during the Term, (i)
improperly use or disclose any proprietary information or trade secrets of any
former or current employer or any other person or entity or (ii) bring onto the
premises of Company any unpublished document or proprietary information
belonging to any such employer, person or entity unless consented to in writing
by such employer, person or entity.

      (d) Inventions and Works Retained and Licensed. Employee attaches hereto,
as "Schedule 2(d) to Exhibit 1: Prior Works and Inventions", a list describing
all Inventions, original works of authorship, developments, improvements, and
trade secrets which were made by Employee prior to his or her employment with or
by Company (collectively "Prior Works or Inventions"), which belong to Employee,
which relate to Company's business, products, or research and development, and
which are not assigned to Company hereunder, or, if no such list is attached or
such list is blank, Employee represents that there are no such Prior Works or
Inventions. If, in the course of employment with or by Company, Employee
incorporates into a Company product, process or machine a Prior Work or
Invention owned by Employee or in which Employee has an interest, Company is
hereby granted and shall have a nonexclusive, royalty-free, assignable,
irrevocable, perpetual, worldwide license to make, have made, modify, use and
sell such Prior Work or Invention as part of or in connection with such product,
process or machine.

      (e) Ownership of Works. Company owns all right, title and interest,
including without limitation trade secrets, patents and copyrights, in the
following works that Employee creates, makes, conceives or reduces to practice,
solely or jointly (i) works that are created using Company's facilities,
supplies, information, trade secrets or time, (ii) works that relate directly or
indirectly to or arise out of the actual or proposed business of Company,
including, without limitation the research and development activities of
Company, (iii) works that relate directly or indirectly to or arise out of any
task assigned to Employee or work Employee performs for Company or (iv) works
that are based on Confidential Information (collectively "Works"). Because these
Works will inevitably be based upon or somehow involve Company's business,
products, services or methodologies, Employee agrees that the Works will belong
to the Company even if Employee creates, makes, conceives or reduces them to
practice on his or her own time, using his or her own equipment, on Company's
premises or elsewhere or after termination of Employee's employment with or by
Company. The Works belonging to Company, include, without limitation program
code and documentation. Employee will promptly provide full written disclosure
to an officer of Company of any Works Employee creates, makes, conceives or
reduces to practice, solely or jointly. To the extent that the Works do not
qualify as works made for hire under U.S. copyright law, Employee irrevocably
assigns to Company the ownership of, and all rights of copyright in, the Works.
Company will have the right to hold in its own name all rights in the Works,
including without limitation all rights of copyright, trade secrets and
trademark. Employee also waives all claims to moral rights in any Works.
Employee acknowledges and agrees that any and all patents, patent applications
or other intellectual property rights relating to the Works are to be the
exclusive property of Company.

      (f) Inventions; Ownership. (i) Employee shall irrevocably assign to
Company Employee's entire right, title and interest in any Invention. Employee
will promptly make full written disclosure to an officer of Company of any
Inventions Employee creates, makes, conceives or reduces to practice, solely or
jointly. Employee also waives all claims to moral rights in any Inventions.
Employee acknowledges and agrees that any and all patents, patent applications
or other intellectual property rights relating to the Inventions are the
exclusive property of Company.

      (ii) Employee shall cooperate fully with Company, both during and after
Employee's employment with or by Company, with respect to the procurement,
maintenance and enforcement of copyrights, patents and other intellectual
property rights (both in the United States and foreign countries) relating to
Works and/or Inventions. Employee shall execute and deliver all papers,
including, without limitation, copyright applications, patent applications,
declarations, oaths, formal assignments, assignments of priority rights, and
powers of attorney, which Company may deem necessary or desirable to protect its
rights and interests in any Works and/or Inventions, and if Company is unable,
after reasonable effort, to secure Employee's signature on any such papers, any
executive officer of Company shall be entitled to execute any such papers as
Employee's agent and attorney-in-fact. Employee hereby irrevocably designates
and appoints each executive officer of Company as Employee's agent and attorney-


                                     3 of 7


Employee Name:             Riddle          Valerie          Dean
                -----------------------------------------------------
                           Last             First           Middle

in-fact to execute any such papers on Employee's behalf, and to take any and all
actions as Company may deem necessary or desirable to protect its rights and
interests in any Works and/or Inventions, under the conditions described in the
preceding sentence.

      (g) Maintenance of Records. Employee shall keep and maintain adequate and
current written records of all Works and Inventions made by Employee (solely or
jointly with others) during the Term with or by Company. The records will be in
the form of notes, sketches, drawings, and any other format that may be
specified by Company. The records will be available to and remain the sole
property of Company at all times.

      (h) Return of Confidential Information. Employee shall return to Company
all Confidential Information in Employee's possession, custody or control
immediately upon Employee's termination from Company, or earlier if Company
requests.

      (i) Notification of New Employer. In the event Employee leaves the employ
of Company or ceases to serve as a consultant to Company, Employee hereby grants
consent to notification by Company to Employee's new employer about Employee's
rights and obligations under this Agreement.

3. Noncompetition; Non-solicitation of Employees.

      (a) Noncompetition. (i) Company is engaged an a unique and specialized
industry, and faces competition on a worldwide basis. Employee, through his or
her association with Company as an employee or consultant, will acquire a
considerable amount of knowledge and goodwill with respect to the business of
Company, which knowledge and goodwill are extremely valuable to Company and
which would be extremely detrimental to Company if used by Employee to compete
with Company. It is, therefore, understood and agreed by Employee and Company
that, because of the nature of the business Company, it is necessary to afford
fair protection to Company from such competition by Employee. Consequently,
while Employee is employed with or by Company and for a period of 12 months
after termination of such employment (for any reason whatsoever, whether
voluntary or involuntarily), Employee will not, whether alone or as a partner,
officer, director, consultant, agent, employee or stockholder of any company or
their commercial enterprise, directly or indirectly engage in any business or
other activity anywhere in the world which is competitive with, or render
services to any firm or business organization which competes with, Company in
the business of research, discovery and/or development of human therapeutics and
vaccines for infectious diseases that are being actively researched, discovered
or developed by Company at the time of termination of such employment. The
foregoing prohibition shall not prevent Employee's employment or engagement
after termination if such employment or engagement, in any capacity, does not
involve work or matters related to the business of research, discovery and/or
development of human therapeutics and vaccines for infectious diseases that are
being actively researched, discovered or developed by Company at the time of
termination of Employee's employment.

      (ii) Nothing in Exhibit 1 - Section 3, however, will prevent Employee from
engaging in additional activities in connection with personal investments and
community affairs that are not inconsistent with Employee's duties under this
Agreement. Employee shall be permitted to own securities of a public company not
in excess of five percent (5%) of any class of such securities and to own stock
partnership interests or other securities of any entity not in excess of five
percent (5%) of any class of such securities and such ownership shall not be
considered to be competition with Company.

      (b) Reasonableness. Company and Employee agree and acknowledge that the
noncompetition clause described in Exhibit 1 - Section 3(a) above is made in
consideration of substantial compensation payable under this Agreement. In
consequence of this Company and Employee agree and acknowledge that the
duration, scope, and geographic area included in such covenant not to compete
are fair, reasonable, necessary, and appropriate, and will not prevent Employee
from engaging in profitable business activities or employment.

      (c) Non-Solicitation. During and for 12 months after termination of
Employee's employment for any reason, Employee shall not, directly or indirectly
solicit, recruit or hire any employee of Company to work for a third party which
competes with Company in the business of research, discovery and/or development
of human therapeutics and vaccines for infectious diseases that are being
actively researched, discovered or developed by Company at the time of
termination, or engage in any activity that would cause any employee to violate
any agreement with Company.

4. Representations and Warranties. Employee represents and warrants that (a)
Employee is able to perform the duties of his or her position, (b) the execution
and delivery of this Agreement, and the performance of Employee's duties and
obligations hereunder, will not, with or without the giving of notice or the
passage of time, or both, (i) conflict with, result in the breach of any
provisions of or the termination of, or constitute a default under, any
agreements or understandings between Employee and other persons or companies, or
(ii) violate any judgment, writ, injunction, or order of any court, arbitrator,
or governmental agency applicable to Employee, and (c) all information provided
by Employee to Company is true and accurate.

5. Severability. If any term or other provision of this Agreement is determined
by any arbitrator or court of competent jurisdiction to be invalid, illegal, or
unenforceable in whole or in part by reason of any applicable law or public
policy, and such determination becomes final and nonappealable, such term or
other provision shall remain in full force and effect to the fullest extent
permitted by Law, and all other terms and provisions shall remain in full force
and effect in their entirety. Without limiting the generality of the foregoing,
if the duration, scope, or area of restrictions set forth in Exhibit 1 - Section
3 are determined by arbitrator or any court of competent jurisdiction to be
invalid, illegal, or unenforceable in whole or in part by reason of any
applicable Law or public policy now or hereafter existing, such restrictions
shall be interpreted, modified, or rewritten to include as much of such
duration, scope or areas as will render such restrictions valid and enforceable.

6. Assignment. Employee shall not assign all or any part of Employee's rights or
delegate its obligations hereunder by operation of Law or otherwise without
Company's express written consent (which consent may be granted or withheld in
Company's sole and absolute discretion).

7. Entire Agreement; Amendment; Waivers.

      (a) Entire Agreement. This Agreement constitutes the entire Agreement
between the Parties with respect to the subject matter hereof, and supersedes
all previous agreements, understandings, commitments or representations
concerning the subject matter contained in this Agreement. Each Party
acknowledges that the other Party has not made any representations other than
those that are contained herein.


                                     4 of 7


Employee Name:             Riddle          Valerie          Dean
                -----------------------------------------------------
                           Last             First           Middle

      (b) Amendments; Waiver. Except for amendments or modifications in
accordance with certain provisions of this Agreement, this Agreement may not be
amended or modified in any way, except by a writing signed by an authorized
officer of Company and by Employee, and none of its provisions may be waived,
except by a written waiver signed by the waiving Party. No failure to act by
Company will waive any right contained in this Agreement. Any waiver by Company
must be in writing and signed by an officer of Company to be effective.

8. Successors and Assigns: No Third-Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the Parties and their respective
successors and permitted assigns. Nothing herein, whether express or implied, is
intended to or shall confer upon any other Person any legal or equitable right,
power, or remedy of any kind, nature, or description whatsoever under or by
reason hereof.

9. Dispute Resolution.

      (a) Arbitration. Any and all disputes or claims arising during the course
of employment, or arising out of the termination of employment, or arising in
the interpretation of this Agreement, between Employee and Company which cannot
be resolved through good faith negotiation, shall be resolved in accordance with
the provisions of this Section by mandatory arbitration, provided, however, that
the arbitration requirement shall not apply to Company seeking damages or
injunctive relief described in Exhibit 1 - Section 9(c), if such relief is
available under applicable law. Except as otherwise provided in this Agreement,
if any controversy should arise between the Parties in as a result of Employee's
employment relationship with Company, or the performance, interpretation or
application of this Agreement, either Party may serve upon the other a written
notice stating that such Party desires to have such controversy reviewed by a
board of three arbitrators and naming the person whom such Party has designated
to act as an arbitrator. Within 10 days after receipt of such notice, the other
Party shall designate an individual to act as arbitrator and shall notify the
Party requesting arbitration of such designation and the name of the individual
so designated. The two arbitrators so designated shall promptly select a third
arbitrator, and if they are not able to agree on such third arbitrator within 10
days, then either arbitrator, on 10 days notice in writing to the other, or both
arbitrators, shall apply to the American Arbitration Association to designate
and appoint such third arbitrator. If the Party upon whom a written request for
arbitration is served shall fail to designate its arbitrator within 10 days
after receipt of such notice, then the arbitrator designated by the Party
requesting arbitration shall act as the sole arbitrator and shall be deemed to
be the single, mutually approved arbitrator to resolve such controversy. All
documents, testimony, and records relating to any such arbitration will be
maintained in secrecy and will be available for inspection by Company, Employee
and their representative attorneys and experts, who will agree, in advance and
in writing, to receive and maintain all such information in secrecy, except as
may be limited by them in writing.

      (b) Binding Nature. The decision and award of a majority of the
arbitrators, or of such sole arbitrator, shall be binding upon both Employee and
Company and shall be enforceable in any court of competent jurisdiction. Such
decision and award may allocate the costs of such arbitration to one of the
Parties or disproportionately between the Parties. The arbitration shall be
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association.

      (c) Damages; Injunctive Relief. (i) Employee's obligations under this
Agreement have a unique and substantial value to Company and Employee remains
obligated even if he or she voluntarily or involuntarily leaves Company's
employment. Employee understands that if Employee violates this Agreement during
or after his or her employment Company may be able to recover monetary damages
from Employee and/or the other relief described below.

      (ii) A violation or even a threatened violation of this Agreement is
likely to result in irreparable harm to Company and monetary damages alone would
not completely compensate Company for the harm. Accordingly, Company may obtain
an injunction prohibiting Employee from violating Section 2 and Section 3 of
Exhibit 1 of this Agreement, an order requiring Employee to render specific
performance of the Agreement, and/or other appropriate equitable remedies.

      (iii) If an arbitrator or court determines that Employee has breached or
attempted or threatened to breach Section 2 or Section 3 of Exhibit 1 of this
Agreement, Employee acknowledges that such a breach would cause irreparable harm
to Company, and Employee consents to the granting of an injunction restraining
Employee from further breaches or attempted or threatened breaches of this
Agreement, compelling Employee to comply with this Agreement, and/or prescribing
other equitable remedies.

10. Governing Law. This Agreement, and any other disputes or claims arising out
of Employee's employment, including all arbitrated disputes, shall be governed
by, and construed and enforced in accordance with, the laws of the State of
Maryland, without regard to its conflict of laws provisions. Suit to enforce any
provision of this Agreement or to obtain any remedy with respect hereto may be
brought in a court of the State of Maryland for this purpose, Employee expressly
consents to the jurisdiction of said courts.

11. Notices. All notices and other communications from one Party to the other
shall be in writing and shall be deemed received upon (a) actual receipt when
personally delivered, (b) electronic confirmation of receipt if sent by
electronic mail, (c) electronic confirmation of receipt if sent by facsimile,
(d) expiration of the 5th business day after being deposited in the United
States mails, postage prepaid, certified or registered mail or (e) expiration of
one business day after being deposited during the regular business hours for
next-day delivery and prepaid for overnight delivery with a national overnight
courier company, addressed to the other Party as set forth on the signature
page. Each Party may change its address by giving the other Party notice thereof
in conformity with this Section.

12. Definitions. For purposes of this Agreement:

      (a) "Agreement" means the agreement, and each such exhibit, appendix,
schedule, rider or addendum attached thereto as they may be amended, restated,
supplemented or modified from time to time.

      (b) "Confidential Information" means confidential, proprietary or trade
secret information relating to Company's past, present or future (i) products,
processes, formulas, patterns, compositions, compounds, projects,
specifications, know how, research data, clinical data, personnel data,
compilations, programs, devices, methods, techniques, inventions, software, and


                                     5 of 7


Employee Name:             Riddle          Valerie          Dean
                -----------------------------------------------------
                           Last             First           Middle

improvements thereto, (ii) research and development activities, (iii) designs
and technical data, (iv) marketing or business development activities, including
without limitation prospective or actual bids or proposals, pricing information
and financial information, (v) customers or suppliers or (vi) other
administrative, management, planning, financial, marketing, purchasing or
manufacturing activities. All of this type of information, whether it belongs to
Company or was provided to Company by a third party with the understanding that
it be kept confidential, and any documents, diskettes or other storage media, or
other materials or items containing this type of information, are proprietary
and confidential to Company.

      (c) "Invention" means any invention, modification, design, program code,
software, documentation, formula, data, know how, technique, process, method,
device, discovery, improvement, developments, or works of authorship and all
related patents, patent applications, copyrights and copyright applications
whether patentable or not, created, made, conceived or reduced to practice,
solely or jointly by Employee whether or not during normal working hours or on
Employee's own time, using Employee's own equipment, on the premises of Company
or elsewhere, or after termination of Employee's employment with or by Company
that (i) is created using Company's facilities, supplies, information, trade
secrets or time, (ii) relates directly or indirectly to or arises out of the
actual or proposed business, including without limitation the research and
development activities, of Company, (iii) relates directly or indirectly to or
arises out of any task assigned to Employee or work Employee performs for
Company or (iv) is based on Confidential Information.

      (d) "Law" means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.

      (e) "Person" means any individual, partnership, firm, corporation, limited
liability company, joint venture, association, trust, unincorporated
organization, or other entity.

13. Indemnification. Employee shall indemnify and hold Company harmless from:

      (a) any and all damages, claims, costs and expenses based on, or arising
from, the breach of any agreement or understanding between Employee and another
person or company, and

      (b) Employee's use or disclosure of any Confidential Information or trade
secrets Employee obtained from sources other than Company.

14. Miscellaneous Provisions.

      (a) Construction. Each Party has participated equally in the preparation
and negotiation of this Agreement, and each Party hereby unconditionally and
irrevocably waives to the fullest extent permitted by law any rule of
interpretation or construction requiring that this Agreement be interpreted or
construed against the drafting Party.

      (b) Order of Precedence. In the event of any conflict between a provision
or provisions set forth under the Basic Terms heading in this Agreement and any
exhibit, appendix, schedule, rider or addendum, the provision or provisions set
forth under such Basic Terms shall control unless the exhibit, appendix,
schedule, rider or addendum specifically provides otherwise.

      (c) Headings. The descriptive headings contained herein are for
convenience of reference only and shall not affect in any way the meaning,
construction, or interpretation of any term or provision hereof.

      (d) Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties in separate counterparts, each of
which when executed shall be deemed an original, and all of which taken together
shall constitute one and the same Agreement with the same effect as if such
signatures were upon the same document. Delivery of an executed counterpart
hereof via facsimile shall be as effective as delivery of a manually executed
counterpart hereof.

      (e) Eligibility Documents. Employee shall provide Company with true and
correct documents ("Eligibility Documents") identifying Employee's eligibility
to work in the United States (see back of 1-9 form for list of acceptable
documents) on or before the Commencement Date. Employee will need these
documents to begin employment.


                                     6 of 7


Employee Name:             Riddle          Valerie          Dean
                -----------------------------------------------------
                           Last             First           Middle

                           SCHEDULE 2(d) TO EXHIBIT 1

                            PRIOR WORKS OR INVENTIONS

The following are Employee's Prior Works Or Inventions as defined in Section
3(d) of Exhibit 1 of this Agreement. If blank, then there are NONE.


                                     7 of 7

EX-10.18

                                                                   Exhibit 10.18

Employee Name:             Morges           Wayne
                -----------------------------------------------------
                           Last             First           Middle

                              EMPLOYMENT AGREEMENT

      THIS EMPLOYMENT AGREEMENT ("Agreement"), dated as of January 31, 2005,
("Execution Date") is made by and between PharmAthene, Inc., a Delaware
corporation ("Company"), and the individual identified herein ("Employee").
Company and Employee may each be referred as a "Party" and collectively as the
"Parties" to this Agreement. The Parties hereby agree as follows:

                                   BASIC TERMS

1. Employment. Company hereby employs Employee, and Employee hereby accepts
Employment by Company. Employee shall initially serve as
Vice President Regulatory Affairs & Quality of Company.
- -------------------------------------------
             Title of Employee

2. Commencement Date. January 31, 2005 ("Commencement Date").

3. Term. Employee's employment with Company shall begin on the Commencement Date
and shall end as provided in this Agreement. The period from the Commencement
Date to the effective date of termination of this Agreement is called the
"Term".

4. At Will Employment. Employee's employment with Company is at-will, meaning
that either Employee or Company may terminate Employee's employment at any time,
with or without cause, for any or no reason.

5. Duties. Employee shall have such powers and duties as are assigned or
delegated to Employee by Company. Employee will devote his entire business time,
attention, skill, and energy exclusively to the business of Company, will use
his best efforts to promote the success of Company's business, and will
cooperate fully with the Board of Directors in the advancement of the best
interests of Company.

6. Salary. Employee shall be paid an annual salary of $205,000 subject to
adjustment as provided below ("Salary"). The Salary is payable in equal periodic
installments according to Company's customary payroll practices, but no less
frequently than monthly. The Salary will be reviewed by Company not less
frequently than annually, and may be adjusted upward or downward in the sole
discretion of Company.

7. Benefits. Employee shall, during the Term, be permitted to participate in
such pension, profit-sharing, bonus, life insurance, hospitalization, major
medical, and other Company employee benefit plans that may be in effect from
time to time, to the extent Employee is eligible under the terms of those plans
(collectively, "Benefits"). Company reserves the right to modify, suspend or
discontinue any and all such Benefits at any time without recourse by Employee,
provided that any such modification, suspension or discontinuance shall also
apply generally to other employees of Company.

8. Leave; Holidays. Employee will be entitled to 4 weeks paid vacation each
fiscal year in accordance with Company's vacation policies in effect for its
employees from time to time. Vacation must be taken by Employee at such time or
times as approved by Company. Employee will also be entitled to the paid
holidays and other paid leave set forth in Company's policies. Vacation days and
holidays during any fiscal year that are not used by Employee during such fiscal
year will be subject to any vacation days and holiday policy that Company may
have in place from time to time.

9. Standard Terms and Conditions. THE STANDARD TERMS AND CONDITIONS ATTACHED
HERETO AS EXHIBIT 1 SET FORTH CERTAIN DEFINITIONS TO CAPITALIZED TERMS,
EMPLOYEE'S REQUIREMENT TO PROVIDE ELIGIBILITY DOCUMENTS, AND OTHER IMPORTANT
PROVISIONS OF THIS AGREEMENT. SUCH STANDARD TERMS AND CONDITIONS AND ANY
EXHIBITS, APPENDIXES, SCHEDULES, RIDERS OR ADDENDA HERETO ARE INCORPORATED
HEREIN AND MADE A PART HEREOF BY THIS REFERENCE.


                                     1 of 7


Employee Name:             Morges           Wayne
                -----------------------------------------------------
                           Last             First           Middle

10. Additional Provisions. The following provisions also apply to this Agreement
(if blank, then there are NONE):

      (a) Stock Options. Employee shall be granted a total of 275,000 stock
options upon the Commencement Date, and such options shall be issued according
to Company's stock option plan with Company as approved and voted on by the
Board of Directors. These options will vest, subject to any stock option
agreement between Company and Employee, 25% after one year following the
Commencement Date ("First Anniversary Date"), and the remainder to vest on a
pro-rata monthly basis over the next 36 months following the First Anniversary
Date such that 100% of all such options shall be vested after four years from
the Commencement Date. Employee will be eligible to receive further stock
options, if any, as may be granted pursuant to any stock option plan the Board
of Directors may have adopted from time to time.

      (b) Severance. Subject to clauses (i) and (ii) below, Employee shall be
granted a severance of 6 months ("Severance Period") of Employee's then current
salary upon termination of employment, payable on a pro rata basis over the
Severance Period beginning the first day of the first full calendar month
following the effective date of Employee's termination, and payable in
consideration for and only after Employee executes a Separation Agreement and
General Release under terms specified by Company.

      (i) Employee shall not receive severance if Employee voluntarily resigns
employment.

      (ii) Employee shall not receive severance if Employee is terminated for:
(1) failure to perform his or her obligations or duties, or (2) any dishonesty
detrimental to Company, or other act or omission by Employee detrimental to
Company's business, financial condition, reputation or good will, or damaging to
its relationships with its employees, business partners, or other third parties,
including, without limitation: (A) any habitual use of alcohol or illegal drugs
such as to interfere with the performance of Employee's obligations hereunder;
and (B) any conviction of a felony or of any crime involving fraud,
embezzlement, misappropriation, or theft.

BY EXECUTING THIS AGREEMENT BELOW, THE PARTIES INDICATE THAT THEY HAVE READ AND
UNDERSTOOD ALL TERMS AND CONDITIONS HEREOF AND AGREE TO BE BOUND LEGALLY BY
THEM, ALL AS OF THE EXECUTION DATE.

COMPANY                                         EMPLOYEE

PHARMATHENE, INC.

By: /s/ David P. Wright                         /s/ Wayne Morges
    ------------------------------------        --------------------------------
Name: David P. Wright                           Name: Wayne Morges
Title: President & CEO
175 Admiral Cochrane Drive, Suite 101
Annapolis, MD 21401
Telephone: 410-571-8920                         Telephone:
Facsimile: 410-571-8927                         Facsimile:
E-mail:                                         E-mail:

ATTACHMENTS

Exhibit 1                              -      Standard Terms and Conditions
Schedule 2(d) to Exhibit 1             -      Prior Works Or Inventions


                                     2 of 7


Employee Name:             Morges           Wayne
                -----------------------------------------------------
                           Last             First           Middle

                                    EXHIBIT 1

                          STANDARD TERMS AND CONDITIONS

1. Tax Matters; Expense Reimbursement. Payments to Employee of all compensation
contemplated under this Agreement shall be subject to all applicable legal
requirements with respect to the withholding of taxes. Employee shall be
entitled to reimbursement by Company for all direct out-of-pocket expenditures
made by him or her on Company's behalf in the performance of his or her services
under this Agreement, subject to any reasonable record keeping, reporting and
other requirements imposed from time to time by Company.

2. Confidentiality.

      (a) Obligations. Employee shall preserve and protect the confidentiality
of Confidential Information both during and after his or her employment with or
by Company. In addition, Employee shall not to, at any time during the Term or
thereafter, (i) disclose or disseminate Confidential Information to any third
party, including without limitation employees or consultants of Company without
a legitimate business need to know, (ii) remove Confidential Information from
Company's premises or make copies of Confidential Information, except as
required to perform Employee's job, or (iii) use Confidential Information for
Employee's own benefit or for the benefit of any third party. Employee shall
also take all actions necessary to avoid unauthorized disclosure and otherwise
to maintain the confidential or proprietary nature of such Confidential
Information. If Employee is not certain whether or not information is
confidential, Employee will treat that information as Confidential Information
until Employee has verification from Company's Personnel Officer that the
information is not Confidential Information.

      (b) Exceptions. The obligations in this Exhibit 1 - Section 2 do not apply
to any information that Employee can establish (i) has become publicly known
without a breach of this Agreement by Employee or a third party's breach of an
agreement to maintain the confidentiality of the information or (ii) was
developed by Employee prior to the Execution Date, and prior to the date any
earlier Confidentiality Agreement of the Company was signed, if the date of
development can be established by documentary evidence.

      (c) Former Employer Information. Employee will not, during the Term, (i)
improperly use or disclose any proprietary information or trade secrets of any
former or current employer or any other person or entity or (ii) bring onto the
premises of Company any unpublished document or proprietary information
belonging to any such employer, person or entity unless consented to in writing
by such employer, person or entity.

      (d) Inventions and Works Retained and Licensed. Employee attaches hereto,
as "Schedule 2(d) to Exhibit 1: Prior Works and Inventions", a list describing
all Inventions, original works of authorship, developments, improvements, and
trade secrets which were made by Employee prior to his or her employment with or
by Company (collectively "Prior Works or Inventions"), which belong to Employee,
which relate to Company's business, products, or research and development, and
which are not assigned to Company hereunder, or, if no such list is attached or
such list is blank, Employee represents that there are no such Prior Works or
Inventions. If, in the course of employment with or by Company, Employee
incorporates into a Company product, process or machine a Prior Work or
Invention owned by Employee or in which Employee has an interest, Company is
hereby granted and shall have a nonexclusive, royalty-free, assignable,
irrevocable, perpetual, worldwide license to make, have made, modify, use and
sell such Prior Work or Invention as part of or in connection with such product,
process or machine.

      (e) Ownership of Works. Company owns all right, title and interest,
including without limitation trade secrets, patents and copyrights, in the
following works that Employee creates, makes, conceives or reduces to practice,
solely or jointly (i) works that are created using Company's facilities,
supplies, information, trade secrets or time, (ii) works that relate directly or
indirectly to or arise out of the actual or proposed business of Company,
including, without limitation the research and development activities of
Company, (iii) works that relate directly or indirectly to or arise out of any
task assigned to Employee or work Employee performs for Company or (iv) works
that are based on Confidential Information (collectively "Works"). Because these
Works will inevitably be based upon or somehow involve Company's business,
products, services or methodologies, Employee agrees that the Works will belong
to the Company even if Employee creates, makes, conceives or reduces them to
practice on his or her own time, using his or her own equipment, on Company's
premises or elsewhere or after termination of Employee's employment with or by
Company. The Works belonging to Company, include, without limitation program
code and documentation. Employee will promptly provide full written disclosure
to an officer of Company of any Works Employee creates, makes, conceives or
reduces to practice, solely or jointly. To the extent that the Works do not
qualify as works made for hire under U.S. copyright law, Employee irrevocably
assigns to Company the ownership of, and all rights of copyright in, the Works.
Company will have the right to hold in its own name all rights in the Works,
including without limitation all rights of copyright, trade secrets and
trademark. Employee also waives all claims to moral rights in any Works.
Employee acknowledges and agrees that any and all patents, patent applications
or other intellectual property rights relating to the Works are to be the
exclusive property of Company.

      (f) Inventions; Ownership. (i) Employee shall irrevocably assign to
Company Employee's entire right, title and interest in any Invention. Employee
will promptly make full written disclosure to an officer of Company of any
Inventions Employee creates, makes, conceives or reduces to practice, solely or
jointly. Employee also waives all claims to moral rights in any Inventions.
Employee acknowledges and agrees that any and all patents, patent applications
or other intellectual property rights relating to the Inventions are the
exclusive property of Company.

      (ii) Employee shall cooperate fully with Company, both during and after
Employee's employment with or by Company, with respect to the procurement,
maintenance and enforcement of copyrights, patents and other intellectual
property rights (both in the United States and foreign countries) relating to
Works and/or Inventions. Employee shall execute and deliver all papers,
including, without limitation, copyright applications, patent applications,
declarations, oaths, formal assignments, assignments of priority rights, and
powers of attorney, which Company may deem necessary or desirable to protect its
rights and interests in any Works and/or Inventions, and if Company is unable,
after reasonable effort, to secure Employee's signature on any such papers, any
executive officer of Company shall be entitled to execute any such papers as
Employee's agent and attorney-in-fact. Employee hereby irrevocably designates
and appoints each executive officer of Company as Employee's agent and attorney-


                                     3 of 7


Employee Name:             Morges           Wayne
                -----------------------------------------------------
                           Last             First           Middle

in-fact to execute any such papers on Employee's behalf, and to take any and all
actions as Company may deem necessary or desirable to protect its rights and
interests in any Works and/or Inventions, under the conditions described in the
preceding sentence.

      (g) Maintenance of Records. Employee shall keep and maintain adequate and
current written records of all Works and Inventions made by Employee (solely or
jointly with others) during the Term with or by Company. The records will be in
the form of notes, sketches, drawings, and any other format that may be
specified by Company. The records will be available to and remain the sole
property of Company at all times.

      (h) Return of Confidential Information. Employee shall return to Company
all Confidential Information in Employee's possession, custody or control
immediately upon Employee's termination from Company, or earlier if Company
requests.

      (i) Notification of New Employer. In the event Employee leaves the employ
of Company or ceases to serve as a consultant to Company, Employee hereby grants
consent to notification by Company to Employee's new employer about Employee's
rights and obligations under this Agreement.

3. Noncompetition; Non-solicitation of Employees.

      (a) Noncompetition. (i) Company is engaged an a unique and specialized
industry, and faces competition on a worldwide basis. Employee, through his or
her association with Company as an employee or consultant, will acquire a
considerable amount of knowledge and goodwill with respect to the business of
Company, which knowledge and goodwill are extremely valuable to Company and
which would be extremely detrimental to Company if used by Employee to compete
with Company. It is, therefore, understood and agreed by Employee and Company
that, because of the nature of the business Company, it is necessary to afford
fair protection to Company from such competition by Employee. Consequently,
while Employee is employed with or by Company and for a period of 12 months
after termination of such employment (for any reason whatsoever, whether
voluntary or involuntarily), Employee will not, whether alone or as a partner,
officer, director, consultant, agent, employee or stockholder of any company or
their commercial enterprise, directly or indirectly engage in any business or
other activity anywhere in the world which is competitive with, or render
services to any firm or business organization which competes with, Company in
the business of research, discovery and/or development of human therapeutics and
vaccines for infectious diseases that are being actively researched, discovered
or developed by Company at the time of termination of such employment. The
foregoing prohibition shall not prevent Employee's employment or engagement
after termination if such employment or engagement, in any capacity, does not
involve work or matters related to the business of research, discovery and/or
development of human therapeutics and vaccines for infectious diseases that are
being actively researched, discovered or developed by Company at the time of
termination of Employee's employment.

      (ii) Nothing in Exhibit 1 - Section 3, however, will prevent Employee from
engaging in additional activities in connection with personal investments and
community affairs that are not inconsistent with Employee's duties under this
Agreement. Employee shall be permitted to own securities of a public company not
in excess of five percent (5%) of any class of such securities and to own stock
partnership interests or other securities of any entity not in excess of five
percent (5%) of any class of such securities and such ownership shall not be
considered to be competition with Company.

      (b) Reasonableness. Company and Employee agree and acknowledge that the
noncompetition clause described in Exhibit 1 - Section 3(a) above is made in
consideration of substantial compensation payable under this Agreement. In
consequence of this Company and Employee agree and acknowledge that the
duration, scope, and geographic area included in such covenant not to compete
are fair, reasonable, necessary, and appropriate, and will not prevent Employee
from engaging in profitable business activities or employment.

      (c) Non-Solicitation. During and for 12 months after termination of
Employee's employment for any reason, Employee shall not, directly or indirectly
solicit, recruit or hire any employee of Company to work for a third party which
competes with Company in the business of research, discovery and/or development
of human therapeutics and vaccines for infectious diseases that are being
actively researched, discovered or developed by Company at the time of
termination, or engage in any activity that would cause any employee to violate
any agreement with Company.

4. Representations and Warranties. Employee represents and warrants that (a)
Employee is able to perform the duties of his or her position, (b) the execution
and delivery of this Agreement, and the performance of Employee's duties and
obligations hereunder, will not, with or without the giving of notice or the
passage of time, or both, (i) conflict with, result in the breach of any
provisions of or the termination of, or constitute a default under, any
agreements or understandings between Employee and other persons or companies, or
(ii) violate any judgment, writ, injunction, or order of any court, arbitrator,
or governmental agency applicable to Employee, and (c) all information provided
by Employee to Company is true and accurate.

5. Severability. If any term or other provision of this Agreement is determined
by any arbitrator or court of competent jurisdiction to be invalid, illegal, or
unenforceable in whole or in part by reason of any applicable law or public
policy, and such determination becomes final and nonappealable, such term or
other provision shall remain in full force and effect to the fullest extent
permitted by Law, and all other terms and provisions shall remain in full force
and effect in their entirety. Without limiting the generality of the foregoing,
if the duration, scope, or area of restrictions set forth in Exhibit 1 - Section
3 are determined by arbitrator or any court of competent jurisdiction to be
invalid, illegal, or unenforceable in whole or in part by reason of any
applicable Law or public policy now or hereafter existing, such restrictions
shall be interpreted, modified, or rewritten to include as much of such
duration, scope or areas as will render such restrictions valid and enforceable.

6. Assignment. Employee shall not assign all or any part of Employee's rights or
delegate its obligations hereunder by operation of Law or otherwise without
Company's express written consent (which consent may be granted or withheld in
Company's sole and absolute discretion).

7. Entire Agreement; Amendment; Waivers.

      (a) Entire Agreement. This Agreement constitutes the entire Agreement
between the Parties with respect to the subject matter hereof, and supersedes
all previous agreements, understandings, commitments or representations
concerning the subject matter contained in this Agreement. Each Party
acknowledges that the other Party has not made any representations other than
those that are contained herein.


                                     4 of 7


Employee Name:             Morges           Wayne
                -----------------------------------------------------
                           Last             First           Middle

      (b) Amendments; Waiver. Except for amendments or modifications in
accordance with certain provisions of this Agreement, this Agreement may not be
amended or modified in any way, except by a writing signed by an authorized
officer of Company and by Employee, and none of its provisions may be waived,
except by a written waiver signed by the waiving Party. No failure to act by
Company will waive any right contained in this Agreement. Any waiver by Company
must be in writing and signed by an officer of Company to be effective.

8. Successors and Assigns: No Third-Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the Parties and their respective
successors and permitted assigns. Nothing herein, whether express or implied, is
intended to or shall confer upon any other Person any legal or equitable right,
power, or remedy of any kind, nature, or description whatsoever under or by
reason hereof.

9. Dispute Resolution.

      (a) Arbitration. Any and all disputes or claims arising during the course
of employment, or arising out of the termination of employment, or arising in
the interpretation of this Agreement, between Employee and Company which cannot
be resolved through good faith negotiation, shall be resolved in accordance with
the provisions of this Section by mandatory arbitration, provided, however, that
the arbitration requirement shall not apply to Company seeking damages or
injunctive relief described in Exhibit 1 - Section 9(c), if such relief is
available under applicable law. Except as otherwise provided in this Agreement,
if any controversy should arise between the Parties in as a result of Employee's
employment relationship with Company, or the performance, interpretation or
application of this Agreement, either Party may serve upon the other a written
notice stating that such Party desires to have such controversy reviewed by a
board of three arbitrators and naming the person whom such Party has designated
to act as an arbitrator. Within 10 days after receipt of such notice, the other
Party shall designate an individual to act as arbitrator and shall notify the
Party requesting arbitration of such designation and the name of the individual
so designated. The two arbitrators so designated shall promptly select a third
arbitrator, and if they are not able to agree on such third arbitrator within 10
days, then either arbitrator, on 10 days notice in writing to the other, or both
arbitrators, shall apply to the American Arbitration Association to designate
and appoint such third arbitrator. If the Party upon whom a written request for
arbitration is served shall fail to designate its arbitrator within 10 days
after receipt of such notice, then the arbitrator designated by the Party
requesting arbitration shall act as the sole arbitrator and shall be deemed to
be the single, mutually approved arbitrator to resolve such controversy. All
documents, testimony, and records relating to any such arbitration will be
maintained in secrecy and will be available for inspection by Company, Employee
and their representative attorneys and experts, who will agree, in advance and
in writing, to receive and maintain all such information in secrecy, except as
may be limited by them in writing.

      (b) Binding Nature. The decision and award of a majority of the
arbitrators, or of such sole arbitrator, shall be binding upon both Employee and
Company and shall be enforceable in any court of competent jurisdiction. Such
decision and award may allocate the costs of such arbitration to one of the
Parties or disproportionately between the Parties. The arbitration shall be
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association.

      (c) Damages; Injunctive Relief. (i) Employee's obligations under this
Agreement have a unique and substantial value to Company and Employee remains
obligated even if he or she voluntarily or involuntarily leaves Company's
employment. Employee understands that if Employee violates this Agreement during
or after his or her employment Company may be able to recover monetary damages
from Employee and/or the other relief described below.

      (ii) A violation or even a threatened violation of this Agreement is
likely to result in irreparable harm to Company and monetary damages alone would
not completely compensate Company for the harm. Accordingly, Company may obtain
an injunction prohibiting Employee from violating Section 2 and Section 3 of
Exhibit 1 of this Agreement, an order requiring Employee to render specific
performance of the Agreement, and/or other appropriate equitable remedies.

      (iii) If an arbitrator or court determines that Employee has breached or
attempted or threatened to breach Section 2 or Section 3 of Exhibit 1 of this
Agreement, Employee acknowledges that such a breach would cause irreparable harm
to Company, and Employee consents to the granting of an injunction restraining
Employee from further breaches or attempted or threatened breaches of this
Agreement, compelling Employee to comply with this Agreement, and/or prescribing
other equitable remedies.

10. Governing Law. This Agreement, and any other disputes or claims arising out
of Employee's employment, including all arbitrated disputes, shall be governed
by, and construed and enforced in accordance with, the laws of the State of
Maryland, without regard to its conflict of laws provisions. Suit to enforce any
provision of this Agreement or to obtain any remedy with respect hereto may be
brought in a court of the State of Maryland for this purpose, Employee expressly
consents to the jurisdiction of said courts.

11. Notices. All notices and other communications from one Party to the other
shall be in writing and shall be deemed received upon (a) actual receipt when
personally delivered, (b) electronic confirmation of receipt if sent by
electronic mail, (c) electronic confirmation of receipt if sent by facsimile,
(d) expiration of the 5th business day after being deposited in the United
States mails, postage prepaid, certified or registered mail or (e) expiration of
one business day after being deposited during the regular business hours for
next-day delivery and prepaid for overnight delivery with a national overnight
courier company, addressed to the other Party as set forth on the signature
page. Each Party may change its address by giving the other Party notice thereof
in conformity with this Section.

12. Definitions. For purposes of this Agreement:

      (a) "Agreement" means the agreement, and each such exhibit, appendix,
schedule, rider or addendum attached thereto as they may be amended, restated,
supplemented or modified from time to time.

      (b) "Confidential Information" means confidential, proprietary or trade
secret information relating to Company's past, present or future (i) products,
processes, formulas, patterns, compositions, compounds, projects,
specifications, know how, research data, clinical data, personnel data,
compilations, programs, devices, methods, techniques, inventions, software, and


                                     5 of 7


Employee Name:             Morges           Wayne
                -----------------------------------------------------
                           Last             First           Middle

improvements thereto, (ii) research and development activities, (iii) designs
and technical data, (iv) marketing or business development activities, including
without limitation prospective or actual bids or proposals, pricing information
and financial information, (v) customers or suppliers or (vi) other
administrative, management, planning, financial, marketing, purchasing or
manufacturing activities. All of this type of information, whether it belongs to
Company or was provided to Company by a third party with the understanding that
it be kept confidential, and any documents, diskettes or other storage media, or
other materials or items containing this type of information, are proprietary
and confidential to Company.

      (c) "Invention" means any invention, modification, design, program code,
software, documentation, formula, data, know how, technique, process, method,
device, discovery, improvement, developments, or works of authorship and all
related patents, patent applications, copyrights and copyright applications
whether patentable or not, created, made, conceived or reduced to practice,
solely or jointly by Employee whether or not during normal working hours or on
Employee's own time, using Employee's own equipment, on the premises of Company
or elsewhere, or after termination of Employee's employment with or by Company
that (i) is created using Company's facilities, supplies, information, trade
secrets or time, (ii) relates directly or indirectly to or arises out of the
actual or proposed business, including without limitation the research and
development activities, of Company, (iii) relates directly or indirectly to or
arises out of any task assigned to Employee or work Employee performs for
Company or (iv) is based on Confidential Information.

      (d) "Law" means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.

      (e) "Person" means any individual, partnership, firm, corporation, limited
liability company, joint venture, association, trust, unincorporated
organization, or other entity.

13. Indemnification. Employee shall indemnify and hold Company harmless from:

      (a) any and all damages, claims, costs and expenses based on, or arising
from, the breach of any agreement or understanding between Employee and another
person or company, and

      (b) Employee's use or disclosure of any Confidential Information or trade
secrets Employee obtained from sources other than Company.

14. Miscellaneous Provisions.

      (a) Construction. Each Party has participated equally in the preparation
and negotiation of this Agreement, and each Party hereby unconditionally and
irrevocably waives to the fullest extent permitted by law any rule of
interpretation or construction requiring that this Agreement be interpreted or
construed against the drafting Party.

      (b) Order of Precedence. In the event of any conflict between a provision
or provisions set forth under the Basic Terms heading in this Agreement and any
exhibit, appendix, schedule, rider or addendum, the provision or provisions set
forth under such Basic Terms shall control unless the exhibit, appendix,
schedule, rider or addendum specifically provides otherwise.

      (c) Headings. The descriptive headings contained herein are for
convenience of reference only and shall not affect in any way the meaning,
construction, or interpretation of any term or provision hereof.

      (d) Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties in separate counterparts, each of
which when executed shall be deemed an original, and all of which taken together
shall constitute one and the same Agreement with the same effect as if such
signatures were upon the same document. Delivery of an executed counterpart
hereof via facsimile shall be as effective as delivery of a manually executed
counterpart hereof.

      (e) Eligibility Documents. Employee shall provide Company with true and
correct documents ("Eligibility Documents") identifying Employee's eligibility
to work in the United States (see back of 1-9 form for list of acceptable
documents) on or before the Commencement Date. Employee will need these
documents to begin employment.


                                     6 of 7


Employee Name:             Morges           Wayne
                -----------------------------------------------------
                           Last             First           Middle

                           SCHEDULE 2(d) TO EXHIBIT 1

                            PRIOR WORKS OR INVENTIONS

The following are Employee's Prior Works Or Inventions as defined in Section
3(d) of Exhibit 1 of this Agreement. If blank, then there are NONE.


                                     7 of 7

EX-10.19

                                                                   Exhibit 10.19

                           LOAN AND SECURITY AGREEMENT

      THIS LOAN AND SECURITY AGREEMENT (this "Agreement") dated as of March 30,
2007 (the "Effective Date") between SILICON VALLEY BANK, a California
corporation and with a loan production office located at 8020 Tower Crescent
Drive, Suite 475, Vienna, Virginia 22182 ("SVB"), as agent (the "Agent"), and
the Lenders listed on Schedule 1.1 thereof and otherwise party hereto, including
without limitation, SVB and OXFORD FINANCE CORPORATION ("Oxford"), and
PHARMATHENE, INC., a Delaware corporation ("Borrower"), provides the terms on
which Lenders shall lend to Borrower and Borrower shall repay Lenders. The
parties agree as follows:

      1 ACCOUNTING AND OTHER TERMS

      Accounting terms not defined in this Agreement shall be construed
following GAAP. Calculations and determinations must be made following GAAP.
Capitalized terms not otherwise defined in this Agreement shall have the
meanings set forth in Section 13. All other terms contained in this Agreement,
unless otherwise indicated, shall have the meaning provided by the Code to the
extent such terms are defined therein.

      2 LOAN AND TERMS OF PAYMENT

      2.1 Promise to Pay. Borrower hereby unconditionally promises to pay
Lenders the outstanding principal amount of all Credit Extensions and accrued
and unpaid interest thereon as and when due in accordance with this Agreement.

      2.1.1 Growth Capital Facility.

            (a) Availability. Subject to the terms and conditions of this
Agreement, on the Effective Date, Lenders agree, severally and not jointly, to
make one (1) loan (the "Growth Capital Loan") available to Borrower in an amount
up to the Growth Capital Loan Amount, according to each Lender's pro-rata share
of the Growth Capital Loan Amount (based upon the respective Commitment
Percentage of each Lender). When repaid, the Growth Capital Loan may not be
re-borrowed.

            (b) Interest Payments. Commencing on the first Payment Date of the
month following the month in which the Funding Date occurs, Borrower shall make
monthly payments of interest at the rate set forth in Section 2.2(a).

            (c) Repayment. Commencing on October 1, 2007 (the first Payment Date
which is six (6) months from the Effective Date) (the "Amortization Date"), and
continuing on the Payment Date of each month thereafter, the Growth Capital Loan
shall be repaid, in advance, in (i) thirty (30) equal monthly installments of
principal, plus (ii) monthly payments of accrued interest at the rate set forth
in Section 2.2(a). The final payment of all unpaid principal and accrued
interest is due and payable in full on the Growth Capital Loan Maturity Date.

      2.2 Payment of Interest on the Credit Extensions.

            (a) Interest Rate. Subject to Section 2.2(b), the principal amount
outstanding under the Growth Capital Loan shall accrue interest at a fixed per
annum rate equal to the Basic Rate, determined by Agent as of the Effective
Date, which interest shall be payable monthly in accordance with Section
2.2.(e).

            (b) Default Rate. Immediately upon the occurrence and during the
continuance of an Event of Default, Obligations shall bear interest at a rate
per annum which is five percentage points above the rate that is otherwise
applicable thereto (the "Default Rate"). Payment or acceptance of the increased
interest rate provided in this Section 2.2(b) is not a permitted alternative to
timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of Agent.



            (c) 360-Day Year. Interest shall be computed on the basis of a
360-day year for the actual number of days elapsed.

            (d) Debit of Accounts. Agent may debit any of Borrower's deposit
accounts, including the Designated Deposit Account, for principal and interest
payments or any other amounts Borrower owes Lenders when due. These debits shall
not constitute a set-off.

            (e) Payments. Unless otherwise provided, interest is payable monthly
on the Payment Date of each month. Payments of principal and/or interest
received after 12:00 noon Eastern time are considered received at the opening of
business on the next Business Day. When a payment is due on a day that is not a
Business Day, the payment is due the next Business Day and additional fees or
interest, as applicable, shall continue to accrue.

            (f) Permitted Prepayment. Borrower may not make any partial
prepayments of principal hereunder at any time prior to the Amortization Date.
At any time after the Amortization Date, so long as no Event of Default has
occurred and is continuing, Borrower shall have the option to prepay all, but
not less than all, of the Growth Capital Loan advanced by Lenders under this
Agreement, provided Borrower (i) delivers written notice to Agent of its
election to prepay the Growth Capital Loan at least five (5) days prior to such
prepayment, and (ii) pays, on the date of such prepayment: (x) all outstanding
principal plus accrued and unpaid interest, (y) the Prepayment Fee, and (z) all
other sums, if any, that shall have become due and payable, including interest
at the Default Rate with respect to any past due amounts.

      2.3 Fees. Borrower shall pay to Agent:

            (a) Commitment Fee. A fully earned, non-refundable commitment fee of
Fifty Thousand Dollars ($50,000.00) to be shared between the Lenders pursuant to
their respective Commitment Percentages on the Effective Date.

            (b) Good Faith Deposit. Borrower has paid to Agent, prior to the
Effective Date, a good faith deposit of Twenty-Five Thousand Dollars
($25,000.00) (the "Good Faith Deposit") to initiate Lenders' due diligence
review process, and such amounts shall be applied towards the Commitment Fee as
set forth in 2.3(a) hereof.

            (c) Prepayment Fee. The Prepayment Fee, when due hereunder; and

            (d) Lenders' Expenses. All Lenders' Expenses (including reasonable
attorneys' fees and expenses, plus expenses, for documentation and negotiation
of this Agreement) incurred through and after the Effective Date, when due.

      2.4 Additional Costs. If any new law or regulation increases Lender's
costs or reduces its income for any loan, Borrower shall pay the increase in
cost or reduction in income or additional expense; provided, however, that
Borrower shall not be liable for any amount attributable to any period before
180 days prior to the date Agent notifies Borrower of such increased costs. Each
Lender agrees that it shall allocate any increased costs among its customers
similarly affected in good faith and in a manner consistent with such Lender's
customary practice.

      3 CONDITIONS OF LOANS

      3.1 Conditions Precedent to Initial Credit Extension. Each Lender's
obligation to make the initial Credit Extension is subject to the condition
precedent that Borrower shall consent to or shall have delivered, in form and
substance satisfactory to Lenders, such documents, and completion of such other
matters, as Lenders may reasonably deem necessary or appropriate, including,
without limitation:

            (a) duly executed original signatures to the Loan Documents to which
Borrower is a party;

            (b) duly executed original signatures to the Control Agreement[s];


                                       2


            (c) Operating Documents and a good standing certificate of Borrower
certified by the Secretary of State of the State of Delaware as of a date no
earlier than thirty (30) days prior to the Effective Date;

            (d) duly executed original signatures to the completed Borrowing
Resolutions for Borrower;

            (e) Agent shall have received certified copies, dated as of a recent
date, of financing statement searches, as Agent shall request, accompanied by
written evidence (including any UCC termination statements) that the Liens
indicated in any such financing statements either constitute Permitted Liens or
have been or, in connection with the initial Credit Extension, will be
terminated or released;

            (f) a legal opinion of Borrower's and Guarantor's counsel dated as
of the Effective Date together with the duly executed original signatures
thereto;

            (g) Borrower shall have delivered the duly executed original
signatures to the Guaranty, together with the completed Borrowing Resolutions
for Guarantor;

            (h) Borrower shall deliver the Guarantor's duly executed original
signatures to the movable Hypothec;

            (i) duly executed Subordination Agreements executed by the holders
of Subordinated Debt in favor of Agent, for the ratable benefit of the Lenders;

            (j) evidence satisfactory to Agent that the insurance policies
required by Section 6.5 hereof are in full force and effect, together with
appropriate evidence showing loss payable and/or additional insured clauses or
endorsements in favor of Agent, for the ratable benefit of the Lenders; and

            (k) payment of the fees and Lenders' Expenses then due as specified
in Section 2.3 hereof.

      3.2 Conditions Precedent to all Credit Extensions. The obligation of each
Lender to make each Credit Extension, including the initial Credit Extension, is
subject to the following:

            (a) timely receipt of an executed Payment/Advance Form;

            (b) the representations and warranties in Section 5 shall be true in
all material respects on the date of the Payment/Advance Form and on the Funding
Date of each Credit Extension; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects
as of such date, and no Default or Event of Default shall have occurred and be
continuing or result from the Credit Extension. Each Credit Extension is
Borrower's representation and warranty on that date that the representations and
warranties in Section 5 remain true in all material respects; provided, however,
that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date; and

            (c) in such Lender's sole discretion, there has not been any
material impairment in the general affairs, management, results of operation,
financial condition or the prospect of repayment of the Obligations, nor has
there been any material adverse deviation by Borrower from the most recent
business plan of Borrower presented to and accepted by Agent.

      3.3 Covenant to Deliver. Borrower agrees to deliver to Agent each item
required to be delivered to Agent under this Agreement as a condition to any
Credit Extension. Borrower expressly agrees that the extension of a Credit
Extension prior to the receipt by Agent of any such item shall not constitute a
waiver by Lenders of Borrower's obligation to deliver such item, and any such
extension in the absence of a required item shall be in Agent's sole discretion.


                                       3


      4 CREATION OF SECURITY INTEREST

      4.1 Grant of Security Interest. Borrower hereby grants Agent, for the
ratable benefit of the Lenders, and to each Lender, to secure the payment and
performance in full of all of the Obligations, a continuing security interest
in, and pledges to Agent, for the ratable benefit of the Lenders, and to each
Lender, the Collateral, wherever located, whether now owned or hereafter
acquired or arising, and all proceeds and products thereof. Borrower represents,
warrants, and covenants that the security interest granted herein is and shall
at all times continue to be a first priority perfected security interest in the
Collateral (subject only to Permitted Liens). If Borrower shall acquire a
commercial tort claim (as defined in the Code), Borrower shall promptly notify
Agent in a writing signed by Borrower of the general details thereof (and
further details as may be required by Agent) and grant to Agent, for the ratable
benefit of the Lenders, and to each Lender in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with
such writing to be in form and substance reasonably satisfactory to Agent.

      If this Agreement is terminated, Agent's and each Lender's Lien in the
Collateral shall continue until the Obligations are repaid in full in cash. Upon
payment in full in cash of the Obligations and at such time as the Lenders'
obligation to make Credit Extensions has terminated, the Agent, and if
appropriate, each Lender shall, at Borrower's sole cost and expense, release its
Liens in the Collateral and all rights therein shall revert to Borrower.

      4.2 Authorization to File Financing Statements. Borrower hereby authorizes
Agent to file financing statements, without notice to Borrower, with all
appropriate jurisdictions to perfect or protect Agent's and each Lender's
interest or rights hereunder, including a notice that any disposition of the
Collateral, except as permitted hereunder, by either Borrower or any other
Person, shall be deemed to violate the rights of the Agent and the Lenders under
the Code.

      5 REPRESENTATIONS AND WARRANTIES

            Borrower represents and warrants as follows:

      5.1 Due Organization, Authorization: Power and Authority. Borrower and
each of its Subsidiaries, if any, are duly existing and in good standing, as
Registered Organizations in their respective jurisdictions of formation and are
qualified and licensed to do business and are in good standing in any
jurisdiction in which the conduct of their business or their ownership of
property requires that they be qualified except where the failure to do so could
not reasonably be expected to have a material adverse effect on Borrower's
business. In connection with this Agreement, Borrower has delivered to Agent a
completed perfection certificate signed by Borrower (the "Perfection
Certificate"). Borrower represents and warrants that (a) Borrower's exact legal
name is that indicated on the Perfection Certificate and on the signature page
hereof; (b) Borrower is an organization of the type and is organized in the
jurisdiction set forth in the Perfection Certificate; (c) the Perfection
Certificate accurately sets forth Borrower's organizational identification
number or accurately states that Borrower has none; (d) the Perfection
Certificate accurately sets forth Borrower's place of business, or, if more than
one, its chief executive office as well as Borrower's mailing address (if
different than its chief executive office); (e) Borrower (and each of its
predecessors) has not, in the past five (5) years, changed its jurisdiction of
formation, organizational structure or type, or any organizational number
assigned by its jurisdiction; and (f) all other information set forth on the
Perfection Certificate pertaining to Borrower and each of its Subsidiaries is
accurate and complete (it being understood and agreed that Borrower may from
time to time update certain information in the Perfection Certificate after the
Effective Date to the extent permitted by one or more specific provisions in
this Agreement). If Borrower is not now a Registered Organization but later
becomes one, Borrower shall promptly notify Agent of such occurrence and provide
Agent with Borrower's organizational identification number.

      The execution, delivery and performance by Borrower of the Loan Documents
to which it is a party have been duly authorized, and do not (i) conflict with
any of Borrower's organizational documents, except to the extent that any such
conflict has been waived or otherwise resolved simultaneous with entering into
this Agreement, (ii) contravene, conflict with, constitute a default under or
violate any Requirement of Law in any material respect, (iii) contravene,
conflict or violate any applicable order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority by which Borrower or any of
its Subsidiaries or any of their property or assets may be bound or affected,
(iv) require any action by, filing, registration, or qualification with, or


                                       4


Governmental Approval from, any Governmental Authority (except such Governmental
Approvals which have already been obtained and are in full force and effect) or
are being obtained pursuant to Section 6.1(b), or (v) constitute an event of
default under any material agreement by which Borrower is bound, except to the
extent that any such event of default has been waived or otherwise resolved
simultaneous with entering into this Agreement . Borrower is not in default
under any agreement to which it is a party or by which it is bound in which the
default could reasonably be expected to have a material adverse effect on
Borrower's business.

      5.2 Collateral. Borrower has good title to, has rights in, and the power
to transfer each item of the Collateral upon which it purports to grant a Lien
hereunder, free and clear of any and all Liens except Permitted Liens. Borrower
has no deposit accounts other than the deposit accounts with Agent, the deposit
accounts, if any, described in the Perfection Certificate, or of which Borrower
has given Agent notice and taken such actions as are necessary to give Agent a
perfected security interest therein.

      The Collateral is not in the possession of any third party bailee (such as
a warehouse) except as otherwise provided in the Perfection Certificate. None of
the components of the Collateral shall be maintained at locations other than as
provided in the Perfection Certificate or as Borrower has given Agent notice
pursuant to Section 7.2. In the event that Borrower, after the date hereof,
intends to store or otherwise deliver any portion of the Collateral to a bailee,
then Borrower will first receive the written consent of Agent and such bailee
must execute and deliver a bailee agreement in form and substance satisfactory
to Agent.

      Except as noted on the Perfection Certificate, Borrower is not a party to,
nor is bound by, any material license or other agreement with respect to which
Borrower is a licensee that (a) prohibits or otherwise restricts Borrower from
granting a security interest in Borrower's interest in such license or agreement
or any other property, or (b) for which a default under or termination of could
interfere with Agent's right to sell any Collateral. Borrower shall provide
written notice to Agent within ten (10) days of entering or becoming bound by
any such license or agreement which is reasonably likely to have a material
impact on Borrower's business or financial condition (other than
over-the-counter software that is commercially available to the public).
Borrower shall take such steps as Agent requests to obtain the consent of, or
waiver by, any person whose consent or waiver is necessary for (x) all such
licenses or agreements to be deemed "Collateral" and for Agent and each Lender
to have a security interest in it that might otherwise be restricted or
prohibited by law or by the terms of any such license or, whether now existing
or entered into in the future, and (y) Agent shall have the ability in the event
of a liquidation of any Collateral to dispose of such Collateral in accordance
with Agent's rights and remedies under this Agreement and the other Loan
Documents.

      5.3 Litigation. There are no actions or proceedings pending or, to the
knowledge of the Responsible Officers, threatened in writing by or against
Borrower or any of its Subsidiaries involving more than One Hundred Thousand
Dollars ($100,000.00).

      5.4 No Material Deviation in Financial Statements. All consolidated
financial statements for Borrower and any of its Subsidiaries delivered to Agent
fairly present, in all material respects Borrower's consolidated financial
condition and Borrower's consolidated results of operations. There has not been
any material deterioration in Borrower's consolidated financial condition since
the date of the most recent financial statements submitted to Agent.

      5.5 Solvency. Borrower is able to pay its debts (including trade debts) as
they mature.

      5.6 Regulatory Compliance. Borrower is not an "investment company" or a
company "controlled" by an "investment company" under the Investment Company Act
of 1940. Borrower is not engaged as one of its important activities in extending
credit for margin stock (under Regulations T and U of the Federal Reserve Board
of Governors). Borrower has complied in all material respects with the Federal
Fair Labor Standards Act. Borrower has not violated any laws, ordinances or
rules, the violation of which could reasonably be expected to have a material
adverse effect on its business. None of Borrower's or any of its Subsidiaries'
properties or assets has been used by Borrower or any Subsidiary or, to the best
of Borrower's knowledge, by previous Persons, in disposing, producing, storing,
treating, or transporting any hazardous substance other than legally. Borrower
and each of its Subsidiaries have obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all Governmental Authorities that are necessary to continue their respective
businesses as currently conducted.


                                       5


      5.7 Subsidiaries; Investments. Borrower does not own any stock,
partnership interest or other equity securities except for Permitted Investments
and its Subsidiary.

      5.8 Tax Returns and Payments; Pension Contributions. Borrower has timely
filed all required tax returns and reports, and Borrower and its Subsidiaries
have timely paid all foreign, federal, state and local taxes, assessments,
deposits and contributions owed by Borrower. Borrower may defer payment of any
contested taxes, provided that Borrower (a) in good faith contests its
obligation to pay the taxes by appropriate proceedings promptly and diligently
instituted and conducted, (b) notifies Agent in writing of the commencement of,
and any material development in, the proceedings, (c) posts bonds or takes any
other steps required to prevent the governmental authority levying such
contested taxes from obtaining a Lien upon any of the Collateral that is other
than a "Permitted Lien". Borrower is unaware of any claims or adjustments
proposed for any of Borrower's prior tax years which could result in additional
taxes becoming due and payable by Borrower. Borrower has paid all amounts
necessary to fund all present pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not withdrawn from
participation in, and has not permitted partial or complete termination of, or
permitted the occurrence of any other event with respect to, any such plan which
could reasonably be expected to result in any liability of Borrower, including
any liability to the Pension Benefit Guaranty Corporation or its successors or
any other governmental agency.

      5.9 Use of Proceeds. Borrower shall use the proceeds of the Credit
Extensions solely to fund its general business requirements and not for
personal, family, household or agricultural purposes.

      5.10 Full Disclosure. No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Agent or
any Lender, as of the date such representation, warranty, or other statement was
made, taken together with all such written certificates and written statements
given to Agent or any Lender, contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statements contained in
the certificates or statements not misleading (it being recognized that the
projections and forecasts provided by Borrower in good faith and based upon
reasonable assumptions are not viewed as facts and that actual results during
the period or periods covered by such projections and forecasts may differ from
the projected or forecasted results).

      6 AFFIRMATIVE COVENANTS

      Borrower shall do all of the following:

      6.1 Government Compliance.

            (a) Maintain its and all its Subsidiaries' legal existence and good
standing in their respective jurisdictions of formation and maintain
qualification in each jurisdiction in which the failure to so qualify would
reasonably be expected to have a material adverse effect on Borrower's business
or operations. Borrower shall comply, and have each Subsidiary comply, with all
laws, ordinances and regulations to which it is subject, the noncompliance with
which could have a material adverse effect on Borrower's business.

            (b) Use commercially reasonably efforts to obtain all of the
Governmental Approvals necessary for the performance by Borrower of its
obligations under the Loan Documents to which it is a party and the grant of a
security interest to Agent for the ratable benefit of the Lenders, in all of its
property. Borrower shall promptly provide copies of any such obtained
Governmental Approvals to Agent.

      6.2 Financial Statements, Reports, Certificates. Deliver to Agent: (i) as
soon as available, but no later than thirty (30) days after the last day of each
month, a company prepared consolidated balance sheet and income statement
covering Borrower's consolidated operations for such month certified by a
Responsible Officer and in a form acceptable to Agent; (ii) as soon as
available, but no later than one hundred eighty (180) days after the last day of
Borrower's fiscal year, audited consolidated financial statements prepared under
GAAP, consistently applied, together with an unqualified opinion on the
financial statements from an independent certified public accounting firm


                                       6


acceptable to Agent in its reasonable discretion; (iii) as soon as available,
but no later than forty-five (45) days after the last day of Borrower's fiscal
year, Borrower's financial projections for current fiscal year as approved by
Borrower's Board of Directors; (iv) within ten (10) days of delivery, copies of
all statements, reports and notices made generally available to Borrower's
security holders or to any holders of Subordinated Debt in such capacity; (v) in
the event that Borrower becomes subject to the reporting requirements under the
Securities Exchange Act of 1934, as amended, within five (5) days of filing, all
reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange
Commission or a link thereto on Borrower's or another website on the Internet;
(vi) a prompt report of any legal actions pending or threatened against Borrower
or any of its Subsidiaries that could result in damages or costs to Borrower or
any of its Subsidiaries of Two Hundred Thousand Dollars ($200,000) or more; and
(vii) other financial information reasonably requested by Agent.

      6.3 Inventory; Returns. Returns and allowances between Borrower and its
Account Debtors shall follow Borrower's customary practices as they exist at the
Effective Date. Borrower must promptly notify Agent of all returns, recoveries,
disputes and claims that involve more than One Hundred Thousand Dollars
($100,000).

      6.4 Taxes; Pensions. Make, and cause each of its Subsidiaries to make,
timely payment of all foreign, federal, state, and local taxes or assessments
(other than taxes and assessments which Borrower is contesting pursuant to the
terms of Section 5.8 hereof) and shall deliver to Agent, on demand, appropriate
certificates attesting to such payments, and pay all amounts necessary to fund
all present pension, profit sharing and deferred compensation plans in
accordance with their terms.

      6.5 Insurance. Keep its business and the Collateral insured for risks and
in amounts standard for companies in Borrower's industry and location and as
Agent may reasonably request. Insurance policies shall be in a form, with
companies, and in amounts that are satisfactory to Agent. All property policies
shall have a lender's loss payable endorsement showing Agent as lender loss
payee and waive subrogation against Agent, and all liability policies shall
show, or have endorsements showing, the Agent, as an additional insured. All
policies (or the loss payable and additional insured endorsements) shall provide
that the insurer must give Agent at least twenty (20) days notice before
canceling, amending, or declining to renew its policy. At Agent's request,
Borrower shall deliver certified copies of policies and evidence of all premium
payments. Proceeds payable under any policy shall, at Agent's option, be payable
to Agent on behalf of the Lenders on account of the Obligations. Notwithstanding
the foregoing, (a) so long as no Event of Default has occurred and is
continuing, Borrower shall have the option of applying the proceeds of any
casualty policy up to $500,000 with respect to any loss, but not exceeding
$500,000, in the aggregate for all losses under all casualty policies in any one
year, toward the replacement or repair of destroyed or damaged property;
provided that any such replaced or repaired property (i) shall be of equal or
like value as the replaced or repaired Collateral and (ii) shall be deemed
Collateral in which Agent and Lenders have been granted a first priority
security interest, and (b) after the occurrence and during the continuance of an
Event of Default, all proceeds payable under such casualty policy shall, at the
option of Agent, be payable to Agent, for the ratable benefit of the Lenders, on
account of the Obligations. If Borrower fails to obtain insurance as required
under this Section 6.5 or to pay any amount or furnish any required proof of
payment to third persons and Agent, Agent may make all or part of such payment
or obtain such insurance policies required in this Section 6.5, and take any
action under the policies Agent deems prudent.

      6.6 Operating Accounts.

            (a) Maintain its primary operating accounts with Agent and Agent's
affiliates.

            (b) Provide Agent five (5) days prior written notice before
establishing any Collateral Account at or with any bank or financial institution
other than Agent or its Affiliates. In addition, for each Collateral Account
that Borrower at any time maintains, Borrower shall cause the applicable bank or
financial institution (other than Agent) at or with which any Collateral Account
is maintained to execute and deliver a Control Agreement or other appropriate
instrument with respect to such Collateral Account to perfect Agent's Lien in
such Collateral Account in accordance with the terms hereunder. The provisions
of the previous sentence shall not apply to deposit accounts exclusively used
for payroll, payroll taxes and other employee wage and benefit payments to or
for the benefit of Borrower's employees and identified to Agent by Borrower as
such.


                                       7


      6.7 Protection of Intellectual Property Rights. Borrower shall: (a)
protect, defend and maintain the validity and enforceability of the intellectual
property material to Borrower's business; (b) promptly advise Agent in writing
of material infringements of its intellectual property; and (c) not allow any
intellectual property material to Borrower's business to be abandoned, forfeited
or dedicated to the public without Agent's written consent.

      6.8 SPAC Closing. In the event that the SPAC Closing has not occurred
prior to August 3, 2007, the Borrower shall deliver to Agent, on or before
August 31, 2007, the Additional Closing Documents, each in form and substance
acceptable to the Lenders, at Borrower's sole cost and expense.

      6.9 Litigation Cooperation. From the date hereof and continuing through
the termination of this Agreement, make available to Agent, without expense to
Agent, Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Agent may deem them reasonably necessary to
prosecute or defend any third-party suit or proceeding instituted by or against
Agent with respect to any Collateral or relating to Borrower.

      6.10 Further Assurances. Execute any further instruments and take further
action as Agent reasonably requests to perfect or continue Agent's and Lenders'
Lien in the Collateral or to effect the purposes of this Agreement. Deliver to
Agent, within five (5) days after the same are sent or received, copies of all
correspondence, reports, documents and other filings with any Governmental
Authority regarding compliance with or maintenance of Governmental Approvals or
Requirements of Law or that could reasonably be expected to have a material
effect on any of the Governmental Approvals or otherwise on the operations of
Borrower or any of its Subsidiaries.

      6.10 Notices of Litigation and Default. Borrower will give prompt written
notice to Agent of any litigation or governmental proceedings pending or
threatened (in writing) against Borrower which would reasonably be expected to
have a material adverse effect with respect to Borrower. Without limiting or
contradicting any other more specific provision of this Agreement, promptly (and
in any event within three (3) Business Days) upon Borrower becoming aware of the
existence of any Event of Default or event which, with the giving of notice or
passage of time, or both, would constitute an Event of Default, Borrower shall
give written notice to Agent of such occurrence, which such notice shall include
a reasonably detailed description of such Event of Default or event which, with
the giving of notice or passage of time, or both, would constitute an Event of
Default.

      7 NEGATIVE COVENANTS

      Borrower shall not do any of the following without Agent's prior written
consent:

      7.1 Dispositions. Convey, sell, lease, transfer, assign, or otherwise
dispose of (collectively, "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, except for Transfers (a)
of Inventory in the ordinary course of business; (b) of worn-out or obsolete
Equipment; and (c) in connection with Permitted Joint Ventures, Permitted Liens
and Permitted Investments; and (d) of non-exclusive licenses for the use of the
property, of Borrower or its Subsidiaries in the ordinary course of business.

      7.2 Changes in Business, Management, Ownership, or Business Locations. (a)
Engage in or permit any of its Subsidiaries to engage in any business other than
the businesses currently engaged in by Borrower and such Subsidiary, as
applicable, or reasonably related thereto; (b) liquidate or dissolve; or (c) (i)
if the Key Person ceases to hold such office with Borrower and a replacement
reasonably satisfactory to Lenders is not made within 90 days thereafter, or
(ii) except in connection with the SPAC Closing, enter into any transaction or
series of related transactions in which the stockholders of Borrower who were
not stockholders immediately prior to the first such transaction or immediately
after the SPAC Closing, own more than 40% of the voting stock of Borrower
immediately after giving effect to such transaction or related series of such
transactions (other than by the sale of Borrower's equity securities in a public
offering or to venture capital investors so long as Borrower identifies to Agent
the venture capital investors prior to the closing of the transaction). Borrower
shall not, without at least thirty (30) days prior written notice to Agent: (1)
add any new offices or business locations, including warehouses (unless such new
offices or business locations contain less than Ten Thousand Dollars ($10,000)
in Borrower's assets or property), (2) change its jurisdiction of organization,
(3) change its organizational structure or type, (4) change its legal name, or
(5) change any organizational number (if any) assigned by its jurisdiction of
organization.


                                       8


      7.3 Mergers or Acquisitions. Except in connection with the SPAC Closing or
a Permitted Acquisition, merge or consolidate, or permit any of its Subsidiaries
to merge or consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person. A Subsidiary may merge or consolidate into another
Subsidiary or into Borrower.

      7.4 Indebtedness. Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness.

      7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of its
property, or assign or convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, or permit any Collateral not to be subject to the first priority security
interest granted herein, or enter into any agreement, document, instrument or
other arrangement (except with or in favor of Agent) with any Person which
directly or indirectly prohibits or has the effect of prohibiting Borrower or
any Subsidiary from assigning, mortgaging, pledging, granting a security
interest in or upon, or encumbering any of Borrower's or any Subsidiary's
intellectual property, except as is otherwise permitted in Section 7.1 hereof
and the definition of "Permitted Liens" herein.

      7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account
except pursuant to the terms of Section 6.6(b) hereof.

      7.7 Distributions; Investments. (a) Pay any dividends or make any
distribution or payment or redeem, retire or purchase any capital stock, or (b)
directly or indirectly make any Investment other than Permitted Investments, or
permit any of its Subsidiaries to do so.

      7.8 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower, except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a non-affiliated Person.

      7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated
Debt, except under the terms of the subordination, intercreditor, or other
similar agreement to which such Subordinated Debt is subject, or (b) amend any
provision in any document relating to the Subordinated Debt which would increase
the principal amount thereof or adversely affect the subordination thereof to
Obligations owed to the Lenders.

      7.10 Compliance. Become an "investment company" or a company controlled by
an "investment company", under the Investment Company Act of 1940 or undertake
as one of its important activities extending credit to purchase or carry margin
stock (as defined in Regulation U of the Board of Governors of the Federal
Reserve System), or use the proceeds of any Credit Extension for that purpose;
fail to meet the minimum funding requirements of ERISA, permit a Reportable
Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply
with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to have a material
adverse effect on Borrower's business, or permit any of its Subsidiaries to do
so; withdraw or permit any Subsidiary to withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event
with respect to, any present pension, profit sharing and deferred compensation
plan which could reasonably be expected to result in any liability of Borrower,
including any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency.

      8 EVENTS OF DEFAULT

      Any one of the following shall constitute an event of default (an "Event
of Default") under this Agreement:

      8.1 Payment Default. Borrower fails to make any payment of principal or
interest on any Credit Extension on its due date, or pay any other Obligations
within three (3) Business Days after such Obligations are due and payable (which
three (3) Business Day grace period shall not apply to payments due on the
Growth Capital Loan Maturity Date). During the cure period, the failure to cure
the payment default is not an Event of Default (but no Credit Extension will be
made during the cure period);


                                       9


      8.2 Covenant Default.

            (a) Borrower fails or neglects to perform any obligation in Sections
6.2, 6.4, 6.5, 6.6, 6.7, 6.8, or violates any covenant in Section 7; or

            (b) Borrower fails or neglects to perform, keep, or observe any
other term, provision, condition, covenant or agreement contained in this
Agreement or any Loan Documents, and as to any default (other than those
specified in this Section 8) under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure the default within
ten (10) days after the occurrence thereof; provided, however, that if the
default cannot by its nature be cured within the ten (10) day period or cannot
after diligent attempts by Borrower be cured within such ten (10) day period,
and such default is likely to be cured within a reasonable time, then Borrower
shall have an additional period (which shall not in any case exceed thirty (30)
days) to attempt to cure such default, and within such reasonable time period
the failure to cure the default shall not be deemed an Event of Default (but no
Credit Extensions shall be made during such cure period). Grace periods provided
under this Section shall not apply, among other things, to financial covenants
or any other covenants set forth in subsection (a) above;

      8.3 Material Adverse Change. A Material Adverse Change occurs;

      8.4 Attachment. (a) Any material portion of Borrower's assets is attached,
seized, levied on, or comes into possession of a trustee or receiver and the
attachment, seizure or levy is not removed in ten (10) days; (b) the service of
process seeking to attach, by trustee or similar process, any funds of Borrower,
or of any entity under control of Borrower (including a Subsidiary), on deposit
with the Lenders and/or Agent or an Affiliate; (c) Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business; (d) a judgment or other claim in excess of Fifty Thousand Dollars
($50,000.00) becomes a Lien on any of Borrower's assets; or (e) a notice of
lien, levy, or assessment is filed against any of Borrower's assets by any
government agency and not paid within ten (10) days after Borrower receives
notice. These are not Events of Default if stayed or if a bond is posted pending
contest by Borrower (but no Credit Extensions shall be made during the cure
period);

      8.5 Insolvency (a) Borrower is unable to pay its debts (including trade
debts) as they become due or otherwise becomes insolvent; (b) Borrower begins an
Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower
and not dismissed or stayed within forty-five (45) days (but no Credit
Extensions shall be made while of any of the conditions described in clause (a)
exist and/or until any Insolvency Proceeding is dismissed);

      8.6 Other Agreements. There is a default which remains uncured in any
agreement to which Borrower is a party with a third party or parties resulting
in a right by such third party or parties (other than any agreement relating to
the Subordinated Debt), whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of Two Hundred Fifty Thousand Dollars
($250,000) or that could have a material adverse effect on Borrower's or
Guarantor's business.

      8.7 Judgments. One or more judgments, orders, or decrees for the payment
of money in an amount, individually or in the aggregate, of at least Fifty
Thousand Dollars ($50,000) (not covered by independent third-party insurance as
to which liability has been accepted by such insurance carrier) shall be
rendered against Borrower and shall remain unsatisfied, unvacated, or unstayed
for a period of ten (10) days after the entry thereof (provided that no Credit
Extensions will be made prior to the satisfaction, vacation, or stay of such
judgment, order, or decree);

      8.8 Misrepresentations. Borrower or any Person acting for Borrower makes
any representation, warranty, or other statement now or later in this Agreement,
any Loan Document or in any writing delivered to Agent and/or Lenders or to
induce Agent and/or Lenders to enter this Agreement or any Loan Document, and
such representation, warranty, or other statement is incorrect in any material
respect when made; or

      8.9 Intentionally Deleted.

      8.10 Governmental Approvals. Any Governmental Approval shall have been
revoked, rescinded, suspended, modified in an adverse manner or not renewed in
the ordinary course for a full term.


                                       10


      8.11 Guaranty. (a) Any guaranty of any Obligations terminates or ceases
for any reason to be in full force and effect and is not restored within three
(3) Business Days thereafter; (b) any Guarantor does not perform any obligation
or covenant under any guaranty of the Obligations within any applicable period
of grace or cure, if any; (c) any circumstance described in Sections 8.3, 8.4,
8.5, 8.7, or 8.8. occurs with respect to any Guarantor that can be cured, has
failed to be cured within three (3) Business Days after the occurrence thereof;
(d) the liquidation, winding up, or termination of existence of any Guarantor;
or (e) a material impairment in the perfection or priority of Bank's Lien in the
collateral provided by Guarantor or in the value of such collateral.

      9 RIGHTS AND REMEDIES

      9.1 Rights and Remedies. While an Event of Default occurs and continues
Agent may, without notice or demand, do any or all of the following:

            (a) declare all Obligations immediately due and payable (but if an
Event of Default described in Section 8.5 occurs all Obligations are immediately
due and payable without any action by Agent or Lenders);

            (b) stop advancing money or extending credit for Borrower's benefit
under this Agreement or under any other agreement between Borrower and Agent
and/or Lenders;

            (c) settle or adjust disputes and claims directly with Account
Debtors for amounts on terms and in any order that Agent considers advisable,
notify any Person owing Borrower money of Agent's and Lenders' security interest
in such funds, and verify the amount of such account;

            (d) make any payments and do any acts it considers necessary or
reasonable to protect the Collateral and/or its security interest in the
Collateral. Borrower shall assemble the Collateral if Agent requests and make it
available as Agent designates. Agent may enter premises where the Collateral is
located, take and maintain possession of any part of the Collateral, and pay,
purchase, contest, or compromise any Lien which appears to be prior or superior
to its security interest and pay all expenses incurred. Borrower grants Agent a
license to enter and occupy any of its premises, without charge, to exercise any
of Agent's rights or remedies;

            (e) apply to the Obligations any (i) balances and deposits of
Borrower it holds, or (ii) any amount held by Agent or Lenders owing to or for
the credit or the account of Borrower;

            (f) ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral. Agent is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower's labels, patents, copyrights, mask works, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Agent's exercise of its rights under this Section, Borrower's
rights under all licenses and all franchise agreements inure to Agent for the
benefit of the Lenders;

            (g) place a "hold" on any account maintained with Agent or Lenders
and/or deliver a notice of exclusive control, any entitlement order, or other
directions or instructions pursuant to any Control Agreement or similar
agreements providing control of any Collateral;

            (h) demand and receive possession of Borrower's Books; and

            (i) exercise all rights and remedies available to Agent under the
Loan Documents or at law or equity, including all remedies provided under the
Code (including disposal of the Collateral pursuant to the terms thereof).

      9.2 Power of Attorney. Borrower hereby irrevocably appoints Agent as its
lawful attorney-in-fact, exercisable only upon the occurrence and during the
continuance of an Event of Default, to: (a) endorse Borrower's name on any
checks or other forms of payment or security; (b) sign Borrower's name on any
invoice or bill of lading for any Account or drafts against Account Debtors; (c)
settle and adjust disputes and claims about the Accounts directly with Account
Debtors, for amounts and on terms Agent determines reasonable; (d) make, settle,


                                       11


and adjust all claims under Borrower's insurance policies; (e) pay, contest or
settle any Lien, charge, encumbrance, security interest, and adverse claim in or
to the Collateral, or any judgment based thereon, or otherwise take any action
to terminate or discharge the same; and (f) transfer the Collateral into the
name of Agent or a third party as the Code permits. Borrower hereby appoints
Agent as its lawful attorney-in-fact to sign Borrower's name on any documents
necessary to perfect or continue the perfection of Agent's and Lenders' security
interest in the Collateral regardless of whether an Event of Default has
occurred until all Obligations have been satisfied in full and Agent and Lenders
are under no further obligation to make Credit Extensions hereunder. Agent's
foregoing appointment as Borrower's attorney in fact, and all of Agent's rights
and powers, coupled with an interest, are irrevocable until all Obligations have
been fully repaid and performed and Agent's and Lenders' obligation to provide
Credit Extensions terminates.

      9.3 Protective Payments. If Borrower fails to obtain the insurance called
for by Section 6.5 or fails to pay any premium thereon or fails to pay any other
amount which Borrower is obligated to pay under this Agreement or any other Loan
Document, Agent may obtain such insurance or make such payment, and all amounts
so paid by Agent are Lenders' Expenses and immediately due and payable, bearing
interest at the then highest applicable rate, and secured by the Collateral.
Agent will make reasonable efforts to provide Borrower with notice of Agent
obtaining such insurance at the time it is obtained or within a reasonable time
thereafter. No payments by Agent are deemed an agreement to make similar
payments in the future or Agent's waiver of any Event of Default.

      9.4 Application of Payments and Proceeds. Borrower shall have no right to
specify the order or the accounts to which Agent shall allocate or apply any
payments required to be made by Borrower to Agent or otherwise received by Agent
under this Agreement when any such allocation or application is not specified
elsewhere in this Agreement. If an Event of Default has occurred and is
continuing, Agent and/or each Lender may apply any funds in its possession,
whether from Borrower account balances, payments, proceeds realized as the
result of any collection of Accounts or other disposition of the Collateral, or
otherwise, to the Obligations in such order as the Lenders shall determine in
their sole discretion. Any surplus shall be paid to Borrower or other Persons
legally entitled thereto; Borrower shall remain liable to Lenders for any
deficiency. If Agent, in its good faith business judgment, directly or
indirectly enters into a deferred payment or other credit transaction with any
purchaser at any sale of Collateral, Agent shall have the option, exercisable at
any time, of either reducing the Obligations by the principal amount of the
purchase price or deferring the reduction of the Obligations until the actual
receipt by Agent of cash therefor.

      9.5 Liability for Collateral. So long as the Agent and Lenders comply with
reasonable banking practices regarding the safekeeping of the Collateral in the
possession or under the control of the Agent and Lenders, the Agent and Lenders
shall not be liable or responsible for: (a) the safekeeping of the Collateral;
(b) any loss or damage to the Collateral; (c) any diminution in the value of the
Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or
other Person. Borrower bears all risk of loss, damage or destruction of the
Collateral.

      9.6 No Waiver; Remedies Cumulative. Agent's failure, at any time or times,
to require strict performance by Borrower of any provision of this Agreement or
any other Loan Document shall not waive, affect, or diminish any right of Agent
thereafter to demand strict performance and compliance herewith or therewith. No
waiver hereunder shall be effective unless signed by Agent and then is only
effective for the specific instance and purpose for which it is given. Agent's
rights and remedies under this Agreement and the other Loan Documents are
cumulative. Agent has all rights and remedies provided under the Code, by law,
or in equity. Agent's exercise of one right or remedy is not an election, and
Agent's waiver of any Event of Default is not a continuing waiver. Agent's delay
in exercising any remedy is not a waiver, election, or acquiescence.

      9.7 Demand Waiver. Borrower waives demand, notice of default or dishonor,
notice of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Agent on which Borrower is
liable.

      9.8 Withholding. In the event any payments are received by Lenders from
Borrower hereunder such payments will be made subject to applicable withholding
for any taxes, levies, fees, deductions, withholding, restrictions or conditions
of any nature whatsoever. Specifically, if at any time any governmental
authority, applicable law, regulation or international agreement requires
Borrower to make any such withholding or deduction from any such payment or
other sum payment hereunder to the Lenders, Borrower hereby covenants and agrees
that the amount due from Borrower with respect to such payment or other sum
payable hereunder will be increased to the extent necessary to ensure that,


                                       12


after the making of such required withholding or deduction, each Lender receives
a net sum equal to the sum which it would have received had no withholding or
deduction been required and Borrower shall pay the full amount withheld or
deducted to the relevant governmental authority. Borrower will, upon request,
furnish Lenders with proof satisfactory to Lenders indicating that Borrower has
made such withholding payment provided, however, that Borrower need not make any
withholding payment if the amount or validity of such withholding payment is
contested in good faith by appropriate and timely proceedings and as to which
payment in full is bonded or reserved against by Borrower. The agreements and
obligations of Borrower contained in this Section shall survive the termination
of this Agreement.

      10 NOTICES

      All notices, consents, requests, approvals, demands, or other
communication (collectively, "Communication") by any party to this Agreement or
any other Loan Document must be in writing and shall be deemed to have been
validly served, given, or delivered: (a) upon the earlier of actual receipt and
three (3) Business Days after deposit in the U.S. mail, first class, registered
or certified mail return receipt requested, with proper postage prepaid; (b)
upon transmission, when sent by electronic mail or facsimile transmission; (c)
one (1) Business Day after deposit with a reputable overnight courier with all
charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of
which shall be addressed to the party to be notified and sent to the address,
facsimile number, or email address indicated below. Either Agent, Lender or
Borrower may change its address or facsimile number by giving the other party
written notice thereof in accordance with the terms of this Section 10.

         If to Borrower:        PharmAthene, Inc.
                                175 Admiral Cochrane Drive, Suite 101
                                Annapolis, Maryland 21401
                                Attn:
                                Fax:
                                Email:

         If to Agent or SVB:    Silicon Valley Bank
                                8020 Tower Crescent Drive, Suite 475
                                Vienna, Virginia  22182
                                Attn: Ms. Megan Scheffel
                                Fax: (703) 356-7643
                                Email: mscheffel@svbank.com

         with a copy to:        Riemer & Braunstein LLP
                                Three Center Plaza
                                Boston, Massachusetts 02108
                                Attn: David A. Ephraim, Esquire
                                Fax: (617) 880-3456
                                Email: DEphraim@riemerlaw.com

         If to Oxford:          Oxford Finance Corporation
                                133 North Fairfax Street
                                Alexandria, Virginia 22314
                                Attention: Ms. Barbara Holmes
                                Fax: 703-519-5225
                                Email: bholmes@oxfordfinance.com

      11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

      Massachusetts law governs the Loan Documents (other than the Warrant)
without regard to principles of conflicts of law. Borrower, Lenders and Agent
each submit to the exclusive jurisdiction of the State and Federal courts in
Massachusetts. Notwithstanding the foregoing, nothing in this Agreement shall be
deemed to operate to preclude Agent from bringing suit or taking other legal
action in any other jurisdiction to realize on the Collateral or any other


                                       13


security for the Obligations, or to enforce a judgment or other court order in
favor of Agent and Lenders. Borrower expressly submits and consents in advance
to such jurisdiction in any action or suit commenced in any such court, and
Borrower hereby waives any objection that it may have based upon lack of
personal jurisdiction, improper venue, or forum non conveniens and hereby
consents to the granting of such legal or equitable relief as is deemed
appropriate by such court. Borrower hereby waives personal service of the
summons, complaints, and other process issued in such action or suit and agrees
that service of such summons, complaints, and other process may be made by
registered or certified mail addressed to Borrower at the address set forth in
Section 10 of this Agreement and that service so made shall be deemed completed
upon the earlier to occur of Borrower's actual receipt thereof or three (3) days
after deposit in the U.S. mails, proper postage prepaid.

      TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER, LENDER AND
AGENT EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

      12 GENERAL PROVISIONS

      12.1 Successors and Assigns. This Agreement binds and is for the benefit
of the successors and permitted assigns of each party. Borrower may not assign
this Agreement or any rights or obligations under it without Agent's prior
written consent (which may be granted or withheld in Agent's discretion).
Lenders and Agent have the right, without the consent of or notice to Borrower,
to sell, transfer, assign, negotiate, or grant participation in all or any part
of, or any interest in, Lenders' obligations, rights, and benefits under this
Agreement and the other Loan Documents, including without limitation, an
assignment to any Affiliate or any related party.

      12.2 Indemnification/Expenses. Borrower agrees to indemnify, defend and
hold Agent and the Lenders and their respective directors, officers, employees,
agents, attorneys, or any other Person affiliated with or representing Agent or
the Lenders harmless against: (a) all obligations, demands, claims, and
liabilities (collectively, "Claims") asserted by any other party in connection
with the transactions contemplated by the Loan Documents; and (b) all losses or
Lenders' Expenses incurred, or paid by Lenders and/or Agent from, following, or
arising from transactions between Agent, and/or Lenders and Borrower (including
reasonable attorneys' fees and expenses), except for Claims and/or losses
directly caused by Agent's or Lenders' gross negligence or willful misconduct.

      12.3 Time of Essence. Time is of the essence for the performance of all
Obligations in this Agreement.

      12.4 Severability of Provisions. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.

      12.5 Amendments in Writing; Integration. All amendments to this Agreement
must be in writing signed by Agent, Lenders and Borrower. This Agreement and the
Loan Documents represent the entire agreement about this subject matter and
supersede prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement and the Loan Documents merge
into this Agreement and the Loan Documents.

      12.6 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, are an original, and all taken together, constitute
one Agreement.

      12.7 Survival. All covenants, representations and warranties made in this
Agreement continue in full force until this Agreement has terminated pursuant to
its terms and all Obligations (other than inchoate indemnity obligations and any
other obligations which, by their terms, are to survive the termination of this
Agreement) have been satisfied. The obligation of Borrower in Section 12.2 to
indemnify each Lender and Agent shall survive until the statute of limitations
with respect to such claim or cause of action shall have run.


                                       14


      12.8 Confidentiality. In handling any confidential information, Lenders
and Agent shall exercise the same degree of care that it exercises for its own
proprietary information, but disclosure of information may be made: (a) to
Lenders' and Agent's Subsidiaries or Affiliates; (b) to prospective transferees
or purchasers of any interest in the Credit Extensions (provided, however,
Lenders and Agent shall use commercially reasonable efforts to obtain such
prospective transferee's or purchaser's agreement to the terms of this
provision); (c) as required by law, regulation, subpoena, or other order; (d) to
regulators or as otherwise required in connection with an examination or audit;
and (e) as Agent considers appropriate in exercising remedies under this
Agreement. Confidential information does not include information that either:
(i) is in the public domain or in Lenders' and/or Agent's possession when
disclosed to Lenders and/or Agent, or becomes part of the public domain after
disclosure to Lenders and/or Agent; or (ii) is disclosed to Lenders and/or Agent
by a third party, if Lenders and/or Agent does not know that the third party is
prohibited from disclosing the information.

      12.9 Right of Set Off. Borrower hereby grants to Agent and to each Lender,
a lien, security interest and right of set off as security for all Obligations
to Agent and each Lender hereunder, whether now existing or hereafter arising
upon and against all deposits, credits, collateral and property, now or
hereafter in the possession, custody, safekeeping or control of Agent or Lenders
or any entity under the control of Agent or Lenders (including an Agent
affiliate) or in transit to any of them. At any time after the occurrence and
during the continuance of an Event of Default, without demand or notice, Agent
or Lenders may set off the same or any part thereof and apply the same to any
liability or obligation of Borrower even though unmatured and regardless of the
adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO
REQUIRE AGENT TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

      13 DEFINITIONS

      13.1 Definitions. As used in this Agreement, the following terms have the
following meanings:

      "Account" is any "account" as defined in the Code with such additions to
such term as may hereafter be made, and includes, without limitation, all
accounts receivable and other sums owing to Borrower.

      "Account Debtor" is any "account debtor" as defined in the Code with such
additions to such term as may hereafter be made.

      "Additional Closing Documents" shall mean the following documents, each in
form and substance satisfactory to the Lenders:

      (a) Officer's Certificate with respect to incumbency and authorizing
resolution;

      (b) Immovable Hypothec covering the real estate located at 320 Chemin St
Georges, ST- Telephone (Quebec) J0P IYO and certain livestock;

      (c) Mortgage Filings;

      (d) Title Insurance;

      (e) Legal Opinion as to Authority/Enforceability; and

      (f) such other documents as the Lenders may reasonably request.

      "Affiliate" of any Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.


                                       15


      "Agent" means, SVB, not in its individual capacity, but solely in its
capacity as agent on behalf of and for the benefit of the Lenders.

      "Agreement" is defined in the preamble hereof.

      "Amortization Date" is defined in Section 2.1.1(c).

      "Basic Rate" is the per annum rate of interest (based on a year of 360
days) equal to the greater of:

      (i) 11.53%, and

      (ii) the sum of:

      (a) U.S. Treasury note yield to maturity for a term equal to the Treasury
Note Maturity as reported in Federal Reserve Statistical Release H.15- Selected
Interest Rates under the heading "U.S. Government Securities/Treasury Constant
Maturities" on November 13, 2006, plus

      (b) the Loan Margin. In the event Release H.15 is no longer published,
Agent shall select a comparable publication to determine the U.S. Treasury note
yield to maturity.

      "Borrower" is defined in the preamble hereof.

      "Borrower's Books" are all Borrower's books and records including ledgers,
federal and state tax returns, records regarding Borrower's assets or
liabilities, the Collateral, business operations or financial condition, and all
computer programs or storage or any equipment containing such information.

      "Borrowing Resolutions" are, with respect to any Person, those resolutions
adopted by such Person's Board of Directors and delivered by such Person to
Agent approving the Loan Documents to which such Person is a party and the
transactions contemplated thereby, together with a certificate executed by its
secretary on behalf of such Person certifying that (a) such Person has the
authority to execute, deliver, and perform its obligations under each of the
Loan Documents to which it is a party, (b) that attached as Exhibit A to such
certificate is a true, correct, and complete copy of the resolutions then in
full force and effect authorizing and ratifying the execution, delivery, and
performance by such Person of the Loan Documents to which it is a party, (c) the
name(s) of the Person(s) authorized to execute the Loan Documents on behalf of
such Person, together with a sample of the true signature(s) of such Person(s),
and (d) that Agent may conclusively rely on such certificate unless and until
such Person shall have delivered to Agent a further certificate canceling or
amending such prior certificate.

      "Business Day" is any day that is not a Saturday, Sunday or a day on which
Agent is closed.

      "Cash Burn" is the average net reduction in Borrower's operating cash
position for the three (3) prior months.

      "Cash Equivalents" are (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor's Ratings
Group or Moody's Investors Service, Inc., and (c) SVB's certificates of deposit
issued maturing no more than one (1) year after issue.

      "Claims" are defined in Section 12.2.

      "Code" is the Uniform Commercial Code, as the same may, from time to time,
be enacted and in effect in the Commonwealth of Massachusetts; provided, that,
to the extent that the Code is used to define any term herein or in any Loan
Document and such term is defined differently in different Articles or Divisions


                                       16


of the Code, the definition of such term contained in Article or Division 9
shall govern; provided further, that in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection, or priority of, or
remedies with respect to, Agent's and Lenders' Lien on any Collateral is
governed by the Uniform Commercial Code in effect in a jurisdiction other than
the Commonwealth of Massachusetts, the term "Code" shall mean the Uniform
Commercial Code as enacted and in effect in such other jurisdiction solely for
purposes on the provisions thereof relating to such attachment, perfection,
priority, or remedies and for purposes of definitions relating to such
provisions.

      "Collateral" is any and all properties, rights and assets of Borrower
described on Exhibit A.

      "Collateral Account" is any Deposit Account, Securities Account, or
Commodity Account of the Borrower.

      "Commitment Percentage" is set forth in Schedule 1.1, as amended from time
to time.

      "Commodity Account" is any "commodity account" as defined in the Code with
such additions to such term as may hereafter be made.

      "Communication" is defined in Section 10.

      "Compliance Certificate" is that certain certificate in the form attached
hereto as Exhibit C.

      "Contingent Obligation" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (a) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (b) any obligations for undrawn letters of credit for the account of
that Person; and (c) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under any guarantee or other support arrangement.

      "Control Agreement" is any control agreement entered into among the
depository institution at which Borrower maintains a Deposit Account or the
securities intermediary or commodity intermediary at which Borrower maintains a
Securities Account or a Commodity Account, Borrower, and Agent pursuant to which
Agent obtains control (within the meaning of the Code) for the benefit of the
Lenders over such Deposit Account, Securities Account, or Commodity Account.

      "Credit Extension" is the Growth Capital Loan or any other extension of
credit by Agent or Lenders for Borrower's benefit.

      "Default" is any event which with notice or passage of time or both, would
constitute an Event of Default.

      "Default Rate" is defined in Section 2.2.(b).

      "Deposit Account" is any "deposit account" as defined in the Code with
such additions to such term as may hereafter be made.

      "Designated Deposit Account" is Borrower's deposit account, account number
3300413584, maintained with SVB.

      "Dollars," "dollars" and "$" each mean lawful money of the United States.

      "Effective Date" is defined in the preamble of this Agreement.


                                       17


      "Equipment" is all "equipment" as defined in the Code with such additions
to such term as may hereafter be made, and includes without limitation all
machinery, fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.

      "ERISA" is the Employee Retirement Income Security Act of 1974, and its
regulations.

      "Event of Default" is defined in Section 8.

      "Funding Date" is any date on which a Credit Extension is made to or on
account of Borrower which shall be a Business Day.

      "GAAP" is generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other Person as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.

      "General Intangibles" is all "general intangibles" as defined in the Code
in effect on the date hereof with such additions to such term as may hereafter
be made, and includes without limitation, all copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any patents,
trademarks, service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, any trade secret rights,
including any rights to unpatented inventions, payment intangibles, royalties,
contract rights, goodwill, franchise agreements, purchase orders, customer
lists, route lists, telephone numbers, domain names, claims, income and other
tax refunds, security and other deposits, options to purchase or sell real or
personal property, rights in all litigation presently or hereafter pending
(whether in contract, tort or otherwise), insurance policies (including without
limitation key man, property damage, and business interruption insurance),
payments of insurance and rights to payment of any kind.

      "Governmental Approval" is any consent, authorization, approval, order,
license, franchise, permit, certificate, accreditation, registration, filing or
notice, of, issued by, from or to, or other act by or in respect of, any
Governmental Authority.

      "Governmental Authority" is any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization

      "Growth Capital Loan" is a loan made by Lenders pursuant to the terms of
Section 2.1.1(a) hereof.

      "Growth Capital Loan Amount" is an amount equal to Ten Million Dollars
($10,000,000.00).

      "Growth Capital Loan Maturity Date" is, for the Growth Capital Loan, the
Payment Date which is the twenty-ninth (29) month after the Amortization Date.

      "Guarantor" is any present or future guarantor of the Obligations,
including PharmAthene Canada, Inc.

      "Indebtedness" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and (d)
Contingent Obligations.

      "Insolvency Proceeding" is any proceeding by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief..

      "Inventory" is all "inventory" as defined in the Code in effect on the
date hereof with such additions to such term as may hereafter be made, and
includes without limitation all merchandise, raw materials, parts, supplies,


                                       18


packing and shipping materials, work in process and finished products, including
without limitation such inventory as is temporarily out of Borrower's custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.

      "Investment" is any beneficial ownership interest in any Person (including
stock, partnership interest or other securities), and any loan, advance or
capital contribution to any Person.

      "Key Person" is the Borrower's Chief Executive Officer, who is David
Wright, as of the Effective Date.

      "Lender" is any one of the Lenders.

      "Lenders" shall mean the Persons identified on Schedule 1.1 hereto and
each assignee that becomes a party to this Agreement pursuant to Section 12.1.

      "Lenders' Expenses" are all audit fees and expenses, costs, and expenses
(including reasonable attorneys' fees and expenses) for preparing, amending,
negotiating, defending and enforcing the Loan Documents (including, without
limitation, those incurred in connection with appeals or Insolvency Proceedings)
or otherwise incurred with respect to Borrower.

      "Lien" is a claim, mortgage, deed of trust, levy, charge, pledge, security
interest or other encumbrance of any kind, whether voluntarily incurred or
arising by operation of law or otherwise against any property.

      "Loan Documents" are, collectively, this Agreement, the Warrant, the
Perfection Certificate, any note, or notes or guaranties executed by Borrower or
any Guarantor, and any other present or future agreement between Borrower any
Guarantor and/or for the benefit of Lenders and Agent in connection with this
Agreement, all as amended, restated, or otherwise modified.

      "Loan Margin" is 675 basis points.

      "Material Adverse Change" is (a) a material impairment in the perfection
or priority of Lenders' Lien in the Collateral or in the value of such
Collateral; (b) a material adverse change in the business, operations, or
condition (financial or otherwise) of Borrower and the Guarantor taken as a
whole; or (c) a material impairment of the prospect of repayment of any portion
of the Obligations.

      "Obligations" are Borrower's obligation to pay when due any debts,
principal, interest, Lenders' Expenses, Prepayment Fees, and other amounts
Borrower owes Lenders now or later, whether under this Agreement, the Loan
Documents, or including, without limitation, all obligations relating to letters
of credit (including reimbursement obligations for drawn and undrawn letters of
credit), cash management services, and foreign exchange contracts, if any, and
including interest accruing after Insolvency Proceedings begin (whether or not
allowed) and debts, liabilities, or obligations of Borrower assigned to Lenders
and/or Agent, and the performance of Borrower's duties under the Loan Documents.

      "Operating Documents" are, for any Person, such Person's formation
documents, as certified with the Secretary of State of such Person's state of
formation on a date that is no earlier than 30 days prior to the Effective Date,
and (a) if such Person is a corporation, its bylaws in current form, (b) if such
Person is a limited liability company, its limited liability company agreement
(or similar agreement), and (c) if such Person is a partnership, its partnership
agreement (or similar agreement), each of the foregoing with all current
amendments or modifications thereto.

      "Payment/Advance Form" is that certain form attached hereto as Exhibit B.

      "Payment Date" is the first day of each calendar month.

      "Perfection Certificate" is defined in Section 5.1.


                                       19


      "Permitted Acquisitions" are the acquisitions of the stock or assets of a
Person ("Transactions"), where (a) the total cash consideration (inclusive of
the assumption of Indebtedness) for all such Transactions does not exceed: (i)
prior to the occurrence of the SPAC Closing, $500,000.00, in the aggregate
(inclusive of the cash component set forth in the definition of Permitted Joint
Ventures), and (ii) after the occurrence of the SPAC Closing, $5,000,000.00, in
the aggregate, provided that, upon and immediately after the consummation of any
such Transactions, Borrower shall have the lesser of :(x) unrestricted and
unencumbered cash in an amount equal to or greater than $10,000,000, or (y) four
(4) times the amount of Borrower's Cash Burn; (b) no Event of Default has
occurred and is continuing or would exist after giving effect to the
Transactions; and (c) Borrower is the surviving legal entity.

      "Permitted Indebtedness" is:

      (a) Borrower's Indebtedness to Lenders and Agent under this Agreement and
the other Loan Documents;

      (b) Indebtedness existing on the Effective Date and shown on the
Perfection Certificate;

      (c) Subordinated Debt;

      (d) unsecured Indebtedness to trade creditors incurred in the ordinary
course of business;

      (e) Indebtedness secured by Permitted Liens; and

      (f) extensions, refinancings, modifications, amendments and restatements
of any items of Permitted Indebtedness (a) through (e) above, provided that the
principal amount thereof is not increased or the terms thereof are not modified
to impose more burdensome terms upon Borrower or its Subsidiary, as the case may
be.

      "Permitted Investments" are:

      (a) Investments shown on the Perfection Certificate and existing on the
Effective Date;

      (b) Permitted Acquisitions;

      (c) Permitted Joint Ventures; and

      (d) Cash Equivalents.

      "Permitted Joint Ventures" are joint ventures, co-development
arrangements, licensing transactions pursuant to which the Borrower licenses
technology from a third party on an exclusive or non-exclusive basis or other
strategic alliances in the ordinary course of Borrower's business consisting of
the licensing of technology (except that if any technology is licensed out by
the Borrower, it will be on a non-exclusive basis, except for exclusive licenses
for less than all or substantially all of the Borrower's intellectual property,
provided that each such license is in the ordinary course of business, and
further provided such licenses are limited to specific fields of use and/or
products), the development of technology or the providing of technical support,
provided that any cash investments by Borrower in connection with all Permitted
Joint Ventures do not exceed $500,000.00 in the aggregate in any fiscal year
(inclusive of the cash component set forth in the definition of "Permitted
Acquisitions"). Notwithstanding the foregoing, cash investments which are
contractually required to be reimbursed within 30 shall not be included for
purposes of calculation hereunder.

      "Permitted Liens" are:

      (a) Liens existing on the Effective Date and shown on the Perfection
Certificate or arising under this Agreement and the other Loan Documents;

      (b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, provided that no notice of
any such Lien has been filed or recorded under the Internal Revenue Code of
1986, as amended , and the Treasury Regulations adopted thereunder;


                                       20


      (c) purchase money Liens (i) on Equipment acquired or held by Borrower
incurred for financing the acquisition of the Equipment securing no more than
Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate amount
outstanding, or (ii) existing on Equipment when acquired, if the Lien is
confined to the property and improvements and the proceeds of the Equipment;

      (d) pledges or deposits in the ordinary course of business in connection
with workers' compensation, health and safety, employment or unemployment
insurance and other social security legislation, other than any Lien imposed by
ERISA or other applicable Canadian employee benefit or tax legislation;

      (e) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase;

      (f) leases or subleases of real property granted in the ordinary course of
business, and leases, subleases, non-exclusive licenses or sublicenses of
property (other than real property or intellectual property) granted in the
ordinary course of Borrower's business, if the leases, subleases, licenses and
sublicenses do not prohibit granting Agent a security interest;

      (g) non-exclusive license of intellectual property granted to third
parties in the ordinary course of business; and

      (h) servitudes, easements, rights of way and similar encumbrances imposed
by applicable law or incurred in the ordinary course of business and
encumbrances consisting of zoning or building restrictions, easements, and
similar restriction.

      "Person" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

      "Prepayment Fee" shall be an amount equal to :

            (i)   for a prepayment made after the Amortization Date and on or
                  prior to March 30, 2008, five percent (5.0%) of the principal
                  amount of the Growth Capital Loan prepaid; or

            (ii)  for a prepayment made after March 30, 2008, and on or prior to
                  March 22, 2009, four percent (4.0%) of the principal amount of
                  the Growth Capital Loan prepaid; and

            (iii) for a prepayment made after March 30, 2009, and on or prior to
                  the Growth Capital Loan Maturity Date, two percent (2.0%) of
                  the principal amount of the Growth Capital Loan prepaid.

      "Registered Organization" is any "registered organization" as defined in
the Code with such additions to such term as may hereafter be made

      "Requirement of Law" is as to any Person, the organizational or governing
documents of such Person, and any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.

      "Responsible Officer" is any of the Chief Executive Officer, President,
Chief Financial Officer of Borrower.


                                       21


      "Securities Account" is any "securities account" as defined in the Code
with such additions to such term as may hereafter be made.

      "SPAC" means Special Purpose Acquisition Companies.

      "SPAC Closing" means the raising of at least Sixty-Five Million
($65,000,000.00) through a SPAC traded on the American Stock Exchange.

      "Subordinated Debt" is indebtedness incurred by Borrower subordinated to
Borrower's indebtedness to Lenders in the manner and to the extent set forth in
a subordination, intercreditor, or other similar agreement in form and substance
satisfactory to Agent and Lenders entered into between Agent, the Borrower and
the other creditor, on terms acceptable to Agent and Lenders.

      "Subsidiary" means, with respect to any Person, any Person of which more
than 50.0% of the voting stock or other equity interests (in the case of Persons
other than corporations) is owned or controlled, directly or indirectly, by such
Person or one or more of Affiliates of such Person.

      "Transfer" is defined in Section 7.1.

      "Treasury Note Maturity" is thirty six (36) months.

      "Warrant" is that certain Warrants to Purchase Stock dated as of the
Effective Date executed by Borrower in favor of each Lender.


                                       22


      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument under the laws of the Commonwealth of
Massachusetts as of the Effective Date.

BORROWER:

PHARMATHENE, INC.


By /s/ David P. Wright
   ------------------------------------------
Name: David P. Wright
Title: President and CEO

LENDERS:

SILICON VALLEY BANK, as Agent and as a Lender


By /s/ Megan Scheffel
   ------------------------------------------
Name: Megan Scheffel
Title: Director

OXFORD FINANCE CORPORATION, as a Lender


By /s/ N.J. Altenburger
   ------------------------------------------
Name: N.J. Altenburger
Title: CFO


                                       23


                                  SCHEDULE 1.1

                             LENDERS AND COMMITMENTS

- --------------------------------------------------------------------------------
          Lender                     Commitment            Commitment Percentage
- --------------------------------------------------------------------------------
    Silicon Valley Bank             $5,000,000.00                 50.00%
- --------------------------------------------------------------------------------
Oxford Finance Corporation          $5,000,000.00                 50.00%
- --------------------------------------------------------------------------------
           TOTAL                   $10,000,000.00                 100.00%
- --------------------------------------------------------------------------------



                                    EXHIBIT A

The Collateral consists of all of Borrower's right, title and interest in and to
the following personal property:

      All goods, Accounts (including health-care receivables), Equipment,
Inventory, contract rights or rights to payment of money, leases, license
agreements, franchise agreements, General Intangibles (except as provided
below), commercial tort claims, documents, instruments (including any promissory
notes), chattel paper (whether tangible or electronic), cash, deposit accounts,
all certificates of deposit, fixtures, letters of credit rights (whether or not
the letter of credit is evidenced by a writing), securities, and all other
investment property, supporting obligations, and financial assets, whether now
owned or hereafter acquired, wherever located; and

      All Borrower's Books relating to the foregoing, and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

      Notwithstanding the foregoing, the Collateral does not include any of the
following, whether now owned or hereafter acquired any copyright rights,
copyright applications, copyright registrations and like protections in each
work of authorship and derivative work, whether published or unpublished, any
patents, licenses for the use of patent rights of a third party, with respect to
which license Borrower is the licensee, patent applications and like
protections, including improvements, divisions, continuations, renewals,
reissues, extensions, and continuations-in-part of the same, trademarks, service
marks and, to the extent permitted under applicable law, any applications
therefor, whether registered or not, and the goodwill of the business of
Borrower connected with and symbolized thereby, know-how, operating manuals,
trade secret rights, rights to unpatented inventions, and any claims for damage
by way of any past, present, or future infringement of any of the foregoing;
provided, however, the Collateral shall include all Accounts, license and
royalty fees and other revenues, proceeds, or income arising out of or relating
to any of the foregoing.

      Pursuant to the terms of a certain negative pledge arrangement with Agent
and Lenders, except as may be permitted hereunder, Borrower has agreed not to
encumber any of its copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work, whether published or unpublished, any patents, licenses agreements solely
for the use of patent rights of a third party, with respect to which license
Borrower is the licensee, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions, and
continuations-in-part of the same, trademarks, service marks and, to the extent
permitted under applicable law, any applications therefor, whether registered or
not, and the goodwill of the business of Borrower connected with and symbolized
thereby, know-how, operating manuals, trade secret rights, rights to unpatented
inventions, and any claims for damage by way of any past, present, or future
infringement of any of the foregoing, without Agent's prior written consent.



                                    EXHIBIT B

                        Loan Payment/Advance Request Form

DEADLINE IS NOON E.S.T.*

Fax To:                                              Date: _____________________



- ----------------------------------------------------------------------------------------------------------------------
LOAN PAYMENT:

                                                 PHARMATHENE, INC.

                                                  
From Account #________________________________       To Account #_________________________________________________
                    (Deposit Account #)                                           (Loan Account #)

Principal $____________________________________      and/or Interest $____________________________________________

Authorized Signature: ___________________________    Phone Number: _______________________________________________

Print Name/Title: _______________________________
- ----------------------------------------------------------------------------------------------------------------------


- ----------------------------------------------------------------------------------------------------------------------
LOAN ADVANCE:

Complete Outgoing Wire Request section below if all or a portion of the funds from this loan advance are for an
outgoing wire.

                                                  
From Account #________________________________       To Account #_________________________________________________
                     (Loan Account #)                                          (Deposit Account #)

Amount of Advance $___________________________

All Borrower's representations and warranties in the Loan and Security Agreement are true, correct and complete in
all material respects on the date of the request for an advance; provided, however, that such materiality qualifier
shall not be applicable to any representations and warranties that already are qualified or modified by materiality
in the text thereof; and provided, further that those representations and warranties expressly referring to a
specific date shall be true, accurate and complete in all material respects as of such date:

Authorized Signature: ___________________________    Phone Number: _______________________________________________

Print Name/Title: _______________________________
- ----------------------------------------------------------------------------------------------------------------------


- ----------------------------------------------------------------------------------------------------------------------
OUTGOING WIRE REQUEST:

Complete only if all or a portion of funds from the loan advance above is to be wired. Deadline for same day
processing is noon, E.S.T.

                                                  
Beneficiary Name: ______________________________     Amount of Wire: $ ___________________________________________

Beneficiary Lender: ____________________________     Account Number: _____________________________________________

City and State: ________________________________

Beneficiary Lender Transit (ABA) #: ____________     Beneficiary Lender Code (Swift, Sort, Chip, etc.): __________
                                                              (For International Wire Only)

Intermediary Lender: ___________________________     Transit (ABA) #: ____________________________________________

For Further Credit to: ___________________________________________________________________________________________

Special Instruction: _____________________________________________________________________________________________

By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).

Authorized Signature: __________________________     2nd Signature (if required): ________________________________

Print Name/Title: ______________________________     Print Name/Title: ___________________________________________

Telephone #: ___________________________________     Telephone #: ________________________________________________
- ----------------------------------------------------------------------------------------------------------------------


- ----------
* Unless otherwise provided for an Advance bearing interest at LIBOR.

EX-10.20

                                                                   Exhibit 10.20

           CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT
                 HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
                 SECURITIES AND EXCHANGE COMMISSION (THE "SEC")
  PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT WITH RESPECT TO THE OMITTED
                                    PORTIONS.
                    OMITTED PORTIONS ARE INDICATED BY [***].


- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                
AWARD/CONTRACT                             1. THIS CONTRACT IS RATED ORDER            RATING             PAGE OF PAGES
                                              UNDER DPAS(15 CFR 35)                     DO                 1     21
- ------------------------------------------------------------------------------------------------------------------------------------
2. CONTRACT (Proc. Inst. Indent) NO.       3. EFFECTIVE DATE                           4.  REQUISITION/PURCHASE REQUEST/PROJECT NO.
   W9113M-O6-C-0189                           22 Sep 2006                                  W90GXK62140117
- ------------------------------------------------------------------------------------------------------------------------------------
5. ISSUED BY                               CODE    W9113M       6.  ADMINISTERED BY (If other than Item 5)    CODE

US ARMY SPACE & MISSILE DEFENSE COMMAND
SMDC-RDCM
PO BOX 1500                                                     See Item 5
HUNTSVILLE, AL 35807-3801
- ------------------------------------------------------------------------------------------------------------------------------------
7. NAME AND ADDRESS OF CONTRACTOR (No., street, city, county, state and zip code)      8. DELIVERY
PHARMATHENE, INC.                                                                      |X| FOB ORIGIN  |_| OTHER   (See below)
175 ADMIRAL COCHRANE DRIVE                                                             ---------------------------------------------
SUITE 101                                                                              9. DISCOUNT FOR PROMPT PAYMENT
ANNAPOLIS, MD  21401-7378                                                              Net 30 Days
                                                                                       ---------------------------------------------
                                                                                       10. SUBMIT INVOICES                ITEM
                                                                                       (4 copies unless  otherwise
                                                                                       specified)                         Section G
CODE:  1ZG60                                FACILITY CODE                              TO THE ADDRESS SHOWN IN:
- ------------------------------------------------------------------------------------------------------------------------------------
11. SHIPTO/MARK FOR                        CODE                 12. PAYMENT WILL BE MADE BY                   CODE    HQ0302
PHARMATHENE, INC.                                               DFAS-ROME
175 ADMIRAL COCHRANE DRIVE                                      DFAS-RO-A, 325 BROOKS ROAD
SUITE 101                                                       PHONE  800-553-0527
ANNAPOLIS, MD  21401-7378                                       ROME NY 13441-4527
- ------------------------------------------------------------------------------------------------------------------------------------
13. AUTHORITY FOR USING OTHER THAN FULL AND OPEN                14. ACCOUNTING AND APPROPRIATION DATA
    COMPETITION:                                                See Schedule
|_| 10 U.S.C. 2304(c)(  )   |_| 41 U.S.C. 253(c)(  )
- ------------------------------------------------------------------------------------------------------------------------------------
15A. ITEM NO.              15B. SUPPLIES/SERVICES               15C. QUANTITY     15D. UNIT    15E. UNIT PRICE    15F. AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
                              SEE SCHEDULE
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                15G. TOTAL AMOUNT OF CONTRACT                     $34,744,063.00
- ------------------------------------------------------------------------------------------------------------------------------------
                                                 16. TABLE OF CONTENTS
- ------------------------------------------------------------------------------------------------------------------------------------
|X|    SEC.             DESCRIPTION                    PAGE(S)      |X|    SEC.                DESCRIPTION                   PAGE(S)
- ------------------------------------------------------------------------------------------------------------------------------------
                  PART I - THE SCHEDULE                                                PART II - CONTRACT CLAUSES
- ------------------------------------------------------------------------------------------------------------------------------------
 X     A     SOLICITATION/CONTRACT FORM                1 - 2         X      I    CONTRACT CLAUSES                            15 - 22
- ------------------------------------------------------------------------------------------------------------------------------------
 X     B     SUPPLIES OR SERVICES AND PRICES/COSTS     3 - 6        PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACHMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
 X     C     DESCRIPTION/SPECS/WORK STATEMENT          7             X      J    LIST OF ATTACHMENTS                         23
- ------------------------------------------------------------------------------------------------------------------------------------
 X     D     PACKAGING AND MARKING                     8                 PART IV - REPRESENTATIONS AND INSTRUCTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
 X     E     INSPECTION AND ACCEPTANCE                 9                    K    REPRESENTATIONS, CERTIFICATIONS AND OTHER
                                                                                 STATEMENTS OF OFFERORS
- ------------------------------------------------------------------------------------------------------------------------------------
 X     F     DELIVERIES OR PERFORMANCE                 10 - 11
- ------------------------------------------------------------------------------------------------------------------------------------
 X     G     CONTRACT ADMINISTRATION DATA              12                   L    INSTRS, CONDS, AND NOTICES TO OFFERORS
- ------------------------------------------------------------------------------------------------------------------------------------
 X     H     SPECIAL CONTRACT REQUIREMENTS             13 - 14              M    EVALUATION FACTORS FOR AWARD
- ------------------------------------------------------------------------------------------------------------------------------------
                                 CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE
- ------------------------------------------------------------------------------------------------------------------------------------

17. |X| CONTRACTOR'S NEGOTIATED AGREEMENT (Contractor is                   18. |_| AWARD. (Contractor is not required to sign this
required to sign this document and return [ ] copies to                    document) Your offer on Solicitation Number
issuing office) Contractor agrees to furnish and deliver                   ___________________ including the additions or changes
all items or perform all the services set forth or                         made by you which additions or changes are set forth in
otherwise identified above and on any continuation                         full above, is hereby accepted as to the items listed
sheets for the consideration stated herein. The rights                     above and on any continuation sheets. This award
and obligations of the parties to this contract shall be                   consummates the contract which consists of the following
subject to and governed by the following documents: (a)                    documents: (a) the Government's solicitation and your
this award/contract, (b) the solicitation, if any, and                     offer, and (b) this award/contract. No further
(c) such provisions, representations, certifications,                      contractual documents is necessary.
and specifications, as are attached or incorporated by
reference herein. (Attachments are listed herein)
- ------------------------------------------------------------------------------------------------------------------------------------
19A. NAME AND TITLE OF SIGNER (Type or Print)                              20A. NAME AND TITLE OF CONTRACTING OFFICER

David P. Wright
President & CEO                                                            Lynn M. Selfridge
                                                                           Contracting Officer
                                                                           TEL:                               E-MAIL:
- ------------------------------------------------------------------------------------------------------------------------------------
19B. NAME OF CONTRACTOR                          19C. DATE SIGNED          20B. UNITED STATES OF AMERICA            20C. DATE SIGNED

     PHARMATHENE

BY /s/ David P. Wright                               9/21/06               BY  /s/ Lynn M. Selfridge                 Sept. 22, 2006
   ----------------------------------------                                    ---------------------------------
   (Signature of person authorized to sign)                                    (Signature of authorized Officer)
- ------------------------------------------------------------------------------------------------------------------------------------


                                                                   Page 2 of 21

Section A - Solicitation/Contract Form

CONTINUATION OF FORM 26

Award is hereby made for the PharmAthene proposal dated 17 July 2006 and
negotiation memorandum dated 23 August 2006 for the Development and Licensure of
Bioscavanger Increment II (recombinant drug candidate).

The PharmAthene proposal is incorporated into contract number W9113M-06-C-0189
with the following revisions:

1.    This contract is awarded excluding CLIN 0006.

2.    The negotiation memorandum dated 23 August 2006 requests the Government
      accept CLIN 0002 as submitted by the contractor in the amount of $[***].
      The Government accepts this request.

3.    Per the negotiation memorandum dated 23 August 2006 regarding CLIN 0005,
      the contractor understands and agrees that there shall be no progress
      payments. Instructions for invoicing are located in Section G - Contract
      Administration of this contract.

4.    CLIN 0005 - The Government will accept TED increments of [***]. The
      contractor may invoice for the increments upon Government acceptance.

- ----------
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                                                                   Page 3 of 21

Section B - Supplies or Services and Prices

SPECIAL NOTICE

B.1. During the Product Development and Licensure Application effort, the
contractor may manufacture some number of doses of product, which will obviate
the need to procure the entire initial stockpile requirement when the Food and
Drug Administration approves the Licensure Application. Knowing that the number
of doses, the Production Option will require the completion in which event the
option CLIN 0005 would be renegotiated prior to being exercised. If exercised,
the only remaining stockpile requirement, which may be less than 90,000 TED, and
in some cases may be none.

The successful offeror's dated proposal will be inserted into CLIN 0003, if
exercised by the Government.



ITEM NO     SUPPLIES/SERVICES                                                 QUANTITY     UNIT LOT    UNIT PRICE    AMOUNT
                                                                                                      
0001        Product Development & Clinical Trial
            CPIF

            Perform all effort required for and incident to
            technology development and product delivery of
            Bioscavenger Increment II Recombinant human
            butyrylcholinestrease (HuBChE) (also rBioscavenger)
            suitable for eventual clinical use, filing of an
            Investigational New Drug Application, small scale
            manufacture, acute toxicity study, conduct of a phase I
            clinical trial, controlled storage of the product from
            date of manufacture through completion of Phase 1
            clinical trial, and International Conference on
            Harmonization stability testing of the stored product.
            All efforts shall be in accordance with the contractor's
            Statement of Work dated July 17, 2006, and made a part
            of this contract as referenced in Section J. Delivery
            dated March 31, 2009. Includes data items as
            identified/attached in Section J. Contract Data
            Requirements List (CDRL), DD Form 1423, Data Items: A001
            through A007. FOB: Origin PURCHASE REQUEST NUMBER:
            W90GXK62140117

                                                                                          TARGET COST                $[***]
                                                                                           TARGET FEE                $[***]
                                                                                                            --------------
                                                                                 TOTAL TGT COST + FEE       $34,182,763.00
                                                                                          MINIMUM FEE                $[***]
                                                                                          MAXIMUM FEE                $[***]
                                                                             SHARE RATIO ABOVE TARGET                 [***]
                                                                             SHARE RATIO BELOW TARGET                 [***]
                                                                                                                     $[***]

ACRN AA
CIN:  000000000000000000000000000000


- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.



                                                                   Page 4 of 21



ITEM NO     SUPPLIES/SERVICES                                                 QUANTITY     UNIT LOT    UNIT PRICE    AMOUNT
                                                                                                               
0002        Earned Value Management System (EVMS)
EXERCISED   CPIF
OPTION      Includes data items as identified/attached in Section J.
            Contract Data Requirements List (CDRL), DD Form
            1423, Data Items: B001.
            FOB: Origin
            PURCHASE REQUEST NUMBER: W90GXK62140117

                                                                                          TARGET COST                $[***]
                                                                                           TARGET FEE                $[***]
                                                                                                            --------------
                                                                                 TOTAL TGT COST + FEE                $[***]
                                                                                          MINIMUM FEE                $[***]
                                                                                          MAXIMUM FEE                $[***]
                                                                             SHARE RATIO ABOVE TARGET                 [***]
                                                                             SHARE RATIO BELOW TARGET                 [***]
                                                                                                                     $[***]

ACRNAA
CIN:  000000000000000000000000000000


- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.



                                                                   Page 5 of 21



ITEM NO     SUPPLIES/SERVICES                                                 QUANTITY     UNIT LOT    UNIT PRICE    AMOUNT
                                                                                                         
0003        Advance Develop.& FDA Approval/Licensure
OPTION      CPIF
            Conduct advance development activities associated with
            drug/biologic development for approval or licensure
            through the FDA and deliver FDA approved licensed end
            item product. All efforts shall be in accordance with
            the contractor's Statement of Work dated July 17,2006
            and made a part of this contract as referenced in
            Section J. Delivery date July 31,2015. Includes data
            items as identified/attached in Section J. Contract Data
            Requirements List (CDRL), DD Form 1423, Data Items: C00I
            through C005. FOB: Origin PURCHASE REQUEST NUMBER:
            W90GXK62140117

                                                                                          TARGET COST                $[***]
                                                                                           TARGET FEE                $[***]
                                                                                                            --------------
                                                                                 TOTAL TGT COST + FEE                $[***]
                                                                                          MINIMUM FEE                $[***]
                                                                                          MAXIMUM FEE                $[***]
                                                                             SHARE RATIO ABOVE TARGET                 [***]
                                                                             SHARE RATIO BELOW TARGET                 [***]

ITEM NO     SUPPLIES/SERVICES                                                 QUANTITY     UNIT LOT    UNIT PRICE    AMOUNT

00004       Technical Transfer Package                                            1                      $[***]      $[***]
OPTION      FFP
            Includes data items as identified/attached in Section J.
            Contract Data Requirements
            List (CDRL), DD Form 1423, Data Items: D00I.
            FOB: Origin
            PURCHASE REQUEST NUMBER: W90GXK62140117

                                                                                                            --------------
                                                                                              NET AMT                $[***]


- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.



                                                                   Page 6 of 21



ITEM NO     SUPPLIES/SERVICES                                                 QUANTITY     UNIT LOT    UNIT PRICE    AMOUNT
                                                                                                         
00005       Manufacture & Deliver up to 90,000 Doses                             1                      $[***]       $[***]
OPTION      FFP
            If unilaterally exercised by the Government, preliminary
            notice shall be issued within 150 calendar days of FDA
            approval/licensure of Bioscavenger Increment II.
            Delivery date is July 31,2019. Consistency lots doses
            may or may not be used to meet the 90,000 doses
            required. Includes data items as identified/attached in
            Section J. Contract Data Requirements List (CDRL), DD
            Form 1423, Data Items: E001. FOB: Origin PURCHASE
            REQUEST NUMBER: W90GXK62140117

                                                                                                            --------------
                                                                                              NET AMT                $[***]


- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.



                                                                   Page 7 of 21

Section C - Descriptions and Specifications

STATEMENT OF WORK

The contractor's proposal dated 17 July 2006 and revised budget dated 23 August
2006 is incorporated (excluding all efforts associated with CLIN 0006) in its
entirety and herein by reference.



                                                                   Page 8 of 21

Section D - Packaging and Marking

SECTION D

PACKAGING AND SHIPPING:

D.1. All product packaging and shipping shall be in strict accordance with FDA
license product requirements. In addition, the contractor shall use approved
shipping validation procedures.



                                                                   Page 9 of 21

Section E - Inspection and Acceptance

INSPECTION AND ACCEPTANCE TERMS

Supplies/services will be inspected/accepted at:


CLIN         INSPECT AT        INSPECTED BY         ACCEPT AT         ACCEPT BY
0001         Origin            Government           Origin            Government
0002         Origin            Government           Origin            Government
0003         Origin            Government           Origin            Government
0004         Origin            Government           Origin            Government
0005         Origin            Government           Origin            Government

CLAUSES INCORPORATED BY REFERENCE

                                                                            
52.246-2           Inspection Of Supplies-Fixed Price                             AUG 1996
52.246-5           Inspection Of Services Cost-Reimbursement                      APR 1984
52.246-7           Inspection Of Research And Development Fixed Price             AUG 1996
52.246-8           Inspection Of Research And Development Cost Reimbursement      MAY 2001
52.246-16          Responsibility For Supplies                                    APR 1984
252.246-7000       Material Inspection And Receiving Report                       MAR 2003





                                                                   Page 10 of 21

Section F - Deliveries or Performance

CONTRACT DATA REQUIREMENT LIST

Contract Data Requirements List

The following deliverables apply to both SOOs.

F.1. Reports

F.1.1. Contractor's Status Report. CDRL Sequence No. A00l & C001, DD Form 1423.
This report shall be submitted monthly and shall contain a summary description
of the progress and accomplishments of the contract; problem areas and proposed
action to resolve the problems; and funds status.

F.1.2. Earned Value Report: Contract Performance Report. CDRL Sequence No. B001,
DD Form 1423. This report shall be submitted monthly and shall contain a
Contract Performance Report (CPR), DJ-MGMT-81466 (DD Form 2734. The CPR shall at
a minimum contain Formats 1, 3, and 5. Format 5 is a monthly Variance Analysis
Report for cost, schedule, and at-completion variance deviations from agreed-to
thresholds. These reports shall be integrated with the Contract Work Breakdown
Structure (CWBS), DI-MGMT-81334A, and the Integrated Master Schedule (IMS),
DI-MGMT-81650 (below).

F.1.3. Contract Funds Status Report. CDRL Sequence No. A002 & C002, DD Form
1423. The Contract Funds Status Report (CFSR), DI-MGMT-81468 (DD Form 1568)
shall be submitted monthly.

F.1.4. Contract Work Breakdown Structure. CDRL Sequence No. A003 & C003, DD Form
1423. The Contract Work Breakdown Structure (CWBS), D1-MGMT-81334A, and the CWBS
dictionary shall be updated quarterly.

F.1.5. Integrated Master Schedule. CDRL Sequence No. A004 & C004, DD Form 1423.
The Integrated Master Schedule, Dl-MGMT-81650, shall be updated monthly.

F.1.6. Pre-Milestone B Data Package. CDRL Sequence No. A005, DD Form 1423. This
data package shall be submitted after the Phase I clinical trial and shall
contain information necessary to conduct the downselection process. These data
shall include, but are not necessarily limited to, preclinical toxicology
studies and Phase 1 clinical data and pharmacokinetic data and chemistry,
manufacturing and control data, including product shelf life and projected
production costs for doses.

F.1.7 Regulatory Submission File. CDRL Sequence No. A006 & C005, DD Form 1423.
This data package shall contain copies of IND submissions, annual reports, NDA
submissions and other communications with the FDA. The data package shall also
contain all FDA-initiated correspondence, to include meeting minutes, requests
for additional information, etc. The Government expects that it shall be
included in all discussions with the FDA. The preferred format for these
regulatory documents is electronic.

F.1.8. Letter of Cross-reference. CDRL Sequence No. A007, DD form 1423. The
Contractor shall prepare for the Government a Letter of Cross-reference to the
Sponsor's IND or Drug Master File that Government shall use to prepare an
Emergency Use Authorization submission to submit to the FDA.

F.2. Optional

F.2.1. Technical Data Package. CDRL Sequence No. D001, DD Form 1423. Technical
Data Package to include all necessary documentation to assist in technical
transfer as determined by the Government.

F.2.2. Initial Operational Capability Doses. CDRL Sequence No. E001, DD Form
1423. The production and post-approval/licensure delivery of 90,000 doses of the
product.



                                                                   Page 11 of 21

DELIVERY INFORMATION- SHIP IN PLACE

CLIN     DELIVERY DATE       QUANTITY     SHIP TO ADDRESS                    UIC

0001     31-MAR-2009                      PHARMATHENE, INC.
                                          175 ADMIRAL COCHRANE DRIVE
                                          SUITE 101
                                          ANNAPOLIS MD 21401-7378
                                          FOB:        Origin

0002     31-JUL-2019                      (SAME AS PREVIOUS LOCATION)
                                          FOB: Origin

0003     31-JUL-2015                      (SAME AS PREVIOUS LOCATION)
                                          FOB: Origin

0004     31-JUL-2019            1         (SAME AS PREVIOUS LOCATION)
                                          FOB: Origin

0005     31-JUL-2019            1         (SAME AS PREVIOUS LOCATION)
                                          FOB: Origin

CLAUSES INCORPORATED BY REFERENCE

52.242-15 Alt I      Stop-Work Order (Aug 1989)- Alternate I            APR 1984
52.242-17            Government Delay Of Work                           APR 1984
52.247-29            F.O.B. Origin                                      FEB 2006



                                                                   Page 12 of 21

Section G - Contract Administration Data

CONTRACT ADMINISTRATION DATA

G.1 INVOICING

The contractor shall submit bi-weekly vouchers using the Standard Form 1034 for
CLINs 0001, 0002 and 0003 (if exercised). Vouchers shall be sent electronically
via Wide Area Work Flow (WAWF) and cc: maryalice.woody@det.amedd.army.mil and
susan.dell@det.amedd.army.mil.

The contractor shall submit DD250 forms for payment related to FFP CLINs 0004
and 0005 (if options are unilaterally exercised by the Government).

The cognizant Defense Finance and Accounting Office for this contract is
identified on the SF 26, Block 12 of this contract.

The Contracting Officer's Representative (COR) and contact information is as
follows:

                Dr. Mary Alice Woody
                64 Thomas Johnson Drive
                Frederick MD 21702
                Phone (301)619-3905
                Email: maryalice.woody@det.amedd.army.mil

ACCOUNTING AND APPROPRIATION DATA

AA: 9760400260165Y5YCM406038BP000255Y12YMBSW90GXK62140117YMBS12044008
AMOUNT: $[***]
CIN 000000000000000000000000000000: $[***]

CLAUSES INCORPORATED BY FULL TEXT

252.201-7000 CONTRACTING OFFICER'S REPRESENTATIVE (DEC 1991)

(a) "Definition. Contracting officer's representative" means an individual
designated in accordance with subsection 201.602-2 of the Defense Federal
Acquisition Regulation Supplement and authorized in writing by the contracting
officer to perform specific technical or administrative functions.

(b) If the Contracting Officer designates a contracting officer's representative
(COR), the Contractor will receive a copy of the written designation. It will
specify the extent of the COR's authority to act on behalf of the contracting
officer. The COR is not authorized to make any commitments or changes that will
affect price, quality, quantity, delivery, or any other term or condition of the
contract.

(End of clause)

- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.



                                                                   Page 13 of 21

Section H - Special Contract Requirements

SPECIAL REQUIREMENTS

H.1 Downselection Process at Milestone B

The downselection process will focus on 1) technical data, as delineated below;
2) contractor performance; and 3) an affordability analysis. The safety of the
product is of the utmost importance, followed by other technical considerations
and contractor performance. If two products cannot be distinguished by product
safety, technical considerations, and contractor performance, then an
affordability analysis will be performed to determine which of two products has
the lowest validated life cycle cost. The downselection determination will be by
expert judgment, possibly from an outside contractor hired on for the specific
purpose, based on evaluation of the data provided.

Pre-Milestone B Data package will include the following.

      1.    Technical data

            a.    Acute toxicology study and Phase 1 clinical trial outcomes, to
                  determine relative safety and tolerability of the product and
                  risks in proceeding to approval or licensure
            b.    Pharmacokinetic properties of product in animals and humans
            c.    Chemistry, Manufacturing, and Control data to allow assessment
                  of risks for scale-up to meet the production option
                  requirements and for process validation

      2.    Contractor performance

            a.    Adherence to contract cost and schedule
            b.    Problem-solving and strategies for effective interaction with
                  the Food and Drug Administration

      3.    Economy of product

            a.    Costs to complete development through approval or licensure
            b.    Projected costs of producing doses needed
            c.    Support needed to effectively field the product

MITS will determine whether sufficient expertise exists in-house or select an
outside contractor (independent of the contractors developing products) to
perform the evaluation of the Pre-Milestone B Data Package. The contractor or
contractors that are developing candidate Increment II products will prepare and
submit the data package(s) by March 31, 2009. If a contractor should be delayed
in completion of the Phase 1 clinical trial, MITS will examine the causes of the
delay and decide if and for how long to postpone the downselection. Extensions
are not automatically granted and might not be granted if poor contractor
performance is determined to be a significant cause. Data packages will be
reviewed independently and confidentially. MITS' decision will be final.

H.2 Insurance/Indemnification

Offerors shall seek commercial insurance coverage for contract performance as
required. When seeking adequate insurance coverage and the cost of coverage is
considered prohibitive, offerors may submit an application for relief under the
Support Anti-terrorism in accordance with Fostering Effective Technologies Act
of 2002 (Safety Act), Public Law 107-296, administered by the Department of
Homeland Security. Applications may be sought at www.safetyact.gov. Application
forms are also available by mail addressing to the Department of Homeland
Security, ATTN: Safety Act, 245 Murray Land, Building 410, Washington, DC 20528.

H.3 Electronic Data Interchange

The contractor shall use a seamless Electronic Data Interchange (EDI) with the
Government to facilitate electronic mail and scheduling, as well as to provide
electronic access to, and updates of all CDRLS (DD 1423s).



                                                                   Page 14 of 21

Section I - Contract Clauses

CLAUSES INCORPORATED BY REFERENCE

                                                                                                               
52.202-1                Definitions                                                                                  JUL 2004
52.203-3                Gratuities                                                                                   APR 1984
52.203-5                Covenant Against Contingent Fees                                                             APR 1984
52.203-6                Restrictions On Subcontractor Sales To The Government                                        JUL 1995
52.203-7                Anti-Kickback Procedures                                                                     JUL 1995
52.203-8                Cancellation, Rescission, and Recovery of Funds for Illegal or Improper                      JAN 1997
                        Activity
52.203-10               Price Or Fee Adjustment For Illegal Or Improper Activity                                     JAN 1997
52.203-12               Limitation On Payments To Influence Certain Federal Transactions                             SEP 2005
52.204-4                Printed or Copied Double-Sided on Recycled Paper                                             AUG 2000
52.204-7                Central Contractor Registration                                                              OCT 2003
52.209-6                Protecting the Government's Interest When Subcontracting With Contractors                    JAN 2005
                        Debarred, Suspended, or
                        Proposed for Debarment
52.211-15               Defense Priority And Allocation Requirements                                                 SEP 1990
52.215-2                Audit and Records--Negotiation                                                               JUN 1999
52.215-8                Order of Precedence--Uniform Contract Format                                                 OCT 1997
52.215-11               Price Reduction for Defective Cost or Pricing Data--Modifications                            OCT 1997
52.215-13               Subcontractor Cost or Pricing Data--Modifications                                            OCT 1997
52.216-7                Allowable Cost And Payment                                                                   DEC 2002
52.219-8                Utilization of Small Business Concerns                                                       MAY 2004
52.219-9                Small Business Subcontracting Plan                                                           JAN 2002
52.219-16               Liquidated Damages-Subcontracting Plan                                                       JAN 1999
52.222-1                Notice To The Government Of Labor Disputes                                                   FEB 1997
52.222-3                Convict Labor                                                                                JUN 2003
52.222-21               Prohibition Of Segregated Facilities                                                         FEB 1999
52.222-26               Equal Opportunity                                                                            APR 2002
52.222-29               Notification Of Visa Denial                                                                  JUN 2003
52.222-35               Equal Opportunity For Special Disabled Veterans, Veterans of the                             DEC 2001
                        Vietnam Era, and Other Eligible Veterans
52.222-36               Affirmative Action For Workers With Disabilities                                             JUN 1998
52.222-37               Employment Reports On Special Disabled Veterans, Veterans Of The                             DEC 2001
                        Vietnam Era, and Other Eligible Veterans
52.223-6                Drug-Free Workplace                                                                          MAY 2001
52.223-14               Toxic Chemical Release Reporting                                                             AUG 2003
52.224-1                Privacy Act Notification                                                                     APR 1984
52.224-2                Privacy Act                                                                                  APR 1984
52.225-13               Restrictions on Certain Foreign Purchases                                                    MAR 2005
52.227-1 Alt I          Authorization And Consent (Jul 1995) - Alternate I                                           APR 1984
52.227-2                Notice And Assistance Regarding Patent And Copyright Infringement                            AUG 1996
52.227-11               Patent Rights--Retention By The Contractor (Short Form)                                      JUN 1997
52.227-14               Rights in Data--General                                                                      JUN 1987
52.228-7                Insurance--Liability To Third Persons                                                        MAR 1996
52.232-2                Payments Under Fixed-Price Research And Development Contracts                                APR 1984
52.232-9                Limitation On Withholding Of Payments                                                        APR 1984
52.232-17               Interest                                                                                     JUN1996
52.232-22               Limitation Of Funds                                                                          APR 1984
52.232-23 Alt I         Assignment of Claims (Jan 1986) - Alternate I                                                APR 1984
52.232-25               Prompt Payment                                                                               OCT 2003
52.232-33               Payment by Electronic Funds Transfer--Central Contractor Registration                        OCT 2003
52.232-35               Designation of Office for Government Receipt of Electronic Funds Transfer Information        MAY 1999
52.233-1                Disputes                                                                                     JUL 2002





                                                                   Page 15 of 21

                                                                                                               
52.233-3 Alt I          Protest After Award (Aug 1996) - Alternate I                                                 JUN 1985
52.233-4                Applicable Law for Breach of Contract Claim                                                  OCT 2004
52.242-1                Notice of Intent to Disallow Costs                                                           APR 1984
52.242-3                Penalties for Unallowable Costs                                                              MAY 2001
52.242-13               Bankruptcy                                                                                   JUL 1995
52.243-1                Changes--Fixed Price                                                                         AUG 1987
52.243-2 Alt V          Changes--Cost-Reimbursement (Aug 1987) - Alternate V                                         APR 1984
52.243-7                Notification Of Changes                                                                      APR 1984
52.244-2                Subcontracts                                                                                 AUG 1998
52.244-5                Competition In Subcontracting                                                                DEC 1996
52.244-6                Subcontracts for Commercial Items                                                            FEB 2006
52.245-2, Alt I (Dev)   Government Property (Fixed Price Contracts Alt I) (Deviation)                                APR 1998
52.245-17 (Dev)         Special Tooling (Deviation)                                                                  APR 1998
52.246-1                Contractor Inspection Requirements                                                           APR 1984
52.249-6                Termination (Cost Reimbursement)                                                             MAY 2004
52.249-14               Excusable Delays                                                                             APR 1984
52.252-4                Alterations in Contract                                                                      APR 1984
52.253-1                Computer Generated Forms                                                                     JAN 1991
252.203-7001            Prohibition On Persons Convicted of Fraud or Other Defense Contract-Related Felonies         DEC 2004
252.203-7002            Display Of DOD Hotline Poster                                                                DEC 1991
252.204-7000            Disclosure Of Information                                                                    DEC 1991
252.204-7003            Control Of Government Personnel Work Product                                                 APR 1992
252.204-7004 Alt A      Central Contractor Registration (52.204-7) Alternate A                                       NOV 2003
252.205-7000            Provision Of Information To Cooperative Agreement Holders                                    DEC 1991
252.209-7004            Subcontracting With Firms That Are Owned or Controlled By The Government of                  MAR 1998
                        a Terrorist Country
252.211-7000            Acquisition Streamlining                                                                     DEC 1991
252.211-7003            Item Identification and Valuation                                                            JUN 2005
252.215-7000            Pricing Adjustments                                                                          DEC 1991
252.215-7002            Cost Estimating System Requirements                                                          OCT 1998
252.219-7003            Small, Small Disadvantaged and Women-Owned Small Business Subcontracting Plan                APR 1996
                        (DOD Contracts)
252.225-7000            Buy American Act--Balance Of Payments Program Certificate                                    JUN 2005
252.225-7001            Buy American Act And Balance Of Payments Program                                             JUN 2005
252.225-7002            Qualifying Country Sources As Subcontractors                                                 APR 2003
252.225-7004            Reporting of Contract Performance Outside the United States and Canada--Submission           JUN 2005
                        after Award
252.225-7006            Quarterly Reporting of Actual Contract Performance Outside the United States                 JUN 2005
252.225-7013            Duty-Free Entry                                                                              JUN 2005
252.226-7001            Utilization of Indian Organizations and Indian-Owned Economic Enterprises, and               SEP 2004
                        Native Hawaiian Small
                        Business Concerns
252.227-7013            Rights in Technical Data--Noncommercial Items                                                NOV 1995
252.227-7015            Technical Data--Commercial Items                                                             NOV 1995
252.227-7015            Technical Data--Commercial Items                                                             NOV 1995
252.227-7016            Rights in Bid or Proposal Information                                                        JUN 1995
252.227-7030            Technical Data--Withholding Of Payment                                                       MAR 2000
252.227-7037            Validation of Restrictive Markings on Technical Data                                         SEP 1999
252.231-7000            Supplemental Cost Principles                                                                 DEC 1991
252.232-7003            Electronic Submission of Payment Requests                                                    JAN 2004
252.232-7010            Levies on Contract Payments                                                                  SEP 2005
252.235-7010            Acknowledgment of Support and Disclaimer                                                     MAY 1995
252.242-7002            Earned Value Management System                                                               MAR 2005
252.242-7004            Material Management And Accounting System                                                    NOV 2005





                                                                   Page 16 of 21
                                                                                                               
252.243-7001            Pricing Of Contract Modifications                                                            DEC 1991
252.243-7002            Requests for Equitable Adjustment                                                            MAR 1998
252.244-7000            Subcontracts for Commercial Items and Commercial Components (DoD Contracts)                  NOV 2005
252.247-7024            Notification Of Transportation Of Supplies By Sea                                            MAR 2000
252.249-7002            Notification of Anticipated Program Termination or Reduction                                 DEC 1996



CLAUSES INCORPORATED BY FULL TEXT

52.216-10 INCENTIVE FEE (MAR 1997)

(a) General. The Government shall pay the Contractor for performing this
contract a fee determined as provided in this contract.

(b) Target cost and target fee. The target cost and target fee specified in the
Schedule are subject to adjustment if the contract is modified in accordance
with paragraph (d) below.

(1) "Target cost," as used in this contract, means the estimated cost of this
contract as initially negotiated, adjusted in accordance with paragraph (d)
below.

(2) "Target fee," as used in this contract, means the fee initially negotiated
on the assumption that this contract would be performed for a cost equal to the
estimated cost initially negotiated, adjusted in accordance with paragraph (d)
below.

(c) Withholding of payment. Normally, the Government shall pay the fee to the
Contractor as specified in the Schedule. However, when the Contracting Officer
considers that performance or cost indicates that the Contractor will not
achieve target, the Government shall pay on the basis of an appropriate lesser
fee. When the Contractor demonstrates that performance or cost clearly indicates
that the Contractor will earn a fee significantly above the target fee, the
Government may, at the sole discretion of the Contracting Officer, pay on the
basis of an appropriate higher fee. After payment of 85 percent of the
applicable fee, the Contracting Officer may withhold further payment of fee
until a reserve is set aside in an amount that the Contracting Officer considers
necessary to protect the Government's interest. This reserve shall not exceed 15
percent of the applicable fee or $100,000, whichever is less. The Contracting
Officer shall release 75 percent of all fee withholds under this contract after
receipt of the certified final indirect cost rate proposal covering the year of
physical completion of this contract, provided the Contractor has satisfied all
other contract terms and conditions, including the submission of the final
patent and royalty reports, and is not delinquent in submitting final vouchers
on prior years' settlements. The Contracting Officer may release up to 90
percent of the fee withholds under this contract based on the Contractor's past
performance related to the submission and settlement of final indirect cost rate
proposals.

(d) Equitable adjustments. When the work under this contract is increased or
decreased by a modification to this contract or when any equitable adjustment in
the target cost is authorized under any other clause, equitable adjustments in
the target cost, target fee, minimum fee, and maximum fee, as appropriate, shall
be stated in a supplemental agreement to this contract.

(e) Fee payable. (1) The fee payable under this contract shall be the target fee
increased by 15 cents for every dollar that the total allowable cost is less
than the target cost or decreased by 15 cents for every dollar that the total
allowable cost exceeds the target cost. For CLIN 0001 in no event shall the fee
be greater than 15 percent or less than 10 percent of the target costs. For CLIN
0002 in no event shall the fee be greater than 15 percent or less than 0 percent
of the target costs. For CLIN 0003 in no event shall the fee be greater than 15
percent or less than 4.6 percent of the target costs.

(2) The fee shall be subject to adjustment, to the extent provided in paragraph
(d) above, and within the minimum and maximum fee limitations in subparagraph
(1) above, when the total allowable cost is increased or decreased as a
consequence of (i) payments made under assignments or (ii) claims excepted from
the release as required by paragraph (h)(2) of the Allowable Cost and Payment
clause.



                                                                   Page 17 of 21

(3) If this contract is terminated in its entirety, the portion of the target
fee payable shall not be subject to an increase or decrease as provided in this
paragraph. The termination shall be accomplished in accordance with other
applicable clauses of this contract.

(4) For the purpose of fee adjustment, "total allowable cost" shall not include
allowable costs arising out of--

(i) Any of the causes covered by the Excusable Delays clause to the extent that
they are beyond the control and without the fault or negligence of the
Contractor or any subcontractor;

(ii) The taking effect, after negotiating the target cost, of a statute, court
decision, written ruling, or regulation that results in the Contractor's being
required to pay or bear the burden of any tax or duty or rate increase in a tax
or duty;

(iii) Any direct cost attributed to the Contractor's involvement in litigation
as required by the Contracting Officer pursuant to a clause of this contract,
including furnishing evidence and information requested pursuant to the Notice
and Assistance Regarding Patent and Copyright Infringement clause;

(iv) The purchase and maintenance of additional insurance not in the target cost
and required by the Contracting Officer, or claims for reimbursement for
liabilities to third persons pursuant to the Insurance Liability to Third
Persons clause;

(v) Any claim, loss, or damage resulting from a risk for which the Contractor
has been relieved of liability by the Government Property clause; or

(vi) Any claim, loss, or damage resulting from a risk defined in the contract as
unusually hazardous or as a nuclear risk and against which the Government has
expressly agreed to indemnify the Contractor.

(5) All other allowable costs are included in "total allowable cost" for fee
adjustment in accordance with this paragraph (e), unless otherwise specifically
provided in this contract.

(f) Contract modification, The total allowable cost and the adjusted fee
determined as provided in this clause shall be evidenced by a modification to
this contract signed by the Contractor and Contracting Officer.

(g) Inconsistencies. In the event of any language inconsistencies between this
clause and provisioning documents or Government options under this contract,
compensation for spare parts or other supplies and services ordered under such
documents shall be determined in accordance with this clause.

(End of clause)

52.217-7 OPTION FOR INCREASED QUANTITY--SEPARATELY PRICED LINE ITEM (MAR 1989)

The Government may require the delivery of the numbered line item, identified in
the Schedule as an option item, in the quantity and at the price stated in the
Schedule. The Contracting Officer may exercise the option by written notice to
the Contractor within sixty (60) days. Delivery of added items shall continue at
the same rate that like items are called for under the contract, unless the
parties otherwise agree.

(End of clause)

52.252-2 CLAUSES INCORPORATED BY REFERENCE (FEB 1998)

This contract incorporates one or more clauses by reference, with the same force
and effect as if they were given in full text. Upon request, the Contracting
Officer will make their full text available. Also, the full text of a clause may
be accessed electronically at this address:
http://acquisition.gov/far/index.html

(End of clause)



                                                                   Page 18 of 21

52.252-6 AUTHORIZED DEVIATIONS IN CLAUSES (APR 1984)

(a) The use in this solicitation or contract of any Federal Acquisition
Regulation (48 CFR Chapter 1) clause with an authorized deviation is indicated
by the addition of "(DEVIATION)" after the date of the clause.

(b) The use in this solicitation or contract of any Defense Federal Acquisition
Regulation (48 CFR Chapter 2) clause with an authorized deviation is indicated
by the addition of "(DEVIATION)" after the name of the regulation.

(End of clause)

252.247-7023 Transportation of Supplies by Sea (MAY 2002)

(a) Definitions. As used in this clause--

(1) "Components" means articles, materials, and supplies incorporated directly
into end products at any level of manufacture, fabrication, or assembly by the
Contractor or any subcontractor.

(2) "Department of Defense" (DoD) means the Army, Navy, Air Force, Marine Corps,
and defense agencies.

(3) "Foreign flag vessel" means any vessel that is not a U.S.-flag vessel.

(4) "Ocean transportation" means any transportation aboard a ship, vessel, boat,
barge, or ferry through international waters.

(5) "Subcontractor" means a supplier, materialman, distributor, or vendor at any
level below the prime contractor whose contractual obligation to perform results
from, or is conditioned upon, award of the prime contract and who is performing
any part of the work or other requirement of the prime contract.

(6) "Supplies" means all property, except land and interests in land, that is
clearly identifiable for eventual use by or owned by the DoD at the time of
transportation by sea.

(i) An item is clearly identifiable for eventual use by the DoD if, for example,
the contract documentation contains a reference to a DoD contract number or a
military destination.

(ii) "Supplies" includes (but is not limited to) public works; buildings and
facilities; ships, floating equipment and vessels of every character, type, and
description, with parts, subassemblies, accessories, and equipment; machine
tools; material; equipment; stores of all kinds; end items; construction
materials; and components of the foregoing.

(7) "U.S.-flag vessel" means a vessel of the United States or belonging to the
United States, including any vessel registered or having national status under
the laws of the United States.

(b)(l) The Contractor shall use U.S.-flag vessels when transporting any supplies
by sea under this contract.

(2) A subcontractor transporting supplies by sea under this contract shall use
U.S.-flag vessels if--

(i) This contract is a construction contract; or

(ii) The supplies being transported are--

(A) Noncommercial items; or

(B) Commercial items that--



                                                                   Page 19 of 21

(1) The Contractor is reselling or distributing to the Government without adding
value (generally, the Contractor does not add value to items that it contracts
for f.o.b. destination shipment);

(2) Are shipped in direct support of U.S. military contingency operations,
exercises, or forces deployed in humanitarian or peacekeeping operations; or

(3) Are commissary or exchange cargoes transported outside of the Defense
Transportation System in accordance with 10 U.S.C. 2643.

(c) The Contractor and its subcontractors may request that the Contracting
Officer authorize shipment in foreign-flag vessels, or designate available
U.S.-flag vessels, if the Contractor or a subcontractor believes that--

(1) U.S.-flag vessels are not available for timely shipment;

(2) The freight charges are inordinately excessive or unreasonable; or

(3) Freight charges are higher than charges to private persons for
transportation of like goods.

(d) The Contractor must submit any request for use of other than U.S.-flag
vessels in writing to the Contracting Officer at least 45 days prior to the
sailing date necessary to meet its delivery schedules. The Contracting Officer
will process requests submitted after such date(s) as expeditiously as possible,
but the Contracting Officer's failure to grant approvals to meet the shipper's
sailing date will not of itself constitute a compensable delay under this or any
other clause of this contract. Requests shall contain at a minimum--

(l) Type, weight, and cube of cargo;

(2) Required shipping date;

(3) Special handling and discharge requirements;

(4) Loading and discharge points;

(5) Name of shipper and consignee;

(6) Prime contract number; and

(7) A documented description of efforts made to secure U.S.-flag vessels,
including points of contact (with names and telephone numbers) with at least two
U.S.-flag carriers contacted. Copies of telephone notes, telegraphic and
facsimile message or letters will be sufficient for this purpose.

(e) The Contractor shall, within 30 days after each shipment covered by this
clause, provide the Contracting Officer and the Maritime Administration, Office
of Cargo Preference, U.S. Department of Transportation, 400 Seventh Street SW.,
Washington, DC 20590, one copy of the rated on board vessel operating carrier's
ocean bill of lading, which shall contain the following information:

(1) Prime contract number;

(2) Name of vessel;

(3) Vessel flag of registry;

(4) Date of loading;

(5) Port of loading;



                                                                   Page 20 of 21

(6) Port of final discharge;

(7) Description of commodity;

(8) Gross weight in pounds and cubic feet if available;

(9) Total ocean freight in U.S. dollars; and

(10) Name of the steamship company.

(f) The Contractor shall provide with its final invoice under this contract a
representation that to the best of its knowledge and belief--

(1) No ocean transportation was used in the performance of this contract;

(2) Ocean transportation was used and only U.S.-flag vessels were used for all
ocean shipments under the contract;

(3) Ocean transportation was used, and the Contractor had the written consent of
the Contracting Officer for all non-U.S.-flag ocean transportation; or

(4) Ocean transportation was used and some or all of the shipments were made on
non-U.S.-flag vessels without the written consent of the Contracting Officer.
The Contractor shall describe these shipments in the following format:

ITEM DESCRIPTION             CONTRACT LINE ITEMS               QUANTITY

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

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

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

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

TOTAL
      --------------------------------------------------------------------------

(g) If the final invoice does not include the required representation, the
Government will reject and return it to the Contractor as an improper invoice
for the purposes of the Prompt Payment clause of this contract. In the event
there has been unauthorized use of non-U.S.-flag vessels in the performance of
this contract, the Contracting Officer is entitled to equitably adjust the
contract, based on the unauthorized use.

(h) In the award of subcontracts for the types of supplies described in
paragraph (b)(2) of this clause, the Contractor shall flow down the requirements
of this clause as follows:

(1) The Contractor shall insert the substance of this clause, including this
paragraph (h), in subcontracts that exceed the simplified acquisition threshold
in part 2 of the Federal Acquisition Regulation.

(2) The Contractor shall insert the substance of paragraphs (a) through (e) of
this clause, and this paragraph (h), in subcontracts that are at or below the
simplified acquisition threshold in part 2 of the Federal Acquisition
Regulation.

(End of clause)



                                                                   Page 21 of 21

Section J - List of Documents, Exhibits and Other Attachments

SECTION J

LIST OF ATTACHEMENTS:

- --------------------------------------------------------------------------------
Exhibit Number               Description                            No. of Pages
- --------------------------------------------------------------------------------
     1           Contract Data Requirements List DD Forms 1423          14
                 and continuation pages.
- --------------------------------------------------------------------------------
     2           Disclosure of Lobbying Activities                      2
- --------------------------------------------------------------------------------

EX-10.21

                                                                   Exhibit 10.21

      CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT HAS BEEN
          OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
          COMMISSION (THE "SEC") PURSUANT TO A REQUEST FOR CONFIDENTIAL
                 TREATMENT WITH RESPECT TO THE OMITTED PORTIONS.
                     OMITTED PORTIONS ARE INDICATED BY [***]

                A COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT

                                     Between
                                PharmAthene, Inc.
            175 Admiral Cochrane Dr., Suite 400, Annapolis, MD 21401
                                  (Cooperator)

                                       and

                           U. S. Army Medical Research
                        Institute of Infectious Diseases
                        Fort Derrick, Maryland 21702-5011
                                  (Laboratory)

      Article 1. Background

      1.00 This Agreement is entered into under the authority of the Federal
Technology Transfer Act of 1986,15 U.S.C. 3710a, et seq., between the Cooperator
and the Laboratory, the parties to this Agreement.

      1.01 Laboratory, on behalf of the U.S. Government, and Cooperator desire
to cooperate in research and development on Evaluation of Valortim(TM), an
Anti-toxin Monoclonal Antibody, in the African green monkey model for
Inhalational Anthrax according to the attached Scope of Work (SOW) described in
Appendix A.

      1.02 Cooperator has entered into a Collaboration Agreement dated November
29, 2004 (the "Collaboration Agreement") with Medarex, Inc. ("Medarex")
regarding the research and development of fully human antibodies with respect to
the anthrax protective factor antigen (the "Collaboration").

      1.03 Valortim (the "Compound") is one of the compounds that is being
developed through the Collaboration and is subject to the terms of the
Collaboration Agreement.

      1.04 On behalf of Cooperator and pursuant to the terms of a Cooperative
Research and Development Agreement for Material Transfer dated August 29th, 2006
(the "CRADA-M"), between Laboratory and Medarex, Medarex is providing Laboratory
with [***] mg of the Compound.

      NOW, THEREFORE, the parties agree as follows:

- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                       1


      Article 2. Definitions

      2.00 The following terms are defined for this Agreement as follows:

      2.01 "Agreement" means this cooperative research and development
agreement.

      2.02 "Invention" and "Made" have the meanings set forth in Title 15 U.S.C.
Section 3703(9) and (10).

      2.03 "Proprietary Information" means information marked with a proprietary
legend which embodies trade secrets developed at private expense or which is
confidential business or financial information, provided that such information:

      (i) is not generally known, or which becomes generally known or available
during the period of this Agreement from other sources without obligations
concerning their confidentiality;

      (ii) has not been made available by the owners to others without
obligation concerning its confidentiality; and

      (iii) is not already available to the receiving party without obligation
concerning its confidentiality.

      (iv) is not independently developed by or on behalf of the receiving
party, without reliance on the information received hereunder.

      2.04 "Subject Data" means all recorded information first produced in the
performance of this Agreement.

      2.05 "Subject Invention" means any Invention Made as a consequence of, or
in relation to, the performance of work under this Agreement.

      Article 3. Research Scope and Administration

      3.00 Scope of Work. Research performed under this Agreement shall be
performed solely in accordance with the SOW incorporated as a part of this
Agreement at Appendix A. It is agreed that any descriptions, statements, or
specifications in the SOW shall be interpreted as goals and objectives of the
services to be provided under this Agreement and not requirements or warranties.
Laboratory and Cooperator will endeavor to achieve the goals and objectives of
such services; however, each party acknowledges that such goals and objectives,
or any anticipated schedule of performance, may not be achieved.

      3.01 Review of Work. Periodic conferences shall be held between the
parties for the purpose of reviewing the progress of work. It is understood that
the nature of this research is such that completion within the period of
performance specified, or within the limits of financial support allocated,
cannot be guaranteed. Accordingly, all research will be performed in good faith.


                                       2


      3.02 Principal Investigator. Any work required by the Laboratory under the
SOW will be performed under the supervision of Elizabeth Leffel, PhD, M.P.H.,
elizabeth.leffel@us.army.mil, phone (301) 619-4459, fax (301)619-4625, who, as
co-principal investigator has responsibility for the scientific and technical
conduct of this project on behalf of the Laboratory. Any work required by the
Cooperator under the SOW will be performed under the supervision of Valerie
Riddle, MD, FACP, Vice President and Medical Director, PharmAthene, Inc., 175
Admiral Cochrane Dr., Suite 400, Annapolis, MD 21401,410-571-8923
(voice),410-571-8927 (fax), riddlev@pharmamene.com, who, as co-principal
investigator has responsibility for the scientific and technical conduct of this
project on behalf of the Cooperator.

      3.03 Scope Change. If at any time the co-principal investigators determine
that the research data dictates a substantial change in the direction of the
work, the parties shall make a good faith effort to agree on any necessary
change to the SOW and make the change by written notice to the addresses listed
in section 13.04 Notices.

      3.04 Final Report. The parties shall prepare a final report of the results
of this project within six months after completing the SOW.

      Article 4. Ownership and Use of Physical Property

      4.01 Ownership of Materials or Equipment. All materials or equipment
developed or acquired under this Agreement by the parties shall be the property
of the party which developed or acquired the property, except that government
equipment provided by Laboratory (1) which through mixed funding or mixed
development must be integrated into a larger system, or (2) which through normal
use at the termination of the Agreement has a salvage value that is less than
the return shipping costs, shall become the property of Cooperator.

      4.02 Use of Provided Materials. Both parties agree that any materials
relating to them which were provided by one party to the other party will be
used for research purposes only. The materials shall not be sold, offered for
sale, used for commercial purposes, or be furnished to any other party without
advance written approval from the Provider's official signing this Agreement or
from another official to whom the authority has been delegated, and any use or
furnishing of material shall be subject to the restrictions and obligations
imposed by this Agreement.

      Article 5. Financial Obligation

      5.00 Advance Payment. The performance of research by Laboratory under this
Agreement is conditioned on the advance payment by Cooperator of Laboratory's
agreed upon costs for the performance of such research.

      5.01 Deposit Account. Cooperator shall pay $[***] to Laboratory for the
performance of the research specified by Article 3.00. $[***] of such funds
shall be deposited in [Department of the Army, Special Collaborative Agreement
Account No. __________________] upon execution of this agreement. The check
should be made payable to:

- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                       3


               U.S. Treasury and sent to:
                  Ms. Elizabeth Dorsey
                  USAMRIID, Budget Office
                  1425 Porter Street
                  Fort Detrick, MD 21702-5011
                  Phone: 301-619-2148     Fax: 301-619-4619

Laboratory shall not be obligated to perform any of the research specified
herein, or to take any other action required by this Agreement, if the agreed to
funds are not deposited as required by this Article.

      5.02 Insufficient and Excess Funds. Laboratory shall not be required to
continue its research and development activities under this Agreement if the
funds provided by Cooperator are insufficient to cover Laboratory's agreed upon
costs for such continued activities. Funds not expended by Laboratory shall be
returned to Cooperator upon Laboratory's submission of a final fiscal report to
Cooperator.

      5.03 Accounting Records. Laboratory shall maintain separate and distinct
current accounts, records, and other evidence supporting all its expenditures
under this Agreement. Laboratory shall provide Cooperator a semi-annual report
accounting for the use of Cooperator's funds and a final fiscal report within
four months after completing the SOW or ending its research activities under
this Agreement. The accounts and records of Laboratory shall be available for
reasonable inspection and copying by Cooperator and its authorized
representative.

      Article 6. Patent Rights

      6.00 Reporting. The parties shall promptly report to each other all
Subject Inventions reported to either party by its employees. All Subject
Inventions Made during the performance of this Agreement shall be listed in the
Final Report required by this Agreement.

      6.01 Cooperator Employee Inventions. Laboratory waives any ownership
rights the U.S. Government may have in Subject Inventions Made by Cooperator
employees and agrees that Cooperator shall have the option to retain title in
Subject Inventions Made by Cooperator employees. Cooperator shall notify
Laboratory promptly upon making this election and agrees to timely file patent
applications on Cooperator's Subject Invention at its own expense.

      6.02 Laboratory Employee Inventions. Laboratory shall have the initial
option to retain title to, and file patent application on, each Subject
Invention Made by its employees ("Laboratory Inventions"). The Laboratory agrees
to grant an exclusive license to any invention arising under this Agreement to
which it has ownership to the Cooperator in accordance with Title 15 U.S. Code
Section 3710a, on terms negotiated in good faith. Any invention arising under
this Agreement is subject to the retention by the U.S. Government of
nonexclusive, nontransferable, irrevocable, paid- up license to practice, or
have practiced, the invention throughout the world by or on behalf of the U.S.
Government. At the written request of Cooperator, Laboratory will grant to
Cooperator a non exclusive, fully paid-up, royalty-free, worldwide license, with
the right to sublicense, to use and practice such Laboratory Invention under
Laboratory's rights in such Laboratory Invention and any and all patent
applications, patents and other rights claiming or covering such Laboratory
Invention.


                                       4


      6.03 Joint Inventions. Any Subject Invention patentable under U.S. patent
law which is Made jointly by Laboratory employees and Cooperator employees under
the Scope of Work of this Agreement shall be jointly owned by the parties. The
parties shall discuss together a filing strategy and filing expenses related to
the filing of the patent covering the Subject Invention. If a party decides not
to retain its ownership rights to a jointly owned Subject Invention, it shall
offer to assign such rights to the other party, pursuant to Paragraph 6.05,
below.

      6.04 Government Contractor Inventions. Laboratory represents that as of
the date of this Agreement the only investigators for the Research Project shall
be Laboratory's employees. Laboratory shall notify Cooperator, in advance, if
Laboratory intends to use its contractors to perform services on the Research
Project either (i) as investigators, or (ii) in any other capacity under which
such contractors will conduct any substantive research, analysis, or evaluation
of the Materials (collectively, "Key Personnel"). If any of Laboratory's
contractors are to be Key Personnel for the Research Project, Laboratory shall
suspend work on the Research Project until Cooperator provides its prior written
consent to the use of the contractor as a Key Personnel. If Cooperator does not
provide its written consent thereto, Laboratory shall cease all work on the
Research Project and shall be entitled to terminate this Agreement immediately.
Cooperator, nevertheless, acknowledges that Laboratory will use contractors to
perform work on the Research Project other than as Key Personnel. In accordance
with 37 Code of Federal Regulations 401.14, if one of Laboratory's contractors
conceives of an invention while performing services at Laboratory's facilities
to fulfill Laboratory's obligations under this Agreement, Laboratory may require
the contractor to negotiate a separate agreement with Cooperator regarding
allocation of rights to any Subject Invention the contractor makes, solely or
jointly, under this Agreement.

      6.05 Filing of Patent Applications. The party having the right to retain
title to, and file patent applications on, a specific Subject Invention may
elect not to file patent applications, provided it so advises the other party
within 90 days from the date it reports the Subject Invention to the other
party. Thereafter, the other party may elect to file patent applications on the
Subject Invention and the party initially reporting the Subject Invention agrees
to assign its ownership interest in the Subject Invention to the other party
subject to the retention by the party assigning ownership of a nonexclusive,
irrevocable, paid-up license to practice, or have practiced, the Subject
Invention throughout the world.

      6.06 Patent Expenses. The expenses attendant to the filing of patent
applications shall be borne by the party filing the patent application. Each
party shall provide the other party with copies of the patent applications it
files on any Subject Invention, along with the power to inspect and make copies
of all documents retained in the official patent application files by the
applicable patent office. The parties agree to reasonably cooperate with each
other in the preparation and filing of patent applications resulting from this
Agreement.

      6.07 Exception for Certain Subject Inventions. The parties hereto
acknowledge and agree that the terms of Section 2 of that certain CRADA-M
between Laboratory and Medarex, Inc., dated as of August 29th, 2006, pursuant to
which Medarex will provide Laboratory with certain materials and information for


                                       5


the performance of work hereunder, will supersede any conflicting term set forth
in this Article 6 with respect to any inventions or discoveries made as a result
of Laboratory's use of such materials or information in the performance of work
hereunder.

      Article 7. Exclusive License

      7.00 Grant. The Laboratory agrees to grant to the Cooperator an exclusive
license in each U.S. patent application, and patents issued thereon, covering a
Subject Invention, which is filed by the Laboratory subject to the reservation
of a nonexclusive, nontransferable, irrevocable, paid-up license to practice and
have practiced the Subject Invention on behalf of the United States.

      7.01 Exclusive License Terms. The Cooperator shall elect or decline to
exercise its right to acquire an exclusive license to any Subject Invention
within six months of being informed by the Laboratory of the Subject Invention.
The specific royalty rate and other terms of license shall be negotiated
promptly in good faith and in conformance with the laws of the United States.

      Article 8. Background Patent(s)

      8.00 Laboratory Background Patent(s): Laboratory has filed patent
application(s), or is the assignee of issued patent(s), listed below which
contain(s) claims that are related to research contemplated under this
Agreement. No license(s) to this/these patent applications or issue patents
is/are granted under this Agreement, and this/these application(s) and any
continuations to it/them are specifically excluded front the definitions of
"Subject Invention" contained in this Agreement:

      8.01 Cooperator Background Patent(s): Cooperator has filed patent
application(s), or is the assignee of issued patent(s), listed below which
contain(s) claims that are related to research contemplated under this
Agreement. No license(s) to this/these patent applications or issue patents
is/are granted under this Agreement, and this/these application(s) and any
continuations to it/them are specifically excluded from the definitions of
"Subject Invention" contained in this Agreement:

            [***]

      Article 9. Subject Data and Proprietary Information

      9.00 Subject Data Ownership. Subject Data shall be jointly owned by the
parties. Either party shall have the right to review all Subject Data that has
not been delivered to the other party, except to the extent that such Subject
Data are subject to a claim of confidentiality or privilege by a third party.
Subject Data shall not be disclosed by Laboratory except as set forth in Section
9.04 below.

- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                       6


      9.01 Proprietary Information/Confidential Information. Each party shall
place a proprietary notice on all information it delivers to the other party
under this Agreement that it asserts is proprietary. The parties agree that any
Proprietary Information or Confidential Information furnished by one party to
the other party under this Agreement, or in contemplation of this Agreement,
shall be used, reproduced and disclosed by the receiving party only for the
purpose of carrying out this Agreement, and shall not be released by the
receiving party to third parties unless consent to such release is obtained from
the providing party.

      9.02 Army limited-access database. Notwithstanding anything to the
contrary in this Article, the existence of established CRADAs specifying areas
of research and their total dollar amounts may be documented on limited access,
password-protected websites of the U.S. Army Medical Research and Materiel
Command (the parent organization of Laboratory), to provide the Command's
leadership with a complete picture of military research efforts.

      9.03 Laboratory Contractors. Cooperator acknowledges and agrees to allow
Laboratory's disclosure of Cooperator's proprietary information to Laboratory's
Contractors for the purposes of carrying out this Agreement. Laboratory agrees
that it has or will ensure that its Contractors are under written obligation not
to disclose Cooperator's proprietary information, except as required by law or
court order, before Contractor employees have access to Cooperator's proprietary
information under this Agreement.

      9.04 Release Restrictions. Laboratory shall have the right to use all
Subject Data for any Governmental purpose, but shall not release Subject Data
publicly except: (i) subject to the last sentence of this Section 9.04,
Laboratory in reporting on the results of research may publish Subject Data in
technical articles and other documents to the extent it determines to be
appropriate; and (ii) Laboratory may release Subject Data where release is
required by law or court order. For the purpose of restricting any disclosure of
Cooperator's confidential information, Laboratory will send proposed
publications or presentations, whether oral, electronic, or written, to
Cooperator for review at least sixty (60) calendar days prior to any such
proposed publications or presentation. Cooperator will return comments or
suggested revisions to the proposed publications to Laboratory within thirty
(30) calendar days of their receipt by Laboratory. In the event a proposed
publication or presentation contains patentable subject matter or Confidential
Information of Cooperator, Laboratory agrees to delay such publication or
presentation for an additional thirty (30) calendar days to allow Cooperator the
opportunity to seek appropriate patent protection for such inventions or
information or to request Recipient to delete any Confidential Information of
Laboratory, which Information shall be deleted upon such request and prior to
publication or presentation.

      9.05 FDA Documents. If this Agreement involves a product regulated by the
U.S. Food and Drug Administration (FDA), then the Cooperator or the U.S. Army
Medical Research and Materiel Command, as appropriate, may file any required
documentation with the FDA. In addition, the parties authorize and consent to
allow each other or their contractors or agents access to, or to
cross-reference, any documents filed with the FDA related to the product.


                                       7


      Article 10. Termination

      10.00 Termination by Mutual Consent. Cooperator and Laboratory may elect
to terminate this Agreement, or portions thereof, at any time by mutual consent.

      10.01 Termination by Unilateral Action. Either party may unilaterally
terminate this entire Agreement at any time by giving the other party written
notice, not less than 30 days prior to the desired termination date.

      10.02 Termination Procedures. In the event of termination, the parties
shall specify the disposition of all property, patents and other results of work
accomplished or in progress, arising from or performed under this Agreement by
written notice. Upon receipt of a written termination notice, the parties shall
not make any new commitments and shall, to the extent feasible, cancel all
outstanding commitments that relate to this Agreement. Notwithstanding any other
provision of this Agreement, any exclusive license entered into by the parties
relating to this Agreement shall be simultaneously terminated unless the parties
agree to retain such exclusive license.

      Article 11. Disputes

      11.00 Settlement. Any dispute arising under this Agreement which is not
disposed of by agreement of the principal investigators shall be submitted
jointly to the signatories of this Agreement. A joint decision of the
signatories or their designees shall be the disposition of such dispute.
However, nothing in this section shall prevent any party from pursuing any and
all administrative and/or judicial remedies which may be allowable.

      Article 12. Liability

      12.00 Property. Neither party shall be responsible for damages to any
property provided to, or acquired by, the other party pursuant to this
Agreement.

      12.01 Cooperator's Employees. Cooperator agrees to indemnify and hold
harmless the U.S. Government for liability of any kind involving an employee of
Cooperator arising in connection with this Agreement, and for all liabilities
arising out of the use by Cooperator of Laboratory's research and technical
developments, or out of any use, sale or other disposition by Cooperator of
products made based on Laboratory's technical developments, except to the extent
the liability is due to the negligence of Laboratory under the provisions of the
Federal Torts Claims Act. This provision shall survive termination or expiration
of this Agreement.

      12.02 No Warranty. The parties make no express or implied warranty as to
any matter whatsoever, including the conditions of the research or any Invention
or product, whether tangible or intangible, Made, or developed under this
agreement, or the ownership, merchantability, or fitness for a particular
purpose of the research or any Invention or product.

      Article 13. Miscellaneous

      13.00 Governing Law. This Agreement shall be governed by the laws of the
United States Government.


                                       8


      13.01 Export Control and Biological Select Agents and Toxins. The
obligations of the parties to transfer technology to one or more other parties,
provide technical information and reports to one or more other parties, and
otherwise perform under this Agreement are contingent upon compliance with
applicable United States export control laws and regulations. The transfer of
certain technical data and commodities may require a license from a cognizant
agency of the United States Government or written assurances by the Parties that
the Parties shall not export technical data, computer software, or certain
commodities to specified foreign countries without prior approval of an
appropriate agency of the United States Government. The Parties do not, alone or
collectively, represent that a license shall not be required, nor that, if
required, it shall be issued. In addition, where applicable, the parties agree
to fully comply with all laws, regulations, and guidelines governing biological
select agents and toxins.

      13.01 Independent Contractors. The relationship of the parties to this
Agreement is that of independent contractors and not as agents of each other or
as joint venturers or partners.

      13.02 Use of Name or Endorsements. (a) The parties shall not use the name
of the other party on any product or service which is directly or indirectly
related to either this Agreement or any patent license or assignment agreement
which implements this Agreement without the prior approval of the other party.
(b) By entering into this Agreement, Laboratory does not directly or indirectly
endorse any product or service provided, or to be provided, by Cooperator, its
successors, assignees, or licensees. Cooperator shall not in any way imply that
this Agreement is an endorsement of any such product or service. Press releases
or other public releases of information shall be coordinated between the parties
prior to release, except that the Laboratory may release the name of the
Cooperator and the title of the research without prior approval from the
Cooperator.

      13.03 Survival of Specified Provisions. The rights specified in provisions
of this Agreement covering Patent Rights, Subject Data and Proprietary
Information, and Liability shall survive the termination or expiration of this
Agreement.

      13.04 Notices. All notices pertaining to or required by this Agreement
shall be in writing and shall be signed by an authorized representative
addressed as follows:

         If to Cooperator:   Valerie Riddle, MD, FACP
                             Vice President and Medical Director
                             PharmAthene, Inc.
                             175 Admiral Cochrane Dr., Suite 400
                             Annapolis, MD 21401
                             410-571-8923 (voice), 410-571-8927 (fax)

         With a copy to:     Ronald Kaiser
                             Vice President and Chief Financial Officer
                             PharmAthene, Inc.
                             175 Admiral Cochrane Dr., Suite 400
                             410-571-7813 (voice), 410-571-8927 (fax)


                                       9


         If to Laboratory:   USAMRIID
                             Business Plans and Programs Office
                             1425 Porter Street
                             Fort Derrick, MD 21702-5011
                             Phone: 301-619-6886 Fax: 301-619-8379

Any party may change such address by notice given to the other in the manner set
forth above.

      Article 14. Article 14. Duration of Agreement and Effective Date

      14.01 Effective Date. This Agreement shall enter into force as of the date
it is signed by the last authorized representative of the parties.

      14.02 Expiration Date. This Agreement will automatically expire l year
from effective date unless it is revised by written notice and mutual agreement.

              [remainder of page remains blank; signatures follow]


                                       10


      IN WITNESS WHEREOF, the Parties have caused this agreement to be executed
by their duly authorized representatives as follows:

For the Cooperator:                      PharmAthene Inc.


                                         /s/ Valerie Riddle, MD
                                         ---------------------------------------
                                         (Signature)

                                         Valerie Riddle, MD
DATE     8/29/06                         Vice-President & Medical Director
     --------------

For the U.S. Government:                 U.S. Army Medical Research Institute of
                                            Infectious Diseases


                                         /s/ George W. Korch, Jr.
                                         ---------------------------------------
                                         (Signature)

                                         George W. Korch, Jr.
                                         Colonel, U.S. Army
DATE    12 Sep 06                        Commanding
     --------------


For the USAMRIID Principal Investigator:

I hereby acknowledge the terms and conditions of this Agreement:


DATE    6 Sept 06                        /s/ Elizabeth Leffel, Ph.D
     --------------                      ---------------------------------------
                                         (Signature)

                                         Elizabeth Leffel, Ph.D

EX-10.22

                                                                   Exhibit 10.22

           CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT
                 HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
                 SECURITIES AND EXCHANGE COMMISSION (THE "SEC")
  PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT WITH RESPECT TO THE OMITTED
                                    PORTIONS.
                    OMITTED PORTIONS ARE INDICATED BY [***].

                              NOTICE OF GRANT AWARD

RESEARCH PROJECT COOPERATIVE AGREEMENT                     Issue Date:09/30/2006

Department of Health and Human Services
National Institutes of Health
NATIONAL INSTITUTE OF NEUROLOGICAL DISORDERS AND STROKE

Grant Number: 1 U01 NS058207-01
Principal Investigator: Troyer, John Karl Project Title:
Novel Therapeutic Agent to Treat
Nerve Agent Exposure after Civilian Attack

VP, POLICY & GOVT AFFAIRS
PHARMATHENE, INC
175 ADMIRAL COCHRANE DR, STE 101
ANNAPOLIS, MD 21401
UNITED STATES
Award e-mailed to: cookf@pharmathene.com

Budget Period:  09/30/2006 - 05/31/2007
Project Period:  09/30/2006 - 05/31/2011

Dear Business Official:

The National Institutes of Health hereby awards a grant in the amount of
$329,739 (see "Award Calculation" in Section I) to PHARMATHENE, INC. in support
of the above referenced project. This award is pursuant to the authority of 42
USC 241, 31 USC 6305 & 6306 and is subject to terms and conditions referenced
below.

Acceptance of this award including the Terms and Conditions is acknowledged by
the grantee when funds are drawn down or otherwise obtained from the grant
payment system.

Award recipients are responsible for reporting inventions derived or reduced to
practice in the performance of work under this grant. Rights to inventions vest
with the grantee organization provided certain requirements are met and there is
acknowledgement of NIH support. In addition, recipients must ensure that patent
and license activities are consistent with their responsibility to make unique
research resources developed under this award available to the scientific
community, in accordance with NIH policy. For additional information, please
visit http://www.iedison.gov.



If you have any questions about this award, please contact the individual(s)
referenced in the information below.

Sincerely yours,

Maxine Davis-Vanlue
Grants Management Officer
NATIONAL INSTITUTE OF NEUROLOGICAL DISORDERS AND STROKE

See additional information below

SECTION I - AWARD DATA - 1          U01 NS058207-01

AWARD CALCULATION (U.S. Dollars):

Salaries and Wages                                                        $[***]
Fringe Benefits                                                           $[***]
Consultant Services                                                       $[***]
Travel Costs                                                              $[***]
Other Costs                                                               $[***]
Federal Direct Costs                                                      $[***]
Federal F&A Costs                                                         $[***]
APPROVED BUDGET                                                        $329,739
TOTAL FEDERAL AWARD AMOUNT                                             $329,739

Recommended future year total cost support, subject to the availability of funds
and satisfactory progress of the project, is as follows.

                          02                    $269,635
                          03                    $434,637
                          04                    $257,277
                          05                    $434,995

FISCAL INFORMATION:

                 CFDA Number:              93.853
                 EIN:                      1043560100A1
                 Document Number:          UNS058207A

IC        CAN        FY2006       FY2007       FY2008       FY2009       FY2010
OD      8470083      329,739      269,635      434,637      257,277      434,995

- ----------
***Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                      -2-


NIH ADMINISTRATIVE DATA:
PCC: JETTD TD / OC: 41.4L /Processed: VANLUEM 060928 0928

SECTION II - PAYMENT/HOTLINE INFORMATION - 1 U01 NS058207-01

For Payment and HHS Office of Inspector General Hotline Information, see the NIH
Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm

SECTION III - TERMS AND CONDITIONS - 1 U01 NS058207-01

This award is based on the application submitted to, and as approved by, the NIH
on the above-titled project and is subject to the terms and conditions
incorporated either directly or by reference in the following:

a. The grant program legislation and program regulation cited in this Notice of
Grant Award.
b. The restrictions on the expenditure of federal funds in appropriations acts,
to the extent those restrictions are pertinent to the award.
c. 45 CFR Part 74 or 45 CFR Part 92 as applicable.
d. The NIH Grants Policy Statement, including addenda in effect as of the
beginning date of the budget period.
e. This award notice, INCLUDING THE TERMS AND CONDITIONS CITED BELOW.

(see NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
for certain references cited above.)

Carry over of an unobligated balance into the next budget period requires Grants
Management Officer prior approval.

Treatment of Program Income:
Additional Costs

SECTION IV - NINDS SPECIAL Terms and Conditions

RESTRICTION: Funds included in this award may not be used to support studies
involving vertebrate animals until verification of IACUC approval for Charles
River (Nevada) and DRDC (Canada) has been submitted to and accepted by NINDS.
See NIH Office of Laboratory Animal Welfare (OLAW) web site:
http://grants.nih.gov/grants/olaw.htm.

Restriction: UNDER GOVERNING PHS POLICY NO FUNDS MAY BE DRAWN DOWN FROM THE
PAYMENT SYSTEM AND NO OBLIGATIONS MAY BE MADE AGAINST FEDERAL FUNDS FOR RESEARCH
INVOLVING LIVE VERTEBRATE ANIMALS PRIOR TO SUBMISSION OF VALID INSTITUTIONAL
ANIMAL CARE AND USE COMMITTEE APPROVAL IN ACCORDANCE WITH THE PHS POLICY ON
HUMANE CARE AND USE OF LABORATORY ANIMALS. THIS RESTRICTION APPLIES TO THE
APPLICANT ORGANIZATION AND ALL PERFORMANCE SITES (e.g., COLLABORATING
INSTITUTIONS, SUBCONTRACTORS, SUBGRANTEES).


                                      -3-


Facilities and administrative costs are awarded at a rate of 10 percent of
salaries and wages. This applied rate is used for awards pending negotiation and
acceptance of facilities and administrative cost rate proposal by the Division
of Cost Allocation, DHHS, or other applicable negotiating office.

Although the budget period for this award is less than 12 months, this award
includes funds for 12 months of support. Future year budget periods will cycle
on June 1. Allowable preaward costs may be charged to this award, in accordance
with the conditions outlined in the NIH Grants Policy Statement (revised
December 2003) and with institutional requirements for prior approval. The NIH
Grants Policy Statement can be found on the internet at
http://grants1.nih.gov/grants/policy/nihgps_2003/index.htm .

This award is funded by the National Institutes of Health, Office of the
Director (NIH/OD). Any papers published under the auspices of this award must
cite the funding support of all institutes.

U01 Cooperative Agreement

This cooperative agreement award is awarded in the amount of $329,739.

Of this amount, 75% ($247,304) be restricted until the awardee has negotiated
and finalized the project timeline, milestones, and deliverables with the
designated NINDS Project Officer and Grants Management Branch. Once the
timeline, milestones, and deliverables have been approved by the designated
NINDS Project Officer and Grants Management Branch Staff, the Notice of Grant
Award will be revised to allow the awardee access to additional funds for the
this cooperative agreement project.

The following special terms of award are in addition to, and not in lieu of,
otherwise applicable OMB administrative guidelines, HHS grant administration
regulations at 45 CFR Parts 74 and 92 (Part 92 is applicable when State and
local Governments are eligible to apply), and other HHS, PHS, and NIH grant
administration policies.

The administrative and funding instrument used for this program will be the
cooperative agreement (U01), CLU "assistance" mechanism (rather than an
"acquisition" mechanism), in which substantial NIH programmatic involvement with
the awardees is anticipated during the performance of the activities. Under the
cooperative agreement, the NIH purpose is to support and stimulate the
recipients' activities by involvement in and otherwise working jointly with the
award recipients in a partnership role; it is not to assume direction, prime
responsibility, or a dominant role in the activities. Consistent with this
concept, the dominant role and prime responsibility resides with the awardees
for the project as a whole, although specific tasks and activities may be shared
among the awardees and the NIH as defined above.


                                      -4-


Principal Investigator Rights and Responsibilities

The Principal Investigator will have the primary responsibility to define
objectives and approaches, and to plan, conduct, analyze, and publish results,
interpretations, and conclusions of their studies.

Awardees are responsible for identifying specific milestones toward development
of medical countermeasures that will be achieved during the project period.

Awardees agree to participate in the overall coordination of NIH research
efforts to develop medical countermeasures against chemical threats. This
participation may include collaboration and consultation with other CounterACT
research awardees, and the sharing of information, data, and research materials.

Awardees agree to participate in Annual CounterACT Network Research Symposiums
during which research progress will be shared with other Network members and
reviewed by NIH staff. The first Symposium will be held in the Spring of 2007.

Awardees will retain custody of and have primary rights to the data and software
developed under these awards, subject to Government rights of access consistent
with current HHS, PHS, and NIH policies.

NIH Responsibilities

An NIH Project Scientist will have substantial programmatic involvement that is
above and beyond the normal stewardship role in awards, as described below.

Each project will have the support of one or more Project Scientists from NIH
program staff who are assigned an administrative role for the countermeasure(s)
being studied and have expertise in the implementation of the CounterACT
research program.

The NIH Project Scientists will have substantial scientific-programmatic
involvement during conduct of this activity, through technical assistance,
advice, and coordination above and beyond normal program stewardship for grants.

NIH Project Scientists will be responsible for assessing the progress of the
projects toward the accomplishment of specified milestones and deliverables, and
for recommending if further funds should be released to the project. Milestones
and deliverables will be reviewed once a year, as part of the non-competitive
renewal process.

The NIH Project Scientists will facilitate the establishment of contacts and
collaborations between awardees of the CounterACT research program and other
persons or organizations whose participation will assist with the accomplishment
of project goals. These persons or organizations may include the FDA, disease
voluntary organizations, pharmaceutical companies, or research organizations
that can provide essential services on contract.


                                      -5-


An important part of the CounterACT research program is the coordination of
research efforts across different funding mechanisms and research structures,
and coordination among efforts aimed at different countermeasures. NIH Project
Scientists will have the primary responsibility for this overall coordination.

The NINDS Project Officer will be responsible for normal stewardship of the
award, and may also serve as a Project Scientist.

Arbitration Process

Any disagreements that may arise in scientific or programmatic matters (within
the scope of the award) between award recipients and the NIH may be brought to
arbitration. An Arbitration Panel composed of three members will be convened. It
will have three members: a designee chosen by the awardee, one NIH designee, and
a third designee with expertise in the relevant area who is chosen by the other
two; in the case of individual disagreement, the first member may be chosen by
the individual awardee. This special arbitration procedure in no way affects the
awardee's right to appeal an adverse action that is otherwise appealable in
accordance with PHS regulations 42 CFR Part 50, Subpart D and HHS regulations 45
CFR Part 16.

Non-competing applications must be submitted to the centralized mailing address:

Division of Extramural Activities Support, OER National Institutes of Health,
6705 Rockledge Drive, Room 2207, MSC 7987 Bethesda, MD 20892-7987 (for regular
or US Postal Service Express mail) Bethesda, MD 20817 (for other courier/express
mail delivery only).

Other documents applicable to this grant should be faxed to (301) 451-5635 or
mailed to:

Grants Management Branch
National Institutes of Neurological Disorders and Stroke
6001 Executive Boulevard, Suite 3290, MSC 9537 Rockville, MD 20852(Express Mail)
Bethesda, MD 20892-9537(Regular Mail)

The Program Official is responsible for the scientific, programmatic and
technical aspects of this project. The Grants Management Specialist is
responsible for the negotiation, award and administration of this project and
for interpretation of grants administration policies and provisions. These
individuals work together in overall project administration. Prior approval
requests (countersigned by the PI & authorized business official) should be
submitted in writing to the Grants Management Specialist. Requests may be made
via e-mail provided they are routed through these same officials (listed below.)
For additional information, you may access the NIH home page at
http://www.nih.gov/ and the NINDS Home Page at http://www.ninds.nih.gov.

DAVID JETT, Program Official
Phone: 301-496-6035  Email: jettd@ninds.nih.gov


                                      -6-


Edward Myrbeck, Grants Specialist
Phone: 301-496-3938  Email: myrbecke@ninds.nih.gov  Fax: 301-451-5635

SPREADSHEET
GRANT NUMBER: 1 U01 NS058207-01

P.I.: Troyer, John Karl
INSTITUTION: PHARMATHENE, INC.



                                    YEAR 01                 YEAR 02              YEAR 03             YEAR 04              YEAR 05
                                    -------                 -------              -------             -------              -------
                                                                                                         
Salaries and Wages                   [***]                   [***]                [***]               [***]                [***]
Fringe Benefits                      [***]                   [***]                [***]               [***]                [***]
Consultant Services                  [***]                   [***]                [***]               [***]                [***]
Travel Costs                         [***]                   [***]                [***]               [***]                [***]
Other Costs                          [***]                   [***]                [***]               [***]                [***]

TOTAL FEDERAL DC                     [***]                   [***]                [***]               [***]                [***]

TOTAL FEDERAL F&A                    [***]                   [***]                [***]               [***]                [***]
TOTAL COST                        329,739                 269,635              434,637             257,277              434,995

                                    YEAR 01                 YEAR 02              YEAR 03             YEAR 04              YEAR 05
                                    -------                 -------              -------             -------              -------
F&A Cost Rate 1                      [***]                  [***]                 [***]                [***]               [***]
F&A Cost Base 1                      [***]                  [***]                 [***]                [***]               [***]
F&A Costs 1                          [***]                  [***]                 [***]                [***]               [***]


- ----------
***Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                      -7-

EX-10.23

                                                                   Exhibit 10.23

           CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT
                 HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
                 SECURITIES AND EXCHANGE COMMISSION (THE "SEC")
      PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT WITH RESPECT TO THE
                                OMITTED PORTIONS.
                    OMITTED PORTIONS ARE INDICATED BY [***].

                             COLLABORATION AGREEMENT

      THIS COLLABORATION AGREEMENT ("Agreement") is made and entered into
effective as of November 29, 2004 (the "Effective Date"), by and between
PHARMATHENE, INC., having principal offices at 175 Admiral Cochrane Dr., Suite
400, Annapolis, MD 21401 ("PharmAthene") and MEDAREX, INC., having principal
offices at 707 State Road, Princeton, New Jersey 08540-1437, on behalf of itself
and its wholly owned subsidiary, GENPHARM INTERNATIONAL, INC., with principal
offices at 521 Cottonwood Drive, Milpitas, California 95035 (collectively,
"Medarex"). PharmAthene and Medarex each may be referred to herein individually
as a "Party," or collectively as the "Parties."

      WHEREAS, Medarex and PharmAthene desire to enter into a definitive
agreement to collaborate in order to commercialize fully human antibodies with
respect to the anthrax protective factor antigen, as more fully described in
Appendix C attached hereto (the "Collaboration Target"), on the terms set forth
below; and;

      NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises and covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties, intending to be legally bound, do hereby agree as follows:

                                   ARTICLE 1 -
                SCOPE OF COLLABORATION; COLLABORATION ACTIVITIES

      Section 1.1 Scope of Collaboration. The Parties have entered into this
collaboration (such collective enterprise, the "Collaboration") to jointly


                                       1


research, develop and commercialize Collaboration Products with respect to the
Collaboration Target throughout the Territory as set forth in this Agreement.
Any capitalized term used in this Agreement not otherwise defined herein shall
have the meaning set forth on Appendix A.

      Section 1.2 Research Activities.

            1.2.1 General. Under the direction and supervision of the Steering
Committee, the Parties shall use Commercially Reasonable Efforts to conduct
their respective research activities in accordance with this Agreement, each
Project Plan and each Project Budget.

            1.2.2 Allocation of Costs. All costs associated with the
immunization of the HuMAb Mice and the raising of the Collaboration Antibodies
(as defined in Section 1.2.3(a) below) to the Collaboration Target that are in
existence as of the Effective Date and the initial development work performed by
Medarex prior to the Effective Date (the "Medarex Research Activities") shall be
borne one-hundred percent (100%) by Medarex. All other costs and expenses
incurred by the Parties with respect to the Project Plan and the Project Budget
shall be borne by PharmAthene and shall be governed by Sections 4.1.1, 4.1.2
and/or 4.1.3, as applicable. PharmAthene will fund all Collaboration Activities
contemplated under the first year Project Plan and Project Budget that are not
covered in full by a Government Award received by either Party, and PharmAthene
will be solely responsible for funding 100% of all research, development, and
commercialization activities (on a fully-burdened basis in accordance with
Section 4.1.1) not funded by a Government Award but included in any future
Project Plan and Project Budget. PharmAthene shall also be responsible for
funding 100% of all activities associated with securing and managing any
Government Contract(s) (the "PharmAthene Activities").

            1.2.3 Collaboration Antibodies.

            (a) The list of antibodies set forth on Appendix D shall be the
initial "Collaboration Antibodies". As the Parties gain greater understanding of
the Collaboration Antibodies (including the amino acid sequence of such
Collaboration Antibodies as described in Section 1.2.3(b), to the extent not
already determined) and the potential utility of Antibody Products, or in the
event that the Parties designate future Collaboration Antibodies, they shall


                                       2


update, to the extent appropriate, the description of the Collaboration
Antibodies on Appendix D to more accurately reflect the identity of the
Collaboration Antibodies.

            (b) The Parties shall determine the amino acid sequence of at least
one heavy chain variable region corresponding to a contiguous portion spanning
CDR1 through CDR3 and defining a complete antibody-heavy chain antigen binding
domain (a "Binding Sequence") for each Collaboration Antibody for which such
sequence has not been determined. Except with respect to the Lead Collaboration
Antibody (as defined below), Medarex shall have the right to delete any such
Collaboration Antibody from Appendix D, on written notice to PharmAthene within
thirty (30) days of its receipt of the correct sequence data for any such
Collaboration Antibody, if Medarex (i) is researching or developing, or has
researched or developed, either alone or in collaboration with a Third Party, or
(ii) has previously granted a Third Party rights with respect to, any Antibody
that has the same Binding Sequence as such Collaboration Antibody, whereupon
such Collaboration Antibody shall no longer be deemed a Collaboration Antibody,
and all amounts of such Collaboration Antibody (and any cell lines expressing
such Collaboration Antibody and other Biological Materials with respect to such
Collaboration Antibody) produced pursuant to this Agreement will be destroyed.

            (c) Once the amino acid sequence for a given Collaboration Antibody
has been determined as provided in Section 1.2.3(b), Medarex shall use
Commercially Reasonable Efforts to deliver to the Collaboration the Antibody
Materials with respect to such Collaboration Antibody in such form as the
Steering Committee may designate. Medarex shall have no obligation under this
Agreement to provide PharmAthene with any Mice Materials or other Biological
Materials other than the Collaboration Antibody (and Antibody Materials with
respect thereto) as provided in this Section 1.2.3.

            1.2.4 Lead Collaboration Antibody. The Parties agree that the
Collaboration Antibody listed in Appendix D under the heading Lead Collaboration
Antibody is the "Lead Collaboration Antibody" pursuant to this Agreement." It is
understood that without the written consent of PharmAthene the Steering
Committee shall not (i) select more than one Lead Collaboration Antibody, (ii)
substitute one Lead Collaboration Antibody for another, or research, develop or


                                       3


commercialize a Collaboration Antibody other than the Lead Collaboration
Antibody without the written authorization of the Steering Committee and the
written consent of PharmAthene and Medarex. With respect to the Lead
Collaboration Antibody, the Steering Committee shall solicit bids from suppliers
to perform the Production Process Development. Each Party shall have the right
to submit a bid on such terms as it desires. The Steering Committee shall use
Commercially Reasonable Efforts to enter into a development agreement with the
supplier that is best able to meet the Parties' requirements, taking into
consideration such factors as price, quality, capacity, quantity, reliability
and reputation. In the event the Steering Committee selects a Party to perform
Production Process Development pursuant to this Section 1.2.4, the price and
other terms and conditions of such Production Process Development shall be based
on arm's length negotiations with the Steering Committee

      Section 1.3 Project Plan and Project Budget. From time to time, Medarex
and PharmAthene shall jointly develop and implement a project plan (each a
"Project Plan") and project budget (each a "Project Budget") for the research,
development, manufacture and commercialization of Collaboration Products. It is
understood and agreed by the Parties that:

            1.3.1 an outline of the initial Project Plan with respect to the
Lead Collaboration Antibody is set forth on Appendix E hereto;

            1.3.2 within sixty (60) days of the Effective Date, Medarex and
PharmAthene will agree to a Project Plan and a Project Budget with respect to
the Lead Collaboration Antibody such Project Plan and Project Budget to address
activities to be performed during the first calendar year of the Collaboration;

            1.3.3 PharmAthene shall pay Two Million United States Dollars
(US$2,000,000) (the "Initial PharmAthene Contribution") to Medarex within
fifteen (15) days of the Effective Date, which amount shall be used by Medarex
solely for purposes of funding activities specified in the initial Project Plan;

            1.3.4 The components of each Project Plan and Project Budget will
evolve as the applicable Collaboration Products move through the research,
development, manufacture and commercialization life cycle, and no later than
December 15th of each calendar year, or upon such date as the Steering Committee


                                       4


otherwise determines, the Steering Committee shall agree upon an update to the
Project Plan and Project Budget which will specify in greater detail the
activities to be undertaken by the Parties during the next calendar year;

            1.3.5 the Parties agree that the Project Plan for the Lead
Collaboration Antibody will include, at a minimum, those research and
development activities described in the two grant proposals submitted by Medarex
to the National Institutes of Health/National Institute of Allergy and
Infectious Disease (NIH/NIAID) and under which the NIH/NIAID has agreed to fund
those activities as performed by Medarex pursuant to the specific activities and
milestones outlined in such proposals and the budgets submitted therewith. Such
research and development activities to be performed by Medarex under the
Government Awards are set forth in Appendix E;

            1.3.6 if the Parties disagree as to the nature and scope of any
additional activities to be included in the initial Project Plan, then the
Project Plan shall be subject to dispute resolution as set forth in Section 2.3;
provided that, at a minimum, the activities described in the two grant proposals
submitted by Medarex and funded by the NIH/NIAID shall be included in the
initial Project Plan;

            1.3.7 any changes or additions to a Project Plan that would alter
the activities that Medarex has agreed to perform under the Government Awards
awarded to Medarex prior to the Effective Date must be approved in advance by
the NIH/NIAID and if approval is not given, then the activities described in the
two grant proposals submitted by Medarex and funded by the NIH/NIAID shall be
performed and shall be Collaboration Activities;

            1.3.8 at each quarterly meeting of the Steering Committee, the
Steering Committee shall review the activities of the Parties during the
upcoming calendar quarter and shall adjust the Project Plan and Project Budget
accordingly;

            1.3.9 upon approval by the Parties of a Project Plan and a Project
Budget, subject to Sections 1.2.2 and 2.3.5, PharmAthene shall fund all
Collaboration activities agreed to in the Project Plan and Project Budget, and
neither Party will commit to a Project Plan or Project Budget without the
ability to undertake (and/or fund) its respective activities and, with respect
to PharmAthene its funding obligations, under such Project Plan or Project
Budget;


                                       5


            1.3.10 no research and development activities shall be conducted by
a Party unless such activities are included in an approved Project Plan and
Project Budget; and

            1.3.11 Unless otherwise agreed to in writing by the Parties, the
Project Plan(s) will provide that PharmAthene will be responsible for
commercialization of Collaboration Product in the United States and in any other
country of the Territory in which the Parties jointly agree to commercialize a
Collaboration Product and will be responsible for securing and managing any
Government Contract(s) for the procurement of Collaboration Products; provided
that Medarex, through the Steering Committee, shall have the right to review and
approve any such Government Contract(s). For the purposes of clarity, no
contract for the sale of Collaboration Products (including without limitation a
Government Contract) shall be entered into without the express written consent
of both Parties, and any decision as to whether or not the Parties (or one of
the Parties) shall enter into such a contract shall not be subject to the
expedited arbitration procedures set forth in Section 2.3.4. If a Party is
willing to enter into a Government Contract and the other Party does not consent
to such Government Contract, then the non-consenting Party shall become an
Opting-Out Party; provided, however, that PharmAthene, as the party responsible
for securing a contract (including without limitation a Government Contract),
shall have used best efforts to secure a contract under terms and conditions
acceptable to Medarex, such terms and conditions including, but not limited to,
terms and conditions that adequately address price, product liability,
intellectual property ownership, and indemnification. In no event shall
PharmAthene agree to enter into a contract (including without limitation a
Government Contract) that would not result in Operating Profit for the
Collaboration based upon the projected calculation of Operating Profit jointly
determined and agreed to by the Parties.

      Section 1.4 Performance Standards. Each Party shall perform, or cause to
be performed, its respective activities hereunder in good scientific manner, and
in compliance in all material respects with all Applicable Law and shall use
Commercially Reasonable Efforts to (a) research, develop, obtain and maintain
Regulatory Approval for and commercialize one or more Collaboration Products
with respect to the Lead Collaboration Antibody, and (b) achieve the objectives


                                       6


of each Project Plan in accordance with each Project Budget, in each case,
efficiently and expeditiously by allocating sufficient time, effort, equipment
and skilled personnel to complete such activities successfully and promptly.

      Section 1.5 Product Trademarks. The Parties shall develop Product
Trademarks for the Lead Collaboration Antibody that will be commercialized. Such
Product Trademarks shall not be confusingly similar to, misleading or deceptive
with respect to, or dilute any of the Trademarks owned or Controlled by either
of the Parties, or any part of such Trademarks. No Party or any of its
Affiliates or sublicensees shall commercialize the Lead Collaboration Antibody
under any Trademark other than the Product Trademarks. No Party or any of its
Affiliates or sublicensees shall use in its business any Trademark that is
confusingly similar to, misleading or deceptive with respect to, or dilutes any
of the Lead Collaboration Antibody or any other Trademarks used to identify or
distinguish the Lead Collaboration Antibody, or any part of the foregoing. The
Steering Committee shall oversee the filing, prosecution and maintenance of all
Product Trademark registrations with respect to the Lead Collaboration Antibody.
The Parties shall share equally (50%/50%) in the costs and expenses of such
filing, prosecution and maintenance. Subject to Applicable Law, the label of the
Lead Collaboration Antibody shall include, at PharmAthene's sole discretion, the
name of PharmAthene and, at Medarex's sole discretion, the name of Medarex.

      Section 1.6 Supply of Collaboration Products. With respect to clinical and
commercial supplies of the Lead Collaboration Antibody, the Steering Committee
shall solicit bids from suppliers to supply the Parties' requirements thereof.
Each Party shall have the right to submit a bid on such terms as it desires. The
Steering Committee shall use Commercially Reasonable Efforts to enter into a
supply agreement with the supplier that is best able to meet the Parties'
requirements, taking into consideration such factors as price, quality,
capacity, quantity, reliability and reputation. In the event the Steering
Committee selects a Party to produce clinical and/or commercial supplies
pursuant to this Section 1.6, a definitive agreement consistent with the terms
of the bid shall be negotiated by such Party (through individuals who are not
members of the Steering Committee) and the other Party. If the Parties fail to
execute a definitive agreement with respect to such clinical and/or commercial
supply within ninety (90) days of the selection of such bid, or such longer
period as the Steering Committee may decide, then the Steering Committee shall
commence negotiations with respect to the next most favorable bid.


                                       7


                                   ARTICLE 2 -
                         OPERATION OF THE COLLABORATION

      Section 2.1 Steering Committee.

            2.1.1 Formation of Steering Committee. The Parties shall establish a
joint committee (the "Steering Committee"), which shall oversee the research,
development and commercialization activities hereunder. Each of PharmAthene and
Medarex shall appoint an equal number of representatives with the requisite
experience and seniority to enable them to make decisions on behalf of the
Parties with respect to the Collaboration. From time to time, PharmAthene and
Medarex each may substitute any of its representatives to the Steering Committee
on written notice to the other Party.

            2.1.2 Responsibilities. The Steering Committee shall, in addition to
its other responsibilities described in this Agreement: (a) prioritize the
research, development, manufacturing and commercialization activities with
respect to Collaboration Antibodies and Collaboration Products; (b) subject to
Section 1.3, allocate responsibility for such activities between PharmAthene and
Medarex taking into consideration their relevant expertise and available
resources; (c) develop and implement a strategy for researching, developing,
manufacturing, obtaining and maintaining Regulatory Approvals for, and
commercializing, the Lead Collaboration Antibody; (d) determine whether to enter
into any agreements pursuant to Section 7.4 or otherwise that would give rise to
Third-Party Payments; (e) establish such subcommittees as deemed appropriate by
the Steering Committee; and (f) take such other actions as are set forth in this
Article 2 or as the Parties may unanimously agree. The Steering Committee may
evaluate additional technologies that may be necessary or beneficial to the
Collaboration and may recommend the acquisition or in-licensing of these
technologies to the Parties.

            2.1.3 Procedural Rules for the Steering Committee.

            Generally. Except as explicitly set forth in this Section 2.1.3, the
Steering Committee shall establish its own procedural rules for its operation.


                                       8


            Voting. The Steering Committee shall take action by unanimous
consent of PharmAthene and Medarex, with each such Party having a single vote,
irrespective of the number of representatives actually in attendance at a
meeting, or by a written resolution signed by the designated representatives of
each of PharmAthene and Medarex.

      Section 2.2 Progress Reports. Within thirty (30) days after the end of
each calendar quarter, or as otherwise required by the Steering Committee, each
Party shall provide to the other Party a written progress report, which shall
(a) describe any research, development or commercialization activities,
including any activities or communications regarding the securing of a
Government Contract, with respect to Collaboration Products and any other work
relating to the Collaboration Products that it has performed, or caused to be
performed, since the last such report, (b) evaluate the work performed in
relation to the goals of this Agreement and the applicable Project Plan, and (c)
provide such other information as may be required by this Agreement and the
applicable Project Plan or reasonably requested by the other Party relating to
such activities. In addition to the progress reports provided hereunder, it is
contemplated that the Parties will maintain informal communications through the
Steering Committee and their day-to-day activities under this Agreement.

      Section 2.3 Disputes; Dispute Resolution.

            2.3.1 Referral to Steering Committee. Any dispute that may arise
relating to the terms of this Agreement or the activities of the Parties
hereunder shall be brought to the attention of the Steering Committee, which
shall attempt in good faith to achieve a resolution. Either Party may convene a
special meeting of the Steering Committee for the purpose of resolving disputes.

            2.3.2 Referral to Chief Executive Officers of the Parties. If the
Steering Committee is unable to resolve such a dispute within twenty (20) days
of the first presentation of such dispute to the Steering Committee, and with
respect to all other disputes, such dispute shall be referred to the Chief
Executive Officers of each of the Parties (or their respective designees) who
shall use their good faith efforts to mutually agree upon the proper course of
action to resolve the dispute.


                                       9


            2.3.3 Unresolved Disputes. If any dispute is not resolved by the
Chief Executive Officers of the Parties (or their designees) within ten (10)
business days after such dispute is referred to them, or such longer period as
the Chief Executive Officers (or their respective designees) may collectively
agree, then either Party shall have the right (a) if such dispute relates to
Section 1.3 (to the extent the dispute relates to the Project Budget or the
determination of the activities to be undertaken pursuant to a Project Plan, but
not with respect to a dispute regarding (i) which Party will perform or fund any
such activities, (ii) the decision as to whether Medarex will perform the
activities described in the two grant proposals submitted by Medarex and funded
by the NIH/NIAID, or (iii) the decision to enter into a contract for sale of
Collaboration Products including without limitation a Government Contract) or
2.1.2(d), to refer such dispute to an Expert for expedited arbitration as set
forth in Section 2.3.4, or (b) with respect to any other dispute, including with
respect to a Party's interpretation of, or any allegation of breach of, this
Agreement, to litigate such dispute in accordance with Section 11.5 or to pursue
such other dispute resolution mechanism as the Parties may agree.

            2.3.4 Expedited Arbitration.

            With respect to disputes under Section 2.3.3(a) above that are not
resolved by the Chief Executive Officers of the Parties (or their designees)
pursuant to Section 2.3.2, upon written request by either Party to the other
Party, the Parties shall promptly negotiate in good faith to appoint a mutually
acceptable disinterested, conflict-free individual not affiliated with either
Party, with scientific, technical and regulatory experience with respect to the
development of Antibody-Based Products necessary to resolve such dispute (an
"Expert"). If the Parties are not able to agree within five (5) days after the
receipt by a Party of the written request in the immediately preceding sentence,
the CPR Institute for Dispute Resolution, or such other similar entity as the
Parties may agree, shall be responsible for selecting an Expert within seven (7)
days of being approached by a Party. The fees and costs of the Expert and the
CPR Institute for Dispute Resolution (or such other entity) shall be shared
equally (50%/50%) by the Parties.

            Within fifteen (15) days after the designation of the Expert, the
Parties shall each simultaneously submit to the Expert and one another a written
statement of their respective positions on such disagreement. Each Party shall


                                       10


have five (5) days from receipt of the other Party's submission to submit a
written response thereto, which shall include any scientific and technical
information in support thereof. The Expert shall have the right to meet with the
Parties, either alone or together, as necessary to make a determination.

            No later than thirty (30) days after the designation of the Expert,
the Expert shall make a determination by selecting the resolution proposed by
one of the Parties that as a whole is the most fair and reasonable to the
Parties in light of the totality of the circumstances and shall provide the
Parties with a written statement setting forth the basis of the determination in
connection therewith. The decision of the Expert shall be final and conclusive,
absent manifest error.

            2.3.5 It is expressly understood and agreed by the Parties that
without the express written permission a Party, such Party will not be required
to pay the cost and expense for the research, development or commercialization
of, or perform research and development activities with respect to, (i) a
Collaboration Product other than the Lead Collaboration Antibody or (ii) for the
Lead Collaboration Antibody other than for research and development thereof for
commercialization in the United States.

                                   ARTICLE 3 -
                                 GRANT OF RIGHTS

      Section 3.1 License Grants for Collaboration Activities.

            3.1.1 Medarex Grant. Subject to Section 3.3 and the other terms and
conditions of this Agreement, Medarex hereby grants to PharmAthene and its
Affiliates a co-exclusive (with Medarex and its Affiliates), worldwide,
royalty-free right and license, with the right to sublicense solely as provided
in Sections 3.3.5 and 3.4, under the Medarex Technology, the Collaboration
Technology and the Joint Technology, in each case to (a) perform PharmAthene's
activities under the Project Plan, and (b) jointly Exploit the Collaboration
Products in accordance with this Agreement.

            3.1.2 PharmAthene Grant. Subject to the terms and conditions of this
Agreement, PharmAthene hereby grants to Medarex and its Affiliates a
co-exclusive (with PharmAthene and its Affiliates), worldwide, royalty-free
right and license, with the right to sublicense solely as provided in Section
3.4, under the PharmAthene Technology, the Collaboration Technology and the


                                       11


Joint Technology, in each case to (a) perform Medarex's activities under the
Project Plan, and (b) jointly Exploit the Collaboration Products in accordance
with this Agreement.

      Section 3.2 Product Trademarks for Collaboration Products.

            3.2.1 Medarex Grant. Subject to the terms and conditions of this
Agreement, Medarex hereby grants to PharmAthene and its Affiliates a
co-exclusive (with Medarex and its Affiliates), worldwide, fully-paid,
royalty-free right and license, with the right to sublicense solely as provided
in Section 3.4, to use the Product Trademarks to Exploit the Collaboration
Products in accordance with this Agreement.

            3.2.2 PharmAthene Grant. Subject to the terms and conditions of this
Agreement, PharmAthene hereby grants to Medarex and its Affiliates a
co-exclusive (with PharmAthene and its Affiliates), worldwide, fully-paid,
royalty-free right and license, with the right to sublicense solely as provided
in Section 3.4, to use the Product Trademarks to Exploit the Collaboration
Products in accordance with this Agreement.

      Section 3.3 Exclusivity, Reserved Rights and Pre-Existing Grants.

            3.3.1 Antigen Exclusivity. Subject to Sections 3.3.2, 3.3.3 and
3.3.4, the Parties acknowledge and agree that no Party shall engage, directly or
indirectly, on behalf of itself or with or through any other party, in the
research, development, commercialization or other Exploitation of Antibody-Based
Products with respect to the Collaboration Target, or grant any other right or
license to do so, other than with respect to the Collaboration Products and
Unilateral Products as provided in this Agreement and any related agreements
between the Parties.

            3.3.2 Research and Commercialization Agreements. Medarex shall have
the right to (a) grant licenses and other rights to other parties, under the
Mice Related Technology for such parties to Exploit Antibody Products (but not
Collaboration Products) with respect to Antigens, including the Collaboration
Target, (b) transfer Mice Related Know-How to such parties in connection
therewith, including by providing instruction with respect to the use and
immunization of HuMAb Mice and the Additional Mice and assistance with respect
to the Mice Related Technology, (c) develop production processes for, and
manufacture, such Antibody Products, and (d) receive license fees, milestone
payments, royalties and other remuneration in connection therewith, but, in


                                       12


connection with clause (a), (b), (c) or (d) above, not to otherwise actively
participate in the clinical development or commercialization of such Antibody
Products by such parties (each agreement with respect to the foregoing, a
"Research and Commercialization Agreement").

            3.3.3 Retained Rights. Notwithstanding anything in this Agreement to
the contrary, Medarex and PharmAthene hereby retain the right to (a) enter into
collaborations or other agreements with, and to grant licenses and other rights
under the Medarex Technology and PharmAthene Technology, respectively, to Third
Parties to Exploit Antibody Products with respect to Antigens other than the
Collaboration Target, and/or (b) independently Exploit Antibody Products with
respect to Antigens other than the Collaboration Target.

            3.3.4 Existing Grants. The Parties further acknowledge and agree
that (a) pursuant to the Cross-License Agreement, Medarex has granted a
non-exclusive license under certain Medarex Patents to Exploit Antibody
Products, including Collaboration Products, with respect to Antigens, including
the Collaboration Target, in the Territory; and (b) pursuant to certain existing
agreements with Third Parties, Medarex has granted exclusive rights under the
Medarex Technology to Exploit Antibody Products with respect to Antigens other
than the Collaboration Target, which Antibody Products could be the same as
Collaboration Products.

            3.3.5 Cross-License Agreement. The Cross-License Agreement prohibits
Medarex from granting commercialization rights to the same Antibody Product,
whether by license or sublicense, under certain Medarex Technology to more than
one party in a territory. The Parties shall structure their respective
commercialization rights in each country in the Territory, in accordance with
this Section 3.3.5, so as to comply with the requirements of the Cross-License
Agreement and shall use good faith efforts to ensure that any such structure
preserves the intended economic benefits of the Collaboration to the Parties.

            So long as the Cross-License Agreement is in effect, if the Steering
Committee desires to grant a sublicense with respect to commercialization of a
Collaboration Product pursuant to Section 3.4 or Section 5.2, then the Steering
Committee shall provide Medarex with written notice thereof, which shall set


                                       13


forth in reasonable detail the terms and conditions of such sublicense, the
Medarex Technology and Collaboration Product involved, and the identity of the
proposed sublicensee. Upon receipt of such notice, Medarex shall make a good
faith determination as to whether such Medarex Technology is subject to the
sublicense restrictions contained in the Cross-License Agreement.

            To the extent that Medarex determines that such Medarex Technology
is not subject to the sublicense restrictions contained in the Cross-License
Agreement, Medarex shall so notify the Steering Committee in writing and the
Collaboration thereafter shall have the right to grant such sublicense, subject
to Section 3.4 or Section 5.2, as applicable.

            To the extent that Medarex determines that all or part of such
Medarex Technology is subject to the sublicense restrictions contained in the
Cross-License Agreement, Medarex shall so notify the Steering Committee in
writing. The Parties shall then meet to discuss in good faith how to proceed in
order to optimize the commercialization of the applicable Collaboration Product
hereunder while complying with the requirements of the Cross-License Agreement.

      Section 3.4 Sublicenses. Subject to Section 3.3.5, each Party shall have
the right to grant sublicenses under the licenses granted in Sections 3.1 and
3.2 pursuant to Section 5.2 or as set forth in a Project Plan to perform
activities under a Project Plan.

      Section 3.5 License Limitations. Each Party hereby covenants to the other
Party that neither such first Party nor any of its Affiliates, licensees or
sublicensees has received, a license to use or practice the Technology of such
other Party, directly or indirectly, on behalf of itself or any other party, for
any purpose other than as permitted under Section 3.1 and in particular, but
without limiting the generality of the foregoing, for any research, development,
commercialization or other Exploitation of an Antibody Product or any other
product or method with respect to the Collaboration Target, other than a
Collaboration Product or a Unilateral Product as provided hereunder or in the
applicable Unilateral Development and Commercialization Agreement.

      Section 3.6 No Other Rights. For the avoidance of doubt, Medarex and its
Affiliates shall have no right, express or implied, with respect to the
PharmAthene Technology and PharmAthene and its Affiliates shall have no right,
express or implied, with respect to the Medarex Technology, in each case except


                                       14


as expressly provided in Section 3.1. For the further avoidance of doubt, under
this Agreement PharmAthene and its Affiliates shall have no rights, express or
implied, in or to the Mice Materials, the Mice-Related Technology or any other
Information and Inventions or Patents or other intellectual property rights of
Medarex or its Affiliates with respect to the Mice Materials.

                                   ARTICLE 4 -
                              FINANCIAL PROVISIONS

      Section 4.1 Profit and Expense Allocation with Respect To Collaboration
Products.

            4.1.1 Research and Development and Commercialization Expenses.
Except as otherwise provided in this Agreement, and subject to Sections 1.2.2
and 2.3.5 PharmAthene shall be responsible for payment of all Authorized R&D
Expenses and Authorized Commercialization Expenses incurred by or on behalf of
the Parties in connection with their activities hereunder, other than the
Medarex Research Activities which shall be the responsibility of Medarex. In the
event that a Government Award is awarded to either Medarex and/or PharmAthene,
funds from such Government Award will be used by the Parties to fund the
Collaboration. Within thirty (30) days after the end of each calendar quarter,
each Party shall furnish the Steering Committee with a statement detailing the
research and development activities performed pursuant to the Project Plan and
the costs and expenses actually incurred in connection with such research and
development activities performed by or on behalf of such Party during such
calendar quarter. Within forty-five (45) days after the end of each calendar
quarter, PharmAthene shall make any necessary payments to Medarex to reimburse
Medarex for any Authorized R&D Expenses and any Authorized Commercialization
Expenses incurred by Medarex during such calendar quarter.

            4.1.2 Operating Profits and Operating Losses.

                  (a) Subject to paragraphs (b) through (i) below, the Parties
      shall share in the Operating Profits, on a calendar quarter-by-calendar
      quarter basis, with respect to Collaboration Products according to each
      Party's Allocation Percentage.


                                       15


                  (b) Prior to any distribution of Operating Profits to the
      Parties, out of Operating Profits, PharmAthene first will reimburse
      Medarex for the expenses incurred by Medarex with respect to the Medarex
      Research Activities prior to the Effective Date, which amount shall be
      provided to PharmAthene within ten (10) days subsequent to the Effective
      Date.

                  (c) Prior to any distribution of Operating Profits to the
      Parties and after reimbursement to Medarex pursuant to 4.1.2(b), out of
      Operating Profits, PharmAthene will retain 100% of any PharmAthene
      non-government funding of Authorized R&D Expenses in excess of the Initial
      PharmAthene Contribution.

                  (d) Any reimbursement of a Party pursuant to paragraphs (b)
      through (c) of this Section 4.1.2 shall be dollar for dollar, with no
      additional consideration (e.g. time or risk factor) included.

                  (e) With respect to each Government Contract, within sixty
      (60) days after execution of the Government Contract and prior to delivery
      of Collaboration Product under the Government Contract, the Steering
      Committee shall make a good faith estimate of (i) the Operating Profits
      for each calendar year of the Government Contract ("Estimated Yearly
      Profit") and (ii) the Operating Profits over the life of the Government
      Contract ("Estimated Total Profit"). After sale of Collaboration Product
      under a Government Contract, at each Steering Committee meeting, the
      Estimated Yearly Profit and Estimated Total Profit shall be reviewed and
      changed for the Government Contract, as required, based on actual
      experience with respect to Operating Profits under the Government Contract

                  (f) Within thirty (30) days after the end of each calendar
      quarter, the Selling Party shall provide the Non-Selling Party with a
      report detailing the calculation of the Operating Profits for each
      Government Contract.

                  (g) Within forty-five days after the end of each Calendar
      Quarter, with respect to each Government Contract, the Selling Product
      Party shall pay the Non-Selling Party its Allocation Percentage multiplied
      by Operating Profit less any payments made under paragraphs (b) - (c) for
      the applicable calendar quarter.


                                       16


                  (h) Within forty-five (45) days after the end of each year of
      a Government Contract and upon termination or expiration of a Government
      Contract, the Selling Party shall send to the Non-Selling Party a report
      as to Operating Profits with respect to Collaboration Product over the
      year or the term of the Government Contract, as the case may be, and if
      the amount of Operating Profits previously paid by the Selling Party to
      the Non-Selling Party under such Government Contract for the year or the
      term, as the case may be is less than the Non-Selling Party's Allocation
      Percentage of Operating Profits less any payments made under paragraphs
      (b) - (c) for the year or the term, as the case may be, then the Selling
      Party shall pay such deficiency to the Non-Selling Party at the time of
      such report. If the amount of Operating Profits previously paid by the
      Selling Party to the Non-Selling Party under such Government Contract for
      the year or the term, as the case may be is in excess of the Non-Selling
      Party's Allocation Percentage of Operating Profits less payments made
      under paragraphs (b) - (c) for the year or the term, as the case may be,
      then the Non-Selling party shall refund the Selling Party such amount so
      that the Selling-Party's Allocation Percentage of Operating Profits less
      payments made under paragraphs (b) - (c) is accurate for such year or the
      term within forty-five (45) days of such report.

                  (i) Within thirty (30) days after the end of each calendar
      quarter, each Party shall furnish the Steering Committee with a statement
      of the Authorized Commercialization Expenses paid by the Party for the
      calendar quarter, and within forty-five (45) days after the end of the
      calendar quarter, PharmAthene shall reimburse Medarex for Authorized
      Commercialization Expenses paid by Medarex in the calendar quarter.

            4.1.3 Other Expenses. With respect to Collaboration Expenses that
are not otherwise addressed in Section 4.1.1 or 4.1.2, each Party shall, within
thirty (30) days after the end of each calendar quarter in which such costs or
expenses are incurred, furnish the Steering Committee and the other Party with a
statement detailing such costs and expenses actually incurred by such Party
during such calendar quarter. In addition, each Party shall promptly furnish the


                                       17


Steering Committee and the other Party with such supporting documentation for
such costs and expenses as the Steering Committee or such other Party may
reasonably request. In the event that the Steering Committee does not approve
such costs and expenses within fifteen (15) days of receipt of such statement,
the party incurring such costs and expenses shall be responsible for such costs
and expenses, and such costs and expenses shall not be included in Authorized
R&D Expenses or Authorized Commercialization Expenses for purposes of
calculating Operating Profits or Operating Losses.

      Section 4.2 Payment Method. All amounts due by one Party hereunder shall
be paid in U.S. dollars by wire transfer in immediately available funds to an
account designated by the receiving Party. Any payments or portions thereof due
hereunder which are not paid on the date such payments are due under this
Agreement shall bear interest at a rate equal to the lesser of the prime rate as
published in The Wall Street Journal, Eastern Edition, on the first day of each
calendar quarter in which such payments are overdue, plus two (2) percentage
points, and the maximum rate permitted by law, calculated on the number of days
such payment is delinquent, compounded monthly.

      Section 4.3 Currency; Foreign Payments. If any currency conversion shall
be required in connection with any payment hereunder, such conversion shall be
made by using the arithmetic mean of the exchange rates for the purchase of U.S.
dollars as published in The Wall Street Journal, Eastern Edition, on the last
business day of each month in the calendar quarter to which such payments
relate. If at any time legal restrictions prevent the prompt remittance of any
Operating Profits with respect to Net Sales in any jurisdiction, the applicable
Party may notify the other and make such payments by depositing the amount
thereof in local currency in a bank account or other depository in such country
in the name of the receiving Party or its designee, and such Party shall have no
further obligations under this Agreement with respect thereto.

      Section 4.4 Taxes. A Party may deduct from any amounts it is required to
pay pursuant to this Agreement an amount equal to that withheld for or due on
account of any taxes (other than taxes imposed on or measured by net income) or
similar governmental charge imposed by a jurisdiction other than the United
States ("Withholding Taxes"). At the receiving Party's request, the paying Party


                                       18


shall provide the receiving Party a certificate evidencing payment of any
Withholding Taxes hereunder and shall reasonably assist the receiving Party, at
the receiving Party's expense, to obtain the benefit of any applicable tax
treaty.

      Section 4.5 Records Retention; Audit.

            4.5.1 Record Retention. Each Party shall maintain (and shall ensure
that its Affiliates and permitted sublicensees shall maintain) complete and
accurate books, records and accounts that fairly reflect their respective (a)
Authorized R&D Expenses, Authorized Commercialization Expenses, Other Operating
(Income)/Expenses, any costs and expenses reimbursable or shared under Article
7, and any other costs and expenses reimbursable or otherwise shared by the
Parties hereunder (collectively, the "Collaboration Expenses"), and (b) Net
Sales of Collaboration Products and Operating Profits and Operating Losses with
respect to Collaboration Products, in each case in sufficient detail to confirm
the accuracy of any payments required hereunder and in accordance with GAAP,
which books, records and accounts shall be retained by such Party until the
later of (i) three (3) years after the end of the period to which such books,
records and accounts pertain, and (ii) the expiration of the applicable tax
statute of limitations (or any extensions thereof), or for such longer period as
may be required by Applicable Law.

            4.5.2 Audit. Each Party shall have the right to have an independent
certified public accounting firm of nationally recognized standing, reasonably
acceptable to the audited Party, to have access during normal business hours,
and upon reasonable prior written notice, to such of the records of the other
Party (and its Affiliates and sublicensees) as may be reasonably necessary to
verify the accuracy of such Collaboration Expenses, Net Sales, or Operating
Profits or Operating Losses, as applicable, for any calendar quarter ending not
more than thirty-six (36) months prior to the date of such request; provided,
however, that neither Party shall have the right to conduct more than one such
audit in any twelve (12)-month period. The accounting firm shall disclose to
each Party whether such Collaboration Expenses, Net Sales, or Operating Profits
or Operating Losses, as applicable, are correct or incorrect and the specific
details concerning any discrepancies. No other information shall be provided to


                                       19


the requesting Party. The requesting Party shall bear the cost of such audit
unless the audit reveals a variance of more than five percent (5%) from the
reported results, in which case the audited Party shall bear the cost of the
audit. The results of such accounting firm shall be final, absent manifest
error.

            4.5.3 Payment of Additional Amounts. If, based on the results of
such audit, additional payments are owed by a Party under this Agreement, such
Party shall make such additional payments, with interest from the date
originally due at the rate of one and a half percent (1.5%) per month, within
sixty (60) days after the date on which such accounting firm's written report is
delivered to such Party.

            4.5.4 Confidentiality. The auditing Party shall treat all
information subject to review under this Section 4.5 in accordance with the
confidentiality provisions of Article 6 and shall cause its accounting firm to
enter into a reasonably acceptable confidentiality agreement with the audited
Party obligating such firm to maintain all such financial information in
confidence pursuant to such confidentiality agreement.

                                   ARTICLE 5 -
          UNILATERAL AND THIRD PARTY DEVELOPMENT AND COMMERCIALIZATION

      Section 5.1 Unilateral Development and Commercialization.

            5.1.1 Opting-Out by a Party. Each Party (i.e., Medarex, on the one
hand, and PharmAthene, on the other hand) (the "Opting-Out Party") shall have
the right, on ninety (90) days' written notice to the other (an "Opt-Out
Notice"), to elect not to proceed with the research, development and
commercialization ("Opt-Out") of all Collaboration Products at any time,
provided that, in the case of PharmAthene, PharmAthene shall be responsible for
all budgeted costs and expenses associated with any Collaboration Activities,
including research and development activities, with respect to the Collaboration
Product(s) that have been committed to in the applicable Project Budget as
necessary to complete that phase of the Project Plan (e.g., establishment of
Master Cell bank, toxicology studies in support of an IND or phase I, phase II
or phase III studies) that were under way when PharmAthene Opted-Out. By way of
clarification, if a Party Opts-Out of a Collaboration Product, such Party will
be deemed to have Opted-Out with respect to all Antibody Products with respect
to the Collaboration Target.


                                       20


            5.1.2 Rights and Obligations of Parties with Respect To Unilateral
Products.

            (a) Unilateral Development and Commercialization. Upon receipt by a
Party of an Opt-Out Notice, the receiving Party shall have the right, on written
notice to the Opting-Out Party within thirty (30) days following receipt of the
Opt-Out Notice (an "Election Notice"), to proceed unilaterally with the
research, development and commercialization of all Collaboration Antibodies and
Collaboration Products (each such antibody and product, a "Discontinued
Product") pursuant to the separate agreement with the Opting-Out Party attached
hereto as Appendix F-1 or Appendix F-2, as applicable (each, a "Unilateral
Development and Commercialization Agreement"). Upon receipt by Medarex of an
Election Notice from PharmAthene, the Unilateral Development and
Commercialization Agreement set forth in Appendix F-1 shall be automatically
amended to include the Collaboration Target and any Discontinued Products with
respect thereto. Upon receipt by PharmAthene of an Election Notice from Medarex
with respect to the Collaboration Target, the Unilateral Development and
Commercialization Agreement set forth in Appendix F-2 shall be automatically
amended to include the Collaboration Target as a Unilateral Target and any
Discontinued Products with respect thereto. Upon such amendment of a Unilateral
Development and Commercialization Agreement pursuant to this Section 5.1.2, the
Collaboration Target shall cease to be a Collaboration Target and Appendix C
shall be amended accordingly, all Antibodies and all Antibody Products with
respect to the Collaboration Target shall cease to be Collaboration Antibodies
or Collaboration Products, as applicable, and any licenses granted pursuant to
Article 3, with respect to such Antigen and any Antibodies and Antibody Products
with respect thereto, shall terminate. The Parties shall work together to ensure
a smooth and orderly transition of the Discontinued Products to the
non-Opting-Out Party (the "Pursuing Party"), including the assignment of any
contracts and transfer of Biological Materials (but not Mice Materials) with
respect to the Exploitation of such Discontinued Products to the Pursuing Party,
and the assumption by the Pursuing Party of any obligations thereunder. Except
for the obligations provided for in Section 5.1.1, the Opting-Out Party shall
have (i) no further financial obligation to support or otherwise fund any
additional efforts in respect of such Discontinued Products, and (ii) no


                                       21


obligation, responsibility, or authority regarding such additional efforts in
respect of such Discontinued Products. In the event that neither Party elects to
proceed with the research, development or commercialization of any Collaboration
Product, the rights and obligations of the Parties with respect to the
Collaboration Target shall be governed by Sections 5.2 and 5.3.

            (b) Opt-Out of Unilateral Products.

                  (i) If, at any time, the Pursuing Party elects to Opt-Out of
all Unilateral Products with respect to a Unilateral Target (each as defined in
the applicable Unilateral Development and Commercialization Agreement) pursuant
to such Unilateral Development and Commercialization Agreement and the other
Party does not elect to proceed unilaterally with the research, development and
commercialization of such Unilateral Products, such Unilateral Target shall
become a Collaboration Target (and Appendix C shall be amended accordingly) and
all such Unilateral Products shall become Dormant Products pursuant to Section
5.3 and the Pursuing Party shall, without any additional consideration, assign
the Opting-Out Party's Allocation Percentage of its right, title and interest in
and to: any Unilateral Products in addition to the Discontinued Products, and
any Improvements thereto, developed by or on behalf of the Pursuing Party under
the applicable Unilateral Development and Commercialization Agreement; any
Product Trademarks and other Trademarks developed by the Pursuing Party for such
Unilateral Products; and any Regulatory Documentation with respect to such
Unilateral Products created by or on behalf of the Pursuing Party under the
applicable Unilateral Development and Commercialization Agreement (but excluding
any Regulatory Documentation comprising Production Process Technology, including
drug master files), to the other Party. If the Parties elect to proceed jointly
with the research, development and commercialization of such Dormant Product as
a Collaboration Product pursuant to Section 5.3 or to jointly sublicense such
Dormant Product to a Third Party pursuant to Section 5.2 (whereupon such Dormant
Product shall become a Collaboration Product), all milestone payments that were
paid by the Pursuing Party to the Opting-Out Party with respect to such Dormant
Product under the applicable Unilateral Development and Commercialization
Agreement shall be refunded by the Opting-Out Party.


                                       22


            5.1.3 Return of Information and Materials. Upon the receipt by a
Party of an Election Notice with respect to the Collaboration Target or the
Unilateral Target, as applicable, such Party, at the request of the Pursuing
Party, shall return, or at the election of the Pursuing Party, destroy, and
thereafter provide the Pursuing Party written certification evidencing such
destruction, any or all Biological Materials (including Antibodies and Antibody
Materials), Collaboration Technology, Technology and other Confidential
Information of the Pursuing Party in such Party's possession or control relating
to Discontinued Products or Unilateral Products, as applicable, in each case, to
which such Party does not retain rights hereunder (except one copy of which
(other than Biological Materials) may be retained solely for archival purposes).

      Section 5.2 Third-Party Development and Commercialization of Collaboration
Products. If the Parties do not elect to proceed with the development and
commercialization of a Collaboration Product in one or more countries in the
Territory, the Parties shall have the right, at any time, to jointly license
such rights to Third Parties in one or more such countries on such terms and
conditions as the Parties may mutually agree; provided that (a) any such
sublicense with respect to the Medarex Technology shall be governed by the
procedures set forth in Sections 3.3.5 and 3.4 and any such sublicense with
respect to any other Technology of a Party (which for purposes of this Section
5.2 shall be deemed to include the Collaboration Technology and Joint
Technology) shall be governed by the procedures set forth in Section 3.4; and
(b) if there is any dispute between the Parties as to whether or not to grant
such a license, no such license shall be granted and such dispute shall not be
subject to litigation or any other Third Party dispute resolution mechanism.

      Section 5.3 Dormant Products. If the Parties do not elect to proceed with
the development and commercialization of a particular Collaboration Product, and
the Parties have not licensed rights to such Collaboration Product to a Third
Party pursuant to Section 5.2 that would be inconsistent therewith, (each such
Collaboration Product may also be referred to as a "Dormant Product") either
Party shall have the right at any time, subject to Section 3.3, to bring such
Dormant Product to the Steering Committee to discuss whether to initiate or
reinitiate the research, development or commercialization of such Dormant
Product. The initiating Party shall specify the reasons for proposing to


                                       23


initiate or reinitiate such research, development or commercialization. If,
within thirty (30) days after the receipt of such notice, the other Party fails
to notify the interested Party in writing that it wishes to participate in the
research, development or commercialization of such Dormant Product, then the
interested Party shall have the right to pursue research, development or
commercialization of such Dormant Product under a Unilateral Development and
Commercialization Agreement pursuant to Section 5.1, provided that no
Collaboration Product or Unilateral Product as such Dormant Product is being
Exploited under this Agreement or by the other Party under a Unilateral
Development and Commercialization Agreement.

                                   ARTICLE 6 -
                                 CONFIDENTIALITY

      Section 6.1 Definition. "Confidential Information" of a Party shall mean
all information and know-how and any tangible embodiments thereof provided by or
on behalf of such Party to the other Party either in connection with the
discussions and negotiations pertaining to, or in the course of performing, this
Agreement or the Unilateral Development and Commercialization Agreements,
including the terms of this Agreement and the Unilateral Development and
Commercialization Agreements; data; knowledge; practices; processes; ideas;
research plans; engineering designs and drawings; research data; manufacturing
processes and techniques; scientific, manufacturing, marketing and business
plans; and financial and personnel matters relating to the disclosing Party or
to its present or future products, sales, suppliers, customers, employees,
investors or business. For purposes of this Agreement and the Unilateral
development and Commercialization Agreements, notwithstanding the Party that
disclosed such information or know-how, (a) all PharmAthene Know-How shall be
Confidential Information of PharmAthene, (b) all Medarex Know-How, including all
Mice-Related Know-How, shall be Confidential Information of Medarex and (c) all
Collaboration Know-How and Joint Know-How shall, with respect to Medarex, be
Confidential Information of PharmAthene and, with respect to PharmAthene, shall
be Confidential Information of Medarex.


                                       24


      Section 6.2 Exclusions. Notwithstanding the foregoing, information or
know-how of a Party shall not be deemed Confidential Information with respect to
a receiving Party for purposes of this Agreement if such information or
know-how:

            (a) was already known to the receiving Party or its Affiliates,
other than under an obligation of confidentiality or non-use, at the time of
disclosure to, such receiving Party or with respect to Collaboration Know-How
prior to discovery or development thereof;

            (b) was part of the public domain, at the time of its disclosure to,
such receiving Party or with respect to Collaboration Know-How prior to
discovery or development thereof;

            (c) became part of the public domain, after its disclosure to, such
receiving Party through no fault of a Party other than the Party that Controls
such information and know-how or with respect to Collaboration Know-How prior to
discovery or development thereof;

            (d) was disclosed to such receiving Party or its Affiliates, other
than under an obligation of confidentiality or non-use, by a Third Party who had
no obligation to the Party that Controls such information and know-how not to
disclose such information or know-how to others; or

            (e) was independently discovered or developed by such receiving
Party or its Affiliates, as evidenced by their written records, without the use
of Confidential Information belonging to the Party that Controls such
information and know-how.

Specific aspects or details of Confidential Information shall not be deemed to
be within the public domain or in the possession of a Party merely because the
Confidential Information is embraced by more general information in the public
domain or in the possession of such Party. Further, any combination of
Confidential Information shall not be considered in the public domain or in the
possession of a Party merely because individual elements of such Confidential
Information are in the public domain or in the possession of such Party unless
the combination and its principles are in the public domain or in the possession
of such Party.


                                       25


      Section 6.3 Disclosure and Use Restriction.

            6.3.1 General. Except as expressly provided herein, the Parties
agree that, for the Term and for five (5) years thereafter, each Party and its
Affiliates and sublicensees shall keep completely confidential and shall not
publish or otherwise disclose and shall not use for any purpose except for the
purposes contemplated by this Agreement any Confidential Information of the
other Party, its Affiliates or sublicensees.

      Section 6.4 Authorized Disclosure. Subject to Section 6.3.2, each Party
may disclose Confidential Information of the other Party to the extent that such
disclosure is:

            6.4.1 Required by Governmental Order. Made in response to a valid
order of a court of competent jurisdiction or other supra-national, federal,
national, regional, state, provincial or local governmental or regulatory body
of competent jurisdiction; provided, however, that such Party shall first have
given notice to such other Party and given such other Party a reasonable
opportunity to quash such order or to obtain a protective order requiring that
the Confidential Information and documents that are the subject of such order be
held in confidence by such court or agency or, if disclosed, be used only for
the purposes for which the order was issued; and provided further that if a
disclosure order is not quashed or a protective order is not obtained, the
Confidential Information disclosed in response to such court or governmental
order shall be limited to that information which is legally required to be
disclosed in response to such court or governmental order;

            6.4.2 Required by Law. Otherwise required by law; provided, however,
that the disclosing Party shall (a) provide the other Party with reasonable
advance notice of and an opportunity to comment on any such required disclosure,
(b) if requested by such other Party, seek confidential treatment with respect
to any such disclosure to the extent available, and (c) use good faith efforts
to incorporate the comments of such other Party in any such disclosure or
request for confidential treatment;

            6.4.3 Required by Regulatory Authority. Made by such Party to the
Regulatory Authorities as required in connection with any filing, application or
request for Regulatory Approval for a Collaboration Product or a Unilateral
Product; provided, however, that reasonable measures shall be taken to assure
confidential treatment of such information;


                                       26


            6.4.4 Required by Agreement. Made by such Party, in connection with
the performance of this Agreement, to Affiliates, permitted sublicensees,
research parties, employees, consultants, representatives or agents, assignees,
manufacturers, and contractors, each of whom prior to disclosure must be bound
by obligations of confidentiality and non-use at least equivalent in scope to
those set forth in this Article 6; or

            6.4.5 Required by Certain Third Parties. Made by such Party to
existing or potential acquirers or merger candidates; existing or potential
pharmaceutical collaborators (to the extent contemplated hereunder); investment
bankers; existing or potential investors, venture capital firms or other
financial institutions or investors for purposes of obtaining financing; or
Affiliates, each of whom prior to disclosure must be bound by obligations of
confidentiality and non-use at least equivalent in scope to those set forth in
this Article 6. Notwithstanding this Section 6.4.5, PharmAthene shall not
disclose any item of Medarex's Confidential Information to any existing or
potential acquirer, merger partner or collaborator that is substantially
involved in the Exploitation of Antibodies or Antibody Products without first
providing Medarex with reasonable advance written notice of each such
disclosure. This Agreement may be disclosed by a Party to investment bankers,
financial institutions, venture capital firms, and potential investors in
connection with a loan, merger or financing or a proposed loan, merger or
financing without an obligation of confidentiality in the event that after
reasonable efforts such Party can not obtain a confidentiality agreement. This
Agreement may be disclosed where required by applicable rule, law or regulation.

            Section 6.5 Use of Name. Each Party may use the name, insignia,
symbol, trademark, trade name or logotype of the other Party only (a) in
connection with announcements and other permitted disclosures relating to this
Agreement and the activities contemplated hereby, (b) as required by Applicable
Law, and (c) otherwise as agreed in writing by such other Party.

            Section 6.6 Press Releases. Press releases or other similar public
communication by either Party relating to this Agreement, shall be approved in
advance by the other Party, which approval shall not be unreasonably withheld or


                                       27


delayed, except for those communications required by Applicable Law (which shall
be provided to the other Party as soon as practicable after the release or
communication thereof), disclosures of information for which consent has
previously been obtained, and information of a similar nature to that which has
been previously disclosed publicly with respect to this Agreement, each of which
shall not require advance approval.

      Section 6.7 Publications. The Parties acknowledge that scientific
lead-time is a key element of the value of the research and development
activities under the Collaboration and further agree that scientific
publications must be strictly monitored to prevent any adverse effect from
premature publication of results of the research or development activities
hereunder. At least sixty (60) days prior to submission of any material related
to the research or development activities hereunder for publication or
presentation, the submitting Party shall provide to the other Party a draft of
such material for its review and comment. The receiving Party shall provide any
comments to the submitting Party within sixty (60) days of receipt of such
materials. No publication or presentation with respect to the research or
development activities hereunder shall be made unless and until the other
Party's comments on the proposed publication or presentation have been addressed
and changes have been agreed upon and any information determined by the other
Party to be Confidential Information has been removed. If requested in writing
by the other Party, the submitting Party shall withhold material from submission
for publication or presentation for an additional sixty (60) days to allow for
the filing of a patent application or the taking of such measures to establish
and preserve proprietary rights in the information in the material being
submitted for publication or presentation.

                                   ARTICLE 7 -
                              INTELLECTUAL PROPERTY

      Section 7.1 Intellectual Property Ownership.

            7.1.1 Ownership of Medarex Technology. Subject to the license grants
to PharmAthene under Article 3, as between the Parties, Medarex shall own and
retain all right, title and interest in and to any and all: (a) Antibody
Materials and Information and Inventions with respect thereto that are owned by
Medarex as of the Effective Date or generated by Medarex pursuant to the


                                       28


Collaboration; (b) Collaboration Antibodies and Information and Inventions with
respect thereto in existence as of the Effective Date; (c) Information and
Inventions that are conceived, discovered, developed or otherwise made, by or on
behalf of Medarex (or its Affiliates or its licensees or sublicensees (other
than PharmAthene and its Affiliates)), whether or not patented or patentable,
and any and all Patent and other intellectual property rights with respect
thereto, except to the extent that any such Information and Inventions, or any
Patent or other intellectual property rights with respect thereto, are
Collaboration Technology; (d) other Information and Inventions, and Patent and
other intellectual property rights that are Controlled (other than pursuant to
the license grants set forth in Article 3) by Medarex, its Affiliates or its
licensees or sublicensees (other than PharmAthene and its Affiliates); and (e)
other Medarex Technology.

            7.1.2 Ownership of PharmAthene Technology. Subject to the license
grants to Medarex under Article 3, as between the Parties, PharmAthene shall own
and retain all right, title and interest in and to any and all: (a) Information
and Inventions that are conceived, discovered, developed or otherwise made, by
or on behalf of PharmAthene (or its Affiliates or its licensees or sublicensees
(other than Medarex and its Affiliates)), whether or not patented or patentable,
and any and all Patent and other intellectual property rights with respect
thereto, except to the extent that any such Information and Inventions, or any
Patent or other intellectual property rights with respect thereto, are
Collaboration Technology; (b) other Information and Inventions, and Patent and
other intellectual property rights that are Controlled (other than pursuant to
the license grants set forth in Article 3) by PharmAthene, its Affiliates or its
licensees or sublicensees (other than Medarex and its Affiliates); and (c) other
PharmAthene Technology.

            7.1.3 Ownership of Mice-Related Technology. Medarex shall own and
retain all right, title and interest in and to all Mice Materials and
Mice-Related Technology, including any and all Information and Inventions with
respect to the Mice Materials or the Mice-Related Technology (including any
Improvements thereto) that are conceived, discovered, developed or otherwise
made, by or on behalf of Medarex, its Affiliates or its licensees or
sublicensees (other than PharmAthene and its Affiliates), whether or not


                                       29


patented or patentable, and any and all Patent and other intellectual property
rights with respect thereto. PharmAthene is not granted any rights, express or
implied, under this Agreement with respect to any Mice-Related Technology or
Mice Materials and nothing in this Agreement is intended to or shall be
interpreted as granting PharmAthene any license to such Mice-Related Technology
or Mice Materials whether subordinate or dominant to any other Technology (which
for purposes of this Section 7.1.3 shall be deemed to include Collaboration
Technology and Joint Technology) pursuant to this Agreement.

            7.1.4 Ownership of Production Process Technology. Subject to the
licenses granted under this Agreement, each Party shall own and retain all
right, title and interest in and to such Party's Production Process Technology,
including any and all Information and Inventions with respect to such Production
Process Technology (including any Improvements thereto) that are conceived,
discovered, developed or otherwise made, by or on behalf of such Party, its
Affiliates or, to the extent permitted, its sublicensees, whether or not
patented or patentable, and any and all Patent and other intellectual property
rights with respect thereto. Except as set forth in this Section 7.1.4, or as
the Parties may otherwise expressly agree ,including by separate written
agreement pursuant to Section 1.2.4 or Section 1.6, neither Party shall have any
rights, express or implied, under this Agreement with respect to any Production
Process Technology of the other Party and nothing in this Agreement is intended
to or shall be interpreted as granting a Party any license to such Production
Process Technology, whether subordinate or dominant to any other Technology
(which for purposes of this Section 7.1.4 shall be deemed to include
Collaboration Technology and Joint Technology). Notwithstanding the foregoing,
the Parties acknowledge and agree that (i) certain Production Process Technology
of Medarex has been used and may be used with respect to the development and the
manufacture of the Lead Collaboration Antibody; (ii) in the event that either or
both of the Parties enter into a written agreement with a Third Party pursuant
to Section 1.6 with respect to the manufacture and supply of Collaboration
Products, or pursuant to a Party's development and/or commercialization of a
Unilateral Product pursuant to Section 5.1 and a Unilateral Development and
Commercialization Agreement, each of the Parties covenants that it will provide
such Third Party with a Party's Production Process Technology used by the


                                       30


Collaboration prior to entering into said Third Party written agreement pursuant
to Section 1.6 or used by the Collaboration prior to the Opting-Out of one Party
and the continuation of the Non-Opting-Out Party under a Unilateral Development
and Commercialization Agreement pursuant to Section 5.1, that is necessary or
reasonably useful with respect to the development and commercialization of such
Collaboration Product or Unilateral Product, as the case may be, and will grant
the Third Party or the Pursuing Party the right and license, without the right
to sublicense, to use such Party's Production Process Technology solely for such
manufacture and supply of such Collaboration Product or Unilateral Product, in
each case without compensation from the Third Party and without any cost or
expense to the other Party other than as otherwise set forth in this Agreement.
The provision of the Production Process Technology and the license thereto shall
be under a separate written agreement that reasonably protects the
confidentiality and unauthorized use of the providing Party's Production Process
Technology and that reasonably protects the intellectual property rights of the
providing Party in and to its Production Process Technology.

            7.1.5 Ownership of Collaboration Technology. Subject to Sections
7.1.3 and 7.1.4 and the license grants under Article 3, the Parties shall each
own an equal, undivided interest in any Collaboration Technology; provided,
however, that, except as otherwise expressly provided in this Agreement or the
Unilateral Development and Commercialization Agreements, neither a Party nor any
of its Affiliates, licensees or sublicensees shall, directly or indirectly,
Exploit any Collaboration Technology, or any intellectual property rights with
respect thereto, without the consent of the other Party, not to be unreasonably
withheld or delayed, except that each Party shall have the right to Exploit such
Collaboration Technology for research and discovery purposes (as opposed to the
development, commercialization or other Exploitation of products or technology
resulting therefrom), and to license others to do so, without the consent of the
other Party; provided, however, that, except as expressly provided in the
Unilateral Development and Commercialization Agreements attached hereto, neither
Party shall have the right to use or otherwise Exploit outside the Collaboration
(a) any Collaboration Antibodies, Collaboration Products or Antibody Materials
with respect thereto produced under this Agreement; or (b) any Collaboration


                                       31


Technology for the Exploitation of products with respect to the Collaboration
Target. Each Party shall promptly disclose to the other Party in writing, and
shall cause its Affiliates, licensees and sublicensees to so disclose, the
development, making, conception or reduction to practice of any Collaboration
Technology, and shall, and does hereby, assign, and shall cause its Affiliates,
licensees and sublicensees to so assign, to the other Party, without additional
compensation, such right, title and interest in and to any Collaboration
Technology as well as any intellectual property rights with respect thereto, as
is necessary to fully effect the joint ownership provided for in the foregoing
sentence.

            7.1.6 Ownership of Product Trademarks. Subject to the license grants
in Article 3, the Parties shall each own an equal, undivided interest in each
Product Trademark with respect to a Collaboration Product. In the event that a
Party Opts-Out with respect to a Collaboration Product or Unilateral Product, it
shall, without any additional consideration, assign all of its right, title and
interest in and to any Product Trademark with respect to such Collaboration
Product to the Pursuing Party; provided, however, that each Party shall retain
all of its right, title and interest in and to any Product Trademarks with
respect to Dormant Products.

            7.1.7 Ownership of Regulatory Approvals.

            Subject to the license grants in Article 3, each Regulatory Approval
and any Regulatory Documentation with respect to a Collaboration Product shall
be owned by Medarex, unless otherwise agreed by the Steering Committee.
Notwithstanding the Party that owns a Regulatory Approval with respect to a
Collaboration Product, the Parties shall cooperate in obtaining, maintaining and
satisfying their obligations under such Regulatory Approval, including by
promptly exchanging information, such as adverse event data, so as to enable the
owner to make reports to, and respond to requests of, the Regulatory Authorities
and perform its other obligations under such Regulatory Approval.

            In the event that a Party Opts-Out with respect to a Collaboration
Product and the non-Opting Out Party elects to proceed unilaterally with the
research, development and commercialization of such Collaboration Product, the
Opting-Out Party shall assign all of its right, title and interest in and to all
Regulatory Approvals for such Collaboration Product, including any applications
therefor, to the Pursuing Party (or its designee).


                                       32


            Notwithstanding the ownership of any Regulatory Approval, neither a
Party nor any of its Affiliates, licensees or sublicensees shall, directly or
indirectly, use or reference any Regulatory Approval with respect to a
Collaboration Product without the consent of the other Party, not to be
unreasonably withheld or delayed; provided, however, that each Party shall have
the right to use and reference any Regulatory Approval with respect to a
Collaboration Product or a Unilateral Product in connection with the
Exploitation of Collaboration Products as provided in this Agreement or
Unilateral Products or other Antibody-Based Products as provided in any
Unilateral Development and Commercialization Agreement. Notwithstanding the
foregoing, any Regulatory Approval containing Production Process Know-How of a
Party or, with respect to Medarex, the Mice-Related Know-How shall be and remain
the sole and exclusive property of such Party and such Party shall have the
right to submit any such Production Process Know-How or, with respect to
Medarex, the Mice-Related Know-How, directly to the Regulatory Authorities using
a drug master file, or any foreign equivalent that is designed to protect such
Party's Confidential Information, which filing shall be and remain the sole and
exclusive property of such Party.

            7.1.8 United States Law. The determination of whether Information
and Inventions are conceived, discovered, developed or otherwise made by a Party
for the purpose of allocating proprietary rights (including Patent, copyright or
other intellectual property rights) therein, shall, for purposes of this
Agreement, be made in accordance with applicable United States law.

      Section 7.2 Prosecution of Patents and Trademarks.

            7.2.1 Medarex Rights. As between the Parties, Medarex shall, subject
to Section 7.2.5, have the sole right, at its cost and expense, to obtain,
prosecute and maintain throughout the world the Medarex Patents, the
Mice-Related Patents and its Production Process Patents.

            7.2.2 PharmAthene Rights. As between the Parties, PharmAthene shall,
subject to Section 7.2.5, have the sole right, at its cost and expense, to
obtain, prosecute and maintain throughout the world the PharmAthene Patents,
including its Production Process Patents.


                                       33


            7.2.3 Collaboration Technology and Product Trademarks. The Steering
Committee shall formulate a strategy for the filing, prosecution and maintenance
of Collaboration Patents and Product Trademark registrations. The Steering
Committee shall establish a process under which each Party shall have a
reasonable opportunity to review and comment upon drafts of each new application
for a Collaboration Patent or Product Trademark registration and all substantive
correspondence to or from any patent or trademark authority with respect
thereto, prior to the filing of such application or correspondence. Subject to
Section 7.2.6, the Parties shall share equally in the expenses associated with
the filing, prosecution (including any interferences, reissue proceedings and
reexaminations) and maintenance of all Collaboration Patents and Product
Trademark registrations.

            7.2.4 Cooperation. Subject to Section 7.2.6, each Party shall, and
shall cause its Affiliates, licensees and sublicensees, as applicable, to,
cooperate fully in the preparation, filing, prosecution and maintenance of the
Product Trademark registrations, Collaboration Patents and, if requested by the
other Party, such other Party's Patents, provided that such other Party shall
reimburse the cooperating Party for its reasonable out-of-pocket expenses
incurred in connection with such requested cooperation. Such cooperation
includes (a) selecting outside counsel, reasonably acceptable to the Parties, to
handle such filing, prosecution and maintenance of the Collaboration Patents and
the Product Trademark registrations; (b) promptly executing all papers and
instruments and requiring employees to execute such papers and instruments as
reasonable and appropriate so as to enable such other Party or the Steering
Committee, as applicable, to file, prosecute, and maintain its Patents or the
Collaboration Patents and Product Trademark registrations in any country; and
(c) promptly informing such other Party of matters that may affect the
preparation, filing, prosecution, or maintenance of any such Patents or Product
Trademark registrations.

            7.2.5 Patent Filings. PharmAthene covenants not to, and to cause its
Affiliates, licensees and sublicensees, as applicable, not to, file any patent
application disclosing or claiming any Information and Inventions comprising any


                                       34


Medarex Technology or the Exploitation thereof, without Medarex's prior written
consent, which consent shall not be unreasonably withheld or delayed with
respect to the Medarex Technology. Medarex covenants not to, and to cause its
Affiliates, licensees and sublicensees, as applicable, not to, file any patent
application disclosing or claiming any Information and Inventions comprising any
PharmAthene Technology or the Exploitation thereof, without PharmAthene's prior
written consent, which consent shall not be unreasonably withheld or delayed
with respect to the PharmAthene Technology.

            7.2.6 Election Not to Prosecute. If a Party elects not (a) to pursue
the filing, prosecution or maintenance of a Collaboration Patent in a particular
country, (b) to pursue the registration, prosecution or maintenance of a Product
Trademark in a particular country, or (c) to take any other action with respect
to Collaboration Technology or a Product Trademark in a particular country that
is necessary or reasonably useful to establish or preserve rights thereto, then
in each such case such Party shall so notify the other Party promptly in writing
and in good time to enable such other Party to meet any deadlines by which an
action must be taken to establish or preserve any such rights in such
Collaboration Technology or Product Trademark, as applicable, in such country.
Upon receipt of each such notice by such other Party or if, at any time, such
Party fails to initiate any such action within thirty (30) days after a request
by such other Party that it do so (or thereafter diligently pursue such action),
such other Party shall have the right, but not the obligation, to pursue the
filing or registration, or support the continued prosecution or maintenance, of
such Patent or Product Trademark, as applicable, at its expense in such country.
If such other Party elects to pursue such filing or registration, as the case
may be, or continue such support, then such other Party shall notify such Party
of such election and such Party shall, and shall cause its Affiliates, licensees
and sublicensees, as applicable, to, (x) reasonably cooperate with such other
Party in this regard, and (y) subject to Article 3, promptly release or assign
to such other Party, without compensation, all right, title and interest in and
to such Collaboration Patent or Product Trademark, as applicable, in such
country.

      Section 7.3 Enforcement of Patents and Trademarks.

            7.3.1 Rights and Procedures. If Medarex or PharmAthene determines
that any Technology (which for purposes of this Section 7.3.1 shall be deemed to


                                       35


include the Collaboration Technology) or Product Trademark is being infringed by
a Third Party's activities with respect to an Antibody-Based Product against the
Collaboration Target and, (an "Infringing Activity"), it shall promptly notify
the other Party in writing and provide such other Party with any evidence of
such infringement that is reasonably available. Promptly after the receipt of
such written notice, the Parties shall meet and discuss in good faith the
removal of such infringement. The pursuing Party shall consider in good faith
any comments from the other Party and shall keep the other Party reasonably
informed of any steps taken to remove such infringement.

            7.3.2 Collaboration Technology and Product Trademarks. With respect
to Collaboration Technology and Product Trademarks and an Infringing Activity,
the Steering Committee shall have the first right, through one or both of the
Parties, to remove such infringement using commercially appropriate steps,
including the filing of an infringement suit or taking other similar action.
Each Party shall be responsible for half of the reasonable and verifiable costs
and expenses incurred in connection with such action.

            In the event the Steering Committee fails to take commercially
appropriate steps to remove any infringement of any such Collaboration
Technology or Product Trademark or an Infringing Activity within ninety (90)
days following notice of such infringement, or earlier notifies the Parties in
writing of its intent not to take such steps, and (i) such failure to act is due
to the refusal of one Party's representatives on the Steering Committee to
authorize action over the objection of the other Party's representatives, then
the Party whose representatives wish to proceed shall have the right to do so at
its expense and retain any amounts recovered thereby, or (ii) such failure to
act is due to any reason other than as set forth in clause (i) above, then
either Party or both Parties shall have the right to proceed at its expense and
retain any amounts recovered thereby; provided, however, that if the Steering
Committee has commenced negotiations with an alleged infringer for
discontinuance of such Infringing Activity within such ninety (90)-day period,
the Steering Committee shall have an additional ninety (90) days to conclude its
negotiations before a Party unilaterally may bring suit for such infringement.
Any amounts recovered by a Party pursuant to this Section 7.3.2 as a result of
an action authorized by the Steering Committee, whether by settlement or
judgment, shall be used to reimburse the Parties for their reasonable costs and


                                       36


expenses in making such recovery (which amounts shall be allocated pro rata if
insufficient to cover the totality of such expenses), with any remainder being
equally shared by the Parties

            7.3.3 Other Technology. With respect to Technology of a Party, the
owner of such Technology at its cost and expense shall have the sole right, but
not the obligation, to remove an infringement that is not an Infringing
Activity, and to retain any amounts recovered thereby.

            7.3.4 Cooperation. The Party not enforcing the applicable Technology
(which for purposes of this Section 7.3.4 shall be deemed to include the
Collaboration Technology) or Product Trademark shall provide reasonable
assistance to the other Party, including providing access to relevant documents
and other evidence, making its employees available at reasonable business hours,
and joining the action to the extent necessary to allow the enforcing Party to
maintain the action.

            7.3.5 Invalidity or Unenforceability Defenses or Actions.

            (a) If a Third Party asserts, as a defense or as a counterclaim in
any infringement action under Section 7.3.2 (a) authorized by the Steering
Committee, that any Technology, Collaboration Technology, Product Trademark, or
Production Process Technology is invalid or unenforceable (or, with respect to
Product Trademarks, is confusing, deceptive or dilutes one or more of such Third
Party's Trademarks), then the Parties shall promptly meet to discuss the
response to such defense or defense of such counterclaim or action (as
applicable) and shall cooperate with one another in such response or defense.
The Party or Parties that are the plaintiffs in the underlying suit or action
against such Third Party shall have the initial right to respond to such defense
or defend against such counterclaim (as applicable), provided that such response
or defense shall be conducted under the supervision, and at the direction, of
the Steering Committee as provided in Section 7.3.2 and, to the extent that the
other Party's intellectual property rights are the subject of such invalidity or
unenforceability defense or counterclaim, the Party plaintiff shall involve such
other Party in all decisions as to such response or defense, and in any event
such Party plaintiff shall not settle or otherwise compromise such defense or
counterclaim in any way that adversely affects such other Party's intellectual
property rights or its interest therein without such other Party's written
consent, not to be unreasonably withheld or delayed.


                                       37


            (b) If a Third Party asserts, in a declaratory judgment action or
similar action or claim filed by such Third Party based upon actions or
activities of a Party under this Agreement or a Unilateral Development and
Commercialization Agreement, that any Technology, Collaboration Technology,
Product Trademark, or Production Process Technology is invalid or unenforceable
(or, with respect to Product Trademarks, is confusing, deceptive or dilutes one
or more of such Third Party's Trademarks), then the Parties shall promptly meet
to discuss the defense of such action or claim and shall cooperate with one
another in such defense. The Party that is the defendant in such claim, suit or
action shall have the initial right to defend against same, provided that such
defense shall be conducted under the supervision, and at the direction, of the
Steering Committee, which shall establish a process under which each Party shall
have a reasonable opportunity to participate in such defense, and provided
further that to the extent that the other Party's intellectual property rights
are the subject of such invalidity or unenforceability claim, suit or action,
the defending Party shall involve such other Party in all decisions as to such
defense, and in any event such defending Party shall not settle or otherwise
compromise such defense in any way that adversely affects such other Party's
intellectual property rights or its interest therein without such other Party's
written consent, not to be unreasonably withheld or delayed.

            (c) Notwithstanding the foregoing, if the defense, counterclaim,
action or claim alleges invalidity or unenforceability of Mice-Related
Technology, Medarex shall have the sole right (except as Medarex may otherwise
agree) to respond or defend against same, and may intervene to effect such
defense or responses.

            (d) The Parties shall share equally the costs and expenses of any
defenses under this Section 7.3.5 with respect to the Collaboration Technology.
With respect to the Medarex Technology (or the Mice-Related Technology) or the
PharmAthene Technology, Medarex and PharmAthene, respectively, shall be
responsible for one-hundred percent (100%) of those costs and expenses, except
to the extent related to the Exploitation of Collaboration Products and the
other activities of the Parties hereunder, where the Parties shall share equally
such costs and expenses.


                                       38


      Section 7.4 Potential Third-Party Rights.

            7.4.1 Third-Party Licenses. If (a) in the Collective Opinion of
Counsel, a Party, or any of its Affiliates, licensees or permitted sublicensees,
cannot Exploit a Collaboration Product in a country in the Territory without
infringing one or more Patents that have issued to a Third Party in such
country, or (b) as a result of any claim made against a Party, or any of its
Affiliates, licensees or permitted sublicensees, alleging that the Exploitation
of a Collaboration Product infringes or misappropriates any Patent or any other
intellectual property right of a Third Party in a country in the Territory, a
judgment is entered by a court of competent jurisdiction from which no appeal is
taken within the time permitted for appeal, such that a Party cannot Exploit
such Collaboration Product in such country without infringing the Patent or
other proprietary rights of such Third Party, then, in either case, the Parties
shall use commercially reasonable efforts to obtain a license in the names of
the Parties from such Third Party as necessary for the Exploitation of any
Collaboration Products hereunder in such country. For purposes of this Section
7.4.1, "Collective Opinion of Counsel" shall mean the final joint opinion of
patent counsel selected by PharmAthene and patent counsel selected by Medarex,
after review of all data and information reasonably available at the time such
opinion is rendered. If patent counsel for the Parties cannot agree on a final
joint opinion within twenty (20) days after submission of the matter to such
counsel, the patent counsel of the Parties shall agree on a third patent counsel
who shall offer an independent opinion on the subject matter, which independent
opinion shall be deemed the Collective Opinion of Counsel.

            7.4.2 Third-Party Litigation. In the event that a Third Party
institutes a Patent, Trademark or other infringement suit against either Party
or its respective Affiliates, licensees or permitted sublicensees during the
Term, alleging that the Exploitation of the Collaboration Products in the
Territory or any other activities hereunder, infringes one or more Patent,
Trademark or other intellectual property rights held by such Third Party (an
"Infringement Suit"), the Parties shall cooperate with one another in defending
such suit. The Parties shall jointly direct and control the defense of any
Infringement Suit with respect to Collaboration Products or any other activity
of the Parties under this Agreement. The Parties shall share equally any costs
and expenses of such defense, and any damages awarded therein.


                                       39


            7.4.3 Retained Rights. Nothing in this Section 7.4 shall prevent
either Party, at its own expense, from obtaining any license or other rights
from Third Parties it deems appropriate in order to permit the full and
unhindered exercise of its rights under this Agreement.

      Section 7.5 Exchange of Know-How.

            7.5.1 Information Disclosure. Each Party shall, and shall cause its
Affiliates, licensees and sublicensees, as applicable, to, without additional
compensation and at such Party's sole expense, disclose and make available to
the other Party, in whatever form each such other Party may reasonably request,
all of its Know-How and all Regulatory Documentation and other Information and
Inventions included in the Collaboration Technology, and any other Information
and Inventions relating, directly or indirectly, to the Exploitation of any
Collaboration Antibodies or Collaboration Products (other than Mice Materials,
Mice-Related Know-How, Excluded Know-How or Production Process Know-How (except
as set forth in Section 7.1.4 above)) promptly after the Effective Date and
thereafter promptly upon the earlier of the conception or reduction to practice,
discovery, development, making or other Control of each such Regulatory
Documentation, Know-How, or other Information and Inventions.

            7.5.2 Cooperation. With respect to the research, development,
commercialization and other Exploitation of the Collaboration Products, each
Party, shall cooperate with any and all reasonable requests for assistance from
the other Party, including by making its employees, consultants and other
scientific staff available upon reasonable notice during normal business hours
at their respective places of business to consult with such other Party, as
applicable, on issues arising during such research, development,
commercialization or Exploitation.

            7.5.3 Biological Materials. For purposes of facilitating the conduct
of the research and development activities under this Agreement, Medarex and
PharmAthene shall each provide to the other tissues, cells, cell lines,
organisms, blood samples, genetic material, and other biological substances and
materials, including the Collaboration Antibodies and Antibody Materials with
respect thereto, and the Collaboration Target (collectively, "Biological


                                       40


Materials") specified from time to time in this Agreement or the applicable
Project Plan. Each Party agrees to provide all such Biological Materials to the
other in accordance with this Agreement and the applicable Project Plan, and
under the supervision of the Steering Committee. The Parties agree that: (a) all
Biological Materials provided by one Party to the other Party and any Biological
Material (including Collaboration Antibodies, the Antibody Materials and, if
applicable, any Mice Materials) produced against or with, or derived from, such
Biological Materials shall be used solely for the research and development
activities as provided in the Project Plan, and in material compliance with all
Applicable Law; (b) all such Biological Materials shall be provided without any
warranties, express or implied; (c) the Party providing such Biological
Materials shall obtain (or cause its Third Party collaborators to obtain or
certify that they have obtained) all appropriate and required consents from the
source of such Biological Materials; (d) Biological Materials provided by one
Party to the other Party (other than Collaboration Products) shall not be made
available by such other Party to any Third Party except as expressly provided
(i) in the Project Plan or (ii) in the applicable Unilateral Development and
Commercialization Agreement, unless the prior written consent of the Party
providing such Biological Materials is first obtained; and (e) all right, title
and interest in and to the Mice Materials shall be, and remain, vested in
Medarex.

            7.5.4 Regulatory Records. With respect to the subject matter of this
Agreement, each Party shall maintain, or cause to be maintained, records of its
respective research, development, manufacturing and commercialization
activities, including all Regulatory Documentation and Regulatory Approvals with
respect to the Collaboration Antibodies and the Collaboration Products, in
sufficient detail and in good scientific manner appropriate for patent and
regulatory purposes, which shall be complete and accurate and shall fully and
properly reflect all work done and results achieved in the performance of such
activities, and which shall be retained during the Term and for a period of five
(5) years thereafter, or for such longer period as may be required by Applicable
Law. Each Party shall have the right, during normal business hours and upon
reasonable notice, to inspect and copy any such records, except(a) with respect
to Medarex's records, to the extent that such records contain proprietary


                                       41


information with respect to the Mice Materials and Mice-Related Technology, or
(b) with respect to a Party's records, to the extent that such records contain
proprietary information with respect to its Production Process Technology.

            7.5.5 Production Process Technology. Notwithstanding anything to the
contrary in this Section 7.5 or elsewhere in this Agreement, neither Party shall
be obligated to disclose or provide any of its Production Process Technology,
including Biological Materials with respect thereto, to the other Party, any of
such other Party's Affiliates or any Third Party except as may be required or
permitted under a separate written agreement entered into by the Parties
pursuant to Sections 1.2.4, 1.6, or 7.1.4.

            7.5.6 Mice Materials. Notwithstanding anything to the contrary in
this Section 7.5 or elsewhere in this Agreement, neither Medarex nor its
Affiliates shall be obligated to provide, transfer, deliver or otherwise
disclose any Mice-Related Technology, Mice Materials, including Biological
Materials with respect thereto, or any Information and Inventions with respect
thereto, to PharmAthene, any of PharmAthene's Affiliates or any Third Party
except for the Antibodies (and Antibody Materials related thereto).

                                   ARTICLE 8 -
                              TERM AND TERMINATION

      Section 8.1 Term. The term of this Agreement (the "Term") shall commence
upon the Effective Date and shall continue in effect until the date which is two
years subsequent to the first date upon which (a) there is no longer any (i)
Collaboration Product being Exploited hereunder, or (ii) Unilateral Product
being Exploited under a Unilateral Development and Commercialization Agreement,
unless this Agreement is terminated at an earlier date in accordance with the
terms and conditions set forth in this Article 8.

      Section 8.2 Termination for Material Breach. Subject to the final sentence
of this Section 8.2, any material failure by a Party to comply with any of its
material obligations contained in this Agreement shall entitle the Party not in
default to give to the Party in default written notice specifying the nature of
the default, requiring the defaulting Party to make good or otherwise cure such
default, and stating its intention if such default is not cured to convert a
Collaboration Product to which the material breach applies to a Discontinued


                                       42


Product pursuant to Section 5.1. If such default is not cured within thirty (30)
days after the receipt of such notice (or, if such default cannot be cured
within such thirty (30)-day period, if the Party in default does not commence
actions to cure such default within such period and thereafter diligently
continue such actions or if such default is not otherwise cured within
one-hundred and eighty (180) days after the receipt of such notice), except in
the case of a payment default, as to which the defaulting Party shall have only
a thirty (30)-day cure period, the Party not in default shall be entitled, on
written notice to the other Party, without prejudice to any of its other rights
conferred on it by this Agreement, and in addition to any other remedies
available to it by law or in equity, to convert such Collaboration Product to a
Discontinued Product pursuant to Section 5.1, whereupon the defaulting Party
shall be deemed the Opting-Out Party with respect to such Discontinued Product
for all purposes hereunder and the notice provided under this provision shall be
deemed equivalent to an Election Notice as provided in Section 5.1.
Notwithstanding the foregoing, if the Party alleged to be in breach disputes
such termination through the dispute resolution procedures set forth in this
Agreement, then such right to terminate shall be tolled for so long as such
dispute resolution procedures are being pursued by such Party in good faith and
if it is finally and conclusively determined that such Party is in breach, then
such Party shall have the right to cure such breach as provided above within
sixty (60) days after such determination.

      Section 8.3 Termination Upon Insolvency. Either Party may terminate this
Agreement if, at any time, the other Party shall file in any court or agency
pursuant to any statute or regulation of any state, country or jurisdiction, a
petition in bankruptcy or insolvency or for the appointment of a receiver or
trustee of that Party or of its assets, or if such other Party proposes a
written agreement of composition or extension of its debts, or if such other
Party shall be served with an involuntary petition against it, filed in any
insolvency proceeding, and such petition shall not be dismissed within sixty
(60) days after the filing thereof, in each of the foregoing cases only if such
proceedings is for liquidation of such other Party.

      Section 8.4 Rights in Bankruptcy. All rights and licenses granted under or
pursuant to this Agreement by Medarex or PharmAthene are, and shall otherwise be
deemed to be, for purposes of Section 365(n) of the United States Bankruptcy
Code, licenses of rights to "intellectual property" as defined under Section 101


                                       43


of the United States Bankruptcy Code. The Parties agree that the Parties, as
licensees of such rights under this Agreement, shall retain and may fully
exercise all of their rights and elections under the United States Bankruptcy
Code. The Parties further agree that, in the event of the commencement of a
bankruptcy proceeding by or against a Party under the United States Bankruptcy
Code, the Party hereto that is not a party to such proceeding shall be entitled
to a complete duplicate of (or complete access to, as appropriate) any such
intellectual property and all embodiments of such intellectual property, which,
if not already in the non-subject Party's possession, shall be promptly
delivered to it (a) upon any such commencement of a bankruptcy proceeding upon
the non-subject Party's written request therefor, unless the Party subject to
such proceeding continues to perform all of its obligations under this Agreement
or (b) if not delivered under clause (a) above, following the rejection of this
Agreement by or on behalf of the Party subject to such proceeding upon written
request therefor by the non-subject Party. It is the understanding and intent of
the Parties that this Agreement and the Unilateral Development and
Commercialization Agreements represent one single transaction that, for the
convenience of the Parties, was prepared in three separate but interrelated
agreements, that the consideration for this Agreement and the Unilateral
Development and Commercialization Agreements is indivisible, that the Parties
would not have entered into any one of this Agreement or the Unilateral
Development and Commercialization Agreements without also entering into the
other agreements, and that, by their terms, each of this Agreement and the
Unilateral Development and Commercialization Agreements depends on the continued
effectiveness and enforceability of the other agreements. Accordingly, the
Parties acknowledge and agree that this Agreement and the Unilateral Development
and Commercialization Agreements may only be rejected as a group and that any
rejection of one of the agreements necessarily entails the rejection of the
other agreements.

      Section 8.5 Cross Default. Any breach of this Agreement shall be deemed to
be a breach of the Unilateral Development and Commercialization Agreements and
vice-versa and any termination or rejection of this Agreement shall be deemed a
termination or rejection of the Unilateral Development and Commercialization
Agreements. The Unilateral Development and Commercialization Agreements shall
automatically terminate upon the expiration or earlier termination of this
Agreement.


                                       44


      Section 8.6 Consequences of Expiration or Termination.

            8.6.1 Licenses. Upon expiration of the Term in accordance with
Section 8.1 and payment of all amounts owed pursuant to Section 4.1, the
licenses granted by Medarex to PharmAthene, and by PharmAthene to Medarex,
hereunder shall terminate.

            8.6.2 Return of Information and Materials. Upon expiration of this
Agreement pursuant to Section 8.1 or upon termination of this Agreement in its
entirety by either Party pursuant to this Article 8, each Party, at the request
of the other Party, shall return, or at the election of such other Party,
destroy, and thereafter provide such other Party written certification
evidencing such destruction, all Biological Materials of such other Party
(including, with respect to PharmAthene, any Mice Materials, Antibodies and
Antibody Materials in its possession or control) and all data, files, records
and other materials in its possession or control relating to such other Party's
Technology (including, with respect to Medarex, Mice-Related Technology), or
containing or comprising such other Party's Information and Inventions or other
Confidential Information and, in each case, to which the returning Party does
not retain rights hereunder (except one copy of which (other than Biological
Materials) may be retained solely for archival purposes).

      Section 8.7 Accrued Rights; Surviving Obligations.

            8.7.1 Accrued Rights. Termination or expiration of this Agreement
for any reason shall be without prejudice to any rights that shall have accrued
to the benefit of a Party prior to such termination or expiration. Such
termination or expiration shall not relieve a Party from obligations that are
expressly indicated to survive the termination or expiration of this Agreement.

            8.7.2 Survival. Articles 4 (with respect to obligations arising
prior to expiration or termination of this Agreement), 6 and 9 (provided Section
9.1 shall survive for three (3) years after the expiration or termination of
this Agreement), and Sections 1.2.2 (with respect to obligations arising prior
to the expiration or termination of this Agreement), 2.3, 3.3.3, 3.3.5, 7.1 (but
not the provisos in Section 7.1.5), 7.2, 7.5.3 (with respect only to the last
sentence thereof), 7.5.4, 7.5.5, 7.5.6, 8.6, 10.4, 11.5 and 11.6 and Appendix A,
Appendix B and Appendix G of this Agreement and this Section 8.7 shall survive
expiration or termination of this Agreement for any reason.


                                       45


                                   ARTICLE 9 -
                          INSURANCE AND INDEMNIFICATION

      Section 9.1 Insurance. Each Party shall have and maintain such types and
amounts of liability insurance as is normal and customary in the industry
generally for parties similarly situated, and shall upon request provide the
other Party with a copy of its policies of insurance in that regard, along with
any endorsements, schedules or riders thereto. Further, the Parties shall
jointly purchase and maintain, with each Party bearing fifty percent (50%) of
all premiums thereon, such types and amounts of product and other liability
insurance as the Steering Committee designate from time to time.

      Section 9.2 Indemnification of Medarex. Except as otherwise covered by any
insurance policy purchased jointly by the Parties as described in Section 9.1,
PharmAthene shall indemnify Medarex, its Affiliates and their respective
directors, officers, employees and agents, and defend and save each of them
harmless, from and against any and all losses, damages, liabilities, costs and
expenses (including reasonable attorneys' fees and expenses) (collectively,
"Losses") in connection with any and all Third-Party suits, investigations,
claims or demands (collectively, "Third-Party Claims") arising from or occurring
as a result of the negligence (except to the extent that such Loss is covered by
one or more product liability insurance policies that were purchased jointly by
the Parties) or willful misconduct on the part of PharmAthene or its Affiliates,
licensees or sublicensees (other than Medarex and its Affiliates and any Third
Parties to whom the Parties license rights with respect to a Collaboration
Product pursuant to Section 5.2) in performing any activity contemplated by this
Agreement, except for those Losses for which Medarex has an obligation to
indemnify PharmAthene and its Affiliates pursuant to Section 9.3, as to which
Losses each Party shall indemnify the other to the extent of their respective
liability for the Losses.

      Section 9.3 Indemnification of PharmAthene. Except as otherwise covered by
any insurance policy purchased jointly by the Parties as described in Section
9.1.2, Medarex shall indemnify PharmAthene, its Affiliates and their respective
directors, officers, employees and agents, and defend and save each of them
harmless, from and against any and all Losses in connection with any and all


                                       46


Third-Party Claims arising from or occurring as a result of the negligence
(except to the extent that such Loss is covered by one or more product liability
insurance policies that were purchased jointly by the Parties) or willful
misconduct on the part of Medarex or its Affiliates, licensees or sublicensees
(other than PharmAthene and its Affiliates and any Third Parties to whom the
Parties license rights with respect to a Collaboration Product pursuant to
Section 5.2) in performing any activity contemplated by this Agreement, except
for those Losses for which PharmAthene has an obligation to indemnify Medarex
and its Affiliates pursuant to Section 9.2, as to which Losses each Party shall
indemnify the other to the extent of their respective liability for the Losses.

      Section 9.4 Product Liability. Except as provided under Section 9.2 or
Section 9.3, all Losses arising from or occurring as a result of any Third-Party
Claim for product liability or personal injury that are not covered by one or
more insurance policies that were purchased jointly by the Parties shall be
borne equally by the Parties.

      Section 9.5 Indemnification Procedure.

            9.5.1 Notice of Claim. The indemnified Party shall give the
indemnifying Party prompt written notice (an "Indemnification Claim Notice") of
any Losses or discovery of fact upon which such indemnified Party intends to
base a request for indemnification under Section 9.3 or Section 9.4, but in no
event shall the indemnifying Party be liable for any Losses that result from any
delay in providing such notice. Each Indemnification Claim Notice must contain a
description of the claim and the nature and amount of such Loss (to the extent
that the nature and amount of such Loss are known at such time). The indemnified
Party shall furnish promptly to the indemnifying Party copies of all papers and
official documents received in respect of any Losses. All indemnification claims
in respect of a Party, its Affiliates or their respective directors, officers,
employees and agents (collectively, the "Indemnitees" and each an "Indemnitee")
shall be made solely by such Party to this Agreement (the "Indemnified Party").

            9.5.2 Control of Defense. At its option, the indemnifying Party may
assume the defense of any Third-Party Claim by giving written notice to the
Indemnified Party within thirty (30) days after the indemnifying Party's receipt
of an Indemnification Claim Notice. The assumption of the defense of a


                                       47


Third-Party Claim by the indemnifying Party shall not be construed as an
acknowledgment that the indemnifying Party is liable to indemnify any Indemnitee
in respect of the Third-Party Claim, nor shall it constitute a waiver by the
indemnifying Party of any defenses it may assert against any Indemnitee's claim
for indemnification. Upon assuming the defense of a Third-Party Claim, the
indemnifying Party may appoint as lead counsel in the defense of the Third-Party
Claim any legal counsel selected by the indemnifying Party that is reasonably
acceptable to the Indemnified Party. In the event the indemnifying Party assumes
the defense of a Third-Party Claim, the Indemnified Party shall immediately
deliver to the indemnifying Party all original notices and documents (including
court papers) received by any Indemnitee in connection with the Third-Party
Claim. Should the indemnifying Party assume the defense of a Third-Party Claim,
the indemnifying Party shall not be liable to the Indemnified Party or any other
Indemnitee for any legal expenses subsequently incurred by such Indemnified
Party or other Indemnitee in connection with the analysis, defense or settlement
of the Third-Party Claim. In the event that it is ultimately determined that the
indemnifying Party is not obligated to indemnify, defend or hold harmless an
Indemnitee from and against the Third-Party Claim, the Indemnified Party shall
reimburse the indemnifying Party for any and all costs and expenses (including
attorneys' fees and costs of suit) and any Losses incurred by the indemnifying
Party in its defense of the Third-Party Claim with respect to such Indemnitee.

            9.5.3 Right to Participate in Defense. Without limiting Section
9.5.2, any Indemnitee shall be entitled to (a) participate in, but not control,
the defense of such Third-Party Claim and to engage counsel of its choice for
such purpose; provided, however, that such engagement shall be at the
Indemnitee's own expense unless the engagement thereof has been specifically
authorized by the indemnifying Party in writing, and (b) control its defense of
such Third-Party Claim and to engage counsel of its choice for such purpose, at
the expense of the indemnifying Party, if (i) the indemnifying Party has failed
to assume the defense and engage counsel in accordance with Section 9.5.2, (ii)
the use of the counsel chosen by the indemnifying Party would present such
counsel with a conflict of interest, (iii) the actual or potential defendants
in, or targets of, such action include both the Indemnifying Party and the
Indemnitee or the Indemnified Party, and the Indemnified Party reasonably


                                       48


concludes that there may be legal defenses available to it or the Indemnitee
that are different from or additional to those available to the indemnifying
Party, (iv) the indemnifying Party denies or fails to timely admit its
obligation to defend and indemnify the action, or (v) in the reasonable opinion
of counsel to the Indemnified Party, the claim could result in the Indemnitee or
the Indemnified Party becoming subject to injunctive relief or relief other than
the payment of money damages that could have a materially adverse effect on the
ongoing business of such Indemnitee of the Indemnified Party.

            9.5.4 Settlement. With respect to any Losses relating solely to the
payment of money damages in connection with a Third-Party Claim and that will
not result in the Indemnitee becoming subject to injunctive or other relief or
otherwise adversely affect the business of the Indemnitee in any manner, and as
to which the indemnifying Party shall have acknowledged in writing the
obligation to indemnify the Indemnitee hereunder, the indemnifying Party shall
have the sole right to consent to the entry of any judgment, enter into any
settlement or otherwise dispose of such Loss, on such terms as the indemnifying
Party, in its sole discretion, shall deem appropriate. With respect to all other
Losses in connection with Third-Party Claims, where the indemnifying Party has
assumed the defense of the Third-Party Claim in accordance with Section 9.5.2,
the indemnifying Party shall have authority to consent to the entry of any
judgment, enter into any settlement or otherwise dispose of such Loss provided
it obtains the prior written consent of the Indemnified Party (which consent
shall not be unreasonably withheld or delayed). The indemnifying Party shall not
be liable for any settlement or other disposition of a Loss by an Indemnitee
that is reached without the written consent of the indemnifying Party.
Regardless of whether the indemnifying Party chooses to defend or prosecute any
Third-Party Claim, no Indemnitee shall admit any liability with respect to, or
settle, compromise or discharge, any Third-Party Claim without the prior written
consent of the indemnifying Party, not to be unreasonably withheld or delayed.

            9.5.5 Cooperation. Regardless of whether the indemnifying Party
chooses to defend or prosecute any Third-Party Claim, the Indemnified Party
shall, and shall cause each other Indemnitee to, reasonably cooperate in the
defense or prosecution thereof and shall furnish such records, information and


                                       49


testimony, provide such witnesses and attend such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested in
connection therewith. Such cooperation shall include access during normal
business hours afforded to the indemnifying Party to, and reasonable retention
by the Indemnified Party of, records and information that are reasonably
relevant to such Third-Party Claim, and making Indemnitees and other employees
and agents available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder, and the
indemnifying Party shall reimburse the Indemnified Party for all its reasonable
out-of-pocket expenses in connection therewith.

            9.5.6 Expenses. Except as provided above, the reasonable and
verifiable costs and expenses, including fees and disbursements of counsel,
incurred by the Indemnified Party in connection with any claim shall be
reimbursed on a calendar quarter basis by the indemnifying Party, without
prejudice to the indemnifying Party's right to contest the Indemnified Party's
right to indemnification and subject to refund in the event the indemnifying
Party is ultimately held not to be obligated to indemnify the Indemnified Party.

                                  ARTICLE 10 -
                    REPRESENTATIONS, WARRANTIES AND COVENANTS

      Section 10.1 Representations, Warranties and Covenants. Each Party hereby
represents, warrants and covenants to the other Party as of the Effective Date
as follows:

            10.1.1 Corporate Authority. Such Party (a) has the power and
authority and the legal right to enter into this Agreement and the Unilateral
Development and Commercialization Agreements and to perform its obligations
hereunder and thereunder, and (b) has taken all necessary action on its part
required to authorize the execution and delivery of this Agreement and the
Unilateral Development and Commercialization Agreements and the performance of
its obligations hereunder and thereunder. This Agreement and the Unilateral
Development and Commercialization Agreements have been duly executed and
delivered on behalf of such Party and constitute legal, valid and binding
obligations of such Party and are enforceable against it in accordance with
their respective terms subject to the effects of bankruptcy, insolvency or other
laws of general application affecting the enforcement of creditor rights and


                                       50


judicial principles affecting the availability of specific performance and
general principles of equity, whether enforceability is considered a proceeding
at law or equity.

            10.1.2 Litigation. Such Party is not aware of any pending or
threatened litigation (and has not received any communication) that alleges that
such Party's activities related to this Agreement or the Unilateral Development
and Commercialization Agreements have violated, or that by conducting the
activities as contemplated herein or therein such Party would violate, any of
the intellectual property rights of any other party.

            10.1.3 Consents, Approvals, etc. All necessary consents, approvals
and authorizations of all Regulatory Authorities and other parties required to
be obtained by such Party in connection with the execution and delivery of this
Agreement and the Unilateral Development and Commercialization Agreements and
the performance of its obligations hereunder and thereunder have been obtained.

            10.1.4 Conflicts. The execution and delivery of this Agreement and
the Unilateral Development and Commercialization Agreements and the performance
of such Party's obligations hereunder and thereunder (a) do not conflict with or
violate any requirement of Applicable Law or any provision of the articles of
incorporation, bylaws or any similar instrument of such Party, as applicable, in
any material way, and (b) do not conflict with, violate, or breach or constitute
a default or require any consent under, any contractual obligation or court or
administrative order by which such Party is bound.

            10.1.5 Debarment. No such Party nor any of its Affiliates has been
debarred or is subject to debarment and neither such Party nor any of its
Affiliates will use in any capacity, in connection with the services to be
performed under this Agreement or the Unilateral Development and
Commercialization Agreements, any party who has been debarred pursuant to
Section 306 of the Federal Food, Drug, and Cosmetic Act, as amended, or who is
the subject of a conviction described in such section. Each Party will inform
the other Party in writing immediately if it or any party who is performing
services hereunder is debarred or is the subject of a conviction described in
Section 306, or if any action, suit, claim, investigation or legal or
administrative proceeding is pending or, to such Party's knowledge, is
threatened, relating to the debarment or conviction of such Party or any party
performing services hereunder or thereunder.


                                       51


      Section 10.2 Additional Representations and Warranties of Medarex. Medarex
represents and warrants to PharmAthene that (i) Medarex is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey, has full corporate power and authority and the legal right to own
and operate its property and assets and to carry on its business as it is now
being conducted and as it is contemplated to be conducted by this Agreement and
the Unilateral Development Commercialization Agreements, and (ii) as of the
Effective Date, Medarex has made available to PharmAthene upon the request of
PharmAthene the material technical information and data with respect to the Lead
Collaboration Antibody known to Medarex as of the Effective Date, including but
not limited to the feasibility of producing such Lead Collaboration Antibody,
the efficacy, safety, side effects and toxicity thereof, that the technical
information and data provided to PharmAthene is to the best of Medarex's
knowledge accurate in all material respects and that to the best of Medarex's
knowledge Medarex has not withheld any information or data from PharmAthene that
would make such technical information and data provided to PharmAthene
misleading in any material respect.

      Section 10.3 Additional Representations, Warranties and Covenant of
PharmAthene.

            10.3.1 PharmAthene represents and warrants to Medarex that
PharmAthene is a corporation duly organized, validly existing and in good
standing under the laws of Delaware, and has full corporate power and authority
and the legal right to own and operate its property and assets and to carry on
its business as it is now being conducted and as it is contemplated to be
conducted by this Agreement and the Unilateral Development and Commercialization
Agreements. PharmAthene shall comply with all the applicable terms and
conditions of the MRC Agreement and the Cross-License Agreement.

            10.3.2 PharmAthene represents and warrants to Medarex that, except
as set forth on Schedule 10.3.2, as of the Effective Date, neither PharmAthene
nor its Affiliates has, directly or indirectly, expressly or by implication, by
action or omission or otherwise (x) assigned, transferred, granted, conveyed or


                                       52


otherwise encumbered any right, title or interest in or to any Patent, know-how
or other intellectual property rights owned by, licensed to or otherwise
controlled by PharmAthene or its Affiliates with respect to the Collaboration
Target, or (y) agreed to or is otherwise bound by any covenant not to sue for
any infringement, misuse or otherwise with respect to the foregoing intellectual
property rights.

      Section 10.4 DISCLAIMER OF WARRANTY. EXCEPT FOR THE EXPRESS WARRANTIES SET
FORTH IN SECTIONS 10.1, 10.2 AND 10.3, PHARMATHENE AND MEDAREX MAKE NO
REPRESENTATIONS AND GRANT NO WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR
BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, UNDER THIS AGREEMENT OR THE
UNILATERAL DEVELOPMENT AND COMMERCIALIZATION AGREEMENTS, AND PHARMATHENE AND
MEDAREX EACH SPECIFICALLY DISCLAIM ANY OTHER WARRANTIES, WHETHER WRITTEN OR
ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY
OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR ANY WARRANTY AS TO THE VALIDITY OF
ANY PATENTS OR THE NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD
PARTIES UNDER THIS AGREEMENT OR THE UNILATERAL DEVELOPMENT AND COMMERCIALIZATION
AGREEMENTS.

                                  ARTICLE 11 -
                                  MISCELLANEOUS

      Section 11.1 Force Majeure. Neither Party shall be held liable or
responsible to the other Party or be deemed to have defaulted under or breached
this Agreement for failure or delay in fulfilling or performing any term of this
Agreement when such failure or delay is caused by or results from events beyond
the reasonable control of the non-performing Party, including fires, floods,
earthquakes, embargoes, shortages, epidemics, quarantines, war, acts of war
(whether war be declared or not) or terrorism, insurrections, riots, civil
commotion, strikes, lockouts or other labor disturbances, acts of God or acts,
omissions or delays in acting by any governmental authority. The non-performing
Party shall notify the other Party of such force majeure within ten (10) days


                                       53


after such occurrence by giving written notice to the other Party stating the
nature of the event, its anticipated duration, and any action being taken to
avoid or minimize its effect. The suspension of performance shall be of no
greater scope and no longer duration than is necessary and the non-performing
Party shall use Commercially Reasonable Efforts to remedy its inability to
perform; provided, however, that in the event the suspension of performance
continues for one-hundred and eighty (180) days after the date of the
occurrence, the Parties shall meet to discuss in good faith how to proceed in
order to accomplish the goals of the Collaboration outlined in this Agreement.

      Section 11.2 Subcontractors. Each Party shall have the right, subject to
the prior written consent of the Steering Committee, such consent not to be
unreasonably withheld or delayed, to subcontract any of its research,
development, manufacture or commercialization activities to a Third Party,
provided that it furnishes the other Party with advanced written notice thereof,
which notice shall specify the work to be subcontracted, and obtains a written
undertaking from the subcontractor that it shall be subject to the applicable
terms and conditions of this Agreement, including the provisions of Article 6.
If a Party wishes to subcontract any of its research, development, manufacturing
or commercialization activities to a Third Party and the Steering Committee
consents, the other Party may submit a bid to the subcontracting Party to
perform such work. The subcontracting Party shall use Commercially Reasonable
Efforts to enter into an agreement with the bidder that is best able to meet the
Collaboration's requirements, taking into consideration such factors as price,
quality, capacity, quantity, reliability and reputation, provided that such
bidder is reasonably acceptable to the Steering Committee. Unless the Project
Plan provides, or the Steering Committee agrees otherwise, PharmAthene shall be
responsible for all the budgeted costs and expenses (in accordance with the
applicable Project Budget) associated with the use of a subcontractor to conduct
research, development, manufacture and commercialization activities, but, unless
the Parties agree otherwise, the subcontracting Party shall remain solely liable
for the performance of its research, development, manufacture or
commercialization activities by its subcontractor; provided, however, that
PharmAthene and Medarex each shall remain solely responsible for all costs and
expenses associated with its use of subcontractor(s) with respect to the
PharmAthene Activities and the Medarex Research Activities, respectively.


                                       54


      Section 11.3 Assignment. (a) Without the prior written consent of the
other Party hereto, neither Party shall sell, transfer, assign, pledge or
otherwise dispose of, whether voluntarily, involuntarily, by operation of law or
otherwise, this Agreement; provided, however, that either Party hereto may (a)
assign or transfer this Agreement or any of its rights or obligations hereunder
without the consent of the other Party to any Affiliate of such Party; or (b)
assign or transfer this Agreement to any Third Party with which it merges or
consolidates, or to which it transfers all or substantially all of its assets;
provided, however, that with respect to both (a) and (b), (i) the assigning
Party (provided that it is not the surviving entity) shall remain jointly and
severally liable with the relevant PharmAthene Affiliate, Medarex Affiliate or
Third Party assignee under this Agreement, and (ii) the relevant PharmAthene
Affiliate assignee, Medarex Affiliate assignee, Third Party assignee or
surviving entity shall assume in writing all of the assigning Party's
obligations under this Agreement that have been assigned pursuant to either (a)
or (b). For purposes of clarification with respect to subsection (b) herein, a
Third Party that merges or consolidates with a Party, or to which a Party
transfers all or substantially all of its assets, shall not be deemed to grant
the other Party to this Agreement any license to such Third Party's technology
in existence as of the effective date of such merger, consolidation or transfer,
unless such grant is made pursuant to a separate agreement, provided such Third
Party shall maintain all licenses granted hereunder by such first Party with
respect to its Technology (which for purposes of this Section 11.3 shall be
deemed to include Collaboration Technology and Joint Technology) and any
Information and Inventions with respect thereto. Any purported assignment or
transfer in violation of this Section shall be void ab initio and of no force or
effect.

      (b) Neither Party shall assign any Technology licensed to the other Party
without written acknowledgement by the assignee that such assigned Technology is
subject to the rights and licenses granted to the other Party under this
Agreement.

      Section 11.4 Severability. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of either Party under this Agreement will not be
materially and adversely affected thereby, (a) such provision shall be fully


                                       55


severable, (b) this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom, and (d) in lieu of such illegal, invalid
or unenforceable provision, there shall be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and reasonably
acceptable to the Parties. To the fullest extent permitted by applicable law,
each Party hereby waives any provision of law that would render any provision of
this Agreement illegal, invalid or unenforceable in any respect.

      Section 11.5 Governing Law, Jurisdiction, Venue and Service.

            11.5.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, excluding any
conflicts or choice of law rule or principle that might otherwise refer
construction or interpretation of this Agreement to the substantive law of
another jurisdiction.

            11.5.2 Jurisdiction. Subject to Section 2.3, the Parties hereby
irrevocably and unconditionally consent to the exclusive jurisdiction of the
courts of the State of Delaware and the United States District Court of Delaware
for any action, suit or proceeding (other than appeals therefrom) arising out of
or relating to this Agreement, and agree not to commence any action, suit or
proceeding (other than appeals therefrom) related thereto except in such courts.

            11.5.3 Venue. The Parties further hereby irrevocably and
unconditionally waive any objection to the laying of venue of any action, suit
or proceeding (other than appeals therefrom) arising out of or relating to this
Agreement in the courts of the State of Delaware or the United States District
Court of Delaware, and hereby further irrevocably and unconditionally waive and
agree not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.

            11.5.4 Service. Each Party hereto further agrees that service of any
process, summons, notice or document by U.S. registered mail to its address set
forth below shall be effective service of process for any action, suit or
proceeding brought against it under this Agreement in any such court.


                                       56


            11.5.5 Patents and Trademarks. Notwithstanding the foregoing, any
disputes regarding the validity, scope or enforceability of Patents or
Trademarks shall be submitted to a court of competent jurisdiction in the
territory in which such rights apply.

      Section 11.6 Notices. All notices or other communications that are
required or permitted hereunder shall be in writing and delivered personally,
sent by facsimile (and promptly confirmed by personal delivery, registered or
certified mail or overnight courier as provided herein), sent by
nationally-recognized overnight courier or sent by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:

            If to PharmAthene, to:

                      PharmAthene, Inc.
                      175 Admiral Cochrane Drive
                      Suite 101
                      Annapolis, MD  21401
                      Attention:  David P. Wright
                      Facsimile:  (410) 571-8927

                      With a copy to:

                      Elliot M. Olstein
                      Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart & Olstein
                      5 Becker Farm Road
                      Roseland,  NJ  07068-1739
                      Facsimile:  (973) 994-1744

            If to Medarex, to:

                      Medarex, Inc.
                      707 State Road
                      Princeton, New Jersey 08540-1437
                      Attention: President
                      Facsimile: (609) 430-2850


                                       57


                      with copies to:

                      Medarex, Inc.
                      707 State Road
                      Princeton, New Jersey 08540-1437
                      Attention: General Counsel
                      Facsimile: (609) 430-2850

                      Medarex, Inc.
                      707 State Road
                      Princeton, New Jersey 08540-1437
                      Attention: Contracts Administrator
                      Facsimile: (609) 430-2850

or to such other address as the Party to whom notice is to be given may have
furnished to the other Party in writing in accordance herewith. Any such
communication shall be deemed to have been received (a) when delivered, if
personally delivered or sent by facsimile on a business day, (b) on the business
day after dispatch, if sent by nationally-recognized overnight courier, and (c)
on the third business day following the date of mailing, if sent by mail. It is
understood and agreed that this Section 11.6 is not intended to govern the
day-to-day business communications necessary between the Parties in performing
their duties, in due course, under the terms of this Agreement.

      Section 11.7 Entire Agreement; Modifications. This Agreement, together
with the Schedules and the Appendices attached hereto (including the Unilateral
Development and Commercialization Agreements), sets forth and constitutes the
entire agreement and understanding between the Parties with respect to the
subject matter hereof and all prior agreements, understanding, promises and
representations, whether written or oral, with respect thereto are superseded
hereby. Each Party confirms that it is not relying on any representations or
warranties of the other Party except as specifically set forth herein. No
amendment, modification, release or discharge shall be binding upon the Parties
unless in writing and duly executed by authorized representatives of both
Parties.

      Section 11.8 Relationship of the Parties. It is expressly agreed that the
Parties shall be independent contractors of one another and that the
relationship between the Parties shall not constitute a partnership, joint
venture or agency. Neither Party shall have the authority to make any


                                       58


statements, representations or commitments of any kind, or to take any action,
which shall be binding on the other, without the prior written consent of the
other to do so. All persons employed by a Party shall be employees of such Party
and not of the other Party and all costs and obligations incurred by reason of
any such employment shall be for the account and expense of such Party.

      Section 11.9 Equitable Relief. Each Party acknowledges and agrees that the
restrictions set forth in Articles 6 and 7 of this Agreement are reasonable and
necessary to protect the legitimate interests of the other Party and that such
other Party would not have entered into this Agreement in the absence of such
restrictions, and that any violation or threatened violation of any provision of
Article 6 or 7 will result in irreparable injury to such other Party. Each Party
also acknowledges and agrees that in the event of a violation or threatened
violation of any provision of Article 6 or 7, the other Party shall be entitled
to seek preliminary and permanent injunctive relief, without the necessity of
proving irreparable seek injury or actual damages, as well as to seek an
equitable accounting of all earnings, profits and other benefits arising from
any such violation. The rights provided in the immediately preceding sentence
shall be cumulative and in addition to any other rights or remedies that may be
available to such other Party. Nothing in this Section 11.9 is intended, or
should be construed, to limit such other Party's right to preliminary and
permanent injunctive relief or any other remedy for a breach of any other
provision of this Agreement.

      Section 11.10 Waiver. Any term or condition of this Agreement may be
waived at any time by the Party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the Party waiving such term or condition. The waiver
by either Party hereto of any right hereunder or of the failure to perform or of
a breach by the other Party shall not be deemed a waiver of any other right
hereunder or of any other breach or failure by said other Party whether of a
similar nature or otherwise.

      Section 11.11 Counterparts. This Agreement may be executed in two (2) or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.


                                       59


      Section 11.12 No Benefit to Third Parties. The representations,
warranties, covenants and agreements set forth in this Agreement are for the
sole benefit of the Parties hereto and their successors and permitted assigns,
and they shall not be construed as conferring any rights on any other parties,
other than MRC as provided in the last sentence of Section 10.3.1.

      Section 11.13 Further Assurance. Each Party shall duly execute and
deliver, or cause to be duly executed and delivered, such further instruments
and do and cause to be done such further acts and things, including the filing
of such assignments, agreements, documents and instruments, as may be necessary
or as the other Party may reasonably request in connection with this Agreement
or to carry out more effectively the provisions and purposes, or to better
assure and confirm unto such other Party its rights and remedies under this
Agreement.

      Section 11.14 English Language. This Agreement has been written and
executed in the English language. Any translation into any other language shall
not be an official version thereof, and in the event of any conflict in
interpretation between the English version and such translation, the English
version shall control.

      Section 11.15 References. Unless otherwise specified, (a) references in
this Agreement to any Article, Section, Appendix, Schedule or Exhibit shall mean
references to such Article, Section, Appendix, Schedule or Exhibit of this
Agreement, (b) references in any section to any clause are references to such
clause of such section, and (c) references to any agreement, instrument or other
document in this Agreement refer to such agreement, instrument or other document
as originally executed or, if subsequently varied, replaced or supplemented from
time to time, as so varied, replaced or supplemented and in effect at the
relevant time of reference thereto.

      Section 11.16 Construction. Except where the context otherwise requires,
wherever used, the singular shall include the plural, the plural the singular,
the use of any gender shall be applicable to all genders and the word "or" is
used in the inclusive sense (and/or). The captions of this Agreement are for
convenience of reference only and in no way define, describe, extend or limit
the scope or intent of this Agreement or the intent of any provision contained
in this Agreement. The term "including" as used herein shall mean including,
without limiting the generality of any description preceding such term.


                                       60


The language of this Agreement shall be deemed to be the language mutually
chosen by the Parties and no rule of strict construction shall be applied
against either Party hereto.

         [The remainder of this page has been intentionally left blank.]


                                       61


      IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.

MEDAREX, INC.                                PHARMATHENE, INC.


By: /s/Ronald A. Pepin, Ph.D.                By: /s/David P. Wright
    ------------------------------               ------------------
Name: Ronald A. Pepin, Ph. D.                Name: David P. Wright
Title: Sr. VP, Business Development          Title: President & CEO


                                       62


                                 SCHEDULE 10.3.2
                      Encumbrances on Collaboration Targets

      This Schedule to the COLLABORATION AGREEMENT ("Agreement") effective as of
November 29, 2004, by and between PHARMATHENE, INC. ("PharmAthene") and MEDAREX,
INC., on behalf of itself and its wholly owned subsidiary, GENPHARM
INTERNATIONAL, INC., (collectively, "Medarex") sets forth any and all
encumbrances on any right, title or interest in or to any Patent, know-how or
other intellectual property rights owned by, licensed to or otherwise controlled
by PharmAthene or its Affiliates with respect to the Collaboration Target listed
on Appendix C. All capitalized terms used herein without definition shall have
the meanings ascribed thereto in the Agreement, unless otherwise expressly
provided herein.

      The contents of this Schedule 10.3.2 are hereby incorporated into the
Agreement and are governed by the terms and conditions of the Agreement,
including the confidentiality provisions set forth therein.

                                      None



                                   APPENDIX A

                                   Definitions

      This Appendix to the COLLABORATION AGREEMENT ("Agreement") effective as of
November 29, 2004, by and between PHARMATHENE, INC. ("PharmAthene") and MEDAREX,
INC., on behalf of itself and its wholly owned subsidiary, GENPHARM
INTERNATIONAL, INC., (collectively, "Medarex") provides agreed upon definitions
applicable to the Parties for purposes of the Agreement. All capitalized terms
used herein without definition shall have the meanings ascribed thereto in the
Agreement, unless otherwise expressly provided herein.

      The contents of this Appendix A are hereby incorporated into the Agreement
and are governed by the terms and conditions of the Agreement, including the
confidentiality provisions set forth therein.

      "Affiliate" of a party shall mean any other party that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with such first party. For purposes of this definition
only, "control" and, with correlative meanings, the terms "controlled by" and
"under common control with" shall mean (a) the possession, directly or
indirectly, of the power to direct the management or policies of a party,
whether through the ownership of voting securities or by contract relating to
voting rights or corporate governance, or (b) the ownership, directly or
indirectly, of more than fifty percent (50%) of the voting securities or other
ownership interest of a party.

      "Allocation Percentage" of a Party means such Party's share of Operating
Profits with respect to commercialization of Collaboration Products and shall be
determined by reference to Appendix G hereto.

      "Antibody" shall mean any fully human antibody, or fragment thereof, with
a unique amino acid sequence that has a therapeutically meaningful binding
affinity for an Antigen. By way of clarification, Antibodies with different
amino acid sequences shall be deemed to be different Antibodies, irrespective of
whether they bind to the same Antigen. For the avoidance of doubt, any



Improvement to an Antibody, such as, by way of example, through affinity
maturation or other similar techniques, shall continue to be an "Antibody" for
purposes of this Agreement.

      "Antibody-Based Product" shall mean any composition or formulation
containing or comprising one or more (a) (i) antibodies, whether or not human,
(ii) with respect to each such antibody, one or more fragments of such antibody
containing a portion of such antibody that confers binding specificity for an
Antigen, or (iii) any protein or other composition of matter that mimics such
antibody or fragment, (b) cells expressing or secreting one or more such
antibodies, fragments or mimetics or containing nucleotide sequences (whether
coding or non-coding) with respect to the expression of such antibodies,
fragments or mimetics, or (c) nucleotide sequences (whether coding or
non-coding) with respect to the expression of one or more such antibodies,
fragments or mimetics.

      "Antibody Material" shall mean, with respect to a particular Antibody, (a)
the nucleic acids (including DNA, RNA, and complementary and reverse
complementary nucleic acids thereto, whether intact or a fragment) that code
specifically for such Antibody (or active fragments thereof) and do not code for
multiple Antibodies, or (b) a host cell (other than a host cell obtained
directly from the HuMAb Mice, or parts of such mice) into which the nucleic
acids described in (a) are introduced or are otherwise present, which cell is
capable of expressing such Antibody.

      "Antibody Product" shall mean any composition or formulation containing or
comprising one or more (a) Antibodies, (b) cells expressing or secreting one or
more Antibodies or containing nucleotide sequences (whether coding or
non-coding) with respect to the expression of Antibodies, or (c) nucleotide
sequences (whether coding or non-coding) with respect to the expression of one
or more Antibodies (or a fragment of an entire Antibody containing that portion
of such Antibody conferring binding specificity for an Antigen), for the
diagnosis, prophylaxis or treatment of human diseases or conditions.

      "Antigen" shall mean any protein (including any glyco- or lipo-protein),
carbohydrate, compound or other composition, and any fragment, peptide or
epitope thereof, that stimulates the production of antibodies.



      "Applicable Law" shall mean the applicable laws, rules, and regulations,
including any rules, regulations, guidelines, or other requirements of the
Regulatory Authorities, that may be in effect from time to time in the
Territory.

      "Authorized Commercialization Expenses" shall mean the cost and expenses
incurred by a Party as Commercialization Expenses under the Project Plan not to
exceed one-hundred and ten percent (110%) of the amount authorized by the
Project Budget for the applicable period for the Party.

      "Authorized R&D Expenses" shall mean the cost and expenses incurred by a
Party for performing research and development activities as set forth in the
Project Plan which cost and expense shall not exceed one-hundred and ten percent
(110%) of the amount authorized by the Project Budget for the applicable period
for the Party.

      "Biosite Agreement" shall mean that certain Collaboration Agreement, dated
as of June 1, 2000, between Medarex and Biosite Diagnostics Incorporated, a
Delaware corporation.

      "BLA" or "Biologics License Application" shall mean a Biologics License
Application, as defined in the U.S. Federal Food, Drug, and Cosmetics Act, as
amended, and the regulations promulgated thereunder, and any corresponding
supranational, foreign or domestic marketing authorization application,
registration or certification, necessary or reasonably useful to market a
Collaboration Product in the Territory, but not including pricing and
reimbursement approvals.

      "Collaboration Product" shall mean any Antibody Product that contains,
expresses or secretes a Collaboration Antibody or any Improvement thereto or
contains nucleotide sequences with respect to the expression of a Collaboration
Antibody or any Improvement thereto.

      "Collaboration Target" shall mean the Antigen listed on Appendix C, as
such appendix may be amended pursuant to this Agreement.

      "Collaboration Technology" shall mean any and all (a) Information and
Inventions, conceived, discovered, developed or otherwise made, by or on behalf
of a Party or its Affiliates or, to the extent permitted, its sublicensees
(whether alone or jointly), in connection with the work conducted under or in
connection with this Agreement (but not the Unilateral Development and
Commercialization Agreements), whether or not patented or patentable, but



excluding any Antibody Materials, Collaboration Antibodies, Mice Materials,
Mice-Related Technology or Production Process Technology (the "Collaboration
Know-How"); and (b) Patents and other intellectual property rights with respect
thereto (collectively, "Collaboration Patents"). The determination of whether
Information and Inventions are conceived, discovered, developed or otherwise
made by a Party for purposes of allocating proprietary rights (including Patent,
copyright or other intellectual property rights) therein, shall be made in
accordance with Section 7.1.8.

      "Commercially Reasonable Efforts" shall mean, with respect to the
research, development, manufacture or commercialization of a Collaboration
Product, efforts and resources commonly used in the biotechnology industry for
an antibody of similar commercial potential at a similar stage in its lifecycle,
taking into consideration its safety and efficacy, its cost to develop, the
competitiveness of alternative products, its proprietary position, the
likelihood of regulatory approval, its profitability and all other relevant
factors. Commercially Reasonable Efforts shall be determined on a
market-by-market basis for each Collaboration Product, without regard to the
particular circumstances of a Party, including any other product opportunities
of such Party.

      "Control" shall mean, with respect to any Information and Invention,
Patent or other intellectual property right, possession of the right, whether
directly or indirectly, and whether by ownership, license or otherwise, to
assign, or grant a license, sublicense or other right to or under, such
Information and Invention, Patent or right as provided for herein without
violating the terms of any agreement or other arrangement with any Third Party.

      "Corixa Agreement" shall mean that certain Asset Purchase Agreement, by
and between Medarex and Corixa Corporation, dated as of May 24, 2002.

      "Cross-License Agreement" shall mean that certain Cross-License Agreement
entered into by and among Abgenix, Inc., Cell Genesys, Inc., Japan Tobacco Inc.,
Xenotech L.P., and GenPharm International, Inc., effective as of March 26, 1997,
as amended from time to time.

      "Excluded Know-How" shall mean (a) with respect to Medarex, any and all
Information and Inventions that Medarex or any of its Affiliates Control
pursuant to the Biosite Agreement, the Kirin Agreement (subject to Section



1.2.6(d)), the Corixa Agreement or any other agreement with a Third Party that
is entered into after the Effective Date, including the ultra potent toxin and
linker technology that Medarex or any of its Affiliates Control pursuant to the
Corixa Agreement (including any Improvements with respect thereto), and (b) with
respect to PharmAthene any and all Information and Inventions that PharmAthene
or its Affiliates Control pursuant to an agreement entered into after the
Effective Date, but in each case excluding any Information and Inventions that
are claimed or covered by the Excluded Patents.

      "Excluded Patent" shall mean any Patent that Medarex or any of its
Affiliates Control pursuant to the Biosite Agreement, the Kirin Agreement
(subject to Section 1.2.6(d)), the Corixa Agreement or any other agreement with
a Third Party that is entered into after the Effective Date, including any
Patents claiming or covering the ultra potent toxin and linker technology that
Medarex or any of its Affiliates Control pursuant to the Corixa Agreement
(including any Improvements with respect thereto), and (b) with respect to
PharmAthene any Patent that PharmAthene or any of its Affiliates Control
pursuant to an Agreement entered into after the Effective Date.

      "Exploit" or "Exploitation" shall mean to make, have made, import, use,
sell, offer for sale, or otherwise dispose of, including all discovery,
research, development, registration, modification, enhancement, improvement,
manufacture, storage, formulation, exportation, transportation, distribution,
promotion and marketing activities related thereto.

      "FDA" shall mean the United States Food and Drug Administration and any
successor agency thereto.

      "GAAP" shall mean United States generally accepted accounting principles
consistently applied.

      "Government Award" shall mean a grant received by a Party from the U.S.
federal government (or any subdivision thereof) for the purpose of researching,
developing or manufacturing Collaboration Products.

      "Government Contract" shall mean a contract, between the Selling Party and
the U.S. federal government (or any subdivision thereof or any foreign
Government ) for the procurement of a specific quantity of one or more
Collaboration Products at a set price over a specific time period for the



purposes of stocking (e.g. Strategic National Stockpile) and intended treatment
and not for testing or otherwise evaluating the Collaboration Product for
consideration as a potential treatment.

      "HuMAb Mice" shall mean any immunizable transgenic mice containing
unrearranged human immunoglobulin transgenes inserted into mouse chromosomes,
but not containing any human chromosomes or fragments thereof, that are
Controlled by Medarex or its Affiliates as of the Effective Date, but excluding
any immunizable mice capable of producing human antibodies that are in-licensed
or otherwise acquired by Medarex or its Affiliates after the Effective Date.

      "Improvement" shall mean any modification to an antibody, compound,
product or technology or any discovery, device, process or formulation related
to such antibody, compound, product or technology, whether or not patented or
patentable, including any enhancement in the efficiency, operation, manufacture,
ingredients, preparation, presentation, formulation, means of delivery,
packaging or dosage of an antibody, compound, product or technology, any
discovery or development of any new or expanded indications or applications for
an antibody, compound, product or technology, or any discovery or development
that improves the stability, safety or efficacy of an antibody, compound,
product or technology.

      "IND" shall mean an investigational new drug application filed with the
FDA for authorization to commence human clinical trials, and its equivalent in
other countries or regulatory jurisdictions.

      "Information and Inventions" shall mean all technical, scientific and
other know-how and information, trade secrets, knowledge, technology, means,
methods, processes, practices, formulas, instructions, skills, techniques,
procedures, experiences, ideas, technical assistance, designs, drawings,
assembly procedures, computer programs, apparatuses, specifications, data,
results and other material, including high-throughput screening, gene
expression, genomics, proteomics and other drug discovery and development
technology, pre-clinical and clinical trial results (including Regulatory
Documentation), manufacturing procedures, test procedures and purification and
isolation techniques, (whether or not confidential, proprietary, patented or
patentable) in written, electronic or any other form now known or hereafter
developed, and all Improvements, whether to the foregoing or otherwise, and
other discoveries, developments, inventions and other intellectual property
(whether or not confidential, proprietary, patented or patentable).



      "Kirin Agreement" shall mean that certain Collaboration and License
Agreement between Kirin Brewery Co, Ltd. ("Kirin") and Medarex, effective as of
September 4, 2002, as amended from time to time.

      "Know-How" shall mean the Medarex Know-How, the PharmAthene Know-How
and/or the Collaboration Know-How, as applicable.

      "Lead Collaboration Antibody" shall have the meaning set forth in Section
1.2.4. For the avoidance of doubt, a Collaboration Antibody that has been
designated the Lead Collaboration Antibody shall continue to be a Collaboration
Antibody for purposes of this Agreement.

      "Medarex Know-How" shall mean all Information and Inventions owned by or
in the Control of Medarex or its Affiliates as of the Effective Date or at any
time during the Term that are necessary or reasonably useful for the
Exploitation of the Collaboration Products and the Unilateral Products or for
the exercise of the Medarex Patents, in each case that are not generally known,
but excluding (w) any Excluded Know-How, (x) any Collaboration Know-How and
Joint Know-How, and (y) any Mice Materials, Mice-Related Know-How and Production
Process Know-How. Subject to the foregoing exclusions, Medarex Know-How shall
include all: (a) biological, chemical, pharmacological, toxicological,
pharmaceutical, physical and analytical, clinical and safety data and
information related to the Collaboration Targets, the Collaboration Products or
the Unilateral Products, and (b) data and information with respect to, or
resulting from, assays and biological methodologies necessary or reasonably
useful for the Exploitation of Collaboration Products or the Unilateral
Products. By way of clarification, PharmAthene shall not have any rights with
respect to Excluded Know-How under this Agreement unless the Parties enter into
a separate written agreement with respect thereto. For purposes of this
definition, Medarex Know-How is not intended, and shall not be construed, to
include any Information and Inventions that are licensed to Medarex and its
Affiliates under Section 3.1.2 of this Agreement or under Section 2.1 of the
applicable Unilateral Development and Commercialization Agreement.



      "Medarex Patents" shall mean all of the Patents that Medarex or its
Affiliates own or Control as of the Effective Date and at any time during the
Term, that cover or claim any invention necessary or reasonably useful for the
Exploitation of the Collaboration Products or the Unilateral Products, but
excluding any Excluded Patents, any Collaboration Patents, any Joint Patents,
any Mice-Related Patents and any Production Process Patents. By way of
clarification, PharmAthene shall not have any rights with respect to any
Excluded Patents under this Agreement unless the Parties enter into a separate
written agreement with respect thereto. For purposes of this definition, Medarex
Patents are not intended, and shall not be construed, to include any Patents
that are licensed to Medarex and its Affiliates under Section 3.1.2 of this
Agreement or under Section 2.1 of the applicable Unilateral Development and
Commercialization Agreement.

      "Medarex Technology" shall mean the Medarex Know-How and Medarex Patents.

      "Mice Materials" shall mean the HuMAb Mice, any parts or derivatives of
such mice, including hybridomas, cells, genetic material (including nucleotide
sequences (e.g., DNA, RNA, and complementary and reverse complementary
nucleotide sequences thereto, whether coding or non-coding) with respect to the
expression of an Antibody or fragment thereof, and any replicates or
modifications thereof or Improvements thereto (e.g., additions, deletions or
substitutions of nucleotides therein)), Antibodies, Antibody Products or other
biological materials derived directly or indirectly from the HuMAb Mice, but
excluding any Collaboration Antibodies and Antibody Materials related thereto.

      "Mice-Related Know-How" shall mean (a) any Information and Inventions with
respect to any Mice Materials or other biological materials derived directly or
indirectly from the HuMAb Mice, but excluding any Information and Inventions
that relate solely to the Exploitation of Collaboration Products (as
distinguished from the Exploitation of the Mice Materials), and (b) any
Information and Inventions with respect to the HuMAb Mice or the Additional
Mice, and the Exploitation thereof, but in each case excluding any Information
and Inventions to the extent covered or claimed by the Mice-Related Patents.

      "Mice-Related Patents" shall mean any Patents that claim or cover (a) Mice
Materials or other biological materials derived directly or indirectly from the
HuMAb Mice, and any Information and Inventions with respect to the foregoing,



but excluding any claims that relate solely to the Exploitation of Collaboration
Products (as distinguished from the Exploitation of the Mice Materials), and (b)
the HuMAb Mice or the Additional Mice, and the Exploitation thereof.

      "Mice-Related Technology" shall mean the Mice-Related Know-How and the
Mice-Related Patents.

      "MRC Agreement" shall mean that certain License Agreement entered into by
the Medical Research Council Institute of Animal Physiology and Genetics
Research of Babraham Hall and Marianne Bruggemann and GenPharm International,
Inc., effective October 1, 1993, as amended on August 12, 1994.

      "Non-Selling Party" shall mean with respect to each country of the
Territory the Party that is not the Selling Party.

      "Patent(s)" shall mean (a) all patents and patent applications, (b) any
substitutions, divisions, continuations, continuations-in-part, reissues,
renewals, registrations, confirmations, re-examinations, extensions,
supplementary protection certificates and the like, and any provisional
applications, of any such patents or patent applications, and (c) any foreign or
international equivalent of any of the foregoing.

      "PharmAthene Know-How" shall mean all Information and Inventions owned by
or in the Control of PharmAthene or its Affiliates as of the Effective Date or
at any time during the Term that are necessary or reasonably useful for the
Exploitation of the Collaboration Products and the Unilateral Products,
including the discovery, identification or characterization of Collaboration
Targets, or for the exercise of the PharmAthene Patents, in each case that are
not generally known, but excluding (w) any Excluded Know-How, and (x) any
Collaboration Know-How and Joint Know-How, (y) Patents and (z) any Production
Process Know-How. Subject to the foregoing exclusions, PharmAthene Know-How
shall include all: (a) biological, chemical, pharmacological, toxicological,
pharmaceutical, physical and analytical, clinical and safety data and
information related to the Collaboration Targets, the Collaboration Products or
the Unilateral Products, and (b) data and information with respect to, or
resulting from, assays and biological methodologies necessary or reasonably
useful for the Exploitation o the Collaboration Targets, the Collaboration
Products or the Unilateral Products. For purposes of this definition,



PharmAthene Know-How is not intended, and shall not be construed, to include any
Information and Inventions that are licensed to PharmAthene and its Affiliates
under Section 3.1.1 of this Agreement or under Section 2.1 of the applicable
Unilateral Development and Commercialization Agreement.

      "PharmAthene Patents" shall mean all of the Patents that PharmAthene and
its Affiliates own or Control as of the Effective Date and at any time during
the Term, that claim or cover any invention necessary or reasonably useful for
the Exploitation of the Collaboration Products or the Unilateral Products, but
excluding any Excluded Patents, Collaboration Patents, any Joint Patents and any
Production Process Patents. For purposes of this definition, PharmAthene Patents
are not intended, and shall not be construed, to include any Patents that are
licensed to PharmAthene and its Affiliates under Section 3.1.1 of this Agreement
or under Section 2.1 of the applicable Unilateral Development and
Commercialization Agreement.

      "PharmAthene Technology" shall mean the PharmAthene Know-How and
PharmAthene Patents.

      "Product Trademarks" shall mean the Trademarks developed for the
Collaboration Products by the Steering Committee, all packaging designs and
other trade dress used in connection with the Collaboration Products and such
other Trademarks relating thereto and any registrations thereof or any pending
applications relating thereto.

      "Production Process Development" shall mean the development of processes
and technology for the production, purification, evaluation, characterization,
stability assessment, vialing and distribution, and release of a Collaboration
Antibody or Collaboration Product.

      "Production Process Know-How" shall mean any Information and Inventions of
a Party with respect to the Production Process Development or the manufacture of
Antibody Products.

      "Production Process Patents" shall mean any Patents of a Party that claim
or cover the Production Process Development or the manufacture of Antibody
Products.

      "Production Process Technology" shall mean any Production Process Know-How
and Production Process Patents of a Party.



      "Regulatory Approval" shall mean any and all approvals (including pricing
and reimbursement approvals), licenses, registrations or authorizations of any
Regulatory Authority, necessary for the Exploitation of a product in a country,
including any (a) approval for a product (including any INDs, BLAs and
supplements and amendments thereto); (b) pre- and post-approval marketing
authorizations (including any prerequisite manufacturing approval or
authorization related thereto); (c) labeling approval; and (d) technical,
medical and scientific licenses.

      "Regulatory Authority" shall mean any applicable government entities
regulating or otherwise exercising authority with respect to the Exploitation of
the Collaboration Products or Unilateral Products, as applicable, in the
Territory.

      "Regulatory Documentation" shall mean all applications, registrations,
licenses, authorizations and approvals, all correspondence submitted to or
received from Regulatory Authorities (including minutes and official contact
reports relating to any communications with any Regulatory Authority), all
supporting documents and all clinical studies and tests, relating to any
product, and all data contained in any of the foregoing, including all
regulatory drug lists, advertising and promotion documents, adverse event files
and complaint files, but excluding any and all Regulatory Approvals with respect
to such product.

      "Selling Party" means, PharmAthene unless otherwise agreed to in writing
by both Parties.

      "Technology" shall mean, with respect to Medarex, the Medarex Technology
and, with respect to PharmAthene, the PharmAthene Technology and, when used
without reference to a specific Party, the Medarex Technology and the
PharmAthene Technology.

      "Territory" shall mean the entire world.

      "Third Party" shall mean any party other than Medarex, PharmAthene or
their respective Affiliates.

      "Trademark" shall include any word, name, symbol, color, designation or
device or any combination thereof, including any trademark, trade dress, service
mark, service name, brand mark, trade name, brand name, logo or business symbol.

      Terms Defined Elsewhere in this Agreement. The following terms are defined
in the applicable Sections of this Agreement:



Defined Term                                        Section

Authorized Commercialization Expenses               Section 4.1.1

Authorized R&D Expenses                             Section 4.1.2

Binding Sequence                                    Section 1.2.3(b)

Biological Materials                                Section 7.5.3

Collaboration                                       Section 1.1

Collaboration Antibody                              Section 1.2.3(a)

Collaboration  Expenses                             Section 4.5.1

Collective Opinion of Counsel                       Section 7.4.1

Commercialization Expenses                          Appendix B

Confidential Information                            Section 6.1

Discontinued Product                                Section 5.1.2(a)

Dormant Product                                     Section 5.3

Effective Date                                      Preamble

Election Notice                                     Section 5.1.2(a)

Expert                                              Section 2.3.4(a)

Indemnification Claim Notice                        Section 9.5.1

Indemnified Party                                   Section 9.5.1

Indemnitee                                          Section 9.5.1

Infringement Suit                                   Section 7.4.2

Initial PharmAthene Contribution                    Section 1.3.2

Joint Know-How                                      Unilateral Development and
                                                    Commercialization Agreements

Joint Patents                                       Unilateral Development and
                                                    Commercialization Agreements

Joint Technology                                    Unilateral Development and
                                                    Commercialization Agreements

Lead Collaboration Antibody                         Section 1.2.4

Losses                                              Section 9.2



Defined Term                                        Section

Medarex Research Activities                         Section 1.2.2

Net Sales                                           Appendix B

Operating Profits, Operating Losses                 Appendix B

Opt-Out                                             Section 5.1.1

Opt-Out Notice                                      Section 5.1.1

Opting-Out Party                                    Section 5.1.1

Other Operating (Income)/Expense                    Appendix B

Party                                               Preamble

PharmAthene Activities                              Section 1.2.2

Project Budget                                      Section 1.3

Project Plan                                        Section 1.3

Pursuing Party                                      Section 5.1.2(a)

Research and Commercialization

Agreement                                           Section 3.3.2

Reversion Target                                    Section 1.7

Steering Committee                                  Section 2.1.1

Term                                                Section 8.1

Third-Party Claims                                  Section 9.2

Third-Party Payments                                Appendix B

Unilateral Development and

Commercialization Agreement                         Section 5.1.2(a)

Unilateral Product                                  Unilateral Development and
                                                    Commercialization Agreements

Withholding Taxes                                   Section 4.4



                                   APPENDIX B

                              Financial Definitions

            This Appendix to the COLLABORATION AGREEMENT ("Agreement") effective
as of November 29, 2004, by and between PHARMATHENE, INC. ("PharmAthene") and
MEDAREX, INC., on behalf of itself and its wholly owned subsidiary, GENPHARM
INTERNATIONAL, INC., (collectively, "Medarex") provides agreed upon definitions
of financial terms applicable to the Parties for purposes of the Agreement. All
capitalized terms used herein without definition shall have the meanings
ascribed thereto in the Agreement, unless otherwise expressly provided herein.

            The contents of this Appendix B are hereby incorporated into the
Agreement and are governed by the terms and conditions of the Agreement,
including the confidentiality provisions set forth therein.

            It is the intention of the Parties that the interpretation of these
definitions will be in accordance with GAAP.

      1. "Net Sales" shall mean, for any period, the gross amount invoiced by
the Parties and their Affiliates and sublicensees for the sale of Collaboration
Product(s) or Unilateral Product(s), as applicable, to Third Parties, less
deductions for: (a) normal and customary trade, quantity and cash discounts and
sales returns and allowances (other than allowances for doubtful accounts),
including (i) those granted on account of price adjustments, billing errors,
rejected goods, damaged goods, returns and rebates, (ii) administrative and
other fees and reimbursements and similar payments directly related to the sale
or delivery of Collaboration Product(s) or Unilateral Product(s), as applicable,
paid to wholesalers and other distributors, buying groups, pharmacy benefit
management organizations, health care insurance carriers and other institutions,
(iii) allowances, rebates and fees directly related to the sale or delivery of
Collaboration Product(s) or Unilateral Product(s), as applicable, paid to
distributors and (iv) chargebacks; (b) freight, postage, shipping and insurance



costs to the extent that such items are included in the gross amount invoiced;
(c) customs and excise duties and other duties related to the sales to the
extent that such items are included in the gross amount invoiced; (d) rebates
and similar payments made with respect to sales paid for or reimbursed by any
governmental or regulatory authority such as, by way of illustration and not in
limitation of the Parties' rights hereunder, Federal or state Medicaid, Medicare
or similar state program or equivalent foreign governmental program; (e) sales
and other taxes and duties (including withholding taxes established by
individual country treaties not reimbursed or creditable) directly related to
the sale or delivery of Collaboration Product(s) or Unilateral Product(s), as
applicable, (but not including taxes assessed against the income derived from
such sale); (f) distribution costs and expenses to the extent that such items
are included in the gross amount invoiced; and (g) any such invoiced amounts
that are not collected by the Parties or their Affiliates or sublicensees;
provided, however, that an amount shall be deducted only once regardless of how
many categories may apply to it. Any of the deductions listed above that
involves a payment by a Party or its Affiliates or sublicensees shall be taken
as a deduction in the calendar quarter in which the payment is accrued by such
entity. Deductions pursuant to subsection (g) above shall be taken in the
calendar quarter in which such sales are no longer recorded as a receivable. For
purposes of determining Net Sales, the Collaboration Product(s) or Unilateral
Product(s), as applicable, shall be deemed to be sold when invoiced and a "sale"
shall not include transfers or dispositions for charitable, promotional,
pre-clinical, clinical, regulatory or governmental purposes.

            For purposes of calculating Net Sales of Collaboration Products,
sales between or among the Parties or their Affiliates shall be excluded from
the computation of Net Sales, but sales of Collaboration Products by a Party or
its Affiliates (other than sales pursuant to a supply agreement entered into
pursuant to Section 1.2.8 or 1.6) to sublicensees or Third Parties shall be
included in the computation of Net Sales.

            For purposes of the Unilateral Development and Commercialization
Agreements, "Net Sales" shall be deemed to be Net Sales of Unilateral Products.
For purposes of calculating Net Sales of Unilateral Products, sales between or
among the Pursuing Party or its Affiliates or its sublicensees shall be excluded
from the computation of Net Sales, but sales by the Pursuing Party or its


                                      B-2


Affiliates or, subject to Section 3.2.3 of the applicable Unilateral Development
and Commercialization Agreement, its sublicensees to Third Parties shall be
included in the computation of Net Sales.

      2. "Operating Profits" and, with correlative meaning, "Operating Losses",
shall mean, with respect to a Collaboration Product, Net Sales of such
Collaboration Product by a Party or its Affiliates (but excluding Net Sales by a
Party's sublicensees) less (a) Authorized Commercialization Expenses (to the
extent not already deducted from Net Sales) and (b) Other Operating
(Income)/Expense with respect to such Collaboration Product, all for a given
period.

      3. "Commercialization Expenses" shall mean all Cost of Sales, Distribution
Costs, Marketing Costs, Sales Costs, General and Administrative Costs (in each
case, to the extent not deducted from Net Sales under Section 1 hereof) of the
Parties and their Affiliates with respect to the applicable Collaboration
Products approved by the Steering Committee in, and in accordance with, the
applicable Project Budget.

            3.1 "Cost of Sales" shall mean (a) the supply price with respect to,
      and any other direct costs and expenses of acquiring, including costs of
      transport, customs, clearance and storage of product (if necessary),
      freight, customs, duty, and insurance borne by the Parties (to the extent
      not included in such supply price) of a Collaboration Product, and (b) any
      Third-Party Payments with respect to the sale of such Collaboration
      Product, to the extent not included in such supply price or reimbursed by
      a Third Party.

                  3.1.1 "Third-Party Payments" shall mean intellectual property
            and technology acquisition and license payments (including
            royalties, license fees, milestone payments and other payment
            obligations) made to Third Parties with respect to a Collaboration
            Product during the Term pursuant to activities under this Agreement,
            only to the extent that such payment obligations are approved by the
            Steering Committee pursuant to Section 2.1.2(d) and/or Section
            7.4.1. For purposes of clarity, any payments made pursuant to the
            MRC Agreement and/or the Kirin Agreement with respect to a
            Collaboration Product shall be Third-Party Payments.


                                      B-3


            3.2 "Distribution Costs" shall mean the direct costs and expenses
      specifically identifiable to the distribution of a Collaboration Product a
      Party including customer services, collection of data about sales to
      hospitals and other end users, order entry, billing, shipping, credit and
      collection and other such activities, but in any case, not including any
      costs or expenses which are reimbursed by any Third Party.

            3.3 "Marketing Costs" shall mean, with respect to a Collaboration
      Product, the direct costs and expenses of marketing, promotion,
      advertising, promotional materials, professional education,
      product-related public relations, relationships with opinion leaders and
      professional societies, market research (before and after Regulatory
      Approval of a Collaboration Product), healthcare economics studies,
      post-marketing studies required to obtain, maintain or expand Regulatory
      Approvals of such Collaboration Product (to the extent not included in
      Authorized R&D Expenses) and other similar activities related to such
      Collaboration Product and approved by the Steering Committee. Such costs
      and expenses will include both internal costs (e.g., salaries, benefits,
      supplies and materials, etc.) and costs of outside services and expenses
      (e.g., consultants, agency fees, meeting costs, etc.). Marketing Costs
      shall also include costs and expenses directly related to obtaining
      reimbursement from payers and the cost of obtaining sales and marketing
      data (to the extent not included in the Distribution Costs).
      Notwithstanding anything to the contrary in the foregoing, Marketing Costs
      shall specifically exclude the cost and expense of activities that promote
      a Party's business as a whole without being specific to a Collaboration
      Product (e.g., corporate image advertising).

            3.4 "Sales Costs" shall mean, with respect to a Collaboration
      Product, direct costs and expenses incurred by either Party or for its
      account and specifically identifiable to the sales efforts for such
      Collaboration Product in all markets in the Territory including the
      managed care market. Sales Costs shall include costs and expenses
      associated with sales representatives for a Collaboration Product,
      including the cost of compensation, benefits, travel, supervision,
      training, sales meetings, and other sales expenses for such sales


                                      B-4


      representatives. Notwithstanding anything to the contrary in the
      foregoing, Sales Costs shall exclude costs and expenses associated with
      the start-up of a Party's sales force, including recruiting, relocation
      and other similar costs and expenses.

            3.5 "General and Administrative Costs" shall mean, with respect to a
      Collaboration Product, costs equal to ten percent (10%) of the sum of the
      Distribution Costs, Marketing Costs and Sales Costs related to such
      Collaboration Product in any country, of the Parties, in the aggregate,
      but only to the extent these costs are chargeable under the Agreement.
      Each Party shall have the right to charge General and Administrative Costs
      with respect to its Distribution Costs, Marketing Costs and Sales Costs
      chargeable under the Agreement. For the avoidance of doubt, neither Party
      shall charge the Collaboration for overhead with respect to the
      commercialization of a Collaboration Product other than General and
      Administrative Costs as provided above, except to the extent that such
      overhead charges are specifically set forth in the applicable Project
      Budget.

      4. "Other Operating (Income)/Expense" shall mean (a) payments and other
consideration received from Third Parties with respect to the commercialization
of a Collaboration Product, including any license fees, milestone payments,
royalties or other payments (including the fair market value of any
consideration received) in connection with the license, sublicense, assignment
or transfer of rights with respect to such Collaboration Product (to the extent
not included in Net Sales but excluding any amounts received by Medarex in
connection with royalties payable by the Parties under the MRC Agreement with
respect to Collaboration Products), (b) any Third-Party Payments with respect to
the sale of such Collaboration Product, to the extent not included in such
supply price or reimbursed by a Third Party, and (c) any other operating income
received from or expense owed to Third Parties in connection with an activity
that is not part of the primary business activity of a Party under the Agreement
but is considered and approved by the Parties as income or expense for purposes
of the Agreement, which may include: (i) the cost and expense of prosecuting,
maintaining and enforcing patent, trademark and other intellectual property
rights and defending against claims of infringement; and (ii) product liability
insurance to the extent the Parties obtain a joint policy pursuant to Section


                                      B-5


9.1, and (c) other expenses indirectly associated with the commercialization of
a Collaboration Product as approved by the Steering Committee in the applicable
Project Budget.


                                      B-6


                                   APPENDIX C

                              Collaboration Target

      This Appendix to the COLLABORATION AGREEMENT ("Agreement") effective as of
November 29, 2004, by and between PHARMATHENE, INC. ("PharmAthene") and MEDAREX,
INC., on behalf of itself and its wholly owned subsidiary, GENPHARM
INTERNATIONAL, INC., (collectively, "Medarex") sets forth the Collaboration
Target.

      The contents of this Appendix C are hereby incorporated into the Agreement
and are governed by the terms and conditions of the Agreement, including the
confidentiality provisions set forth therein.

      [***]

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***Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.



                                   APPENDIX D

                           Lead Collaboration Antibody

                                      [***]

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***Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.



                                   APPENDIX E

                              Initial Project Plan

                                      [***]

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***Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                      G-2


                                  APPENDIX F-1

             Unilateral Development and Commercialization Agreement

[Pursuant to the terms of the Collaboration Agreement effective as of November
29, 2004 between PharmAthene, Inc. and Medarex, Inc., on behalf of itself and
its wholly owned subsidiary GenPharm International, Inc., this document is not
currently operative.]


                                      G-3


                                  APPENDIX F-2

             Unilateral Development and Commercialization Agreement

[Pursuant to the terms of the Collaboration Agreement effective as of November
29, 2004 between PharmAthene, Inc. and Medarex, Inc., on behalf of itself and
its wholly owned subsidiary GenPharm International, Inc., this document is not
currently operative.]



                                   APPENDIX G

                     Determination of Allocation Percentage

A.    The initial Allocation Percentage of Medarex shall be 100% and the initial
      Allocation Percentage of PharmAthene shall be 0%. The sum of the Parties'
      Allocation Percentages shall at all times equal 100%, and any increase in
      one Party's Allocation Percentage shall be deemed a corresponding decrease
      in the other Party's Allocation Percentage in the same amount.

B.    Pursuant to Section 1.3.2 of this Agreement, PharmAthene will make the
      Initial PharmAthene Contribution of Two Million Dollars (US $2,000,000) to
      Medarex within fifteen (15) days of Effective Date such Initial
      PharmAthene Contribution to be used by Medarex solely for purposes of
      funding activities specified in the initial Project Plan outlined in
      Appendix E. Upon Medarex's receipt of the Initial PharmAthene
      Contribution, PharmAthene's Allocation Percentage will be increased to
      20%.

C.    In order to maintain PharmAthene's Allocation Percentage at 20% following
      Medarex's receipt of the Initial PharmAthene Contribution, PharmAthene
      shall contribute to the Collaboration no less than the amount (dollar for
      dollar) received by Medarex from the U.S. Government as reimbursement of
      the costs incurred by the Collaboration in the performance of the
      activities outlined in the two Government Awards granted to Medarex by the
      National Institutes of Health/National Institute of Allergy and Infectious
      Disease (NIH/NIAID) (the " PharmAthene Government Grant Match
      Contribution"). Such PharmAthene Government Grant Match Contribution will
      due and payable to Medarex by PharmAthene upon receipt by PharmAthene of
      an invoice from Medarex detailing the funds received by Medarex from the
      U.S. Government as reimbursement for costs incurred in performance of the
      activities outlined in the Government Awards, and will be used to offset
      expenses incurred by the Collaboration that are not fully covered by the
      monies received as reimbursement from the Government Awards awarded to
      Medarex. The PharmAthene Government Grant Match Contribution shall not be
      included in the calculation of PharmAthene's Allocation Percentage for
      purposes of Paragraph D below.


                                      G-2


D.    PharmAthene's Allocation Percentage will increase by 10% for every
      $5,000,000 spent in the Collaboration after the Effective Date and in
      excess of the Initial PharmAthene Contribution and the PharmAthene
      Government Grant Match Contribution up to a maximum Allocation Percentage
      of: (i) fifty percent (50%) in the absence of a Government Contract and
      (ii) sixty percent (60%) if a Government Contract is secured. Any monies
      received by Medarex as a result of a Government Award which are based on
      the Government Awards awarded to Medarex as of the Effective Date shall
      not be included as money spent in the Collaboration by PharmAthene.

E.    In the event that revenue is received in connection with a Government
      Contract that is awarded to the Selling Party prior to PharmAthene
      contributing an amount in excess of the sum of (i) the Initial PharmAthene
      Contribution and (ii) the amount of PharmAthene Government Grant Match
      Contribution (such sum, the "Milestone Trigger Amount"), then PharmAthene
      shall make a milestone payment in the amount of One Million Five Hundred
      Dollars ($1,500,000) to Medarex within fifteen (15) days after the receipt
      of revenue from such Government Contract; provided that if PharmAthene's
      contribution at the time that such revenue is received is between ninety
      percent (90%) and one hundred percent (100%) of the Milestone Trigger
      Amount, then in lieu of making such milestone payment, PharmAthene shall
      pay to Medarex the difference between (x) the Milestone Trigger Amount and
      (b) the amount contributed by PharmAthene at the time that such revenue is
      received (such difference, the "Make-Up Payment"). This milestone payment
      (or Make-Up Payment") shall not be considered for purposes of the
      calculation of PharmAthene's Allocation Percentage, and PharmAthene will
      not be reimbursed for such milestone payment (or Make-Up Payment) under
      Section 4.1.2 of the Agreement. In the event that PharmAthene has funded
      the activities of the Collaboration in an amount greater than the sum of
      (i) the Initial PharmAthene Contribution and (ii) the PharmAthene
      Government Grant Match Contribution, then no milestone payment or Make-Up
      Payment shall be owed to Medarex.


                                      G-3


F.    Upon compliance with the payment obligations set forth in Paragraph E
      above, PharmAthene's Allocation Percentage will be adjusted to 50%.


                                      G-4

EX-10.24

                                                                   Exhibit 10.24

      CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT HAS BEEN
          OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
          COMMISSION (THE "SEC") PURSUANT TO A REQUEST FOR CONFIDENTIAL
                 TREATMENT WITH RESPECT TO THE OMITTED PORTIONS.
                     OMITTED PORTIONS ARE INDICATED BY [***]

                         RESEARCH AND LICENSE AGREEMENT

      This Agreement ("AGREEMENT") is made and entered into August 8, 2006 (the
"EFFECTIVE DATE") by and between Nektar Therapeutics AL, Corporation, having its
principal place of business at 490 Discovery Drive, Huntsville, AL 35806
("NEKTAR AL"); and PharmAthene, Inc. having its principal place of business at
175 Admiral Cochrane Drive, Suite 101, Annapolis, MD 21401 ("COMPANY"). NEKTAR
AL and COMPANY may be referred to herein individually as a "PARTY" and
collectively as the "PARTIES."

                                    RECITALS

WHEREAS, COMPANY is in the business of developing, making, marketing and selling
pharmaceutical products for the treatment of diseases;

WHEREAS, NEKTAR AL has proprietary technology useful for attaching
poly(ethylene) glycol-based molecules to pharmaceutical compounds;

WHEREAS, COMPANY desires to obtain a license under certain of NEKTAR AL's
intellectual property rights and proprietary technology to make, have made, use,
sell, offer for sale and import the SELECTED PRODUCT (as defined herein)
throughout the world, under the terms and conditions specified herein;

WHEREAS, NEKTAR AL is also engaged in the business of performing research in
relation to REAGENTS and CONJUGATES (as defined herein) and manufacturing bulk
quantities of REAGENTS used in the manufacture of pharmaceutical products;

WHEREAS, COMPANY desires NEKTAR AL to perform research in relation to REAGENTS
and CONJUGATES, and NEKTAR AL agrees to undertake such research, all in
accordance with and subject to the terms and conditions specified below; and


                                                                    Page 1 of 70


NOW, THEREFORE, in consideration of the foregoing and the covenants and promises
contained in this AGREEMENT, the PARTIES agree as follows:

                                    AGREEMENT

1. Definitions

1.1 "AFFILIATE" means, with respect to any person or entity, any other person or
entity that directly or indirectly controls, is controlled by, or is under
common control with, such person or entity. For purposes of this definition
only, "control," "controlled by" and "under common control with" shall mean the
possession of the power to direct or cause the direction of the management and
policies of an entity, whether through the ownership of voting stock or
partnership interest, by contract or otherwise. In the case of a corporation,
the direct or indirect ownership of fifty percent (50%) or more of its
outstanding voting shares or the ability otherwise to elect a majority of the
board of directors or other managing authority of the entity shall in any event
be deemed to confer control, it being understood that the direct or indirect
ownership of a lesser percentage of such shares shall not necessarily preclude
the existence of control.

1.2 "BIODEFENSE SALES" means sales of SELECTED PRODUCT for the purpose of the
treatment or prophylaxis of organophosphate poisoning by a nerve agent (i) to a
government or agency thereof and/or (ii) to non-government entities that are
required by a government or agency thereof to purchase SELECTED PRODUCT provided
that the price paid by such non-government entities does not exceed ([***]%)
(net of all discounts) of the price paid by the federal government in the
country where such sale occurs.

1.3 "BLA" means a Biologics License Application filed with the FDA or any
foreign equivalent filed with the regulatory authorities in a country or
territory to obtain MARKETING AUTHORIZATION for SELECTED PRODUCT in such country
or territory.

- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                                                    Page 2 of 70


1.4 "CLAIMS" has the meaning set forth in Section 10.1.1.

1.5 "COMBINATION PRODUCT" means a product that contains one or more clinically
active components that are not SELECTED PRODUCT in addition to the SELECTED
PRODUCT.

1.6 "COMMERCIAL SALES" has the meaning set forth in Section 2.8.2.

1.7 "COMMERCIALLY REASONABLE EFFORTS" means, with respect to the research,
development or commercialization of the SELECTED PRODUCT under this AGREEMENT,
as the case may be, the efforts and resources typically used by pharmaceutical
companies for an internally-developed product of similar commercial potential at
a similar stage in its development or commercialization lifecycle, without
regard to the particular circumstances of a PARTY, including any other product
opportunities of such PARTY.

1.8 "COMPANY CORE TECHNOLOGY" means: (i) the composition of the THERAPEUTIC
AGENT; (ii) methods of using the THERAPEUTIC AGENT; and/or (iii) methods of
making the THERAPEUTIC AGENT but, in each case, specifically excluding
PEGYLATION of any REAGENT (including SELECTED REAGENT) to or with the
THERAPEUTIC AGENT.

1.9 "COMPANY CORE TECHNOLOGY INVENTIONS" has the meaning set forth in Section
11.5.

1.10 "COMPANY INDEMNITEE" has the meaning set forth in Section 10.1.1.

1.11 "COMPANY KNOW-HOW" means all KNOW-HOW CONTROLLED by COMPANY that is
necessary or useful for NEKTAR AL in connection with NEKTAR AL's performance of
its obligations under this AGREEMENT. COMPANY PATENT RIGHTS are excluded from
the definition of COMPANY KNOW-HOW.


                                                                    Page 3 of 70


1.12 "COMPANY PATENT RIGHTS" means all PATENTS and PATENT APPLICATIONS
CONTROLLED by COMPANY that are necessary for NEKTAR AL in connection with NEKTAR
AL's performance of its obligations under this AGREEMENT.

1.13 "CONFIDENTIAL INFORMATION" has the meaning set forth in Section 7.1.

1.14 "CONJUGATE" has the meaning set forth in Section 3.3.

1.15 "CONTROL(LED)" means the ability to grant a license or sublicense as
provided for herein without violating the terms of any agreement or other
arrangement with any THIRD PARTY.

1.16 "DISCLOSING PARTY" means the PARTY disclosing CONFIDENTIAL INFORMATION to
the other PARTY hereunder.

1.17 "DOLLAR(S)" means United States dollars.

1.18 "EMEA" means the European Medicines Agency, and any successor agency
thereto, having the administrative authority to regulate the marketing of human
pharmaceutical products, biological therapeutic products and delivery systems in
the European Union.

1.19 "FDA" means the United States Food and Drug Administration, or any
successor entity that may be established hereafter which has substantially the
same authority or responsibility currently vested in the United States Food and
Drug Administration.

1.20 "FIELD" means the treatment, prevention or diagnosis of human diseases,
disorders or conditions (other than Hemophilia A).

1.21 "FIRST COMMERCIAL SALE" means, with respect to SELECTED PRODUCT, the first
sale by COMPANY or its SUBLICENSEE to a THIRD PARTY following receipt of
MARKETING AUTHORIZATION in the country of sale; provided, however, that SELECTED
PRODUCT shipped by COMPANY or its SUBLICENSEE to a THIRD PARTY prior to receipt
of MARKETING AUTHORIZATION therefor in a particular country where such SELECTED
PRODUCT is intended for sale, shall be deemed for the purposes hereof a FIRST
COMMERCIAL SALE to the extent such SELECTED PRODUCT is sold to a THIRD PARTY for
sale in that country after such MARKETING AUTHORIZATION is obtained.


                                                                    Page 4 of 70


1.22 "INQUIRIES" has the meaning set forth in Section 8.3.

1.23 "INVENTIONS" means any and all ideas, concepts, methods, procedures,
processes, improvements, inventions and discoveries, whether or not patentable,
that are conceived or made after the EFFECTIVE DATE during and in the course of
the performance of activities conducted under this AGREEMENT including the
development or manufacture of SELECTED PRODUCT.

1.24 "JOINT INVENTION" has the meaning set forth in Section 11.3.

1.25 "JOINT PATENT APPLICATIONS" has the meaning set forth in Section 11.7.

1.26 "KNOW-HOW" means all technical, scientific and other know-how, data,
materials, information, trade secrets, ideas, formulae, inventions, discoveries,
processes, machines, manufactures, compositions of matter, improvements,
protocols, techniques, works of authorship, and results of experimentation and
testing (whether or not patentable) in written, electronic, oral or any other
form.

1.27 "LAW(S)" means any local, state or federal rule, regulation, statute or law
in the United States or any foreign country relevant to the activities
undertaken pursuant to this AGREEMENT or applicable to either of the PARTIES
with respect to any matters set forth herein.

1.28 "MANAGING COMMITTEE" means the committee described in Section 14.1.

1.29 "MARKETING AUTHORIZATION" means the requisite governmental approval for the
marketing and sale of SELECTED PRODUCT in a given country.

1.30 "MSA" has the meaning set forth in Section 4.9.


                                                                    Page 5 of 70


1.31 "NEKTAR AL CORE TECHNOLOGY" means: (i) the composition of REAGENTS
(including SELECTED REAGENT); (ii) methods of using REAGENTS (including SELECTED
REAGENT) by themselves or in combination; (iii) methods of making, processing,
analyzing or characterizing REAGENTS (including SELECTED REAGENT) or products
(including SELECTED PRODUCT) incorporating REAGENT by means of covalent chemical
bonding; (iv) methods of attaching one or more REAGENTS (including SELECTED
REAGENT) to or associating one or more REAGENTS (including SELECTED REAGENT)
with or to any therapeutic agent (including the THERAPEUTIC AGENT); (v) methods
of directing or determining the point of attachment of one or more REAGENTS
(including SELECTED REAGENT) to or associating one or more REAGENTS (including
SELECTED REAGENT) with any therapeutic agent (including the THERAPEUTIC AGENT);
(vi) the chemical structure of product (including the chemical structure of
SELECTED PRODUCT) obtained by attaching or associating one or more REAGENTS
(including by PEGYLATION and including SELECTED REAGENT) to or with any
therapeutic agent (including the THERAPEUTIC AGENT) but for the avoidance of
doubt, excluding the chemical structure and composition of THERAPEUTIC AGENT;
and (vii) methods of making, formulating, combining, processing, using,
analyzing or characterizing two (2) or more REAGENTS (including SELECTED
REAGENT) in combination.

1.32 "NEKTAR AL CORE TECHNOLOGY INVENTIONS" has the meaning set forth in Section
11.4.

1.33 "NEKTAR AL INDEMNITEE" has the meaning set forth in Section 10.1.2.

1.34 "NEKTAR AL KNOW-HOW" means all KNOW-HOW that

      (a) is owned in whole or in part by NEKTAR AL, or licensed to NEKTAR AL as
of the EFFECTIVE DATE; or

      (b) that becomes owned in whole or in part by NEKTAR AL during the TERM;
or


                                                                    Page 6 of 70


      (c) that is licensed to NEKTAR AL during the TERM with the right to grant
a sublicense;

in each case that is necessary or useful for COMPANY to develop, make, have
made, use, sell, offer for sale or import SELECTED PRODUCT pursuant to the
license granted under Sections 2.1 and 3.2 of this AGREEMENT, but excluding
KNOW-HOW for manufacture of SELECTED REAGENT and/or methods for delivery of
SELECTED PRODUCT to a patient by a means other than injection.

1.35 "NEKTAR AL LICENSED TECHNOLOGY" means, collectively, the NEKTAR AL PATENT
RIGHTS and NEKTAR AL KNOW-HOW.

1.36 "NEKTAR AL MATERIALS" has the meaning set forth in Section 3.3.

1.37 "NEKTAR AL PATENT RIGHTS" means all PATENTS and PATENT APPLICATIONS (a)
that are owned in whole or in part by NEKTAR AL, or licensed to NEKTAR AL, as of
the EFFECTIVE DATE, (b) that become owned in whole or in part by NEKTAR AL at
any time during the TERM, or (c) that are licensed to NEKTAR AL after the
EFFECTIVE DATE, with the right to grant a sublicense, in each of the foregoing
cases ((a), (b) and (c)), to the extent that such PATENTS or PATENT APPLICATIONS
are infringed (in the case of a pending patent application, would be infringed
if granted) by making, having made, using, selling, offering to sell or
importing SELECTED PRODUCT and/or the SELECTED REAGENT in accordance with the
terms of the license granted under Section 2.1 or Section 3.2 of this AGREEMENT.

1.38 "NET SALES" means the amount invoiced (or in the absence of an invoice,
received) by COMPANY, its AFFILIATES or SUBLICENSEES for the sale to THIRD
PARTIES (including without limitation, distributors) of SELECTED PRODUCT less
the following, to the extent included in the amount invoiced:

            (i) trade, quantity and/or cash discounts, allowances or rebates,
including promotional or similar discounts or rebates and discounts or rebates
to governmental or managed care organizations, in each case to the extent
reasonable and customary;


                                                                    Page 7 of 70


            (ii) credits or allowances with respect to SELECTED PRODUCT by
reason of rejection, defects, recalls or returns, or chargebacks;

            (iii) an allowance for bad debt not to exceed ([***] percent
([***]%)) of NET SALES, provided such amounts are included in NET SALES if and
when subsequently collected;

            (iv) any tax, tariff, duty or government charge (including any
sales, value added, excise or similar tax or government charge, but excluding
any income tax) levied on the sale, transportation or delivery of any SELECTED
PRODUCT; and

            (v) any charges for freight, postage, shipping or transportation, or
for insurance (if charged to the purchaser).

      NET SALES shall be deemed to accrue upon the date of the invoice for
SELECTED PRODUCT. In addition, NET SALES by COMPANY hereunder are subject to the
following:

            (a) In the case of pharmacy incentive programs, hospital performance
      incentive program charge backs, disease management programs, similar
      programs or discounts on "bundles" of products, all discounts and the like
      shall be allocated among products on the basis on which such discounts and
      the like were accrued, or if such basis cannot be determined,
      proportionately to the list prices of such products; and

            (b) In the case of any sale or other disposal of SELECTED PRODUCT by
      COMPANY to an AFFILIATE, for resale, the NET SALES shall be calculated as
      above on the value charged or invoiced on the first arm's length sale to a
      THIRD PARTY.

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      If the SELECTED PRODUCT is sold as part of a COMBINATION PRODUCT, then the
NET SALES from the COMBINATION PRODUCT, for the purposes of determining royalty
payments, shall be determined by multiplying the NET SALES of the COMBINATION
PRODUCT (as determined using the standard NET SALES definition), during the
applicable royalty reporting period, by the fraction, A/A+B, where A is the
average unit net sales price of the SELECTED PRODUCT in the applicable country,
where net sales is calculated in the same manner as NET SALES, when sold
separately in finished form and B is the average unit net sales price in the
same country (net sales being calculated in the same manner as NET SALES) of
products that include only the therapeutically active ingredient other than the
SELECTED PRODUCT that is included in the COMBINATION PRODUCT ("OTHER PRODUCTS")
when such OTHER PRODUCTS are sold separately in finished form at the same dosage
levels, in each case during the applicable royalty reporting period or, if sales
of both the SELECTED PRODUCT, and the OTHER PRODUCT(S) did not occur in the same
country in such period, then in the most recent royalty reporting period in
which sales of both occurred. In the event that such average unit sale price
cannot be determined for both the SELECTED PRODUCT and all such OTHER PRODUCT(S)
included in the COMBINATION PRODUCT, NET SALES for the purposes of determining
royalty payments shall be calculated by multiplying the NET SALES of the
COMBINATION PRODUCT by the fraction of C/C+D where C is the fair market value of
the SELECTED PRODUCT, and D is the fair market value of all OTHER PRODUCTS
included in the COMBINATION PRODUCT, as agreed by the PARTIES as follows:
COMPANY shall initially make a reasonable determination of such fair market
values for purposes of its royalty reporting and payments and shall advise
NEKTAR AL of its basis for such determination. NEKTAR AL shall have the right to
review such COMPANY determination and supporting data with respect to fair
market value, and to notify COMPANY if it disagrees with such determination. If
NEKTAR AL does not agree with such determination and if the PARTIES are unable
to agree in good faith as to such respective fair market values, then the
determination of fair market value shall be determined by an independent THIRD
PARTY.


                                                                    Page 9 of 70


      NET SALES will be determined in accordance with GAAP consistently applied.

1.39 "NON-DISCLOSURE AGREEMENT" means that agreement entered into between the
PARTIES on July 15, 2005 providing for confidential treatment of the PARTIES'
information.

1.40 "PATENT" means: (i) any letters patent and utility models including any
extension, substitution, registration, confirmation, reissue, supplemental
protection certificate, re-examination or renewal thereof; and (ii) to the
extent valid and enforceable rights are granted by a governmental authority
thereunder, a PATENT APPLICATION (and in each case any foreign counterpart
thereto).

1.41 "PATENT APPLICATION" means an application for letters patent, including a
provisional application, converted provisional application, continuation
application, a continued prosecution application, a continuation-in-part
application, a divisional application, a re-examination application, and a
reissue application (and in each case any foreign counterpart thereto).

1.42 "PEG" means poly(ethylene) glycol or a derivative thereof.

1.43 "PEGYLATION," with correlative meanings "PEGYLATED" or to "PEGYLATE", means
covalent chemical bonding of any REAGENT (including SELECTED REAGENT and
including covalent chemical bonding through linking groups) with or to another
material or materials. Such materials include, without limitation, proteins,
peptides, oligonucleotides, other biomolecules, small molecules, therapeutic
agents (including THERAPEUTIC AGENT), diagnostic agents, imaging agents and
detectable labels. Additional materials that may be PEGYLATED include without
limitation, polymers, liposomes, films, chemical separation and purification
surfaces, solid supports, metal/metal oxide surfaces and other surfaces such as,
by way of example but not limitation, those on implanted devices, and equipment,
where a REAGENT is covalently chemically bonded to one or more reactive
molecules on the surface of such device or equipment. "PEGYLATION" shall include
the synthesis, derivatization, characterization, and modification of PEG for


                                                                   Page 10 of 70


such purposes, together with the synthesis, derivatization, characterization,
and modification of the raw materials and intermediates for the manufacture of
REAGENTS (including SELECTED REAGENT) or products (including SELECTED PRODUCT)
incorporating such REAGENT by means of covalent chemical bonding, and all
methods of making and using each and all of the foregoing.

1.44 "PHASE I CLINICAL TRIAL" means a study in humans, conducted in accordance
with 21 C.F.R. ss. 312.21(a), as amended from time to time or any successor
regulation thereto, including, as applicable, the corresponding regulation in
jurisdictions other than the United States.

1.45 "PHASE III CLINICAL TRIAL" means a study in humans, conducted in accordance
with 21 C.F.R. ss. 312.21(c) as amended from time to time or any successor
regulation thereto, including, as applicable, the corresponding regulation in
jurisdictions other than the United States.

1.46 "PLAN" means the work plan attached hereto as Schedule I.

1.47 "PURCHASE PRICE" has the meaning set forth in Section 4.5.1.

1.48 "REAGENT" means a PEG derivative used in the manufacture of a
pharmaceutical or diagnostic product or medical device.

1.49 "RECIPIENT" means the PARTY receiving CONFIDENTIAL INFORMATION hereunder.

1.50 "RESEARCH COMMITTEE" means the committee described in Section 14.2.

1.51 "RESEARCH PROGRAM" means the PARTIES' respective activities and
responsibilities as set forth in the PLAN attached hereto as Schedule I and made
a part hereof, and COMPANY's payment obligations in respect thereof.

1.52 "RESPONSIBLE PARTY" has the meaning set forth in Section 11.7.

1.53 "ROYALTY TERM" means, with respect to SELECTED PRODUCT in each country in
the world, the period of time commencing on the date of the FIRST COMMERCIAL


                                                                   Page 11 of 70


SALE of the first SELECTED PRODUCT in such country and expiring for such a
SELECTED PRODUCT in such country upon the later of: (a) [***] years after such
FIRST COMMERCIAL SALE of such SELECTED PRODUCT; and (b) the expiration date of
the last VALID CLAIM in such country that is infringed in such country by the
manufacture, use, importation, sale or offer to sell SELECTED REAGENT or such
SELECTED PRODUCT.

1.54 "SELECTED PRODUCT" means the chemical entity resulting from attachment of
the THERAPEUTIC AGENT to the SELECTED REAGENT by means of PEGYLATION, as
formulated, packaged and sold in finished form.

1.55 "SELECTED REAGENT" means the REAGENT that is selected by the RESEARCH
COMMITTEE pursuant to the RESEARCH PROGRAM to be attached to the THERAPEUTIC
AGENT by means of PEGYLATION.

1.56 "SOLE INVENTION" has the meaning set forth in Section 11.3.

1.57 "SPECIFICATIONS" has the meaning set forth in Section 4.7.

1.58 "SUBLICENSEE" means any person or entity, including AFFILIATES, to which
COMPANY grants a sublicense (i) to research and/or develop SELECTED PRODUCT, or
(ii) to make, have made, use, sell, have sold and/or import SELECTED PRODUCT.

1.59 "TERRITORY" means the world.

1.60 "TERM" has the meaning set forth in Section 13.1.

1.61 "THERAPEUTIC AGENT" means human recombinant butyrylcholinesterase (BChE)
having the amino acid sequence shown in Schedule II or having an amino acid
sequence with ([***]%) sequence identity to such human BChE sequence or a
fragment of such a BChE and in each case which has activity of human recombinant
butyrylcholinesterase (BChE).

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1.62 "THIRD PARTY" means any entity other than NEKTAR AL, COMPANY and their
respective AFFILIATES.

1.63 "VALID CLAIM" means either: (a) a claim of an issued and unexpired PATENT
covering the manufacture, use, import, sale or offer for sale of SELECTED
REAGENT or SELECTED PRODUCT, which PATENT is owned or CONTROLLED by NEKTAR AL or
jointly by the PARTIES and has not (i) expired or been canceled, (ii) been
declared invalid by an unreversed and unappealable or unappealed decision of a
court or other appropriate body of competent jurisdiction, (iii) been admitted
to be invalid or unenforceable through reissue, disclaimer, or otherwise, or
(iv) been abandoned; or (b) a claim filed and kept pending in good faith that is
included in a PATENT APPLICATION, provided that such PATENT APPLICATION has not
been pending for the longer of [***] years from the EFFECTIVE DATE or for more
than [***] years from the earliest priority date to which the PATENT APPLICATION
is entitled.

2. Licenses to NEKTAR AL LICENSED TECHNOLOGY and COMPANY Technology

2.1 License to COMPANY. Subject to the terms and conditions of this AGREEMENT
and upon selection of the SELECTED REAGENT pursuant to Section 3.4, NEKTAR AL
agrees to grant and hereby grants to COMPANY a worldwide, exclusive,
royalty-bearing license, with the right to grant sublicenses as provided in
Section 2.2, in the NEKTAR AL LICENSED TECHNOLOGY solely to use SELECTED REAGENT
for and to research, develop, make, have made, import, use, offer for sale and
sell SELECTED PRODUCT in the FIELD and in the TERRITORY. Except as may be
provided in the MSA, no license is granted to make or have made SELECTED
REAGENT.

2.2 Terms of Sublicense. Subject to Section 3.4, COMPANY shall have the right to
grant sublicenses under the rights and licenses granted to COMPANY under this
Agreement subject to the terms of this Agreement; provided, however, COMPANY

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                                                                   Page 13 of 70


shall neither grant a sublicense to nor exercise COMPANY's rights under Section
2.1 to have made SELECTED PRODUCT by an AFFILIATE or THIRD PARTY in either case
when such AFFILIATE or THIRD PARTY, at the time of the proposed grant of a
sublicense or exercise of COMPANY's rights under Section 2.1 to have made
SELECTED PRODUCT, is engaged in the business of manufacturing REAGENTS or
attaching REAGENTS to pharmaceutical or biotechnology products, without NEKTAR
AL's prior written consent, provided however that no such consent shall be
required with respect to a CMO listed on Schedule III. Notwithstanding the
foregoing, NEKTAR AL's prior written consent shall no longer be required after
(i) first dosing in a phase III clinical study of the SELECTED PRODUCT in
primate animals for BIODEFENSE SALES or (ii) first dosing in a human in a PHASE
III CLINICAL TRIAL of the SELECTED PRODUCT in the FIELD. The sublicense shall be
consistent with the terms and conditions of this AGREEMENT. COMPANY's grant of
any sublicense shall not relieve COMPANY from any of its obligations (including
without limitation financial obligations) or liability under this AGREEMENT.
Without limiting the foregoing, COMPANY shall require that each SUBLICENSEE
comply with the provisions of Sections 2.4, 2.7, 2.8, 6.1, 6.2, 8.3, 8.4, 9.5,
17.9 and 17.12 and Articles 7, 10, 11, and 12 of this AGREEMENT; provided,
however, that to the extent that the U.S. government or agency thereof is a
SUBLICENSEE, COMPANY shall not be required to include in a sublicense agreement
provisions to comply with Section 2.7.1, and/or Articles 10, 11 or 12 of this
AGREEMENT. Notwithstanding the foregoing or anything to the contrary herein, if
COMPANY is unwilling or unable to enforce any SUBLICENSEE's (including without
limitation the U.S. government or agency thereof) compliance with any of the
foregoing Sections or Articles, then NEKTAR AL shall have the right to terminate
this AGREEMENT under Section 13.2.

2.3 NEKTAR AL Research Rights and Limitations. Notwithstanding anything to the
contrary in this AGREEMENT and without limiting any other retained rights, the
license granted under Section 2.1 shall be subject to the retained right of
NEKTAR AL and its AFFILIATES: (i) to practice the NEKTAR AL LICENSED TECHNOLOGY
for the conduct of research and development of products that it is developing
either itself or with others that are not SELECTED PRODUCTS, and in connection


                                                                   Page 14 of 70


with the sale of REAGENTS through NEKTAR AL's catalog for research purposes;
(ii) to develop, make, have made, use, sell, offer for sale, import and license
products other than SELECTED PRODUCT, including products containing SELECTED
REAGENT that are not SELECTED PRODUCTS; and (iii) to practice the NEKTAR AL
LICENSED TECHNOLOGY solely to the extent necessary or useful to perform its
obligations under this AGREEMENT.

2.4 No Implied Rights or Licenses. Neither PARTY grants to the other PARTY any
rights or licenses, including without limitation to any PATENTS, PATENT
APPLICATIONS, KNOW -HOW or other intellectual property rights, whether by
implication, estoppel or otherwise, except to the extent expressly provided for
under this AGREEMENT. Other than as expressly provided for or licensed herein or
in the MSA, COMPANY is not authorized or licensed to develop, make, have made,
use, sell, offer for sale or import NEKTAR AL MATERIALS or SELECTED REAGENT.
Except as expressly permitted by or licensed under this AGREEMENT or the MSA,
COMPANY may not copy, distribute, reverse engineer (except for quality control)
(by way of example but not limitation, by performing tests such as HPLC, gas
chromatography or x-ray crystallography), sell, lease, license or otherwise
transfer, modify, adapt or create derivatives of any NEKTAR AL MATERIALS or
SELECTED REAGENT.

2.5 License to NEKTAR AL. COMPANY hereby grants to NEKTAR AL a non-exclusive,
worldwide, royalty-free license, with the right to grant and authorize the grant
of sublicenses under the COMPANY KNOW-HOW owned by the COMPANY and COMPANY
PATENT RIGHTS owned by the COMPANY only to the extent useful or necessary for
NEKTAR AL to fulfill its obligations under this AGREEMENT.

2.6 Use of Therapeutic Agent. COMPANY hereby acknowledges and agrees that
COMPANY has the right to transfer to NEKTAR AL the THERAPEUTIC AGENT that
COMPANY will transfer to NEKTAR AL for performing work pursuant to the RESEARCH
PROGRAM and that NEKTAR AL has the right to use the THERAPEUTIC AGENT for
performing work pursuant to the RESEARCH PROGRAM. NEKTAR AL acknowledges and


                                                                   Page 15 of 70


agrees that COMPANY shall retain all right, title and interest in and to such
transferred THERAPEUTIC AGENT and that NEKTAR AL will not use or transfer such
THERAPEUTIC AGENT to a THIRD PARTY except for use in connection with the
RESEARCH PROGRAM.

2.7 Covenants.

      2.7.1 COMPANY covenants and agrees that neither it nor COMPANY's
AFFILIATES will use the SELECTED REAGENT or the PEGYLATION process transferred
by NEKTAR AL to COMPANY with respect to producing SELECTED PRODUCT or any
CONFIDENTIAL INFORMATION of NEKTAR AL provided by NEKTAR AL to COMPANY for any
purpose other than for research, development, making, having made, selling,
offering for sale and/or importing SELECTED PRODUCT in accordance with the
licenses granted under this AGREEMENT. A breach of this covenant that results in
material harm to NEKTAR AL shall be a material breach of this AGREEMENT. COMPANY
covenants and agrees to cease any non-permitted use and to take all necessary
actions to assign to NEKTAR AL any inventions made through use of CONFIDENTIAL
INFORMATION of NEKTAR AL outside the scope of the license rights granted
hereunder.

      2.7.2 Other than for the purposes of obtaining MARKETING AUTHORIZATION of
SELECTED PRODUCT, and except as may be permitted by the MSA COMPANY agrees not
to disclose to any foreign government or agency thereof any of the CONFIDENTIAL
INFORMATION of NEKTAR AL that is provided to COMPANY pursuant to this AGREEMENT.
Except as permitted by the MSA and/or except as permitted pursuant to NEKTAR
AL's prior written consent, COMPANY shall not enter into an agreement with a
foreign government or agency thereof that requires NEKTAR AL to disclose to a
foreign government or agency thereof CONFIDENTIAL INFORMATION with respect to
SELECTED REAGENT.


                                                                   Page 16 of 70


2.8 Diligence.

      2.8.1 COMPANY shall use COMMERCIALLY REASONABLE EFFORTS (a) to perform any
other activities or undertakings assigned to it under the PLAN in accordance
with this AGREEMENT, (b) to develop and obtain BLA approval for SELECTED PRODUCT
for BIODEFENSE SALES in accordance with the outline of Schedule IV, and (c) to
market, promote, distribute and sell SELECTED PRODUCT for BIODEFENSE SALES in
each country in the TERRITORY within [***] months after receiving the approval
of the BLA for such SELECTED PRODUCT in such country. The remedy for the failure
to meet such obligation will be handled according to Section 13.2; except that
with respect to Section 2.8.1 (c), such remedy shall apply only to the
applicable country; however, if the failure is primarily due to a suspension of
government funding of development of SELECTED PRODUCT or the government or
government agency causing a delay or suspension of such development work, and in
each case provided that COMPANY has not caused such suspension or delay (a
"GOVERNMENT DELAY"), there shall be no breach and the obligation shall be
suspended until the GOVERNMENT DELAY is terminated unless the GOVERNMENT DELAY
exceeds [***] consecutive months, in which case NEKTAR AL, by written notice to
COMPANY, may convert the exclusive license granted under this AGREEMENT with
respect to BIODEFENSE SALES to a non-exclusive license with respect to
BIODEFENSE SALES. In addition to (and without limiting) the foregoing general
diligence obligation, COMPANY shall meet the following objectives by the
following dates (each, a "DEVELOPMENT DATE"):

      First dosing of the first patient in a PHASE I CLINICAL TRIAL with respect
to SELECTED PRODUCT for BIODEFENSE SALES by [***]; and

      Submission of the first BLA for SELECTED PRODUCT with respect to SELECTED
PRODUCT for BIODEFENSE SALES by [***].

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In the event that COMPANY has not successfully achieved a DEVELOPMENT DATE,
NEKTAR AL may terminate this AGREEMENT in accordance with Section 13.2, except
in the case of a GOVERNMENTAL DELAY, in which case the applicable DEVELOPMENT
DATES shall be extended by the aggregate period of GOVERNMENT DELAY. Without
limiting the foregoing, if COMPANY's inability to achieve a DEVELOPMENT DATE is
due to (a) an event of Force Majeure, or (b) any material breach of this
AGREEMENT by NEKTAR AL, or (c) any regulatory delays, in each case that
materially and adversely affects COMPANY's ability to meet the relevant
deadline, then the applicable DEVELOPMENT DATE shall be extended by a period of
time equivalent to the length of such delay; provided, however, that in no event
shall a DEVELOPMENT DATE be extended more than (i) [***] years, in any one
instance, or (ii) [***] years, in the aggregate, during TERM.

2.8.2 COMPANY shall use COMMERCIALLY REASONABLE EFFORTS to (a) develop and
obtain BLA approval for SELECTED PRODUCT for sales other than BIODEFENSE SALES
(such other sales being "COMMERCIAL SALES"), and (b) market, promote, distribute
and sell SELECTED PRODUCT for COMMERCIAL SALES in each country in the TERRITORY
within [***] months after receiving the approval of the BLA for such SELECTED
PRODUCT in such country. The sole and exclusive remedy for the breach of either
such obligation is termination of the license granted under this AGREEMENT with
respect to SELECTED PRODUCT for COMMERCIAL SALES by written notice from NEKTAR
AL to COMPANY, except that with respect to Section 2.8.2(b), such remedy shall
apply only to the applicable country. In addition to (and without limiting) the
foregoing general diligence obligation, COMPANY shall meet the following
objectives by the following dates (each, a "COMMERCIAL DEVELOPMENT DATE"):

      First dosing of the first patient in a PHASE I CLINICAL TRIAL with respect
to SELECTED PRODUCT for COMMERCIAL SALES by [***]; and

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      Submission of the first BLA for SELECTED PRODUCT with respect to SELECTED
PRODUCT for COMMERCIAL SALES by [***].

      In the event that COMPANY has not successfully achieved a COMMERCIAL
DEVELOPMENT DATE, as the sole and exclusive remedy, NEKTAR AL may terminate the
license granted under this AGREEMENT with respect to SELECTED PRODUCT for
COMMERCIAL SALES by written notice to COMPANY. Without limiting the foregoing,
if COMPANY's inability to achieve a COMMERCIAL DEVELOPMENT DATE is due to (a) an
event of Force Majeure, or (b) any material breach of this AGREEMENT by NEKTAR
AL, or (c) any regulatory delays, in each case that materially and adversely
affects COMPANY's ability to meet the relevant deadline, then the applicable
DEVELOPMENT DATE shall be extended by a period of time equivalent to the length
of such delay; provided, however, that in no event shall a COMMERCIAL
DEVELOPMENT DATE be extended more than (i) [***] years, in any one instance, or
(ii) [***] years, in the aggregate, during TERM.

3. RESEARCH PROGRAM

3.1 PLAN. NEKTAR AL and COMPANY shall use COMMERCIALLY REASONABLE EFFORTS to
collaborate and cooperate in researching and developing the SELECTED PRODUCT as
specified in the PLAN for the RESEARCH PROGRAM that is attached hereto as
Schedule I and made a part hereof. In consideration of NEKTAR AL's performance
under the PLAN, COMPANY shall make the payments to NEKTAR AL as provided in
Schedule I.

3.2 Research Licenses. In addition to the licenses granted under Section 2.1,
NEKTAR AL hereby grants to COMPANY a non-assignable, non-exclusive,
royalty-free, sublicensable (but only to the parties listed in Schedule III)
license under PATENTS, PATENT APPLICATIONS and KNOW HOW owned by NEKTAR AL for
the sole purpose of performing COMPANY's activities under the PLAN. For clarity,

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                                                                   Page 19 of 70


other than the THIRD PARTIES listed in Schedule III, COMPANY shall not have the
right to use any THIRD PARTY in connection with the performance of its
activities under the PLAN, except with the prior written consent of NEKTAR AL
which consent may be withheld at NEKTAR AL's sole discretion.

3.3 NEKTAR AL Materials. Any samples of REAGENTS or chemical entities that are
the product of the covalent chemical attachment of a REAGENT to a therapeutic
agent (including the THERAPEUTIC AGENT) ("CONJUGATES") that are provided by
NEKTAR AL to COMPANY in the course of the PLAN (collectively, the "NEKTAR AL
MATERIALS") are owned exclusively by NEKTAR AL and provided solely for the
performance of the PLAN and for no other purpose. Without limitation, except as
authorized by the licenses of Section 2.1 and Section 3.2, COMPANY will not use
any such NEKTAR AL MATERIALS (i) in any research or other activities except for
the PLAN, (ii) or any derivative products thereof in humans, or (iii) for any
commercial purpose. COMPANY understands and agrees that the NEKTAR AL MATERIALS
may have unpredictable and unknown biological and/or chemical properties, and
that they are to be handled and used with caution. COMPANY will handle and use
the NEKTAR AL MATERIALS and conduct its activities under the PLAN in compliance
with LAWS and the terms of this AGREEMENT. COMPANY will maintain reasonable
security measures, no less strict than it maintains to protect its own valuable
tangible property against loss, theft or destruction. Except as permitted in
accordance with Schedule III or expressly authorized in or licensed under this
AGREEMENT, COMPANY will not sell, transfer, disclose or otherwise provide access
to any NEKTAR AL MATERIALS to any THIRD PARTY, without the prior written consent
of NEKTAR AL.

3.4 Selection of SELECTED REAGENT; Technology Transfer and Assistance.

      3.4.1 The RESEARCH COMMITTEE shall select the SELECTED REAGENT(S) and,
following such selection, NEKTAR AL shall (i) transfer to COMPANY and/or a THIRD
PARTY designated by COMPANY and approved by NEKTAR AL, all of the NEKTAR AL
KNOW-HOW necessary for enabling COMPANY and/or such THIRD PARTY to attach the
SELECTED REAGENT to the THERAPEUTIC AGENT by means of PEGYLATION, which shall


                                                                   Page 20 of 70


include a description of the synthetic and analytical methods for the SELECTED
PRODUCT and (ii) reasonably assist in the technical transfer of such NEKTAR AL
KNOW-HOW, including such synthetic and analytical methods at the laboratory
scale used in the RESEARCH PROGRAM. The CMO's listed in Schedule III and
permitted SUBLICENSEES are hereby approved by NEKTAR AL, as a THIRD PARTY who
can be designated by COMPANY for such transfer. After dosing of a first primate
in a phase III clinical trial with respect to a SELECTED PRODUCT for BIODEFENSE
SALES or first dosing of a human patient in a PHASE III CLINICAL TRIAL of the
SELECTED PRODUCT in the FIELD, the approval of NEKTAR AL shall not be required
for such transfer to any THIRD PARTY whether or not such THIRD PARTY is on
Schedule III.

      3.4.2 If, following NEKTAR AL's receipt of COMPANY's notice to proceed
with the use of a SELECTED REAGENT in accordance with Section 12.1.5, NEKTAR AL
reasonably believes that the use of such SELECTED REAGENT for the SELECTED
PRODUCT may pose a risk of infringement or misappropriation of THIRD PARTY
intellectual property rights that have been identified by either PARTY, within
thirty (30) days after such notice from COMPANY, NEKTAR AL shall notify COMPANY
and identify such intellectual property rights to COMPANY. In such case, COMPANY
shall have the right to cause NEKTAR AL to proceed with such SELECTED REAGENT
for the SELECTED PRODUCT if, and only if, (x) COMPANY assumes sole and exclusive
responsibility for making any and all payments to any and all THIRD PARTIES
arising out of the manufacture, use, sale offer for sale or import of such
SELECTED REAGENT used in SELECTED PRODUCT, and (y) in accordance with Section
10.1.2, COMPANY assumes sole and exclusive responsibility for indemnifying any
and all NEKTAR AL INDEMNITEES against any CLAIMS based on infringement or
misappropriation of such identified THIRD PARTY intellectual property arising
from the use, manufacture, sell, offer for sale, or import of such SELECTED
REAGENT or SELECTED PRODUCT, and (z) NEKTAR AL's royalties are not reduced as a
result thereof.

      3.4.3 NEKTAR AL shall provide COMPANY and/or a THIRD PARTY designated by
COMPANY (subject to the limitations of Sections 2.2 and 3.4) with the technical


                                                                   Page 21 of 70


assistance reasonably requested by COMPANY and agreed in writing by NEKTAR AL in
order to manufacture and produce SELECTED PRODUCT from SELECTED REAGENT for
research, development, clinical trials and commercialization of SELECTED
PRODUCT. COMPANY shall pay NEKTAR AL for such technical assistance at a rate
agreed to by the PARTIES to compensate NEKTAR AL for the cost (including FTE
time) and expenses associated with such technical assistance.

      3.4.4 NEKTAR AL shall assist COMPANY with respect to selecting a SELECTED
REAGENT and a CMO for producing SELECTED PRODUCT incorporating such SELECTED
REAGENT. In this respect NEKTAR AL shall assist COMPANY by providing, to the
CMO's listed in Schedule III, certain information that will enable such CMOs to
assess the manufacturability of a potential SELECTED PRODUCT utilizing potential
SELECTED REAGENT; provided however, COMPANY shall not make any disclosures of
such information to such CMO's except with NEKTAR AL, and in no event shall
COMPANY disclose any NEKTAR AL CONFIDENTIAL INFORMATION related to REAGENTS or
CONJUGATES without NEKTAR AL's prior written consent, such consent not to be
unreasonably withheld.

      3.4.5 NEKTAR AL shall provide reports to COMPANY as provided for in
Schedule I..

3.5 Disclaimer of Warranty. EXCEPT FOR THE WARRANTIES MADE BY EACH PARTY IN
SECTION 4.10 AND ARTICLE 9 OF THIS AGREEMENT, NEITHER PARTY PROVIDES WARRANTIES,
EXPRESS OR IMPLIED, REGARDING THE PLAN OR ANY REAGENT, CONJUGATE, PRODUCT OR
DELIVERABLE PROVIDED PURSUANT TO THE PLAN, AND DISCLAIMS ALL EXPRESS AND IMPLIED
WARRANTIES, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT WITH
RESPECT THERETO. MOREOVER, EXCEPT FOR THE WARRANTIES MADE BY EACH PARTY IN
SECTION 4.10 AND ARTICLE 9 OF THIS AGREEMENT, NEITHER PARTY PROVIDES WARRANTIES,
EXPRESS OR IMPLIED, REGARDING THE NEKTAR AL LICENSED TECHNOLOGY, SELECTED


                                                                   Page 22 of 70


REAGENT OR SELECTED PRODUCT (INCLUDING THE SUCCESSFUL DEVELOPMENT, REGISTRATION,
MANUFACTURE OR COMMERCIALIZATION OF SELECTED PRODUCT), AND EXCEPT FOR THE
WARRANTIES MADE IN SECTION 4.10 AND ARTICLE 9 OF THIS AGREEMENT, EACH PARTY
DISCLAIMS ALL EXPRESS AND IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION THE
IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT.

3.6 Records. NEKTAR AL shall maintain records, in sufficient detail and in good
scientific manner appropriate for patent and regulatory purposes, which shall
fully and properly reflect all work done and results achieved in the performance
of its work pursuant to the RESEARCH PROGRAM. At the reasonable request of
COMPANY following the conclusion of an applicable stage of the RESEARCH PROGRAM,
NEKTAR AL shall provide COMPANY with copies of the above-described records.
COMPANY shall have the right, twice per calendar year, during normal business
hours and upon reasonable notice, to inspect the above-described records as
applicable to COMPANY's performance of its activities under the PLAN (including
COMPANY's production of SELECTED PRODUCT by PEGYLATION with the SELECTED
REAGENT).

3.7 Reports. At each Committee meeting during the RESEARCH PROGRAM, each PARTY
shall provide to the other PARTY a report on the progress and evaluate the work
performed in relation to the RESEARCH PROGRAM. Such report shall include all
other information reasonably requested by the other PARTY relating to such
progress and reasonably necessary to assess the completion of the other PARTY's
activities under the PLAN.

4. Manufacture and Supply of SELECTED REAGENT

4.1 Manufacturing Process Development. Upon selection of a SELECTED REAGENT, if
not established, NEKTAR AL shall establish a manufacturing process for SELECTED
REAGENT in order to meet the obligations of NEKTAR AL with respect to
manufacture of SELECTED REAGENT for use in pre-clinical development and in PHASE


                                                                   Page 23 of 70


I CLINICAL TRIALS under this AGREEMENT. NEKTAR AL agrees to establish such
manufacturing process on a fixed fee basis based on NEKTAR AL's then current
rates, which shall be payable by COMPANY in installments as set forth in the
applicable work order agreed upon by the PARTIES. The fixed fee to be charged by
NEKTAR AL shall be inclusive of all work and materials and NEKTAR AL shall
notify COMPANY thereof in writing promptly after selection of the SELECTED
REAGENT. Such fixed fee shall be approved by COMPANY prior to NEKTAR AL
commencing any such services. Such fixed fee when agreed to by the PARTIES shall
cover NEKTAR AL's performance of all activities appropriate for the development,
scale-up and validation of the manufacture of SELECTED REAGENT, including, but
not limited to:

      (a)   improvements to and expansion of facilities, analytical method
            development, analytical method validation, cleaning method
            validation, process validation, reprocessing, supporting
            documentation including, but not limited to, the preparation, filing
            and maintenance of Drug Master Files and other regulatory filings;

      (b)   NEKTAR AL's generating and providing information or performing work
            pursuant to any governmental or regulatory agency requests for
            information or work (including any testing) regarding SELECTED
            REAGENT or its manufacturing process; and

      (c)   installation, qualification and validation needed for SELECTED
            REAGENT including scale-up.

4.2 Pre-Clinical and Phase I Clinical Supply. Upon establishing a manufacturing
process for SELECTED REAGENT, NEKTAR AL shall manufacture and supply to COMPANY
the SELECTED REAGENT for the purpose of producing SELECTED PRODUCT under the
terms of this Article 4 solely for use in pre-clinical development and PHASE I
CLINICAL TRIALS. NEKTAR AL shall manufacture and produce SELECTED REAGENT in
accordance with applicable laws, rules and regulations and with respect to
SELECTED REAGENT produced for PHASE I CLINICAL TRIALS such work shall be
consistent with ICH Q7A. COMPANY agrees to purchase and NEKTAR AL agrees to
supply one hundred percent (100%) of COMPANY's requirements of such SELECTED
REAGENT for pre-clinical and PHASE I CLINICAL TRIALS.


                                                                   Page 24 of 70


4.3 Forecasts. No later than [***] days after selection of the SELECTED REAGENT,
COMPANY shall provide NEKTAR AL with a [***] quarter rolling forecast of its
requirements of SELECTED REAGENT. COMPANY shall update such forecast at least
[***] days following the start of each calendar quarter. Such forecasts are
estimates and are not binding on either PARTY.

4.4 Purchase Orders. COMPANY shall, from time to time, purchase SELECTED REAGENT
from NEKTAR AL by a written purchase order provided to NEKTAR AL. Each such
purchase order shall be sent to the attention of NEKTAR AL's Contract Management
and shall specify the quantity and requested delivery date of SELECTED REAGENT,
as well as the site to which SELECTED REAGENT is to be shipped; provided,
however, that COMPANY shall not designate in any purchase order a delivery date
that is less than [***] months after the date of such purchase order. No
purchase order shall be binding upon NEKTAR AL until accepted by NEKTAR AL in
writing. NEKTAR AL shall accept such orders for SELECTED REAGENT to the extent
that the quantities of SELECTED REAGENT do not exceed the forecasted amount and
to the extent such order is consistent with the terms of this AGREEMENT. Upon
acceptance of a purchase order, NEKTAR AL shall have each shipment of SELECTED
REAGENT shipped pursuant to its standard shipping procedures and documentation.
Any change to NEKTAR AL's standard shipping procedures and documentation will be
addressed through NEKTAR AL's change control procedures. The terms and
conditions of this AGREEMENT shall govern all purchase orders, notwithstanding
the fact that a purchase order or the standard shipping document may provide for
additional or different obligations of NEKTAR AL than the terms and conditions
of this AGREEMENT. Any such additional or different terms in any such purchase
order or shipping documents are hereby expressly rejected. NEKTAR AL shall
deliver SELECTED REAGENT in the quantities and at the delivery schedules set

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forth in this Section 4.4 provided, however, the specifics thereof will be
mutually agreed to by the PARTIES in writing and set forth in a purchase order
delivered in accordance with this Section 4.4.

4.5 Fees for Manufacturing and Supply of SELECTED REAGENT.

      4.5.1 NEKTAR AL shall supply SELECTED REAGENT to COMPANY at a commercially
reasonable price (the "PURCHASE PRICE"), equal to the BENCHMARK PRICE for such
SELECTED REAGENT as that BENCHMARK PRICE is adjusted as provided for herein. For
the purposes hereof, BENCHMARK PRICE (at a scale of [***]kg or less) means [***]
DOLLARS per gram of the REAGENT [***] (2006 NEKTAR AL catalogue price is $[***]
per gram), and [***] DOLLARS per gram of the REAGENT [***])) (2006 NEKTAR AL
catalogue price is $[***] per gram); if a REAGENT other than [***] is being
considered for selection as a SELECTED REAGENT, prior to selection thereof,
NEKTAR AL shall provide to COMPANY the PURCHASE PRICE of such REAGENT. Prior to
selection of a REAGENT as a SELECTED REAGENT, NEKTAR AL shall disclose to
COMPANY any increase or decrease to the applicable BENCHMARK to reflect the cost
of raw materials for such REAGENT, any process changes related to such REAGENT
and any changes required by LAW. If such REAGENT is selected as the SELECTED
REAGENT such increased or decreased price shall be the PURCHASE PRICE for such
SELECTED REAGENT.

      4.5.2 During the TERM hereof, COMPANY shall pay to NEKTAR AL the PURCHASE
PRICE for the supply of SELECTED REAGENT, which PURCHASE PRICE shall be adjusted
on an annual basis as follows: by November 1st during the TERM, the PURCHASE
PRICE will be:

      (a)   Increased for the following year by adding to the PURCHASE PRICE a
            number obtained by multiplying the then-current PURCHASE PRICE by a
            fraction, the

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            numerator of which is the United States Department of Labor Producer
            Price Index for Chemical Manufacturing Series ID: PCU325---325---
            ("PPI") in the month and year of the EFFECTIVE DATE subtracted from
            the PPI in the month three (3) months prior to November 1st and the
            denominator of which is the PPI in the month and year of the
            EFFECTIVE DATE. If the numerator reflects an increase, the number
            will be added to the PURCHASE PRICE; and

      (b)   increased or decreased for the following year to reflect the then
            current forecasted cost of raw materials for such SELECTED REAGENT,
            any process changes related to such SELECTED REAGENT, and any
            changes required by applicable LAW; in each case to the extent not
            covered by the change to PPI described in Section 4.5.2(a).

4.6 Delivery and Shipment; Title and Risk of Loss. NEKTAR AL shall deliver all
SELECTED REAGENT to COMPANY, and title to and risk of loss of each quantity of
SELECTED REAGENT so delivered shall pass to COMPANY Ex Works (Incoterms 2000)
NEKTAR AL's manufacturing or storage facilities. Such delivery shall constitute
a shipment hereunder. COMPANY shall pay all packaging, storage, shipping,
customs, duties, taxes, freight and insurance charges associated with shipments
of SELECTED REAGENT. All shipments shall be addressed to the destination
selected by COMPANY and set forth in the relevant purchase order. NEKTAR AL
shall send invoices to COMPANY for any SELECTED REAGENT shipped to COMPANY no
earlier than the date of shipment pursuant to this Section.

4.7 Acceptance and Rejection. COMPANY shall notify NEKTAR AL in writing if
COMPANY believes that a shipment of SELECTED REAGENT does not meet
specifications therefor that have been mutually agreed in writing by the PARTIES
("SPECIFICATIONS"). Such notice must be received by NEKTAR AL within [***] days
after COMPANY's receipt of the relevant shipment of SELECTED REAGENT (or [***]
days if the cycle time of tests require a longer period, such notice date to be

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determined upon selection of the SELECTED REAGENT), and shall include full
details of the basis for its assertion of such nonconformance (including
supporting data) for purposes of consideration and verification by NEKTAR AL. If
no such written notice of nonconformance is received by NEKTAR AL within the
above [***] day period, COMPANY shall be deemed to have accepted the applicable
shipment of SELECTED REAGENT, and NEKTAR AL shall thereafter have no liability
with respect to such delivered SELECTED REAGENT under the warranty or any other
provision of this AGREEMENT.

4.8 Replacement of Nonconforming SELECTED REAGENT. NEKTAR AL shall at no
additional cost to COMPANY, supply COMPANY with a replacement quantity of
SELECTED REAGENT in an amount equal to that which is determined not to meet the
SPECIFICATIONS (provided notice thereof is given to NEKTAR AL within the [***]
day period or longer, as applicable, specified in Section 4.7. Such replacement
shipment shall be made within a timeframe that has been mutually agreed to by
both PARTIES in writing, such agreement not to be unreasonably withheld or
delayed and which timeframe shall be no longer than the normal timeframe for
producing SELECTED REAGENT. In addition, NEKTAR AL shall replace, upon a
timeframe that is mutually agreed to by both PARTIES in writing (which time
period shall be no longer than the normal time for producing SELECTED REAGENT),
all SELECTED REAGENT that is lost or damaged during shipment at the cost and
expense of COMPANY, except if caused by NEKTAR AL, in which case, such
replacement shall be at the cost and expense of NEKTAR AL. Notwithstanding
anything to the contrary in this AGREEMENT, NEKTAR AL's sole liability and
COMPANY's sole remedy for any SELECTED REAGENT that does not meet the
SPECIFICATIONS, shall be limited to NEKTAR AL's replacement of such
nonconforming SELECTED REAGENT as provided for in this Section 4.8.

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4.9 Manufacturing and Supply Agreement. Upon selection of the SELECTED REAGENT,
the PARTIES shall commence good-faith negotiations of and enter into a
Manufacturing and Supply Agreement ("MSA") for SELECTED REAGENT to govern the
exclusive purchase of SELECTED REAGENT other than in connection with
pre-clinical or PHASE I CLINICAL TRIALS. Until such MSA is completed, the terms
and conditions of this AGREEMENT shall be applicable to the purchase of SELECTED
REAGENT by COMPANY from NEKTAR AL; provided that, pursuant to this Article 4,
NEKTAR AL shall have no obligation to supply SELECTED REAGENT for uses other
than for research, pre-clinical and PHASE I CLINICAL TRIALS. In the event that
the PARTIES are not able to reach agreement as to all of the terms of the MSA
within [***] days after initiating such negotiations, either PARTY shall have
the right to initiate an arbitration proceeding in accordance with Schedule VIII
in order to resolve the dispute as to the terms that have not been agreed to by
the PARTIES.

4.10 Warranty. NEKTAR AL hereby warrants and represents that all SELECTED
REAGENTS purchased by COMPANY from NEKTAR AL under this AGREEMENT shall conform
to the SPECIFICATIONS when delivered to COMPANY and will have been manufactured
for and delivered to COMPANY in accordance with applicable laws, rules and
regulations, and except for SELECTED REAGENTS to be used for preclinical use,
consistent with ICH Q7A.

4.11 Records; Audits. NEKTAR AL shall keep full and accurate records and books
of account containing all particulars that may be reasonably necessary for the
purpose of determining amounts that are charged to COMPANY pursuant to this
AGREEMENT are consistent with NEKTAR AL's standard current practices for
charging THIRD PARTIES for similar services for similar REAGENTS as those
provided by NEKTAR AL to COMPANY pursuant to this AGREEMENT. Such books of
account shall be kept by NEKTAR AL at its places of business and, with all
necessary supporting data shall, for the two (2) years following the end of the
calendar year to which each shall pertain be open for inspection by an
independent certified accountant selected by COMPANY and reasonably acceptable

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to NEKTAR AL upon reasonable notice during normal business hours for the sole
purpose of verifying that the amounts charged to COMPANY under this AGREEMENT
are consistent with NEKTAR AL's standard practices for charging THIRD PARTIES
for similar services for similar REAGENTS as those provided by NEKTAR AL to
COMPANY pursuant to this AGREEMENT. The foregoing inspection shall occur no more
than once each calendar year. All information and data offered shall be redacted
to protect any confidential information of the THIRD PARTY and shall be used
only for the purpose of verifying the consistency of amounts charged to COMPANY.
In the event that such inspection shall indicate in any calendar year that the
charges paid by COMPANY exceeded by [***] percent or more the charges (as
adjusted to reflect any increase in PPI) paid by THIRD PARTIES for similar
services for similar REAGENTS as those provided by NEKTAR AL to COMPANY pursuant
to this AGREEMENT, then NEKTAR AL shall pay the cost of the inspection. COMPANY
will invoice NEKTAR AL for any overpayments, which shall become due and payable
no later than [***] days after receipt of an invoice from COMPANY.

4.12 NEKTAR AL agrees that it will comply with the FAR and DFAR clauses of
Schedule VII of this Agreement (such clauses being incorporated herein in their
entirety). For the purposes of this AGREEMENT NEKTAR AL shall be considered the
"Contractor" and COMPANY shall be the "Government" under such clauses.

With respect to the inclusion of clauses 52.215 -- 2 and 52.215 -- 20, if as a
result of any government audit or inspection of NEKTAR AL's books or records
(including any contracts) under these clauses, the government determines that
the pricing of the SELECTED REAGENT and/or the SELECTED PRODUCT is too high
under this AGREEMENT, or that the government otherwise does not agree with
NEKTAR AL's methodology in determining the pricing of the SELECTED REAGENT under
this AGREEMENT, and the government wants NEKTAR AL to supply the SELECTED
REAGENT at a lower price than what has been agreed by NEKTAR AL and COMPANY in

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this AGREEMENT, or wants COMPANY to supply the SELECTED PRODUCT at a lower
price, or if the government decides not to purchase the SELECTED PRODUCT at all
from COMPANY because of the pricing of the SELECTED REAGENT under this
AGREEMENT, then NEKTAR AL shall have no liability whatsoever to COMPANY (other
than as contractually obligated under this AGREEMENT) or to the government as a
result thereof. Any kind of information that is required to be provided to the
government under such clauses would be provided by NEKTAR AL directly to the
government, and not to COMPANY as an intermediary.

If in connection with COMPANY's compliance with FAR 52.246-2 or similar
Inspection Clause, the government or an agency thereof requires access to NEKTAR
AL'S facilities where the SELECTED REAGENT is made, NEKTAR AL will provide
access to the government for such purpose provided that COMPANY bears the costs
and expenses of such access and inspection. Moreover if the government requires
that any samples of SELECTED REAGENT be provided to the government, NEKTAR AL
will agree to do so entirely at COMPANY's cost and expense. In the event that as
a result of any government inspection pursuant to such clause with respect to
NEKTAR AL'S manufacturing facility and or samples of SELECTED REAGENT, the
government requires any corrective actions on the part of NEKTAR AL or otherwise
finds the SELECTED REAGENT not to be acceptable, in each case for reasons other
than what NEKTAR AL is contractually obligated to provide to COMPANY under this
AGREEMENT, then NEKTAR AL, will take corrective action only if COMPANY agrees to
be solely responsible for all of the costs and expenses that may be required in
connection with such corrective actions, including any government re-inspection
of NEKTAR AL's facilities, or other steps that must be taken in order to meet
the government's requirements regarding the SELECTED REAGENT.

5. Milestones; Royalty Payments; Royalty Reports

5.1 Milestone Payments. COMPANY shall pay to NEKTAR AL milestone payments in
accordance with and on the dates provided in Schedule V hereto for SELECTED
PRODUCT. Such milestone payments shall be non-refundable and non-creditable, and


                                                                   Page 31 of 70


in addition to any royalty or other payments due under this AGREEMENT. If for
whatever reason, Milestone Event A is not achieved then in such case, the
milestone payment that NEKTAR AL would have received upon the occurrence of
Milestone Event A shall be paid on the occurrence of any of the next occurring
Milestone Events B through E, which payment shall be paid in addition to and not
instead of the milestone payment that is to be paid to NEKTAR AL upon the
occurrence of any of the next occurring Milestone Events B through E.

5.2 Royalties.

      5.2.1 During the ROYALTY TERM for a country, COMPANY shall pay NEKTAR AL
non-refundable and non-creditable royalties for sales of SELECTED PRODUCT on a
country-by-country basis as follows:

      (a)   For sales that are BIODEFENSE SALES, a royalty of [***] percent
            ([***]%) of NET SALES of SELECTED PRODUCT.

      (b)   For NET SALES of SELECTED PRODUCT other than those of Section
            5.2.1(a):

                          Annual NET SALES                         Royalty Rate

               (i) If aggregate, worldwide, NET SALES of            ([***]%) of
               SELECTED PRODUCT other than for BIODEFENSE            NET SALES
               SALES in a calendar year do not exceed $[***]

               (ii) If aggregate, worldwide, NET SALES of           ([***]%) of
               SELECTED PRODUCT other than for BIODEFENSE            NET SALES
               SALES in a calendar year exceed $[***] but not
               $[***]

               (iii) If aggregate, worldwide, NET SALES of          ([***]%) of
               SELECTED PRODUCT other than for BIODEFENSE            NET SALES
               SALES in a calendar year exceed $[***]

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      By way of example, for purposes of this Section 5.2.1(b) if aggregate,
worldwide NET SALES of SELECTED PRODUCT other than BIODEFENSE SALES during a
calendar year were equal to $[***], then the [***]% royalty rate would apply to
all such NET SALES, not just the portion in excess of $[***], resulting in a
royalty of $[***].

      5.2.2 The royalties payable pursuant to Section 5.2.1 for NET SALES of
SELECTED PRODUCT sold in a country shall be reduced by [***] percent ([***]%) in
such country if manufacture, use, import, offer for sale and or sale of SELECTED
PRODUCT in such country does not infringe a VALID CLAIM in such country. In any
country where the royalty reduction of Section 5.2.2 is in effect, there shall
not be any further royalty reduction pursuant to Sections 5.2.3, 5.2.4 or
12.1.4.

      5.2.3 [***]

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                                     [***]

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                                     [***]

      5.2.4 [***]

      5.2.5 Only one royalty shall be due under this AGREEMENT with respect to
the same unit of SELECTED PRODUCT.

      5.2.6 Notwithstanding anything to the contrary in this AGREEMENT, in no
event shall the royalties paid by COMPANY for SELECTED PRODUCT be lower than the
following:

      (a)   For sales that are BIODEFENSE SALES, a royalty of [***] percent
            ([***]%) of NET SALES of SELECTED PRODUCT.

      (b)   For NET SALES of SELECTED PRODUCT other than those of Section
            5.2.6(a):

                          Annual NET SALES                         Royalty Rate

               (i) If aggregate, worldwide, NET SALES of            ([***]%) of
               SELECTED PRODUCT other than for BIODEFENSE            NET SALES
               SALES in a calendar year do not exceed $[***]

               (ii) If aggregate, worldwide, NET SALES of           ([***]%) of
               SELECTED PRODUCT other than for BIODEFENSE            NET SALES
               SALES in a calendar year exceed $[***] but not
               $[***]

               (iii) If aggregate, worldwide, NET SALES of          ([***]%) of
               SELECTED PRODUCT other than for BIODEFENSE            NET SALES
               SALES in a calendar year exceed $[***]

5.3 Reports, Exchange Rates. COMPANY shall notify NEKTAR AL in writing promptly
upon the FIRST COMMERCIAL SALE of SELECTED PRODUCT in each country. Commencing
upon the FIRST COMMERCIAL SALE of SELECTED PRODUCT, COMPANY shall furnish to

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NEKTAR AL with respect to NET SALES of SELECTED PRODUCT for which royalties are
payable under this AGREEMENT a quarterly written report showing, on a
country-by-country basis, according to the volume of units of SELECTED PRODUCT
sold in each such country during the reporting period: (a) the gross invoiced
sales of the SELECTED PRODUCT subject to royalty sold in each country during the
reporting period, and the amounts deducted therefrom to determine NET SALES from
such gross invoiced sales detailed in accordance with those deductions provided
for in the definition of NET SALES; (b) the royalties payable in DOLLARS, if
any, which shall have accrued hereunder based upon the NET SALES of SELECTED
PRODUCT; (c) the withholding taxes, if any, required by LAW to be deducted in
respect of such sales; and (d) the date of the FIRST COMMERCIAL SALE of SELECTED
PRODUCT in each country during the reporting period. With respect to sales of
SELECTED PRODUCT invoiced in DOLLARS, the gross invoiced sales, NET SALES, and
royalties payable shall be expressed in the report in DOLLARS. With respect to
sales of SELECTED PRODUCT invoiced in a currency other than DOLLARS, the gross
invoiced sales, NET SALES and royalties payable shall be expressed in the report
provided hereunder in the domestic currency of the party making the sale as well
as in the DOLLAR equivalent of the royalty payable and the exchange rate used in
determining the amount of DOLLARS. The DOLLAR equivalent shall be calculated
using the average exchange rate (local currency per DOLLAR) published in The
Wall Street Journal, Western Edition, under the heading "Currency Trading," on
the last business day of each month during the applicable calendar quarter.
Reports shall be due hereunder on the thirtieth (30th) day following the close
of each quarter.

6. Records; Audits; Shipment Terms; Payment Terms

6.1 Records. COMPANY and its SUBLICENSEES shall keep complete and accurate
records in sufficient detail to make the reports required hereunder. Without
limiting the foregoing, COMPANY shall include in each sublicense granted by it
pursuant to this AGREEMENT a provision requiring the SUBLICENSEE to make reports
to COMPANY consistent with those COMPANY is required to provide hereunder, to
keep and maintain records of sales made and deductions taken in calculating
royalties due to NEKTAR AL with respect to such sublicense, and to grant access
to such records by NEKTAR AL's independent accountant pursuant to Section 6.2
below to the same extent required of COMPANY under this AGREEMENT.


                                                                   Page 36 of 70


6.2 Audits. Upon reasonable advance written notice from NEKTAR AL, COMPANY shall
permit an independent certified public accounting firm of recognized national
standing in the United States, selected by NEKTAR AL and reasonably acceptable
to COMPANY, at NEKTAR AL's expense, to have access during normal business hours
to such of the records of COMPANY as may be reasonably necessary to verify (i)
COMPANY's compliance with the purchase requirements of Section 4.2 and the
royalty payments of Section 5.2, and (ii) the accuracy of any amounts reported,
actually paid or payable under this AGREEMENT for any year ending not more than
twenty-four (24) months prior to the date of such request. Such inspection shall
occur no more than once a year. If such accounting firm concludes that
additional royalty amounts were owed to NEKTAR AL during such period, or that
there has been an overpayment of royalties, COMPANY shall pay NEKTAR AL such
additional royalties or NEKTAR AL shall credit COMPANY the amount of such
overpayment (including interest on such additional royalties or overpayment at
the prime rate reported in the Wall Street Eastern Edition plus [***] percent
([***]%), compounded annually, or the maximum rate allowed under LAW, whichever
is less from the date such royalty amounts were payable) within [***] days of
the date NEKTAR AL delivers to COMPANY such accounting firm's written report so
concluding. The fees charged by such accounting firm shall be paid by NEKTAR AL;
provided however, that if the audit discloses that the royalties payable by
COMPANY for the audited period are more than [***] percent ([***]%) of the
royalties actually paid for such period or if the audit discloses that COMPANY
has breached its obligations under Section 4.2, then COMPANY shall pay the
reasonable fees and expenses charged by such accounting firm. Upon the
expiration of twenty-four (24) months following the end of any calendar year,
the calculation of royalties payable with respect to such calendar year shall be
binding and conclusive upon NEKTAR AL and COMPANY and its SUBLICENSEES.

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6.3 Invoicing; Payment Terms. All undisputed payments due under this AGREEMENT
(other than royalty and milestone payments) shall be due and payable thirty (30)
days from date of invoice but in no event later than any date otherwise
prescribed by this AGREEMENT. Royalties shown to have accrued to NEKTAR AL as
set forth in each royalty report to be provided under Section 5.3 shall be due
and payable on or before the date such royalty report is due. Any and all
amounts past due under this AGREEMENT shall bear interest at the prime rate
reported in the Wall Street Eastern Edition plus [***] percent ([***]%),
compounded annually, or the maximum rate allowed under LAW, whichever is less.
If there is a dispute between NEKTAR AL and COMPANY as to whether a royalty or
milestone is owed and/or the amount thereof, and such amount has not been
determined pursuant to an audit under Section 6.2, if COMPANY pays such amount,
such payment itself shall not limit the COMPANY's right to seek to recover such
payment including through a legal action provided that COMPANY notifies NEKTAR
in writing within thirty (30) days after the end of the quarter in which the
payment is made that the COMPANY has the right to recover such payment.

6.4 Payment Method. Except as otherwise provided for herein, all payments by
COMPANY under this AGREEMENT shall be paid in DOLLARS, and all such payments
shall be made by bank wire transfer in immediately available funds to such
account as NEKTAR AL shall designate before such payment is due. Upon the
election of NEKTAR AL made in writing not less than thirty (30) days prior to
any payment date, COMPANY shall pay all royalties owing to NEKTAR AL hereunder
in the currency in which such royalties accrued, without conversion into
DOLLARS. If at any time legal restrictions prevent the prompt remittance of part
or all royalties due with respect to sales of SELECTED PRODUCT in any country
where SELECTED PRODUCT is sold, payment shall be made through such lawful means
or methods as NEKTAR AL shall reasonably determine.

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6.5 Taxes. All royalty amounts due hereunder shall be paid with deduction for
withholding for any taxes or similar governmental charges imposed by a
jurisdiction other than the United States, and COMPANY shall provide NEKTAR AL
evidence of its payment of any such withholdings that may be required to claim a
credit against NEKTAR AL's United States tax liability.

7. Confidentiality

7.1 In General. For the TERM and for a period of ten (10) years thereafter, each
PARTY shall maintain in confidence all information and materials of the other
PARTY (including, but not limited to, KNOW-HOW and samples of THERAPEUTIC AGENT,
any NEKTAR AL MATERIALS, SELECTED REAGENT, and SELECTED PRODUCT) disclosed or
provided to it by the other PARTY and identified as confidential in writing or,
if disclosed verbally or by observation, summarized in writing and submitted to
RECIPIENT within thirty (30) days of the oral or visual disclosure thereof
(together with all embodiments thereof, the "CONFIDENTIAL INFORMATION").
CONFIDENTIAL INFORMATION may also include information regarding intellectual
property and confidential or proprietary information of THIRD PARTIES. In
addition, and notwithstanding the foregoing, INVENTIONS that, under Article 11
are to be owned by one PARTY, shall be deemed CONFIDENTIAL INFORMATION of such
PARTY and not the other PARTY, even if such INVENTIONS initially are generated
and disclosed by the other PARTY. The terms and conditions of this AGREEMENT and
the NON-DISCLOSURE AGREEMENT, also shall be deemed CONFIDENTIAL INFORMATION of
both PARTIES. Notwithstanding the foregoing, CONFIDENTIAL INFORMATION shall not
include that portion of information or materials that the RECIPIENT can
demonstrate by written documentation or other competent proof was (i) known to
the general public at the time of its disclosure to the RECIPIENT, or thereafter
became generally known to the general public, other than as a result of actions
or omissions of the RECIPIENT; (ii) known by the RECIPIENT prior to the date of
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                                                                   Page 39 of 70


unrestricted basis from a source unrelated to the DISCLOSING PARTY and not under
a duty of confidentiality to the DISCLOSING PARTY; or (iv) independently
developed by the RECIPIENT by personnel that did not have access to or use of
CONFIDENTIAL INFORMATION of the DISCLOSING PARTY.

Any combination of features or disclosures shall not be deemed to fall within
the foregoing exclusions merely because individual features are published or
known to the general public or in the rightful possession of the RECIPIENT
unless the combination itself and principle of operation thereof are published
or known to the general public or are in the rightful possession of the
RECIPIENT.

7.2 Additional Protections. Each PARTY shall take reasonable steps to maintain
the confidentiality of the CONFIDENTIAL INFORMATION of the other PARTY, which
steps shall be no less protective than those that such PARTY takes to protect
its own information and materials of a similar nature, but in no event less than
a reasonable degree of care. Neither PARTY shall use or permit the use of any
CONFIDENTIAL INFORMATION of the other PARTY except for the purposes of carrying
out its obligations or exercising its rights under this AGREEMENT. All
CONFIDENTIAL INFORMATION of a PARTY, including all copies thereof, is and shall
remain the sole and exclusive property of the DISCLOSING PARTY and subject to
the restrictions provided for herein. Neither PARTY shall disclose any
CONFIDENTIAL INFORMATION of the other PARTY other than to those of its
directors, officers, AFFILIATES, employees, licensors, independent contractors,
SUBLICENSEES, assignees, agents and external advisors directly concerned with
the carrying out of this AGREEMENT (in the case of COMPANY, subject to the
limitations and restrictions on disclosures to be made to potential and actual
CMOs and government agencies and entities hereunder); provided, however, that
any such disclosure is subject to written confidentiality and non-use
obligations no less protective than those provided herein. Other than as
expressly permitted herein, RECIPIENT may not use CONFIDENTIAL INFORMATION of
the other PARTY in applying for PATENTS or securing other intellectual property
rights.


                                                                   Page 40 of 70


7.3 Permitted Disclosures. The obligations of Sections 7.1 and 7.2 shall not
apply to the extent RECIPIENT (a) is required to disclose information by LAW,
judicial order by a court of competent jurisdiction, or rules of a securities
exchange or requirement of a governmental agency (provided the RECIPIENT shall
provide prior written notice thereof to the DISCLOSING PARTY and sufficient
opportunity for the DISCLOSING PARTY to review and comment on such required
disclosure and request confidential treatment thereof or a protective order
therefor), or (b) discloses information to a patent office for the purposes of
filing or maintaining a PATENT APPLICATION or PATENT to the extent covering an
INVENTION assigned to a PARTY pursuant to Article 11 of this AGREEMENT, or (c)
discloses CONFIDENTIAL INFORMATION of NEKTAR AL (other than CONFIDENTIAL
INFORMATION of NEKTAR AL with respect to manufacture of SELECTED REAGENT) to a
government or agency thereof in order to obtain regulatory approval of SELECTED
PRODUCT and/or discloses CONFIDENTIAL INFORMATION of NEKTAR AL with respect to
production of SELECTED PRODUCT to a government or government agency pursuant to
a contract with a government or government agency related to research,
development or supply of SELECTED PRODUCT, provided that in each case COMPANY
requests confidential treatment thereof.

7.4 Publicity/Use of Names; Selected Transactions.

      7.4.1 A PARTY may issue a press release relating to entry into this
AGREEMENT only if approved in advance, in writing, by the other PARTY. A PARTY
may issue subsequent press releases relating to this AGREEMENT, upon prior
written approval of the other PARTY, such approval not to be unreasonably
withheld or delayed; provided, however, that no approval of the other PARTY
shall be required if a subsequent press release or SEC filing solely discloses
any information that has previously been approved and disclosed as permitted by
this Section 7.4. Except as otherwise provided in this Section 7.4, neither
PARTY shall use the name, trademark, trade name or logo of the other PARTY or
its employees in any publicity or news release relating to this AGREEMENT or its
subject matter, without the prior express written permission of the other PARTY.
Neither PARTY shall publicly disclose the existence or terms of this AGREEMENT
pursuant to a press release or otherwise except as provided in this Article 7.


                                                                   Page 41 of 70


      7.4.2 Notwithstanding the terms of this Article 7, either PARTY shall be
permitted to disclose the existence and terms of this AGREEMENT to the extent
required, in the reasonable opinion of such PARTY'S legal counsel, to comply
with applicable laws, rules or regulations, including without limitation the
rules and regulations promulgated by the United States Securities and Exchange
Commission or any other governmental agency. Notwithstanding the foregoing,
before disclosing this AGREEMENT or any of the terms hereof pursuant to this
Section 7.4, the PARTIES will consult with one another on the terms of this
AGREEMENT for which confidential treatment will be sought in making any such
disclosure. If a PARTY wishes to disclose this AGREEMENT or any of the terms
hereof in accordance with this Section 7.4, such PARTY agrees, at its own
expense, to seek confidential treatment of the portions of this AGREEMENT or
such terms as may be reasonably requested by the other PARTY, provided that the
disclosing PARTY shall always be entitled to comply with legal requirements,
including without limitation the requirements of the SEC.

      7.4.3 Either PARTY may also disclose the existence and terms of this
AGREEMENT in confidence to its attorneys and advisors, and to potential
acquirors (and their respective professional advisors), in connection with a
potential change of control and to existing and potential investors or lenders
of such PARTY, as a part of their due diligence investigations, or to potential
licensees and SUBLICENSEES or to permitted assignees and SUBLICENSEES in each
case under an agreement to keep the terms of this AGREEMENT confidential under
terms of confidentiality and non-use substantially similar to the terms
contained in this AGREEMENT and to use such CONFIDENTIAL INFORMATION solely for
the purpose permitted pursuant to this Section 7.4.3. A PARTY may disclose this
AGREEMENT to investment bankers in connection with a contemplated transaction
without an obligation of confidentiality provided that reasonable efforts are
exerted to obtain such obligation and that the PARTY wishing to make such
disclosure notifies the other PARTY in advance thereof.


                                                                   Page 42 of 70


7.5 Notwithstanding the obligations in this Section 7.1 and 7.2, COMPANY may
disclose the CONFIDENTIAL INFORMATION of NEKTAR AL, if such disclosure is made
to governmental or other regulatory agencies in order to gain or maintain
approval to conduct clinical trials or to market SELECTED PRODUCT, but such
disclosure may be only to the extent reasonably necessary to obtain such
approvals or authorizations; or is deemed necessary by COMPANY to be disclosed
to SUBLICENSEES, AFFILIATES, agents, consultants, or other THIRD PARTIES for the
development or commercialization of SELECTED PRODUCT, or in connection with an
assignment of this AGREEMENT, a licensing transaction related to such SELECTED
PRODUCT(s) or loan, financing or investment or acquisition, merger,
consolidation or similar transaction (or for such entities to determine their
interest in performing such activities), in each case on the condition that any
THIRD PARTIES to whom such disclosures are made agree to be bound by
confidentiality and non-use obligations substantially similar to those contained
in this AGREEMENT. In the event a THIRD PARTY who receives CONFIDENTIAL
INFORMATION of NEKTAR AL from COMPANY breaches any of the obligations of
confidentiality in this Article 7, COMPANY agrees to enforce such provisions
against such THIRD PARTY and the failure to enforce such provisions shall be a
material breach as to which NEKTAR AL shall have the ability to terminate this
AGREEMENT under Section 13.2, provided that the cure period shall be limited to
thirty (30) days.

7.6 Irreparable Injury. The PARTIES acknowledge that either PARTY'S breach of
this Article 7 would cause the other PARTY irreparable injury for which it would
not have an adequate remedy at LAW. In the event of a breach, the nonbreaching
PARTY shall be entitled to seek injunctive relief in addition to any other
remedies it may have at LAW or in equity without necessity of posting a bond.

7.7 Return of CONFIDENTIAL INFORMATION. Each PARTY shall return or destroy all
CONFIDENTIAL INFORMATION of the other PARTY in its possession upon termination
or expiration of this AGREEMENT, except any CONFIDENTIAL INFORMATION that is
necessary to allow such PARTY to perform or enjoy any of its rights or
obligations that expressly survive the termination or expiration of this
AGREEMENT.


                                                                   Page 43 of 70


8. Regulatory Matters

8.1 In General. Upon completion of the RESEARCH PROGRAM, as between the PARTIES,
COMPANY shall be responsible for the research, development, testing, use,
manufacture, transport, storage, disposal of, commercialization and marketing of
SELECTED PRODUCT and, except as specifically provided in this AGREEMENT, COMPANY
shall bear all costs of doing so. As authorized in writing in advance by
COMPANY, to the extent NEKTAR AL advances or incurs any of the costs
contemplated in the preceding sentence, COMPANY shall reimburse NEKTAR AL for
such costs within thirty (30) days after the date of any invoice therefor. Each
PARTY shall promptly notify the other in writing of any information that comes
to its attention concerning the safety or efficacy of SELECTED REAGENT and/or
SELECTED PRODUCT and/or any PEG and/or any product conjugated to a PEG,
including, without limitation, any threatened or pending action by any
regulatory authority with respect thereto.

8.2 Specific Requirements. Without limiting the generality of Section 8.1,
COMPANY shall learn and verify the hazards involved in using SELECTED REAGENT,
including the Material Safety Data Sheet ("MSDS") therefor. COMPANY shall comply
with safety instructions provided by NEKTAR AL. COMPANY shall warn COMPANY's
freight handlers, SUBLICENSEES, customers and others who reasonably might be
expected to come into contact with SELECTED REAGENT or SELECTED PRODUCT of any
risks involved in using or handling SELECTED REAGENT or SELECTED PRODUCT,
including providing them with the MSDS.

8.3 Complaints and Communications. COMPANY shall be responsible for handling all
complaints and communications (including with regulatory authorities) relating
to SELECTED PRODUCT. In addition to the foregoing, COMPANY shall promptly notify
NEKTAR AL and make NEKTAR AL aware of the nature of any communications with or
inspections by regulatory authorities relating to, or which could affect,


                                                                   Page 44 of 70


SELECTED REAGENT, including any questions, complaints or comments ("INQUIRIES")
by regulatory authorities relating to or affecting SELECTED REAGENT. COMPANY
shall provide NEKTAR AL with copies of any correspondence with regulatory
authorities that relate to or could affect SELECTED REAGENT. COMPANY shall give
NEKTAR AL sufficient opportunity to review and comment on any proposed response
to any INQUIRIES prior to filing any such response, and shall give NEKTAR AL a
copy of any final response so filed.

8.4 Adverse Reaction Reporting. To the extent permitted by LAW, each PARTY shall
notify the other in writing of all information that comes to its attention
concerning serious adverse events relating to SELECTED REAGENT or SELECTED
PRODUCT. Such reports shall be provided to the other PARTY within forty-eight
(48) hours after receipt of the information in the case of any experience
coincident with the use of SELECTED REAGENT or SELECTED PRODUCT, whether or not
considered related to the SELECTED REAGENT or SELECTED PRODUCT, that suggests a
significant hazard, contraindication, side effect or precaution or results in
death, a life-threatening experience, inpatient hospitalization, prolongation of
an existing hospitalization, a persistent or significant disability or
incapacity, or a congenital anomaly or birth defect. Information concerning all
other serious adverse events not covered by the preceding sentence (including
those covered in summary reports that may be prepared annually by a PARTY
covering product complaints and complaint handling) shall be provided on a
semi-annual basis by each PARTY to the other.

9. Representations, Warranties; Covenants; Limitation of Liability

9.1 By Both PARTIES. Each PARTY represents and warrants to the other that as of
the EFFECTIVE DATE to the best of its knowledge and belief: (a) it has the full
corporate power to enter into and perform this AGREEMENT; (b) this AGREEMENT
constitutes its legal, valid and binding obligation; (c) it has sufficient legal
and/or beneficial title or other rights under its intellectual property rights
to grant the licenses contained in this AGREEMENT; (d) each of such PARTY'S
employees and officers has executed an agreement that requires such employee or
officer to the extent permitted by law, to assign all INVENTIONS, PATENTS, and


                                                                   Page 45 of 70


KNOW-HOW made during the course of and as a result of the performance of such
PARTY'S obligations under this AGREEMENT, to such PARTY; and (e) each of such
PARTY'S employees and officers is subject to an executed agreement that requires
such employee or officer to maintain as confidential any information CONTROLLED
by such PARTY, or provided by the other PARTY, that is CONFIDENTIAL INFORMATION
under this AGREEMENT.

9.2 By NEKTAR AL.

      9.2.1 As of the effective date of the license of Section 2.1, NEKTAR AL
shall represent and warrant to COMPANY that, to the knowledge of NEKTAR AL,
NEKTAR AL has not previously assigned, transferred, conveyed or otherwise
encumbered its right, title and interest in the NEKTAR AL PATENT RIGHTS, or the
NEKTAR AL KNOW-HOW, with respect to SELECTED PRODUCT in a manner that conflicts
and/or is inconsistent with the rights granted to COMPANY under this AGREEMENT.

      9.2.2 NEKTAR AL agrees that if during the TERM, NEKTAR AL assigns to an
AFFILIATE any of the NEKTAR AL LICENSED TECHNOLOGY that is subject to the
license grant provided for in Section 2.1 or Section 3.4 of this AGREEMENT, then
COMPANY's license under such NEKTAR AL LICENSED TECHNOLOGY shall follow such
assignment and COMPANY's license under such NEKTAR AL LICENSED TECHNOLOGY will
not, as a result of such assignment, be diminished or impaired.

      9.2.3 As of the effective date of the license of Section 2.1, NEKTAR AL
shall represent and warrant to COMPANY that to the knowledge of NEKTAR AL except
for PATENTS AND PATENT APPLICATIONS licensed to COMPANY under Section 2.1,
AFFILIATES of NEKTAR AL do not own any PATENTS or PATENT APPLICATIONS that if
owned by NEKTAR AL as of such effective date would be NEKTAR AL PATENT RIGHTS
licensed to COMPANY under 2.1 of the AGREEMENT.


                                                                   Page 46 of 70


9.3 Exclusion of Damages.

      9.3.1 EXCEPT FOR INTENTIONAL OR WILLFUL MISCONDUCT, AND EXCEPT FOR
INTENTIONAL OR WILLFUL MATERIAL BREACH AS TO WHICH COMPANY HAS KNOWLEDGE AND HAS
PROVIDED WRITTEN NOTICE THEREOF TO NEKTAR AL WITHIN FIVE (5) DAYS OF SUCH
KNOWLEDGE: (i) IN NO EVENT SHALL NEKTAR AL's LIABILITY ARISING OUT OF THE
DEVELOPMENT, MANUFACTURE, SUPPLY, USE OR SALE OF SELECTED REAGENT OR SELECTED
PRODUCT, EXCEED NEKTAR AL's OBLIGATION TO REPLACE THAT QUANTITY OF SELECTED
REAGENT GIVING RISE TO THE LIABILITY, AND (ii) IN NO EVENT SHALL NEKTAR AL's
LIABILITY ARISING OUT OF THIS AGREEMENT, EXCEED IN THE AGGREGATE, AN AMOUNT THAT
IS EQUAL TO THE TOTAL AMOUNT PAID BY COMPANY UNDER THE RESEARCH PLAN. THE
FOREGOING LIMITATION ON NEKTAR AL'S LIABILITY SHALL NOT APPLY WITH RESPECT TO
THE AMOUNT OF ANY OVERPAYMENT OF ROYALTIES OR MILESTONES BY COMPANY TO NEKTAR AL
HEREUNDER, PROVIDED SUCH OVERPAYMENT IS (X) NOTIFIED IN WRITING BY COMPANY TO
NEKTAR AL PROMPTLY AFTER SUCH OVERPAYMENT IS DISCOVERED BY COMPANY, BUT IN NO
EVENT LATER THAN 30 DAYS AFTER THE QUARTER IN WHICH SUCH OVERPAYMENT WAS MADE,
OR (Y) REVEALED BY AN AUDIT AS PROVIDED FOR UNDER SECTION 6.2. IN THE EVENT OF
SUCH OVERPAYMENT, NEKTAR AL SHALL CREDIT COMPANY WITH RESPECT TO FUTURE PAYMENTS
OWED BY COMPANY TO NEKTAR AL HEREUNDER, TO THE EXTENT OF SUCH OVERPAYMENT

      9.3.2 NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR SPECIAL,
INDIRECT, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES (INCLUDING WITHOUT
LIMITATION, DAMAGES RESULTING FROM LOSS OF USE, LOSS OF PROFITS, INTERRUPTION OR
LOSS OF BUSINESS OR OTHER ECONOMIC LOSS) ARISING OUT OF THIS AGREEMENT OR WITH
RESPECT TO A PARTY'S PERFORMANCE OR NON-PERFORMANCE HEREUNDER.


                                                                   Page 47 of 70


      9.3.3 Nothing in this Article 9 shall limit COMPANY's and/or NEKTAR AL'S
indemnification obligation under Article 10 or recovery of damages for breach of
Article 7 or COMPANY's indemnification under Section 3.4.2 or Section 12.1.2.

9.4 Essential Basis. The limitation of liability and exclusion of damages under
this AGREEMENT: (i) apply even if a PARTY had or should have had knowledge,
actual or constructive, of the possibility of such damages; (ii) are a
fundamental element of the basis of the bargain between the PARTIES and this
AGREEMENT would not be entered into without such limitations and exclusions and
(iii) shall apply whether a claim is based on breach of contract, breach of
warranty, tort (including negligence), product liability, strict liability or
otherwise, and notwithstanding any failure of essential purpose of any limited
remedy herein. Moreover, the exclusive remedies under this AGREEMENT are
intended to be exclusive and the limitations of liability and the exclusion of
damages under this AGREEMENT are intended to apply even if there is a total and
fundamental breach of this AGREEMENT, and the essential purpose of these
provisions is to limit the PARTIES' respective liabilities hereunder.

9.5 Covenant. COMPANY agrees that COMPANY will not use government funds to pay
for work performed by NEKTAR AL (a) under the RESEARCH PROGRAM or (b) with
respect to the development of the manufacturing process by NEKTAR AL pursuant to
Section 4.1 of this AGREEMENT, in either case, unless NEKTAR AL provides its
prior written consent to the use of such government funds or monies for such
purpose. COMPANY may use government funds (i) to purchase SELECTED REAGENT from
NEKTAR AL under this AGREEMENT and/or (ii) to manufacture and sell SELECTED
PRODUCT to the government, which SELECTED PRODUCT includes SELECTED REAGENT
obtained from NEKTAR AL, and/or (ii) to pay NEKTAR AL for transfer of NEKTAR AL
KNOW-HOW pursuant to Section 3.4.1 and 3.4.3 of this AGREEMENT. COMPANY may
provide the government with the necessary information and data with respect to
manufacture of SELECTED PRODUCT, provided that such use of government funds
and/or the providing of such information and data does not breach the covenant
of COMPANY set forth in the first sentence of this Section and provided further
that COMPANY seek confidential treatment of any such information and data
provided to the government.


                                                                   Page 48 of 70


      COMPANY covenants and agrees that the COMPANY will not grant any rights or
licenses under this AGREEMENT to a THIRD PARTY, including, without limitation,
any agency of the U.S. federal government other than as permitted by this
AGREEMENT and/or as may be permitted by the MSA. Except as provided in the MSA,
COMPANY may not authorize, or purport to authorize, the government (or any THIRD
PARTY) to manufacture SELECTED REAGENT and/or to use, practice or otherwise
exploit any intellectual property of NEKTAR AL for manufacture of SELECTED
REAGENTS.

10. Indemnification; Insurance

10.1 Indemnity.

      10.1.1 By NEKTAR AL. NEKTAR AL shall defend, indemnify and hold COMPANY,
COMPANY's AFFILIATES, COMPANY SUBLICENSEES and their respective shareholders,
directors, officers, employees and agents (each, a "COMPANY INDEMNITEE")
harmless from and against all losses, liabilities, damages, costs and expenses
(including reasonable attorney's fees and costs of investigation and litigation,
regardless of outcome) resulting from all claims, demands, actions and other
proceedings by or on behalf of any THIRD PARTY (including any governmental
authority) (collectively, "CLAIMS") to the extent arising from: (a) the breach
of any representation, warranty (other than any warranty that SELECTED REAGENT
conforms to SPECIFICATIONS), covenant or material obligation of NEKTAR AL under
this AGREEMENT; or (b) the gross negligence, recklessness or willful misconduct
of NEKTAR AL in the performance of its obligations under this AGREEMENT, or (c)
any CLAIMS brought by an employee or contractor of NEKTAR AL, for personal
injury or death or damage to property caused directly and proximately by such
employee's or contractor's performance of the manufacture of SELECTED REAGENT
for NEKTAR AL under this AGREEMENT, or (d) any CLAIMS brought by a THIRD PARTY
for personal injury or death or damage to property, which personal injury, death
or damage occurs as a direct and proximate result of an accident occurring at
the facility of NEKTAR AL where the manufacture of SELECTED REAGENT is carried


                                                                   Page 49 of 70


out under this AGREEMENT, except in each case (i) to the extent such claim,
demand, action or proceeding arises from COMPANY's material breach of this
AGREEMENT or a breach of any representation or warranty of COMPANY under this
AGREEMENT, or the gross negligence, recklessness or willful misconduct of a
COMPANY INDEMNITEE; or (ii) to the extent that COMPANY is obligated to indemnify
NEKTAR AL under Section 10.1.2.

      10.1.2 By COMPANY. Subject to the limitations and exclusions set forth in
Section 9.3, COMPANY shall defend, indemnify and hold NEKTAR AL, NEKTAR AL
AFFILIATES, and their respective shareholders, directors, officers, employees
and agents (each, a "NEKTAR AL INDEMNITEE") harmless from and against all
losses, liabilities, damages, costs and expenses (including reasonable
attorney's fees and costs of investigation and litigation, regardless of
outcome) resulting from all CLAIMS to the extent arising from: (a) the breach of
any representation, warranty, covenant or material obligation of COMPANY under
this AGREEMENT; (b) the development (including without limitation the conduct of
clinical trials), manufacturing, testing, storage, handling, transportation,
disposal, commercialization (including any recalls, field corrections or market
withdrawals), marketing, distribution, promotion, sale or use of SELECTED
PRODUCT by or for COMPANY or its SUBLICENSEES or any of their respective THIRD
PARTY agents or subcontractors (including as a result of any illness, injury or
death to persons, including employees, agents or contractors of COMPANY or its
SUBLICENSEES, or damage to property); or (c) the gross negligence, recklessness
or willful misconduct of COMPANY or its SUBLICENSEES or any of their respective
THIRD PARTY agents or subcontractors in the performance of its or their
obligations under this AGREEMENT, except in each case (i) to the extent such
claim, demand, action or proceeding arises from NEKTAR AL's material breach of
this AGREEMENT or the gross negligence, recklessness or willful misconduct of a
NEKTAR AL INDEMNITEE and/or (ii) to the extent that NEKTAR AL is obligated to
indemnify COMPANY under Section 10.1.1.

10.2 Procedures. If any CLAIM covered by Section 10.1 is brought: (i) the
indemnified PARTY shall promptly notify the indemnifying PARTY in writing of
such CLAIM, (ii) the indemnifying PARTY shall assume, at its cost and expense,


                                                                   Page 50 of 70


the sole defense of such CLAIM through counsel selected by the indemnifying
PARTY and reasonably acceptable to the other PARTY, except that those
indemnified may at their option and expense select and be represented by
separate counsel; provided that the indemnifying PARTY shall have the sole right
to control such defense; (iii) the indemnifying PARTY shall maintain control of
such defense and/or the settlement of such CLAIM; (iv) those indemnified may, at
their option and expense, participate in such defense, and if they so
participate, the indemnifying PARTY and those indemnified shall cooperate with
one another in such defense, provided that the indemnifying PARTY shall have the
sole right to control such defense; (v) the indemnifying PARTY will have
authority to consent to the entry of any judgment, to enter into any settlement
or otherwise to dispose of such CLAIM, and (vi) an indemnified PARTY may not
consent to the entry of any judgment, enter into any settlement or otherwise to
dispose of such CLAIM or admit liability with respect thereto without the prior
written consent of the indemnifying PARTY.

10.3 Insurance. COMPANY, at its own expense, shall maintain comprehensive
general liability insurance, including product liability insurance, in the
minimum amount of [***] DOLLARS ($[***]) per occurrence, and [***] DOLLARS
($[***]) in the aggregate, with NEKTAR AL named as an additional insured,
provided however that such aggregate shall be increased to [***] dollars
($[***]) when SELECTED PRODUCT is used in a human. Such policies shall include a
provision that NEKTAR AL shall be given [***] days written notice prior to
cancellation or material change in such a policy, except in the case of
non-payment, which shall require at least [***] days notice. The insurance
carriers must be rated A-, VII or better by A.M. Best Company. COMPANY shall
maintain such insurance for so long as it continues to research or develop or
commercialize SELECTED PRODUCT, and shall from time to time provide copies of
certificates of such insurance to NEKTAR AL upon its request. If the insurance
policy is written on a claims-made basis than the coverage must be kept in place
for at least [***] years after the termination of this AGREEMENT.

- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                                                   Page 51 of 70


11. INVENTIONS, KNOW-HOW and PATENTS

11.1 Existing Intellectual Property. Other than as expressly provided in this
AGREEMENT, neither PARTY grants nor shall be deemed to grant any right, title or
interest to the other PARTY in any PATENT, PATENT APPLICATION, KNOW-HOW or other
intellectual property right CONTROLLED by such PARTY as of the EFFECTIVE DATE.

11.2 Disclosure. Each PARTY shall promptly disclose in writing to the other all
INVENTIONS arising from the joint or separate activities (including any
INVENTIONS first made, conceived or first reduced to practice as a result of
such activities) of the PARTIES or their employees, agents, independent
contractors or SUBLICENSEES; provided, however, NEKTAR AL shall not be obligated
to disclose a SOLE INVENTION to the extent such SOLE INVENTION falls outside the
scope of COMPANY CORE TECHNOLOGY owned by COMPANY and that COMPANY shall not be
obligated to disclose a SOLE INVENTION to the extent such SOLE INVENTION falls
outside the scope of NEKTAR AL CORE TECHNOLOGY owned by NEKTAR AL.

11.3 Ownership of INVENTIONS. Except as otherwise set forth in Sections 11.4 or
11.5, all INVENTIONS made solely by employees, agents, independent contactors or
SUBLICENSEES of a PARTY (each, a "SOLE INVENTION") shall be the exclusive
property of such PARTY. Except as otherwise set forth in Sections 11.4 or 11.5,
if employees, agents, independent contractors or SUBLICENSEES of each of NEKTAR
AL and COMPANY jointly develop any INVENTION (each, a "JOINT INVENTION"),
COMPANY and NEKTAR AL shall each own an undivided one-half (1/2) interest in and
to such JOINT INVENTION, and, subject to the exclusive licenses granted to
COMPANY under this AGREEMENT, each PARTY shall have the right to freely exploit
and grant licenses under any such JOINT INVENTION and any PATENT claiming such
JOINT INVENTION without consent of or a duty of accounting to the other PARTY.
For the avoidance of doubt, the determination as to whether an INVENTION has
been "solely" or "jointly" made shall be based upon whether employees, agents,
independent contractors or SUBLICENSEES of a PARTY would be or are properly
named as an inventor on a corresponding PATENT APPLICATION under United States
inventorship laws.


                                                                   Page 52 of 70


11.4 NEKTAR AL CORE TECHNOLOGY INVENTIONS. Any and all rights, title and
interest in and to all SOLE INVENTIONS and JOINT INVENTIONS which fall within
the scope of NEKTAR AL CORE TECHNOLOGY that are potentially patentable and/or as
to which a patent application has been filed shall belong solely to NEKTAR AL
("NEKTAR AL CORE TECHNOLOGY INVENTIONS"). COMPANY hereby agrees to and hereby
does, and shall, without additional consideration transfer and assign to NEKTAR
AL all of its right, title and interest in and to such NEKTAR AL CORE TECHNOLOGY
INVENTIONS and all intellectual property rights therein including enforcement
rights, and, except for a government or government agency, shall require its
employees, agents, independent contractors and SUBLICENSEES to so transfer and
assign their right, title and interest therein to NEKTAR AL. NEKTAR AL shall be
responsible, at its sole expense and discretion, and with the cooperation of
COMPANY, for the filing, prosecution and maintenance of foreign and domestic
PATENT APPLICATIONS and PATENTS covering such NEKTAR AL CORE TECHNOLOGY
INVENTIONS. Any disputes arising from the foregoing or under Section 11.5 as to
ownership shall be presented to the MANAGING COMMITTEE for discussion and
resolution, provided neither PARTY shall have the right of final determination
with respect to such dispute. In the event the MANAGING COMMITTEE cannot agree
on the foregoing, either PARTY may seek remedy in accordance with Schedule VIII.

11.5 COMPANY CORE TECHNOLOGY INVENTIONS. Any and all rights, title and interest
in and to all SOLE INVENTIONS and JOINT INVENTIONS which fall within the scope
of COMPANY CORE TECHNOLOGY that are potentially patentable and/or as to which a
patent application has been filed shall belong solely to COMPANY ("COMPANY CORE
TECHNOLOGY INVENTIONS"). NEKTAR AL hereby agrees to and hereby does, and shall,
without additional consideration transfer and assign to COMPANY all of its
right, title and interest in and to any COMPANY CORE TECHNOLOGY INVENTIONS and
all intellectual property rights therein including enforcement rights, and shall
require its employees, agents, independent contractors to so transfer and assign


                                                                   Page 53 of 70


their right, title and interest therein to COMPANY. COMPANY shall be
responsible, at its sole expense and discretion, and with the cooperation of
NEKTAR AL if requested by COMPANY, for the filing, prosecution and maintenance
of foreign and domestic PATENT APPLICATIONS and PATENTS covering such COMPANY
CORE TECHNOLOGY INVENTIONS.

11.6 Individual PATENT Filings. Each PARTY shall have sole discretion and right
to prepare, file, prosecute, maintain and defend PATENT APPLICATIONS or PATENTS
for INVENTIONS it solely owns under this AGREEMENT, and shall be responsible for
related interference proceedings.

11.7 Joint PATENT Filings. With respect to all PATENT APPLICATIONS on JOINT
INVENTIONS that are jointly owned by the PARTIES (i.e., JOINT INVENTIONS that
have not been assigned nor are assignable to the other PARTY pursuant to
Sections 11.4 and 11.5) (the "JOINT PATENT APPLICATIONS"), the PARTIES shall
determine which PARTY shall be responsible for filing, prosecuting and
maintaining PATENT APPLICATIONS and PATENTS on behalf of both PARTIES (the
"RESPONSIBLE PARTY") based on a good faith determination of the relative
contributions of the PARTIES to the INVENTION and the relative interests of the
PARTIES in the INVENTION. At least twenty (20) days prior to the contemplated
filing of such PATENT APPLICATION, the RESPONSIBLE PARTY shall submit a
substantially completed draft of the JOINT PATENT APPLICATION to the other PARTY
for its approval, which shall not be unreasonably withheld or delayed. Except as
set forth below, the PARTIES shall share equally the costs of the preparation,
filing, prosecution and maintenance of all JOINT PATENT APPLICATIONS. If either
PARTY elects not to pay its portion of any shared costs for a JOINT PATENT
APPLICATION or PATENT issuing therefrom, the other PARTY may proceed with such
JOINT PATENT APPLICATION in its own name and at its sole expense, in which case
the PARTY electing not to pay its share of costs hereby agrees to transfer and
assign and shall transfer and assign its entire right, title and interest in and
to such JOINT PATENT APPLICATION to the other PARTY and such INVENTION shall be
treated as a SOLE INVENTION of the assignee for the purposes hereof.


                                                                   Page 54 of 70


11.8 The PARTIES recognize and agree that this Agreement is a "joint research
agreement" under 35 U.S.C. 103(c)(3). The PARTIES further agree to cooperate to
avail themselves and each other of the provisions of said section 35 U.S.C.
103(c) amended through the CREATE Act on December 10. 2004.

12. Infringement

12.1 Infringement of THIRD PARTY Rights.

      12.1.1 Notice. If the development, manufacture, use, import, sale or offer
for sale of SELECTED PRODUCT or SELECTED REAGENT results in a claim for PATENT
infringement by a THIRD PARTY, the PARTY to this AGREEMENT first having notice
shall promptly notify the other PARTY in writing. The notice shall set forth the
facts of the claim in reasonable detail.

      12.1.2 Indemnification by COMPANY. Except to the limited extent provided
for in Section 12.1.3, COMPANY shall defend, indemnify and hold harmless each
NEKTAR AL INDEMNITEE from and against all losses, liabilities, damages, costs
and expenses (including reasonable attorney's fees and costs of investigation
and litigation, regardless of outcome) resulting from any claim that the
development, manufacture, use, import, offer for sale or sale of SELECTED
PRODUCT infringes a THIRD PARTY patent or misappropriates THIRD PARTY KNOW-HOW,
and the provisions of Sections 10.1.2 and 10.3 shall apply with respect to any
such claim to the same extent as though it were a CLAIM for which COMPANY has an
obligation to defend, indemnify and defend NEKTAR AL under Section 10.1.2. In
the event of a conflict between the provisions of Article 10 and this Section
12.1.2, the provisions of this Section 12.1.2 shall govern. NEKTAR AL shall
cooperate with COMPANY at COMPANY's request and expense in such defense, and
shall have the right to be represented by counsel of its own choice, at NEKTAR
AL's expense.

      12.1.3 Limitation on Indemnity by COMPANY. COMPANY's obligations under
Section 12.1.2 shall not apply to the extent that (a) any infringement of a
THIRD PARTY PATENT or misappropriation of THIRD PARTY KNOW -HOW results solely


                                                                   Page 55 of 70


from the composition of matter or the manufacture of SELECTED REAGENT, or (b)
the synthetic and/or analytical methods for the SELECTED PRODUCT at the
laboratory scale used in the RESEARCH PROGRAM, which are transferred by NEKTAR
AL to COMPANY pursuant to Section 3.4.1(ii), have been misappropriated by NEKTAR
AL from a THIRD PARTY. Nothing in this Section 12.1.3 shall be deemed to limit
COMPANY's obligations set forth in Section 3.4.2.

      12.1.4 Third Party Royalties. If either PARTY is required to pay royalties
or any other payments to a THIRD PARTY because the composition of matter or
method of making of the SELECTED REAGENT contained in the SELECTED PRODUCT
infringes a PATENT of a THIRD PARTY in a particular country, then COMPANY shall
pay such THIRD PARTY any royalties or other payments for a license under such
PATENT necessary to use, manufacture, import, sell or offer for sale such
SELECTED PRODUCT in such country. In the event that payment of such THIRD PARTY
royalties in accordance with this Section 12.1.4 causes the total royalty
payable by COMPANY to exceed the ORIGINAL ROYALTY cap, or any REVISED ROYALTY
CAP, as applicable, then the terms of Sections 5.2.3 or 5.2.4 shall apply.

      12.1.5 Freedom to Operate Determination. Promptly after the selection of
the SELECTED REAGENT, NEKTAR AL will provide to COMPANY any information,
including any freedom to operate studies, then in NEKTAR AL's possession,
relating to composition of matter or method of manufacturing the SELECTED
REAGENT, and following COMPANY's receipt of such information but in no event
later than 30 days following such receipt, COMPANY shall notify NEKTAR AL in
writing whether or not COMPANY shall proceed with the use of such SELECTED
REAGENT and along with such notification, shall provide to NEKTAR AL any and all
freedom to operate studies that COMPANY may have conducted with respect to such
SELECTED REAGENT, in each case, only after entering into a joint defense
agreement or other agreement sufficient to preserve any privilege (including the
attorney client privilege) held by either PARTY.


                                                                   Page 56 of 70


12.2 Infringement By THIRD PARTIES.

      12.2.1 Notice of Infringement. If any VALID CLAIM is infringed by a THIRD
PARTY, or any NETKTAR AL KNOW-HOW utilized in the manufacture, use, import or
sale of SELECTED REAGENT or SELECTED PRODUCT is misappropriated by a THIRD
PARTY, the PARTY first having knowledge of such infringement or misappropriation
shall promptly notify the other PARTY in writing. The notice shall set forth the
facts of such infringement or misappropriation in reasonable detail.

      12.2.2 Prosecution of Actions Relating to SELECTED REAGENT.

            (a)   NEKTAR AL shall have the primary right, but not the
                  obligation, to institute, prosecute and control any action or
                  proceeding with respect to any infringement of a VALID CLAIM
                  or misappropriation of NEKTAR AL KNOW-HOW by reason of a THIRD
                  PARTY'S manufacture, use, import, offer for sale or sale of
                  SELECTED REAGENT using counsel of its own choice, at its own
                  expense. COMPANY shall cooperate with NEKTAR AL at NEKTAR AL's
                  request and expense in the prosecution of such action or
                  proceeding. If NEKTAR AL determines that COMPANY is an
                  indispensable PARTY to the action, COMPANY hereby consents to
                  be joined. In such event, COMPANY shall have the right to be
                  represented in that action by its own counsel and at its own
                  expense.

            (b)   If NEKTAR AL fails to bring an action or proceeding within a
                  period of sixty (60) days after receiving written notice from
                  COMPANY or otherwise having knowledge of such infringement or
                  misappropriation by reason of a THIRD PARTY'S manufacture,
                  use, import, offer for sale or sale of SELECTED REAGENT,
                  COMPANY shall have the right to bring and control any such
                  action using counsel of its own choice, and at its own
                  expense. If COMPANY determines that NEKTAR AL is an


                                                                   Page 57 of 70


                  indispensable PARTY to the action, NEKTAR AL hereby consents
                  to be joined. In such event, NEKTAR AL shall have the right to
                  be represented in such action by its own counsel at its own
                  expense. No settlement, consent judgment or other voluntary
                  final disposition of a suit under this Section 12.2.2 may be
                  entered into without the joint consent of COMPANY and NEKTAR
                  AL (which consent shall not be withheld or delayed
                  unreasonably).

            (c)   If either PARTY brings an action for infringement or
                  misappropriation by a THIRD PARTY under this Section 12.2.2,
                  any damages or other monetary awards or payments in settlement
                  recovered by such PARTY shall be applied first to defray the
                  costs and expenses incurred by both PARTIES in the action. If
                  NEKTAR AL has brought the action, any remainder shall be
                  retained by NEKTAR AL. If COMPANY has brought the action, any
                  remainder shall be retained by COMPANY, except to the extent
                  that damages are based on lost sales of COMPANY, in which
                  event such amounts shall be deemed NET SALES and subject to
                  the payment of royalties under this AGREEMENT.

      12.2.3 Prosecution of Actions Related to SELECTED PRODUCT.

            (a)   Subject to NEKTAR AL's right under Section 12.2.2, COMPANY
                  shall have the primary right, but not the obligation, to
                  institute, prosecute and control any action or proceeding with
                  respect to any infringement of NEKTAR AL PATENT RIGHTS or
                  misappropriation of NEKTAR AL KNOW -HOW by reason of a THIRD
                  PARTY'S manufacture, use, import, offer for sale or sale of
                  SELECTED PRODUCT, using counsel of its own choice, at its own
                  expense. NEKTAR AL shall cooperate with COMPANY at COMPANY's
                  request and expense in the prosecution of such action or
                  proceeding. If COMPANY reasonably determines that NEKTAR AL is


                                                                   Page 58 of 70


                  an indispensable PARTY to the action, NEKTAR AL hereby
                  consents to be joined. In such event, NEKTAR AL shall have the
                  right to be represented in that action by its own counsel and
                  at its own expense.

            (b)   If COMPANY fails to bring an action or proceeding within a
                  period of sixty (60) days after receiving written notice from
                  NEKTAR AL of the possibility of a claim, or otherwise having
                  knowledge of a claim described in Section 12.2.3(a), NEKTAR AL
                  shall have the right, but not the obligation, to bring and
                  control any such action using counsel of its own choice, at
                  its own expense. If NEKTAR AL determines that COMPANY is an
                  indispensable PARTY to the action, COMPANY hereby consents to
                  be joined. In such event, COMPANY shall have the right to be
                  represented in such action using counsel of its own choice, at
                  its own expense. No settlement, consent judgment or other
                  voluntary final disposition of a suit under this Section
                  12.2.3(b) may be entered into without the joint consent of
                  NEKTAR AL and COMPANY (which consent shall not be withheld
                  unreasonably).

            (c)   If either PARTY brings an action for infringement or
                  misappropriation by a THIRD PARTY under this Section 12.2.3
                  any damages or other monetary awards or payments in settlement
                  recovered by such PARTY shall be applied first to defray the
                  costs and expenses incurred by both PARTIES in the action. Any
                  remainder shall be retained by the PARTY bringing such action,
                  provided that if the remainder is retained by COMPANY, such
                  remainder shall be treated as NET SALES subject to royalty
                  under this AGREEMENT.


                                                                   Page 59 of 70


13. Term and Termination

13.1 Expiration. The term of this AGREEMENT (the "TERM") shall commence on the
EFFECTIVE DATE and shall expire on a country-by-country basis upon the
expiration of all royalty obligations in the applicable country, unless earlier
terminated as provided herein.

13.2 Termination for Default. Each PARTY shall have the right to terminate this
AGREEMENT for material breach by the other PARTY by providing written notice to
the other PARTY, which notice shall specify the breach and notify the other
PARTY that this AGREEMENT will be terminated if such breach is not cured. If the
material breach is a payment breach and such payment is not made within [***]
days of such notice or if the material breach is other than a payment breach,
and such material breach is not cured in [***] days, then this AGREEMENT shall
be terminated at the end of such [***] day period.

13.3 Voluntary Termination. COMPANY has the right within its sole discretion to
terminate this AGREEMENT by [***] days prior written notice to NEKTAR AL.

13.4 Effect of Termination.

      13.4.1 The provisions of Sections 2.4, 3.5, 4.11 (with respect to amounts
charged prior to termination), 6.1 - 6.5 (as to accrued amounts), 9.3, 9.4,
12.1.2, 12.1.3, 13.4, 17.1 - 17.8, and 17.10 - 17.12 and 17.14 and Articles 7,
8, 10, and 11 (and in each case together with any defined terms applicable to
such provisions) shall survive termination of this AGREEMENT for any reason
whatsoever.

      13.4.2 Notwithstanding anything in this AGREEMENT to the contrary, if this
AGREEMENT is terminated for any reason whatsoever:

- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                                                   Page 60 of 70


            (a)   COMPANY shall have the right to use or sell SELECTED PRODUCTS
                  on hand on the date of such termination and to complete
                  SELECTED PRODUCTS in the process of manufacture at the time of
                  such termination and use or sell the same as if licensed under
                  this AGREEMENT for a period of [***] months, provided that
                  COMPANY shall submit the applicable royalty report, along with
                  the royalty payments required by this AGREEMENT; provided that
                  COMPANY's right to use or sell SELECTED PRODUCTS pursuant to
                  this subsection (a) shall be at the discretion of NEKTAR AL if
                  the AGREEMENT is terminated by NEKTAR AL for material breach
                  of COMPANY; and

            (b)   COMPANY shall continue to be obligated to purchase and shall
                  purchase SELECTED REAGENT manufactured pursuant to any issued
                  purchase orders pursuant to Article 4, and any SELECTED
                  REAGENT so manufactured shall be invoiced to COMPANY in full
                  and paid by COMPANY in accordance with the terms of this
                  AGREEMENT; and

            (c)   COMPANY shall be responsible for all unavoidable authorized
                  costs and expenses, including arising out of those activities
                  that would reasonably have been required by NEKTAR AL in order
                  to meet COMPANY's requirements of SELECTED REAGENT, except if
                  this AGREEMENT is terminated by COMPANY for material breach by
                  NEKTAR AL; and,

            (d)   COMPANY shall pay NEKTAR AL all accrued milestone payments and
                  accrued royalties in accordance with the terms of this
                  AGREEMENT.

      13.4.3 Subject to Section 13.4.2, if this AGREEMENT is terminated for any
reason whatsoever, any licenses granted under this AGREEMENT shall automatically

- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                                                   Page 61 of 70


terminate and all licensed rights shall revert in their entirety to the
respective licensor and all obligations of each PARTY shall terminate except
those that survive under Section 13.4.1. Subject to the limitations of liability
and exclusions of damages provided for herein, termination of this AGREEMENT by
a PARTY shall not be an exclusive remedy and all other remedies will be
available to the terminating PARTY, in equity and at LAW.

14. Governance

14.1 MANAGING COMMITTEE.

            (i) To facilitate communication between the PARTIES during the
RESEARCH PROGRAM, the PARTIES shall appoint a MANAGING COMMITTEE consisting of
two (2) representatives from each of NEKTAR AL and COMPANY. The initial
representatives are set forth on Schedule VI hereto. Each PARTY may replace its
representatives on the MANAGING COMMITTEE by prior written notice to the other
PARTY. The MANAGING COMMITTEE shall have such responsibilities as set forth
herein and as the PARTIES may agree from time to time. The MANAGING COMMITTEE
shall supervise the activities of the RESEARCH COMMITTEE; resolve issues
referred by members of the RESEARCH COMMITTEE; make strategic decisions related
to research and development activities in connection with the SELECTED PRODUCT
and review the progress of research and development activities in connection
with the SELECTED PRODUCT. The MANAGING COMMITTEE shall meet at such times and
places, in person or by telephone conferencing or other electronic
communication, as it shall determine to carry out its responsibilities;
provided, that a meeting of the MANAGING COMMITTEE shall take place no later
than thirty (30) days after the EFFECTIVE DATE.

            (ii) The MANAGING COMMITTEE shall operate by consensus with
representatives of NEKTAR AL having one (1) collective vote and representatives
of COMPANY having one (1) collective vote. If a dispute arises or there is not a
unanimous vote regarding matters within the scope of responsibilities of the
MANAGING COMMITTEE, and the MANAGING COMMITTEE fails to reach a consensus on its


                                                                   Page 62 of 70


resolution within thirty (30) days of when the dispute was presented to the
MANAGING COMMITTEE or when a unanimous vote is not obtained, then the dispute
shall be referred to the senior management representatives of each PARTY. If
such senior management representatives fail to agree, then (a) NEKTAR AL shall
have the right to resolve the dispute and/or cast the deciding vote on matters
pertaining to (i) the choice of REAGENTS used in the PLAN but not the selection
of a SELECTED REAGENT and (ii) after selection of a SELECTED REAGENT, the
development and/or manufacture of the SELECTED REAGENT, and (b) COMPANY shall
have the right to resolve the dispute and/or cast the deciding vote on all other
matters, provided that resolution or decision does not require NEKTAR AL to
allocate financial or personnel resources or manufacturing capacity not already
provided for in the PLAN in effect at that time.

14.2 RESEARCH COMMITTEE. The MANAGING COMMITTEE shall appoint a RESEARCH
COMMITTEE to plan and manage the research and development activities to be
conducted in connection with the SELECTED PRODUCT pursuant to the RESEARCH
PROGRAM and to facilitate communication on research and development issues
between the PARTIES. Implementation of the RESEARCH PROGRAM and other day-to-day
research and development activities shall be managed by the RESEARCH COMMITTEE,
subject to oversight by the MANAGING COMMITTEE. The RESEARCH COMMITTEE shall be
comprised of appropriate representatives of both PARTIES, and shall meet no less
frequently than once a month in person or by teleconference as agreed upon by
the PARTIES. Each PARTY shall appoint a RESEARCH PROGRAM team leader (and other
key contacts, as necessary) to serve as principal RESEARCH COMMITTEE liaisons
for the PARTIES. Employees of each PARTY who are not on the RESEARCH COMMITTEE
may attend meetings of the RESEARCH COMMITTEE, as required to further the
research and development of the SELECTED PRODUCT. The RESEARCH COMMITTEE shall
operate by consensus with representatives of NEKTAR AL having one (1) collective
vote and representatives of COMPANY having one (1) collective vote. Any
disagreements between the PARTIES' representatives at the RESEARCH COMMITTEE
level shall be referred to the MANAGING COMMITTEE. Members of the RESEARCH
COMMITTEE will be notified by each PARTY to the other PARTY within twenty (20)
days after the EFFECTIVE DATE.


                                                                   Page 63 of 70


14.3 Notwithstanding anything to the contrary herein, neither the MANAGING
COMMITTEE nor the RESEARCH COMMITTEE shall have the right or power to amend the
terms of this AGREEMENT or waive rights or obligations of the PARTIES hereunder,
or take any action that would conflict with any provision of this AGREEMENT.

15. Assignment

      (a) Unless otherwise expressly permitted hereunder, neither PARTY may
assign any of its rights or delegate any of its duties under this AGREEMENT
without the prior written consent of the other PARTY, except that either PARTY
may assign its rights and responsibilities hereunder without the other PARTY'S
consent as part of: (i) either (a) the sale of all or substantially all of the
assets or the entire business to which this AGREEMENT relates or (b) a merger,
consolidation, reorganization or other combination with or into another person
or entity; or (ii) the transfer or assignment to an AFFILIATE, in each case,
pursuant to which the surviving entity or assignee assumes the assigning or
merging PARTY'S obligations hereunder. Any assignment made in violation of this
Article 15 shall be null and void.

      (b) NEKTAR AL shall not assign or transfer PATENTS licensed to COMPANY
under this AGREEMENT without making such assignment or transfer subject to the
licenses granted under this AGREEMENT.

16. Notices

Any notice or other communication or payment herein required or permitted to be
given shall be deemed sufficient if and when personally delivered in writing or
if and when given by United States registered or certified mail, postage
prepaid, return receipt requested, properly addressed to the respective
addresses of the PARTIES as written below. Notices so given shall be effective


                                                                   Page 64 of 70


upon the earlier to occur of (i) receipt by the PARTY to which notice is given,
or (ii) the fourth (4th) business day following the date such notice was posted,
whichever occurs first.

If to COMPANY, addressed to:

PharmAthene, Inc.
175 Admiral Cochrane Drive, Suite 101,
Annapolis, MD 21401
Attention: CEO

If to NEKTAR AL, addressed to:

NEKTAR Therapeutics AL, Corporation
1112 Church Street
Huntsville, AL 35801
Attention: Contract Management

With a copy to:

Nektar Therapeutics
150 Industrial Road
San Carlos, CA 94070-6256
Attention: Vice President, Corporate Legal

17. Miscellaneous

17.1 Force Majeure. Neither PARTY shall be held liable or responsible to the
other PARTY nor be deemed to have defaulted under or breached this AGREEMENT for
failure or delay in fulfilling or performing any term of this AGREEMENT to the
extent, and for so long as, such failure or delay is caused by or results from
causes beyond the reasonable control of the affected PARTY; provided, however,
that the foregoing shall not be applied to excuse or delay any payment
obligation of COMPANY under this AGREEMENT.

17.2 Severability. If any one or more of the provisions contained in this
AGREEMENT is held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby, unless the absence
of the invalidated provision(s) adversely affects the substantive rights of the


                                                                   Page 65 of 70


PARTIES. The PARTIES shall in such an instance use their best efforts to replace
the invalid, illegal or unenforceable provision(s) with valid, legal and
enforceable provision(s) which, insofar as practical, implement the purposes of
this AGREEMENT.

17.3 Variation. This AGREEMENT may not be amended, varied or modified in any
manner except by an instrument in writing signed by a duly authorized officer or
representative of each PARTY hereto.

17.4 Forbearance and Waiver. No waiver by a PARTY in respect of any breach shall
operate as a waiver in respect of any subsequent breach. No forbearance, failure
or delay by a PARTY in exercising any right or remedy shall operate as a waiver
thereof, nor shall any single or partial forbearance, exercise or waiver of any
right or remedy prejudice its further exercise of any right or remedy under this
AGREEMENT or at LAW.

17.5 Counterparts. This AGREEMENT may be executed in more than one counterpart,
each of which constitutes an original and all of which together shall constitute
one enforceable agreement.

17.6 No Partnership. The relationship of the PARTIES is that of independent
contractors and this AGREEMENT shall not operate so as to create a partnership
or joint venture of any kind between the PARTIES.

17.7 Construction. The PARTIES have participated jointly in the negotiation and
drafting of this AGREEMENT. In the event that an ambiguity or question of intent
or interpretation arises, this AGREEMENT shall be construed as if drafted
jointly by the PARTIES and no presumption or burden of proof shall arise
favoring or disfavoring any PARTY by virtue of the authorship of any of the
provisions of this AGREEMENT. Except where the context otherwise requires, where
used, the singular shall include the plural, the plural the singular, the use of
any gender shall be applicable to all genders and the word "or" is used in the
inclusive sense (and/or). The captions of this AGREEMENT are for convenience of
reference only and in no way define, describe, extend or limit the scope or
intent of this AGREEMENT or the intent of any provision contained in this
AGREEMENT. The term "including" as used herein means including the generality of
any description preceding such term.


                                                                   Page 66 of 70


17.8 Entire Agreement. This AGREEMENT and the Schedules attached hereto
constitute the entire understanding between the PARTIES and supersedes any prior
or contemporaneous written or oral understanding, negotiations or agreements
between and among them respecting the subject matter hereof. This AGREEMENT
shall be binding upon, and inure to the benefit of, the PARTIES and their
respective successors and assigns.

17.9 Patent Marking and SELECTED PRODUCT Marking. COMPANY shall place
appropriate NEKTAR AL patent and/or patent pending markings on SELECTED PRODUCT
or the packaging therefor provided that NEKTAR AL provides to COMPANY the
identity of such patents and the SELECTED PRODUCT and country for which marking
is applicable. The content, form, size, location and language of such markings
shall be in accordance with the laws, regulations, and practices of the country
in which the applicable units of SELECTED PRODUCT is distributed. In the event
that COMPANY believes that such marking is not in accordance with applicable
law, rules or regulations, COMPANY shall inform NEKTAR AL and COMPANY shall not
be required to mark the SELECTED PRODUCT unless COMPANY is indemnified by NEKTAR
AL in writing with respect to any and all losses that may arise from such
marking. COMPANY shall be responsible for all packaging (non-commercial and
commercial) and labeling of SELECTED PRODUCT. To the extent allowed by the
applicable laws and regulations, all SELECTED PRODUCT labeling, packaging and
package inserts and any promotional materials associated with SELECTED PRODUCT
shall carry, in a conspicuous location, the trademark of NEKTAR AL, the identity
and style of which shall be selected by NEKTAR AL in its sole discretion,
provided that such identity and style is reasonably acceptable to COMPANY.
NEKTAR AL authorizes the use of its trademark pursuant to this Section 17.9.

17.10 Governing Law. All questions of inventorship will be determined in
accordance with U.S. patent laws. In respect to all other PATENT rights, the


                                                                   Page 67 of 70


rights of the PARTIES will be governed by the laws of the jurisdiction in which
the applicable PATENT is filed or granted. In all other respects, this AGREEMENT
shall be governed by and construed in accordance with the laws of the State of
Delaware without regard to its choice of law rules that would require
application of the law of another jurisdiction.

17.11 Termination of NON-DISCLOSURE AGREEMENT. All provisions of, rights granted
and covenants made in the NON-DISCLOSURE AGREEMENT are hereby terminated and of
no further force and effect and are superseded in their entirety by the
provisions of, rights granted and covenants made in this AGREEMENT. The PARTIES
acknowledge and agree that any disclosure made pursuant to the NON-DISCLOSURE
AGREEMENT shall be governed by the terms and conditions of Article 7.

17.12 Compliance with Laws. COMPANY will comply with all LAWS in performing its
obligations and exercising its rights hereunder, and NEKTAR AL will comply with
all United States laws in performing its obligations and exercising its rights
hereunder. Nothing in this AGREEMENT shall be deemed to permit COMPANY or its
SUBLICENSEES to export, re-export or otherwise transfer any information or
materials (including NEKTAR AL MATERIALS and SELECTED REAGENT) transferred
hereunder or SELECTED PRODUCT manufactured therefrom without complying with
LAWS.

17.13 Section 365(n) of the Bankruptcy Code. All rights and licenses granted
under or pursuant to this AGREEMENT by one PARTY to the other PARTY are, for all
purposes of Section 365(n) of Title 11, U.S. Code (the "BANKRUPTCY CODE"),
licenses of rights to "intellectual property" as defined in the BANKRUPTCY CODE.
As a licensee of such rights under this AGREEMENT, a PARTY shall retain and may
fully exercise all of its rights and elections under the BANKRUPTCY CODE. If a
BANKRUPTCY CODE case is commenced by or against a PARTY (the "BANKRUPTCY PARTY")
and this AGREEMENT is rejected as provided in the BANKRUPTCY CODE and the
BANKRUPTCY PARTY elects to retain its rights hereunder as provided in the
BANKRUPTCY CODE, then the BANKRUPTCY PARTY (in any capacity, including
debtor-in-possession) and its successors and assigns (including, without
limitation, a BANKRUPTCY CODE trustee) shall take such steps as are necessary to


                                                                   Page 68 of 70


permit the other PARTY to exercise its rights under this AGREEMENT. All rights,
powers and remedies of the non-BANKRUPTCY PARTY provided under this provision
are in addition to and not in substitution for any and all other rights, powers
and remedies now or hereafter existing at law or in equity (including, without
limitation, the BANKRUPTCY CODE) in the event of any such commencement of a
bankruptcy proceeding by or against a BANKRUPTCY PARTY.

17.14 Export Restrictions. NEKTAR AL acknowledges and understands that the
CONFIDENTIAL INFORMATION supplied by COMPANY with respect to this AGREEMENT are
subject to the export control and sanctions laws and regulations of the United
States and other applicable countries, including without limitation, the
International Traffic in Arms Regulations, the Foreign Assets Control
Regulations, and the Export Administration Regulations. Diversion contrary to
United States and other laws is strictly prohibited. COMPANY will comply with
all applicable laws and regulations and shall ensure, at its sole expense, that
such CONFIDENTIAL INFORMATION are maintained, used disclosed, and transferred in
accordance with United States and other applicable laws and regulations,
including without limitation any restrictions on disclosures to non-United
States persons, export license requirements, or reporting requirements.

                            Signature Page to Follow


                                                                   Page 69 of 70


IN WITNESS WHEREOF, the PARTIES hereto have caused their authorized
representatives to execute this AGREEMENT by signing below:

Signed:
For and on behalf of:                         For and on behalf of:
NEKTAR Therapeutics AL, Corporation           PharmAthene, Inc.

Signature                                     Signature


/s/ Jennifer A. Filbey                        /s/ Richard Schoenfeld
- ----------------------------------            ----------------------------------
Name: Jennifer A. Filbey                      Name: Richard Schoenfeld
Title:  V.P., Business Development            Title:  V.P., Operations

                Signature Page for Research and License Agreement


                                                                   Page 70 of 70

EX-10.25

                                                                   Exhibit 10.25

           CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT
                 HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
                 SECURITIES AND EXCHANGE COMMISSION (THE "SEC")
  PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT WITH RESPECT TO THE OMITTED
                                    PORTIONS.
                    OMITTED PORTIONS ARE INDICATED BY [***].

                               SERVICES AGREEMENT

      This Services Agreement (this "Agreement"), effective as of the 2nd day of
March, 2007 (the "Effective Date"), by and between PharmAthene, Inc., a Delaware
corporation, with its principal executive offices located at 175 Admiral
Cochrane Drive, Annapolis, Maryland 21401 ("PharmAthene"), and GTC
Biotherapeutics, Inc. ("GTC"), a Delaware company with its principal executive
offices located at 175 Crossing Blvd, Framingham, MA 01701.

      WHEREAS, PharmAthene is engaged in, among other things, the research and
development of pharmaceutical products;

      WHEREAS, GTC is a biopharmaceutical company which develops and
commercializes pharmaceutical products produced in the milk of transgenic
mammals using, among other things, its extensive experience in the separation
and purification of target proteins isolated from the milk of transgenic animals
which may be used for therapeutic drugs;

      WHEREAS, GTC owns a significant intellectual property portfolio around the
development and maintenance of transgenic mammals;

      WHEREAS, GTC and Nexia Biotechnologies, Inc. ("Nexia") have entered into a
Patent Licensing Agreement dated September 17, 2004 (the "Original License
Agreement");

      WHEREAS, PharmAthene acquired substantially all of the assets of Nexia on
March 10, 2005, pursuant to which the Original License Agreement was novated to
PharmAthene Canada on January 17, 2005;

      WHEREAS, PharmAthene Canada is a wholly-owned subsidiary of PharmAthene;

      WHEREAS, GTC and PharmAthene have entered into good faith negotiations to
enter into a license agreement to replace the Original License Agreement (the
"License Agreement"), and the parties expect to enter into the License Agreement
no later than March 15, 2007;

      WHEREAS, PharmAthene will, during the Term (as hereinafter defined),
retain GTC to provide the "Services" as set forth on Exhibit A to this Agreement
(the "Scope of Work" or "SOW"); and

      WHEREAS, GTC shall provide services to PharmAthene in accordance with the
terms and conditions of this Agreement and each attached SOW.

      NOW, THEREFORE, for good and valuable consideration contained herein, the
exchange, receipt and sufficiency of which are acknowledged, the parties agree
as follows:



1. Scope of Work.

      If and as the parties hereto reach agreement with respect to particular
services to be provided, a SOW must be executed and attached to this Agreement
as Exhibit A, and this Agreement and the SOW including amendments and proposals
thereto shall constitute the entire agreement for the specific services
addressed in such SOW. If and to the extent any terms set forth in a SOW
conflict with the terms set forth in this Agreement, the terms of this Agreement
shall control.

2. Services.

      2.1. GTC shall provide the services described in the SOW attached to this
Agreement (the "Services"). In performing the Services, GTC shall
reasonably-comply with (i) the written instructions of PharmAthene and standard
operating procedures established in support of the services; (ii) all applicable
Federal, state, and local governmental laws and regulations, including without
limitation, applicable U.S. Food and Drug Administration ("FDA") laws,
regulations, guidelines, Export Control Laws (as defined in Section 10), and ICH
guidelines however delineated, and shall cause any person performing the
Services contemplated by this Agreement and the SOW to comply with all such laws
and regulations.

      2.2. If PharmAthene request GTC to perform services beyond those which are
set forth in a SOW any such additional services and a compensation schedule
shall be negotiated by the parties in good faith and a written amendment shall
be executed prior to the provision of such services.

3. Compensation and Payment.

      3.1. GTC shall submit to PharmAthene invoices for the "Services" on a
monthly basis or as defined in the SOW, in each case, as submitted to and
accepted by PharmAthene. The costs for services are defined in Exhibit B
(Standard Pricing). Any service pricing not defined in Exhibit B will be
proposed and separately negotiated by the Parties. GTC shall maintain original
documentation for all materials and third party charges and shall make such
documentation available to PharmAthene for audit upon request. PharmAthene shall
pay said invoices within thirty (30) days of receipt. Payments shall be payable
to GTC.

      3.2. All taxes (and any penalties thereon) and other types of charges
assessed on any payment made by PharmAthene to GTC shall be the sole
responsibility of GTC.

4. Term and Termination.

      4.1. The term of this Agreement (the "Term") shall commence on the
Effective Date and end on the third anniversary of the Effective Date unless
earlier terminated in accordance with Sections 4.2 and 4.3 below.

      4.2. Either Party may terminate this Agreement if the other Party breaches
any material provisions hereof or has knowingly or willfully violated any
international, federal, country, state or local laws, regulations or guidelines,
and such breach or violation is not substantially cured within [***] days
following delivery of written notice specifying the nature of the alleged
breach. During the [***] day cure period each party will continue to perform its
obligations under the Agreement. If the cure period has expired without a
substantial cure of the breach, then the parties shall promptly meet to prepare

- ----------
***Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                  Page 2 of 13


a closeout schedule, and GTC shall cease performing the Services and will
perform only the work necessary for the orderly close-out of the Services or
required by laws or regulations.

      4.3. PharmAthene or GTC may also terminate this Agreement without cause
upon [***] days written notice to the other Party, provided, however, that GTC
may not terminate this Agreement until it has completed any manufacturing
campaigns for which a down payment has been made.

      4.4. Upon termination, PharmAthene shall be obligated to pay for any and
all materials purchased or binding commitments made to third party testing
services by GTC for performance of services under the SOW to the extent not
cancelable, and any Committed Time (as defined below) in the cGMP Manufacturing
Suite should the Agreement be terminated by PharmAthene under Sections 4.2 and
4.3. For purposes hereof, "Committed Time" means that time (days) for which
PharmAthene has provided written acceptance of a proposal or amended SOW causing
GTC to reserve time (days) in GTC's cGMP clinical manufacturing facility for
provision of clinical manufacturing services. If, however, PharmAthene provides
[***] days notice to GTC that PharmAthene no longer requires the Committed Time
for cGMP manufacture, then PharmAthene would not be obligated to pay GTC for
such Committed Time.

      4.5. The obligations contained in this Section 4 and in Sections 3
(Compensation and Payment), 6 (Confidentiality), 7 (Intellectual Property), 8
(Publication), 9 (Indemnification), 10 (International Traffic in Arms
Regulations), 15 (Publicity), 20 (Governing Law), and 21 (Arbitration) shall
survive the termination of this Agreement.

5. Personnel.

      5.1. During any period in which Services are being performed, neither
party hereto shall recruit, hire or employ any employee or contractor of the
other party who is performing the Services without the prior written consent of
the other; provided, however, that the foregoing shall not apply to individuals
hired as a result of the use of an independent employment agency (as long as
such agency was not directed to solicit such individuals).

      5.2. All GTC personnel providing Services to PharmAthene shall be bound by
written obligations of confidentiality and intellectual property ownership at
least as stringent as the terms of this Agreement.

      5.3. GTC will use reasonable efforts to utilize Key Program Personnel (as
defined in Exhibit C) for the management and/or performance of Services during
the Term of the Agreement. Any decision to remove or replace Key Program
Personnel shall be communicated to PharmAthene in writing, in a reasonable
timeframe along with the curriculum vitae of new Key Program Personnel. GTC
shall use reasonable efforts to assure that replacement Key Program Personnel
are highly qualified and are fully capable of performing the tasks to which they
are assigned. PharmAthene shall have the right to approve replacement Key
Program Personnel, such approval not to be unreasonably withheld. GTC shall bear
all expenses associated with the assignment of new or replacement Key Program
Personnel unless the replacement is requested by PharmAthene.

- ----------
***Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                  Page 3 of 13


6. Confidentiality.

      All information received by GTC concerning the performance of the Services
or generated or developed in the performance of the Services is considered to be
confidential information belonging to PharmAthene (hereinafter "PharmAthene
Confidential Information"). All information regarding GTC's operations, methods,
know-how, procedures, and all GTC's property, disclosed by GTC to PharmAthene in
connection with this Agreement is proprietary, confidential information
belonging solely to GTC (the "GTC Confidential Information", and together with
the PharmAthene Confidential Information, the "Confidential Information"). The
Confidential Information will be held in confidence by the receiving party and
not disclosed to third parties or appropriated by the receiving party for its
own use. It shall be understood, however, that Confidential Information shall
not include, and the obligations of confidentially and non-disclosure shall not
apply to, disclosed information that:

      (a) is or becomes publicly available through no fault of the receiving
party;

      (b) is already known to the receiving party as shown by its prior written
records;

      (c) is required by law or regulation to be disclosed;

      (d) becomes available to the receiving party on a non-confidential basis
from a source which is not prohibited from disclosing such information by an
obligation to the disclosing party; or

      (e) that the receiving party develops independently of any disclosure by
the disclosing party as can be demonstrated by written documentation.

      The parties agree that each will only use the Confidential Information for
the purpose of its obligations under this Agreement. Upon the completion of
Services under this Agreement and upon the written request of PharmAthene, GTC
will either destroy or promptly return to PharmAthene all written and tangible
Confidential Information (PharmAthene Confidential Information), as well as all
written and tangible material which incorporates any Confidential Information;
provided, however, that GTC may retain a copy of information that GTC is (1)
required by government regulations to retain and shall use any such retained
information solely for the purpose required by such government regulation; or
(2) which is necessary to demonstrate the satisfaction of its obligations
hereunder.

      If any of the information provided to PharmAthene by GTC as part of its
obligations under Section 7 contain GTC Confidential Information, PharmAthene
does not have the right to use any of the information for its own benefit
without first obtaining written permission from GTC.

      Neither party will use any such Confidential Information for its own
benefit or for the benefit of any third party, and will not furnish to any third
party any materials which incorporate any Confidential Information except as
otherwise herein provided. All obligations of confidentiality and non-disclosure
set forth in this Agreement will survive, without limitation, the expiration of
earlier termination, for any reason, of this Agreement for a period often (10)
years from the date of expiration or termination of this Agreement in accordance
with Section 4 hereunder.

7. Intellectual Property.

      7.1. Except as set forth in this Agreement and in the License Agreement,
nothing contained herein (including the delivery of any information hereunder)


                                  Page 4 of 13


shall be deemed to grant to any party any right or license under any patents or
patent applications or to any know-how, technology or inventions of the
disclosing party.

      7.2. A. Subject to Section 7.3 below, GTC hereby assigns to PharmAthene
all rights GTC may have in any invention, technology, know-how, information,
process, computer software, data or other intellectual property to the extent
first developed or produced under the SOW (the "Services Intellectual Property")
as applicable to BChE. With respect to the Services Intellectual Property, GTC
shall reasonably cooperate with PharmAthene and provide PharmAthene with
reasonable assistance in order for PharmAthene to comply with its obligations to
the U.S. Government under its contract with the U.S. Army Space and Missile
Command for the development, procurement and licensure of Bioscavenger Increment
II, and to obtain or extend protection for the Services Intellectual Property,
in either case, at PharmAthene's expense.

      B. GTC shall have an irrevocable, worldwide, non-exclusive license to
utilize such invention, technology, know-how or other intellectual property
outside the scope of this Agreement; provided, however, that the license
provided by the foregoing sentence may not be used for any Competing Products
(as defined below). For purposes of this Section 7.2, the term "Competing
Products" means any product using BChE.

      C. GTC warrants that it has and shall make every effort to continue to
have right, title and interest to the intellectual property required to conduct
its business to effect the terms of this Section 7.2 and shall enforce such
intellectual property agreements as necessary to provide PharmAthene the
benefits granted under this Section.

      7.3. GTC hereby represents to PharmAthene that GTC possesses certain
inventions, processes, know-how, trade secrets, improvements, other intellectual
property and assets, including but not limited to data processes, technology,
means or know-how developed by GTC which relate to animal maintenance and
management, analytical methods, procedures and techniques related to the
purification and processing of proteins in the milk of transgenic animals,
regulatory policy and procedures, computer technical expertise and software
(including codes) which have been independently developed without the benefit of
any information or support provided directly by PharmAthene or indirectly
through funding support of the U.S. Department of Defense or any other U.S.
Government Agencies ("GTC Property"). All GTC Property or improvements thereto
are and shall remain the sole and exclusive property of GTC, except for rights
to those improvements that may be vested in the U.S. Government as they relate
to the SOW. For the avoidance of doubt, the terms and conditions of the License
Agreement are not affected by the terms and conditions of this Agreement,
specifically, the services to be provided by GTC under this Agreement (as
outlined in the SOW) are funded under a U.S. Government contract.

      7.4. GTC will disclose promptly to PharmAthene or its nominee any and all
new inventions, discoveries, new uses and improvements regarding PharmAthene
property conceived, made or reduced to practice by GTC. While providing such
Services as defined in the SOW to PharmAthene pursuant to this Agreement all
such inventions, discoveries, new uses and improvements, notwithstanding FAR
52.227-11, shall belong solely to PharmAthene. GTC agrees to assign all its
interest therein to PharmAthene or its nominee with GTC receiving a worldwide,
royalty free, non-exclusive license to utilize such intellectual property
outside the scope of this Agreement, Services and SOW. GTC will execute any and
all applications, assignments, or other instruments and give testimony which
PharmAthene shall deem necessary to apply for and obtain Letters of Patent of
the United States or of any foreign country or to otherwise protect
PharmAthene's interests therein, and PharmAthene shall provide compensation to
GTC for the time devoted to said activities and reimburse it for expenses
incurred.


                                  Page 5 of 13


      None of the above requirements shall alter or amend the requirements set
forth in the Original License Agreement, or to be set forth in the License
Agreement.

8. Publication.

      Subject to the provisions of Section 8, neither Party may publish any
articles or make any presentations relating to the Services or referring to
data, information or materials generated as part of the Services without the
prior written consent of the other Party, which consent shall not be
unreasonably withheld.

9. Indemnification.

      9.1. PharmAthene shall indemnify, defend and hold harmless GTC, its
respective affiliates, and its and their officers, directors, employees and
agents from and against any and all loss, damage, liability, cost or expense
(each, a "Loss"), joint and several, resulting or arising from any third-party
claim, demand, assessment, action, suit or proceeding relating to or arising
from or in connection with this Agreement or the Services under this Agreement
(each, a "Claim"), to the extent such Claim or Loss is determined not to have
resulted from GTC's gross negligence or intentional misconduct.

      9.2. GTC shall indemnify, defend and hold harmless PharmAthene, its
affiliates, and each its and their officers, directors, employees and agents
from and against any and all Claim or Loss, joint or several, resulting or
arising from or relating to the Services to the extent such Claim or Loss is not
determined to have resulted from the gross negligence or intentional misconduct
of PharmAthene or resulting from PharmAthene's breach of any of its obligations
under this Agreement.

      9.3. Any party obligated to provide indemnification hereunder with respect
to a Claim or Loss shall be entitled to control the defense and settlement of
the Claim or Loss, as applicable, provided the indemnifying party shall act
reasonably and in good faith with respect to all matters relating to the
settlement or disposition of the Claim or Loss, as applicable, as such
disposition or settlement relates to the party. The indemnified party shall
reasonably cooperate in the investigation, defense and settlement of a Claim or
Loss for which indemnification is sought hereunder and shall provide prompt
notice of the Claim or Loss or reasonably expected Claim or Loss to the
indemnifying party. An indemnified party may retain separate legal counsel at
its own expense.

10. International Traffic in Arms Regulations.

      GTC acknowledges and understands that the PharmAthene Confidential
Information (as defined above) may be subject to the export control and
sanctions laws and regulations of the United States and other applicable
countries (collectively, "Export Control Laws"), including without limitation,
the International Traffic in Arms Regulations, the Foreign Assets Control
Regulations, and the Export Administration Regulations. Diversion of the
PharmAthene Confidential Information contrary to United States and other laws is
strictly prohibited. In addition to any other obligations of GTC to generally
comply with applicable laws, GTC will comply with all applicable export control
laws and regulations and shall ensure, at its sole expense, that PharmAthene
Confidential Information is maintained, used disclosed, and transferred in
accordance with those laws and regulations, including, without limitation, any
restrictions on disclosures to non-United States persons, export license
requirements, or reporting requirements.


                                  Page 6 of 13


11. Status Reporting.

      GTC will inform PharmAthene of the progress and status of Services through
regularly prepared and delivered reports. Such reports shall be distributed at
predetermined intervals as agreed to in writing between the Parties, but not
less frequently than once per month. PharmAthene and GTC shall mutually agree
upon acceptable formatting for such reports.

12. Non-Discrimination.

      GTC hereby certifies by executing this Agreement that (i) Services are
provided without discrimination on the basis of race, age, color, religion,
national origin, disability, or gender and (ii) GTC does not maintain nor
provide for its employees any segregated facilities other than restrooms and
locker rooms that are segregated based upon gender.

13. Compliance with Laws, Audit and Inspections.

      GTC represents and warrants that, to the best of its knowledge the
Services were not performed, and are not being sold or priced, in violation of
any federal, state, or local law, executive order, or administrative ruling.
Without limiting the generality of the foregoing, GTC represents and warrants
that to the best of its knowledge it complies with the following provisions of
federal law and all applicable regulations and Executive Orders issued
thereunder, which are hereby incorporated by reference into this Services
Agreement: (1) the Federal Food, Drug and Cosmetic Act, as amended; (2) the
Civil Rights Act of 1964, as amended; and (3) the Fair Labor Standards Act, as
amended. PharmAthene is a holder of U.S. Government contracts and is subject to
certain additional statutory, regulatory, and contract requirements by virtue
thereof. If an SOW is issued under a U.S. Government prime contract or a
subcontract under a U.S. Government prime contract, GTC agrees to comply with
all statutory, regulatory, and contract requirements applicable to the prime
contract or subcontract with respect to such SOW, copies of which may be
furnished to GTC upon GTC's request. Subject to the foregoing, GTC's standard
operating procedures will be used in performance of the Services, unless
otherwise agreed to in writing between the Parties. PharmAthene represents and
certifies that it will not require GTC to perform any assignments or tasks in a
manner that would violate any applicable law or regulation. PharmAthene further
represents that it will cooperate with GTC in taking any actions that GTC
reasonably believes are necessary to comply with any legal or regulatory
obligations that have been transferred to GTC.

      Each party acknowledges that the other party may respond independently to
any regulatory correspondence or inquiry in which such party or its affiliate is
named. Each party, however, shall

      (a) Notify the other party promptly of any FDA or other governmental or
regulatory inspection or inquiry concerning any Services pursuant to this
Agreement, including, but not limited to, inspections of applicable laboratories
and/or manufacturing sites;

      (b) Forward to the other party copies of any correspondence from any
regulatory or governmental agency relating to the Services, including, but not
limited to, FDA Form 483 notices and warning letters, or equivalents; and

      (c) Permit the truthful use of the other party's name or the names of any
of its applicable corporate affiliates in any regulatory correspondence.


                                  Page 7 of 13


      Where reasonably practicable, PharmAthene will be given the opportunity to
have a representative present during an FDA or regulatory inspection related to
any Services conducted by GTC under this Agreement. PharmAthene, however,
acknowledges that it may not direct the manner in which GTC fulfills its
obligations to permit inspection by governmental entities.

      Each party agrees that, during an inspection by the FDA or other
regulatory authority concerning any Proposal of PharmAthene in which GTC is
providing Services, it will not disclose information and materials that are not
required to be disclosed to such agency, without the prior consent of the other
party, which shall not unreasonably be withheld.

14. Independent Contractor Relationship.

      For the purposes of this Agreement, the parties hereto are independent
contractors, and nothing in this Agreement or the arrangements for which it is
made shall constitute either party, or anyone furnished or used by either party
in the performance of the Services contemplated by this Agreement, as an
employee, joint venturer, partner, or servant of the remaining party. Neither
party shall have the right to bind or obligate the other, nor shall a party hold
itself out as having such authority.

15. Publicity.

      Except as required by law, neither party shall use the name of the other
party nor of any Agent of the other party in connection with any publicity
without the prior written approval of the other party.

16. Force Majeure.

      If either party shall be delayed or prevented from the performance of any
act required hereunder by reason of strike, lockout, labor strife, restrictive
governmental or judicial order or decree, riot, insurrection, war, Act of God,
inclement weather or other similar reason or cause beyond such party's control
("Disability"), then performance of such act shall be excused for the period of
such Disability. Any timelines affected by such Disability shall be extended for
a period equal to that of the Disability. Notice of the start and stop of any
Disability shall be provided to the other party.

17. Record Storage.

      17.1. During the Term, GTC shall maintain all materials and all other data
obtained or generated by GTC in the course of providing the Services hereunder,
including all computerized records and files. GTC shall cooperate with any
internal review or audit requested by PharmAthene and make available to
PharmAthene for examination and duplication, during normal business hours and at
mutually agreeable times, all documentation, data and information relating to a
Proposal.

      17.2. Within thirty (30) days of the expiration or termination of this
Agreement other than for PharmAthene's breach of Section 3, all materials and
all other data and information obtained or generated by GTC in the course of
providing the Services hereunder shall, at the election of PharmAthene and at
PharmAthene's option and expense, be (i) delivered to PharmAthene at its offices
in Annapolis, Maryland in such form as is then currently in the possession of
GTC, (ii) retained by GTC for PharmAthene for a period of two years, or (iii)
disposed of as directed by written request of PharmAthene, unless such materials
are otherwise required to be stored or maintained by GTC under applicable law.
If GTC is required or requested to maintain and/or store such material for a


                                  Page 8 of 13


period beyond two years after the termination or expiration of this Agreement,
the parties shall mutually agree on GTC's further compensation therefore. In no
event shall GTC dispose of any materials or data or other information obtained
or generated by GTC in the course of providing the Services hereunder without
first giving PharmAthene sixty (60) days prior written notice of its intent to
dispose same. Notwithstanding the foregoing, GTC may retain copies of any such
materials, data and information as is reasonably necessary for regulatory
purposes or to demonstrate the satisfaction of if its obligations hereunder, all
subject to the confidentiality obligations set forth herein.

      17.3. GTC shall employ all reasonable and appropriate measures and
processes to ensure that all data collected and stored by GTC on its premises or
offsite at any storage facility pursuant to this Agreement will be safeguarded
against loss, damage and destruction arising from any cause including, but not
limited to, theft, fire, flood, earthquake, lightening and electrical
disruption. Such measures and processes shall include, but not be limited to,
(a) storage of hard-copy documents and computer storage disks in locked,
fireproof containers, and (b) back-up and recovery systems (which are
periodically tested) for computer-based systems.

18. Debarment.

      18.1. GTC warrants that it has not been debarred by the FDA or any other
governmental or regulatory agency having jurisdiction over the provision of drug
development services. If GTC or any of its agents who perform Services becomes
debarred or receives notice of action or threat of action with respect to
debarment, GTC, upon learning same, shall notify PharmAthene immediately
thereof. Additionally, GTC certifies that there are no debarment proceedings
pending for GTC.

      18.2. GTC warrants that it will not employ or contract with any person to
perform Services under this Agreement (i) who has been debarred by any
regulatory agency having jurisdiction over the provision of drug development
services, (ii) who has been disqualified pursuant to 21 C.F.R. Part 312 or (iii)
who has been convicted of a crime which could lead to debarment. If GTC receives
notice of the debarment or threatened debarment of any such person, GTC shall
immediately notify PharmAthene thereof. GTC shall use its best efforts to
ascertain whether any person that will perform Services has been debarred or
disqualified as described in this Section 18.2

19. Notices.

      Any notice required or permitted to be given hereunder by either party
hereto shall be in writing and shall be deemed given on the date received if (i)
delivered personally, (ii) by recognized overnight courier, (iii) by facsimile
or (iv) by registered or certified mail, return receipt requested, postage
prepaid. All notices shall be sent to the address set forth below. Either party
may change its notice address by notice to the other party hereto in the form
and manner herein presented.

If to PharmAthene:                       175 Admiral Cochrane Drive, Suite 101
                                         Annapolis, Maryland 21401
                                         Attention:  Richard Schoenfeld
                                         Telephone:  (410)571-8920
                                         Facsimile:  (410) 571-8927


                                  Page 9 of 13


         with a copy to:                 Elizabeth Mackessy-Lloyd
                                         Contracts Manager
                                         PharmAthene, Inc.
                                         175 Admiral Cochrane Drive, Suite 101
                                         Annapolis, Maryland 21401
                                         Telephone:  (410)571-8920
                                         Facsimile:  (410) 571-8927

If to GTC:        Name:                  GTC Biotherapeutics
                                         175 Crossing Blvd
                  Address:               Framingham, MA 01702
                                         Attention:  Gregory Liposky
                                         Telephone:  (508) 370-5212
                                         Facsimile:  (508) 370-3797

20. Governing Law.

      This Agreement and the rights and obligations of the parties hereunder
shall be governed by the laws of Delaware.

21. Arbitration.

      If any dispute arises with respect to Services to be provided under this
Agreement, the parties shall submit such dispute to binding arbitration at a
mutually acceptable location pursuant to the commercial arbitration rules of the
American Arbitration Association then in effect. The decision of an arbitrator
selected hereunder shall be final, binding and enforceable by any court of
competent jurisdiction.

22. Severance.

      If one or more provisions of this Agreement shall be found to be illegal
or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
provided the surviving agreement materially comports with the parties' original
intent.

23. Waiver.

      Waiver, failure or forbearance by either party to claim a breach of any
provision of this Agreement or exercise any right or remedy provided under this
Agreement or by applicable law, shall not be deemed to constitute a waiver with
respect to any subsequent breach, right or remedy.

24. Changes and Modification.

      No changes or modifications of this Agreement hereto shall be effective
unless in writing signed by the parties hereto.


                                 Page 10 of 13


25. Assignment and Subcontracting.

      The rights and obligations set forth in this Agreement may not be assigned
or subcontracted by either party without the prior written consent of the other
party; provided, however, that the parties may assign this Agreement to a
successor-in interest to the party's business.

26. Incorporation Of Far Clauses.

      The Federal Acquisition Regulation (FAR) clauses referenced below are
incorporated herein. The complete text of those clauses is set forth in Exhibit
D, and is applicable, including any notes following the clause citation, to this
Agreement. The Contracts Dispute Act shall have no application to this
Agreement. Any reference to a "Disputes" clause shall mean the "Arbitration"
clause of this contract.

      The following FAR and DFARS Clauses apply to this contract:

52.222-21         PROHIBITION OF SEGREGATED FACILITIES (FEB 1999)

52.222-26         EQUAL OPPORTUNITY (APR 2002)

52.222-35         EQUAL OPPORTUNITY FOR SPECIAL DISABLED VETERANS, VETERANS OF
                  THE VIETNAM ERA, AND OTHER ELIGIBLE VETERANS (DEC 2001)

52.222-36         AFFIRMATIVE ACTION FOR WORKERS WITH DISABILITIES (JUN 1998)

52.222-39         NOTIFICATION OF EMPLOYEE RIGHTS CONCERNING PAYMENT OF UNION
                  DUES OR FEES (DEC 2004)

52.225-13         RESTRICTIONS ON CERTAIN FOREIGN PURCHASES (MAR 2005)

52.227-11         PATENT RIGHTS--RETENTION BY THE CONTRACTOR (SHORT FORM) (JUN
                  1997)

52.244-6          SUBCONTRACTS FOR COMMERCIAL ITEMS (FEB 2006)

52.247-64         PREFERENCE FOR PRIVATELY OWNED U.S.-FLAG COMMERCIAL VESSELS
                  (FEB 2006)

252.247-7023      TRANSPORTATION OF SUPPLIES BY SEA (MAY 2002)

252.247-7024      NOTIFICATION OF TRANSPORTATION OF SUPPLIES BY SEA (MAR 2000)

CERTIFICATIONS AND REPRESENTATIONS:

52.209.5          CERTIFICATION REGARDING DEBARMENT, SUSPENSION, PROPOSED
                  DEBARMENT, AND OTHER RESPONSIBILITY MATTERS. (1) GTC certified
                  that, to the best of its knowledge and belief, GTC and/or any
                  of its Principals, (as defined in FAR 52.209-5) are not
                  presently debarred, suspended, proposed for debarment, or
                  declared ineligible for the award of contracts by any Federal
                  agency.

                  (2) GTC shall provide immediate written notice to PharmAthene,
                  Inc. if any time prior to award to any contract, it learns
                  that its certification was erroneous when submitted or has
                  become erroneous by reason of changed circumstances.


                                 Page 11 of 13


52.219-1          SMALL BUSINESS PROGRAM REPRESENTATIONS.

                  (1) The North American Industry Classification System (NAICS)
                      code for this acquisition is 325414.

                  (2) The small business size standard is 500 employees.

                  (3) In accordance with 52.219-1 and 13 CFR Part 121, GTC
                      represents that it is, at the time of signing this
                      agreement, a small business concern.

52.222-21         PREVIOUS CONTRACTS AND COMPLIANCE REPORTS. GTC represents that
                  if GTC has participated in a previous contract or subcontract
                  subject to Equal Opportunity clause (FAR 52.222-26): (i) GTC
                  has filed all required compliance reports, and (ii) that
                  representations indicating submission of required compliance
                  reports, signed by proposed subcontractors, will be obtained
                  before subcontract awards.

52.222-25         AFFIRMATIVE ACTION COMPLIANCE. GTC represents: (i) that GTC
                  has developed and has on file at each establishment,
                  Affirmative Action programs required by the rules and
                  regulations of the Secretary of Labor (41 CFR 60-1 and 60-2),
                  or (ii) that in the event such a program does not presently
                  exist, GTC will develop and place in operation such a written
                  Affirmative Action Compliance Program within one-hundred
                  twenty (120) days from the award of this Contract.

27. Entire Agreement.

      This Agreement represents the complete and entire understanding between
the parties regarding the subject matter hereof and supersedes all prior
negotiations, representations and agreements, either written or oral, with
respect to the subject matter hereof.

28. Amendments.

      No changes may be made to this Agreement except by written amendment. In
the event a change in the terms of this Agreement or SOW, is identified by
PharmAthene or GTC, the identifying party will promptly notify the other party
of such change in writing. During the period over which a written amendment is
being prepared and assessed, GTC shall continue to perform the Services, unless
directed by PharmAthene to stop work, but shall not implement the proposed
change to the Services without the written amendment signed by PharmAthene. Both
parties agree to act in good faith and promptly when considering an amendment
and will not unreasonably withhold approval.

                               [SIGNATURES FOLLOW]


                                 Page 12 of 13


      IN WITNESS THEREOF, this Agreement has been executed by the parties hereto
through their duly authorized officers as of the date first set forth above.

GTC Biotherapeutics, Inc.                     PharmAthene, Inc.


By: /s/ Geoffrey F. Cox                       By: /s/ David P. Wright
    ------------------------------                ------------------------------
Name: Geoffrey F. Cox                         Name: David P. Wright
Title: Chairman, President and CEO            Title: President and CEO
Date: March 2, 2007                           Date: March 2, 2007

EX-10.26

                                                                   Exhibit 10.26

           CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT
                 HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
                 SECURITIES AND EXCHANGE COMMISSION (THE "SEC")
  PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT WITH RESPECT TO THE OMITTED
                                    PORTIONS.
                    OMITTED PORTIONS ARE INDICATED BY [***].

                                LICENSE AGREEMENT

                                 by and between

                            GTC BIOTHERAPEUTICS, INC.

                                       AND

                                PHARMATHENE, INC.

                           Dated as of March 12, 2007



                                LICENSE AGREEMENT

      This License Agreement ("Agreement"), made as of this 12th day of March,
2007 (the "Effective Date"), is between GTC Biotherapeutics, Inc., a
Massachusetts corporation, with offices at 175 Crossing Boulevard, Suite 410,
Framingham, Massachusetts, U.S.A. 01702 ("GTC") and PharmAthene, Inc., a
Delaware corporation, with its principal executive offices located at 175
Admiral Cochrane Drive, Annapolis, Maryland 21401 ("PharmAthene"), GTC and
PharmAthene are each referred to as "Party" and, collectively, the "Parties."

                                 R E C I T A L S

      WHEREAS, GTC and PharmAthene each have substantial programs and know-how
in the development of transgenic animals and biopharmaceuticals sourced
therefrom;

      WHEREAS, GTC and Nexia Biotechnologies ("Nexia") entered into a license
agreement on September 17, 2004 (the "Original Agreement") for GTC's Transgenic
Animal Production Technology and an option to license GTC's product processing
technology;

      WHEREAS, Nexia has paid to GTC $[***] toward certain milestone payments as
required by the Original Agreement;

      WHEREAS, PharmAthene, through its wholly-owned subsidiary, PharmAthene
Canada, acquired substantially all of the assets of Nexia on March 10, 2005,
pursuant to which the Original Agreement was novated to PharmAthene Canada on
January 17, 2005;

      WHEREAS, PharmAthene and GTC wish to terminate the Original Agreement and
enter into this Agreement; and

      WHEREAS, both Parties understand that the license granted herein extends
only to the production of recombinant BChE produced from the milk of transgenic
goats and/or mice.

      NOW, THEREFORE the Parties agree as follows:

                                    ARTICLE 1
                               DEFINITION OF TERMS

      Capitalized terms used in this Agreement shall have the meaning ascribed
to them in Schedule 1 unless otherwise specifically defined herein.

- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.



                                    ARTICLE 2
                                  LICENSE GRANT

      2.1 License Grant from GTC to PharmAthene.

            2.1.1 Grant.

            Subject to the terms and conditions of this Agreement, GTC hereby
grants to PharmAthene an exclusive worldwide license under the GTC Intellectual
Property to develop, test, manufacture, use, sell, offer for sale, export and
import the Product and recombinant BChE only produced from the milk of
transgenic goats or mice (the "License").

            GTC shall retain all of its rights to the GTC Intellectual Property
exclusively outside of the BChE Field, in accordance with Article 4.

            The License granted herein with respect to GTC Intellectual Property
is sole and exclusive and precludes GTC or any of its Affiliates from (i) making
any commercial use of GTC Intellectual Property in connection with the
production of BChE or the Product (ii) out-licensing or granting any rights in
GTC Intellectual Property to any third party in connection with the production
of BChE or the Product.

            With respect to Transgenic Technology Patent Rights which GTC does
not own, but to which it has non-exclusive licenses (the "Non-Exclusive Third
Party Patents"), the rights provided to PharmAthene hereunder will be
non-exclusive and subject to the same Territory that GTC has with respect to
such rights. With respect to such Non-Exclusive Third Party Patents, GTC hereby
agrees not to use such patents in any way in connection with the production of
BChE or the Product or license or grant any rights in such patents to any third
party in connection with the production of BChE or the Product.

            Subject to Section 9.4.1, the License granted to PharmAthene herein
shall not terminate upon and shall survive an Insolvency Event relating to GTC.

            2.1.2 Sublicensing. Subject to the terms and conditions of this
Agreement, GTC hereby grants to PharmAthene the right to grant sublicenses under
the GTC Intellectual Property, to any person, including third party contract
manufacturing organizations and Affiliates. Such sublicenses can only be granted
for the purpose of facilitating the development, testing, manufacture and/or
sale of recombinant transgenically derived BChE. Such sublicensees shall not
have the right to further sublicense any of GTC Intellectual Property, as is
applicable.

            Subject to Section 9.4.1, the sublicensing rights granted to
PharmAthene herein shall not terminate and shall survive an Insolvency Event
relating to GTC.

            2.1.3 Diligence. GTC and PharmAthene each agree to use commercially
reasonable efforts to diligently conduct the research and development activities
required to commercialize the recombinant transgenically derived BChE.


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            2.1.4 Consideration.

                  (a) Initial License Fees. In consideration of the License and
the sublicensing rights granted pursuant to Section 2.1.1, PharmAthene shall pay
to GTC the following license fees:

                        (i) USD $[***] to be received by GTC no later than the
tenth (10th) business day following the signing of this Agreement;

                        (ii) USD $[***] to be received by GTC no later than
December 21, 2007;

                        (iii) USD $[***] on the date PharmAthene files its first
IND for a Product with the FDA or pursuant to a similar filing within a
different jurisdiction, specifically including Europe; and

                        (iv) USD $[***] on the date PharmAthene files its first
BLA for a Product with the FDA or pursuant to a similar filing within a
different jurisdiction, specifically including Europe.

                  (b) Royalties. In addition to the payments due under Section
2.1.4(a) above, PharmAthene shall pay to GTC the following royalties (the
"Royalties"):

                        (i) [***]% of Net Sales for any Product produced with
the use of GTC Intellectual Property in transgenic animals (regardless of
whether those Net Sales are Commercial Sales).

                        (ii) If the Product is not made in transgenic animals,
then a reduced Royalty (from Subsection (i) above), the amount of which shall be
determined by the mutual agreement of the Parties based upon a good faith
determination by the Parties as to the contribution of GTC Intellectual Property
to the Product.

                  (c) Minimum Royalty. PharmAthene shall:

                        (i) within thirty (30) days after the end of the
twelve-month period following the date of the first Commercial Sale (the "First
Period") or equivalent foreign agency, pay the positive difference, if any,
between (i) USD $[***]; and (ii) the aggregate Royalties on Net Sales during the
First Period;

                        (ii) within thirty (30) days after the end of the
twelve-month period following the First Period (the "Second Period"), pay the
positive difference, if any, between (i) USD $[***]; and (ii) the aggregate
Royalties on Net Sales during the Second Period; and

- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


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                        (iii) within thirty (30) days after the end of the
twelve month period following the Second Period and each subsequent twelve-month
period thereafter, pay the positive difference, if any, between (i) USD $[***] ;
and (ii) the aggregate Royalties on Net Sales during any such twelve-month
period.

      2.2 No Involvement. Other than as provided in the Services Agreement, or
as otherwise mutually agreed to by the parties, GTC agrees not to be involved or
otherwise be engaged, directly or indirectly, in the development, production or
sale of BChE throughout the Term of this Agreement.

      2.3 Quarterly Reporting and Payment of Royalties Due. Within thirty (30)
days following the end of each calendar quarter after having filed an BLA for
BChE or a similar filing within a different jurisdiction, PharmAthene shall
submit to GTC a written report for the immediately preceding calendar quarter
setting forth in reasonable detail the Net Sales in such quarter and the
calculation of any Royalties owed by PharmAthene to GTC for such Net Sales. All
reports will be reported in U.S. dollars and converted from other currencies, as
applicable, at the prevailing rate published in The Wall Street Journal on the
date of payment to GTC. Concurrently with the submission of such report,
PharmAthene shall pay to GTC, in a manner reasonably specified by GTC from time
to time, all amounts accrued in such immediately preceding calendar quarter less
any applicable taxes or other withholdings therefrom required by applicable law.
All payments to GTC shall be made in United States dollars.

      2.4 Taxes. Licensee may withhold from payments due to the Licensor under
this Agreement any taxes which it is required to withhold under applicable Law
as a result of any of the transactions made or contemplated under this
Agreement.

      2.5 Audit Rights. During the Term and for a period of five (5) years
thereafter, PharmAthene shall keep, and shall require all Affiliates to keep,
full, true and accurate books of accounts and other records containing all
information and data which may be necessary to ascertain and verify the
royalties payable hereunder. During the Term and during the period ending six
(6) months thereafter, GTC will have the right once annually, at its own
expense, to have an independent, certified public accountant, selected by GTC
and reasonably acceptable to PharmAthene, review financial and sales records of
PharmAthene for the prior twenty-four (24) month period related to sales of
Products, in all cases in the location(s) where such records are maintained by
PharmAthene, upon reasonable notice during regular business hours and under
obligations of strict confidence, for the purpose of verifying the basis and
accuracy of royalty payments due or made or other compliance with the terms and
conditions of this Agreement. Costs and expenses incurred by GTC in connection
with the exercise of its audit rights hereunder shall be borne entirely by GTC;
provided, however, that if an audit reveals an underpayment of Royalties or
other payments to GTC by more than five percent (5%), then GTC shall be entitled
to reimbursement of all such costs and expenses of the audit as well as all
unpaid monies due with interest calculated at the annual rate of six per cent
(6%) per annum calculated from the payment first became due until it is received
by GTC.

- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


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      2.6 Avoidance of Illegal Payments. Where Royalties are due hereunder for
sales of Products in a country where, by reason of currency regulations or taxes
of any kind, it is impossible or illegal for PharmAthene to transfer Royalty
payments to GTC for sales in that country, such Royalties shall be deposited in
whatever currency is allowable by the person not able to make the transfer for
the benefit or credit of GTC in an accredited bank in that country that is
reasonably acceptable to GTC.

                                    ARTICLE 3
                            CONFIDENTIAL INFORMATION

      3.1 Restrictions. The Parties agree that, for the Term of this Agreement
and for five (5) years thereafter, either Party that receives Confidential
Information (a "Receiving Party") from the other Party (a "Disclosing Party")
shall keep completely confidential and shall not publish or otherwise disclose
to any third party (other than contractors and consultants as set forth in
Section 3.2) and shall not use for any purpose (except as expressly permitted
hereunder) any Confidential Information of the Disclosing Party.

      3.2 Employees and Consultants. Each Party shall inform its employees,
contractors and consultants of the obligations of confidentiality under this
Agreement, and each Party shall cause all such persons employed or engaged by
it, including employees, contractors and consultants, in connection with the
performance of a Party's obligations hereunder on a "need to know" basis, to be
bound (in writing) by obligations of confidentiality consistent with those in
this Agreement.

      3.3 Distribution of GTC Intellectual Property within PharmAthene.
PharmAthene agrees not to make any copies of documents which GTC reasonably
designates are covered by this Agreement without the express written permission
of GTC. GTC will clearly mark those documents as, "GTC Confidential Information
- - Do Not Duplicate." PharmAthene further agrees to maintain control of all
original documents plus any copies that are authorized by GTC. In addition, GTC
may audit the system used to control documents transferred from GTC to
PharmAthene.

      3.4 Exceptions to Restrictions. Each Party's respective obligations under
Section 3.1 shall not apply to information that: (a) was already known to the
Receiving Party, other than under an obligation of confidentiality to the
Disclosing Party; (b) was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the Receiving Party; (c)
became generally available to the public or otherwise part of the public domain
after its disclosure and other than through any act or omission of the Receiving
Party in breach of this Agreement; (d) was subsequently lawfully disclosed to
the Receiving Party by a third party; (e) can be shown by written records to
have been independently developed by the Receiving Party without reference to
the Confidential Information received from the Disclosing Party and without
breach of any of the provisions of this Agreement; or (f) is information that
the Disclosing Party has specifically agreed in writing that the Receiving Party
may disclose.


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      3.5 Permitted Disclosures.

            3.5.1 Regulations; Law. Notwithstanding anything to the contrary
herein, either Party may disclose Confidential Information of the Disclosing
Party as required by law (including as required by the Securities Act of 1933,
the Securities Exchange Act of 1934, and the listing regulations of a self
regulatory organization) , government regulation, court order or alternative
dispute resolution process; provided, however, in any such case the Party
seeking to make such disclosure provides, to the extent not prohibited, the
Disclosing Party with advance written notice of such disclosure and provides the
Disclosing Party with a reasonable opportunity to secure protection of the
Confidential Information therein.

            3.5.2 Customers. To the extent that it is reasonably necessary to
fulfill its obligations with its customers and exercise its rights under this
Agreement, a Receiving Party may disclose Confidential Information of the
Disclosing Party to potential and actual customers who require the information
to develop or assist in the development or sale of recombinant BChE; provided
however, that any such customer shall first acknowledge in writing such
Receiving Party obligations of confidentiality consistent with those of the
Parties herein.

            3.5.3 Disclosures Required for Patent Application. In the event that
a Receiving Party intends to submit a patent application in accordance with this
Agreement that will disclose the Confidential Information of the Disclosing
Party, then such Disclosing Party shall be provided at least thirty (30) days to
review the proposed patent application to suggest ways to minimize the extent of
disclosure and/or to file a patent application of its own on such Confidential
Information. The filing of any patent application disclosing the Confidential
Information of the Disclosing Party shall be delayed for up to thirty (30)
additional days after the initial thirty (30) day waiting and review period upon
written request by the Disclosing Party Confidential Information. After such
waiting and review period(s), a Receiving Party shall be permitted to file a
patent application containing the Confidential Information of the Disclosing
Party to the limited extent reasonably necessary to support patentability of the
subject invention.

                                    ARTICLE 4
                                    OWNERSHIP

      4.1 Ownership of Inventions and Improvements in the BChE Field. Any (i)
intellectual property created and/or invented by GTC during the Term, and/or any
improvements made to GTC Intellectual Property during the Term, to the extent
required for the BChE Field or used in the production, purification or
manufacture of the Product. GTC hereby agrees to assign and cooperate in the
appropriate filing of all necessary documents reasonably requested by
PharmAthene to reflect the exclusive ownership by PharmAthene of newly developed
technology/improvements within the BChE Field.

      4.2 Joint Ownership. Any intellectual property created and/or invented by
GTC during the term of this Agreement, which has an application both within BChE
Field and outside the BChE Field shall be jointly owned by GTC and PharmAthene.


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      4.3 Ownership outside the BChE Field. Any intellectual property created
and/or invented by GTC during the term of this Agreement and/or any improvements
made by GTC to intellectual property owned by GTC that relates exclusively to
applications outside the BChE Field shall be owned exclusively by GTC.

      4.4 Inventorship. Inventorship for inventions or data conceived, reduced
to practice, discovered or generated by a Party exercising its rights under this
Agreement shall be determined in accordance with United States patent laws for
determining inventorship.

      4.5 Sole Ownership. Unless otherwise agreed in writing, each Party shall,
in its sole discretion and at its sole expense, be responsible for all
preparation, filing, prosecution and maintenance of intellectual property rights
associated with the inventions or data that a Party solely owns in accordance
with Section 4.1.

                                    ARTICLE 5
                        PATENT PROSECUTION & MAINTENANCE

      5.1 Joint Ownership - Patent Applications. GTC shall inform in writing
PharmAthene of any invention or improvement pursuant to Sections 4.1 or 4.2 (an
"Invention Notice"). In the case of subject matter owned jointly in accordance
with Section 4.2, GTC shall have the first option to pursue patent(s) or other
forms of registered intellectual property protection for such subject matter in
one or several jurisdictions by notifying PharmAthene of its intention to do so
(the "Filing Notice"). If PharmAthene responds in writing of its desire to join
in the prosecution of such intellectual property protection in any or all such
jurisdictions, within thirty (30) days of the Filing Notice by GTC, then GTC
shall file the application in selected relevant jurisdiction(s) for such
registered form of intellectual property protection in the name of both Parties
as joint owners, and the Parties shall share equally all costs and expenses
reasonably incurred by GTC in connection with the preparation, filing,
prosecution of the subject application and maintenance of any registered form of
intellectual property resulting therefrom. If PharmAthene does not notify GTC,
within thirty (30) days of the Filing Notice, of its desire to join in the
prosecution of the intellectual property protection in one or several of the
jurisdictions proposed by GTC, GTC shall be free to file the application for
such protection as sole owner of the invention in such jurisdiction(s), at its
sole cost and expense, and PharmAthene shall execute all documents required
assign its rights to GTC. As a joint owner of any registered form of
intellectual property, subject to any other Transgenic Technology Patent Rights
of the other joint owner or other duties of obligations of the Parties under
this Agreement, such joint owner may freely assign or license its interest
therein without accounting to the other joint owner(s) and shall have no duty of
contribution to the other joint owner(s) in respect of any such assignment or
license. The assignee or licensee shall, however, acknowledge and accept in
writing the terms and conditions set forth in this Section 5.1prior to such
assignment or license becoming effective. Moreover, the assigning or licensing
Party shall, within thirty (30) days following the assignment or license, notify
in writing the other Party of the identity of the assignee or licensee.

            If GTC has not, within sixty (60) days of the Invention Notice or of
the moment PharmAthene advises that it becomes aware of the invention or
improvement, sent a Filing Notice to PharmAthene or if GTC has not, within four
(4) months of sending a Filing Notice to PharmAthene, filed a patent


8 of 20


application, PharmAthene may file patent applications as sole owner of the
invention or improvement in any jurisdiction where GTC has not filed a patent
application, with the sole cost being borne by PharmAthene.

      5.2 Joint Ownership - Management. The Parties agree that a patent attorney
designated by the prosecuting Party and agreed to by the Notified Party,
agreement not being unreasonably withheld, shall be responsible for the
management and prosecution of any patent application for intellectual property
which is jointly owned pursuant to this Agreement. If GTC desires to abandon any
patent or patent application within the BChE Field or to decline responsibility
for the maintenance or prosecution of any such patent or patent application in
any country, GTC shall provide PharmAthene with sufficient prior written notice
of such intended abandonment or declination of responsibility such that
PharmAthene shall have the opportunity to assume responsibility for such patent
or patent application without the loss of any rights therein, and PharmAthene
shall have the right, at its cost and expense, to prepare, file, prosecute, and
maintain the relevant patents and/or patent applications in the relevant country
or countries in the name of PharmAthene. In such an event, GTC shall cooperate,
and cause its Affiliates to cooperate, with PharmAthene with respect thereto.

      5.3 Patent Prosecution and Maintenance. GTC shall reasonably prosecute and
maintain the GTC Intellectual Property and, to the extent patentable, any
patents or pending patent applications existing as of the Effective Date hereof
and during the Term of this Agreement. GTC shall have the ultimate
responsibility for meeting all payment, cost, and filing deadlines concerning
GTC Intellectual Property, and any other form of intellectual property
protection associated therewith.

                                    ARTICLE 6
                          INFRINGEMENT BY A THIRD PARTY

      6.1 Obligation to Notify. Should PharmAthene or GTC become aware of any
infringement or potential infringement of the GTC Intellectual Property, each
shall give to the other Party prompt written notice including a reasonable
amount of factual details concerning such infringement or potential
infringement.

      6.2 Patent Litigation. GTC shall initiate, defend and save PharmAthene
harmless against any infringement lawsuit and claims made by a person against
PharmAthene related to PharmAthene's use of GTC's Intellectual Property provided
herein, the whole without prejudice to PharmAthene's right to intervene in any
such proceedings with legal counsel of its choice. If, however, applicable law
requires that PharmAthene be joined to the legal proceedings as a necessary
party-plaintiff, GTC shall reimburse PharmAthene for expenses and costs
(including reasonable legal fees and costs) incurred by PharmAthene, or
representatives of PharmAthene whose involvement is reasonably required,
provided however that such expenses and costs are reasonable.

      6.3 Infringement Proceedings. In the event a third party is believed to be
infringing on the GTC Intellectual Property, GTC shall institute and direct
legal proceedings against such third party provided however, that GTC shall not
settle any claim or proceeding relating to the GTC Intellectual Property in a


9 of 20


manner that prejudices the License, the sublicense rights granted hereunder or
any other rights of PharmAthene hereunder without the prior written consent of
PharmAthene. All costs, including attorneys' fees, relating to such legal
proceedings shall be borne by GTC and all damages and awards, if any, shall
belong to GTC after reimbursement of any costs and expenses incurred by
PharmAthene in connection with such proceedings, provided however that such
expenses and costs are reasonable.

      6.4 Cooperation in Patent Infringement Proceedings. In the event that
either Party takes action pursuant to this Section 6, the other Party shall
cooperate to the extent reasonably necessary. GTC shall reimburse PharmAthene
for the costs incurred in such cooperation, including the salary of
PharmAthene's employees and agents involved in such cooperation.

                                    ARTICLE 7
                         REPRESENTATIONS AND WARRANTIES

      7.1 Authority. Each Party represents and warrants that it has the full
right, power and authority to enter into this Agreement and that this Agreement
has been duly executed by such Party and constitutes a legal, valid and binding
obligation of such Party, enforceable in accordance with its terms.

      7.2 No Conflicts. Each Party represents and warrants that the execution,
delivery and performance of this Agreement do not conflict with, or constitute a
breach or default under any of its charter or organizational documents, any law,
order, judgment or governmental rule or regulation applicable to it, or any
material agreement, contract, commitment or instrument to which it is a party.
Each Party represents and warrants that its obligations under this Agreement are
not encumbered by any rights granted by such Party to any third party or by any
third party to such Party that are or may be inconsistent with the rights and
licenses and sublicenses granted in this Agreement.

      7.3 Intellectual Property. GTC represents and warrants to PharmAthene
that:

            (a) the Transgenic Technology Patent Rights and the GTC Intellectual
Property licensed to PharmAthene under this Agreement are valid and enforceable;

            (b) GTC possesses the necessary rights to grant the License and the
sub-license rights hereunder;

            (c) GTC has not received any notice from any third party asserting
the invalidity, misuse, unenforceability or non-infringement of any of the
Transgenic Technology Patent Rights licensed to PharmAthene under this Agreement
and to the extent applicable, in the GTC Intellectual Property, and GTC has not
received any notice from any third party challenging its right to use or
ownership of any of such Transgenic Technology Patent Rights or the GTC
Intellectual Property;


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            (d) GTC has no knowledge that the testing, manufacture, use, sale,
offer for sale or importation of recombinant BChE as contemplated hereunder will
infringe or otherwise violate the patent rights or other intellectual property
rights of any third party; and

            (e) GTC is not aware of any pending or threatened claim or
litigation that alleges that the Transgenic Technology Patent Rights or the GTC
Intellectual Property have violated the intellectual property rights of any
third party.

      7.4 Warranties Relative to the Right to Practice. PharmAthene hereby
warrants that as of the date hereof:

            7.4.1 PharmAthene is not aware of any rights to any valid patent
claim (other than the rights licensed by GTC to PharmAthene herein or that
PharmAthene already has) that are necessary in order to allow PharmAthene to
commercialize BChE;

            7.4.2 PharmAthene is not aware that the commercialization of BChE by
PharmAthene would infringe any valid patent claims of any third party;

            7.4.3 To its knowledge and as of the date of this Agreement,
PharmAthene owns or has rights to the intellectual property currently required
to commercialize BChE as it intends to commercialize it; and

            7.4.4 there are no patent infringement suits or patent infringement
claims asserted against PharmAthene relative to BChE.

      7.5 Disclaimer of Warranties. Except as expressly set forth in this
Agreement, neither Party makes any representations and extends no warranties or
conditions of any kind, either express or implied, including, but not limited
to, warranties of merchantability, fitness for a particular purpose or
non-infringement.

      7.6 Limitation on Liability. Neither Party shall be liable to the other
Party for special, indirect, incidental or consequential damages, whether based
in contract, warranty, tort, negligence, strict liability or otherwise,
including, but not limited to, loss of profits or revenue; provided, however,
such limitation shall not apply to the indemnification obligations of one Party
under Sections 8.1 or 8.2, as the case may be, with respect to claims by a third
party against the other Party, nor shall it apply to Sections 8.1.2 and 8.2.2 or
with respect to a breach of Section 11.4.

                                    ARTICLE 8
                                 INDEMNIFICATION

      8.1 Indemnification by GTC.

            8.1.1 General. Subject to Section 7.6 hereof and except as provided
specifically in Section 8.1.2, GTC shall indemnify, defend and hold PharmAthene
and its employees, officers, directors, contractors, consultants and agents (the
"PharmAthene Indemnitees") harmless from and against any and all liability,
damage, loss, cost or expense (including reasonable attorneys' fees)


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(collectively, "Losses") arising out of: (a) GTC's performance of its
obligations under this Agreement; (b) the testing, manufacture, use,
importation, offer for sale or sale of Products by GTC and its distributors,
agents or customers; (c) a material breach by GTC of any of its covenants,
representations or warranties set forth in this Agreement, and (d) any third
party claim made against PharmAthene relating to its use of the Transgenic
Technology Patent Rights pursuant to the terms and conditions of this Agreement
except to the extent such Losses result from the material breach of any of the
provisions of this Agreement by PharmAthene or the PharmAthene Indemnitees or
the gross negligence or willful misconduct of PharmAthene or the PharmAthene
Indemnitees.

            8.1.2 Confidentiality. Notwithstanding Sections 7.6 and 8.1.1
herein, GTC shall defend, indemnify and hold harmless PharmAthene and the
PharmAthene Indemnitees from and against any and all Losses that may result, in
whole or part, from any breach of the obligations of confidentiality under this
Agreement by GTC or the GTC Indemnitees or otherwise caused by the GTC
Indemnitees or customers and potential customers of GTC that should have an
obligation of confidentiality to GTC as a Receiving Party in accordance with
this Agreement.

            8.1.3 Conditions of Indemnities and Settlement. The indemnities
under Sections 8.1.1 and 8.1.2 are conditioned upon: (i) promptly notifying GTC
in writing of the claim; (ii) providing GTC all reasonably requested information
that PharmAthene has concerning the claim; (iii) reasonably cooperating with,
and assisting GTC in, defending the claim at GTC's expense; and (iv) granting
GTC authority to defend and control the defense of the claim (provided that
PharmAthene may participate in the defense to the extent it deems appropriate
and at its expenses). GTC shall not settle any such claim or suit without the
prior written consent of PharmAthene, unless: (i) GTC or the GTC Indemnitees
shall have first waived its/their rights to indemnification hereunder; (ii) the
settlement involves the payment of monetary damages by GTC only; and (iii) the
settlement would not result in any injunctive or other relief against, or the
assumption or admission of any liability by, PharmAthene.

      8.2 Indemnification by PharmAthene.

            8.2.1 General. Subject to Section 7.6, PharmAthene shall indemnify,
defend and hold GTC and its employees, officers, directors, contractors,
consultants and agents (the "GTC Indemnitees") harmless from and against any and
all Losses arising out of: (a) PharmAthene's performance of its obligations
under this Agreement; (b) subject to Section 8.1, the manufacture, use,
importation, offer for sale or sale of Products by PharmAthene and its
distributors, agents or customers; and (c) a material breach by PharmAthene of
any of its covenants, representations or warranties set forth in this Agreement,
except to the extent such Losses result from the breach of any of the provisions
of this Agreement by GTC or the GTC Indemnitees or gross negligence or willful
misconduct of GTC or the GTC Indemnitees.

            8.2.2 Confidentiality. Notwithstanding Sections 7.6 and 8.2.1,
PharmAthene shall defend, indemnify and hold harmless GTC and the GTC
Indemnitees from and against any and all Losses that may result, in whole or
part, from any breach of the obligations of confidentiality under this Agreement
by PharmAthene or the PharmAthene Indemnitees or otherwise caused by the
PharmAthene Indemnitees or customers and potential customers of PharmAthene that
should have an obligation of confidentiality to PharmAthene as a Receiving Party
in accordance with this Agreement.


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            8.2.3 Conditions of Indemnities and Settlement. The indemnitees
under Sections 8.2.1 and 8.2.2 are conditioned upon: (i) promptly notifying
PharmAthene in writing of the claim; (ii) providing PharmAthene all reasonably
requested information that GTC has concerning the claim; (iii) reasonably
cooperating with, and assisting PharmAthene in, defending the claim at
PharmAthene's expense; and (iv) granting PharmAthene authority to defend and
control the defense of the claim (provided that GTC may participate in the
defense to the extent it deems appropriate and at its expense). PharmAthene
shall not settle any such claim or suit without the prior written consent of
GTC, unless: (i) PharmAthene or the PharmAthene Indemnitees shall have first
waived its/their rights to indemnification hereunder; (ii) the settlement
involves the payment of money damages by PharmAthene only; and (iii) the
settlement would not result in any injunctive or other relief against, or the
assumption or admission of liability by, GTC.

      8.3 Insurance. Each Party shall maintain necessary insurance, including
product liability insurance and workers compensation or an insurance product
with a similar purpose, with respect to its activities hereunder. Such insurance
shall be in such amounts and subject to such deductibles as the Parties may
agree based upon standards prevailing in the industry at the time. Each Party
may satisfy its obligations under this Section 8.3 through self-insurance to the
same extent.

                                    ARTICLE 9
                              TERM AND TERMINATION

      9.1 Term. This Agreement shall commence on the Effective Date hereof and,
unless extended by mutual written agreement of the Parties or terminated sooner
under this Article 9, this Agreement and its provisions shall expire on December
31, 2026 (the "Term").

      9.2 Termination for Breach. The failure by a Party to comply in any
material respects with any of the material obligations contained in this
Agreement shall entitle the other Party to give notice to have the default
cured. Failure by PharmAthene to pay any Royalty, milestone payment, annual fee
or licensing fee due pursuant to Section 2.1.4 or failure by GTC to comply with
its obligations pursuant to Section 2.1.1 shall be considered a material failure
to comply with a material obligation. If such default is not cured within sixty
(60) days after the receipt of such notice, or if diligent steps are not taken
to cure or if, by its nature, such default could not be cured within sixty (60)
days, the notifying Party shall be entitled, without prejudice to any of its
other rights conferred on it by this Agreement, and in addition to any other
remedies that may be available to it, to terminate this Agreement in its
entirety. This ability to terminate, however, shall be stayed in the event that,
during such sixty (60) day period, the Party alleged to have been in default
shall have: (a) initiated arbitration in accordance with Article 10, below, with
respect to the alleged default, and (b) diligently and in good faith cooperates
in the prompt resolution of such arbitration proceedings.


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      9.3 Termination by PharmAthene. PharmAthene may terminate this Agreement
at any time upon notice to GTC, but in such case shall forfeit all rights to any
refund of any prior payment and shall also forfeit any and all licenses, access
or utilization of the GTC Intellectual Property or any other intellectual
property rights granted herein.

      9.4 Insolvency or Bankruptcy.

            9.4.1 Termination. Either Party may, in addition to any other
remedies available by law or in equity, terminate this Agreement by written
notice to the other Party in the event (collectively, an "Insolvency Event"):
(i) the latter Party (the "Insolvent Party") shall have become insolvent or
bankrupt, or shall have assigned its property for the benefit of its creditors,
or there shall have been appointed a trustee or receiver of the Insolvent Party
or for all or a substantial part of its property; or (ii) any other proceeding
that shall have been commenced or other action taken by or against the Insolvent
Party in bankruptcy or seeking reorganization, liquidation, dissolution,
winding-up, arrangement or readjustment of the Insolvent Party's debts or any
other relief under any bankruptcy, insolvency, reorganization or other similar
act or law of any jurisdiction now or hereafter in effect; or (iii) there shall
have been issued a warrant of attachment, execution, restraint or similar
process against any substantial part of the property of the Insolvent Party, and
any such event shall have continued for ninety (90) days undismissed, unbonded
and undischarged.

            9.4.2 Intellectual Property. All rights, licenses and sublicenses
granted under or pursuant to this Agreement by GTC are, and shall otherwise be
deemed to be, for purposes of Section 365(n) of the United States Bankruptcy
Code, licenses of right to "Intellectual Property" as defined under Section
ss.101 of the United States Bankruptcy Code. The Parties agree that PharmAthene
as licensee of such rights under this Agreement shall retain and may fully
exercise all of its rights and elections under the United States Bankruptcy
Code. The Parties further agree that, in the event of the commencement of a
bankruptcy proceeding by or against GTC under the United States Bankruptcy Code,
PharmAthene shall be entitled to a complete duplicate of (or complete access to,
as appropriate) any such intellectual property and all embodiments or
descriptions of such licensed intellectual property, and same, if not already in
its possession, shall be promptly delivered to it (a) upon any such commencement
of a bankruptcy proceeding upon its written request therefor, unless GTC elects
to continue to perform all of its obligations under this Agreement or (b) if not
delivered under (a) above, upon the rejection of this Agreement by or on behalf
of GTC upon written request therefor by the non-debtor Party.

            9.4.3 GTC Rights in Bankruptcy. PharmAthene shall notify GTC in
writing promptly after: (i) the filing by or against PharmAthene of any petition
in bankruptcy or similar filing seeking relief from creditors; (ii) receipt by
PharmAthene of any notice of foreclosure and/or default that could be reasonably
foreseen to have the effect of preventing the commercialization of BChE or the
filing of a BLA.

            9.4.4 Right of First Negotiation. PharmAthene hereby grants to GTC a
right of first negotiation for the purpose of negotiating in good faith a
license to any intellectual property owned by PharmAthene with respect to the
production or development of BChE, including all rights assigned by GTC to
PharmAthene pursuant to this Agreement. This right of first negotiation may only
be exercised if PharmAthene becomes bankrupt or otherwise, for any reason,


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completely ceases its operations, other than as a result of a sale of its
business to an Affiliate or a third party. If, after good faith negotiations,
the Parties fail to reach an agreement within thirty (30) days following
PharmAthene's bankruptcy or the end of PharmAthene's operations, then
PharmAthene shall be free to negotiate with other parties for the licensing or
assignment of its intellectual property relevant to the production or
commercialization of BChE. If PharmAthene, at any moment before the expiry of a
four (4) month period after the above thirty (30) day period, wants to enter
into an agreement with a third party on terms that are less favorable to
PharmAthene than the best offer from GTC, PharmAthene shall give a written
notice thereof to GTC and the Parties shall negotiate again, in good faith and
for a period of thirty (30) days, an agreement for the purchase of the
intellectual property referred to above. This Section 9.4.4 shall not survive in
the event of an assignment of the Agreement by PharmAthene pursuant to Section
11.4.

      9.5 Survival of Obligations. The termination or expiration of this
Agreement shall not relieve the Parties of any obligations accruing prior to
such termination, and any such termination shall be without prejudice to the
rights of either Party against the other. The provisions of Sections 1.1.1,
2.1.1 (only in the case of a termination by PharmAthene under Section 9.3 or the
expiration of the Term set forth in Section 9.1), 2.1.2 (only in the case of a
termination by PharmAthene under Section 9.3 or the expiration of the Term set
forth in Section 9.1), 2.1.4(a)(i), 2.1.4(a)(ii), 2.3 (only with respect to Net
Sales that give rise to the payment of a royalty), 3.1, 3.5, 4.1, 4.2, 4.3, 8.1,
8.2, 9.5, 9.6, Article 10 and Sections 11.12 and 11.5 shall survive any
termination of this Agreement.

      9.6 Effects of Termination.

            9.6.1 Confidential Information. Upon termination of this Agreement
for any reason, all use by the Receiving Party of the Confidential Information
of the Disclosing Party shall immediately cease, and within thirty (30) days
after termination, the Disclosing Party shall return or destroy, as directed by
the Disclosing Party, all Confidential Information of the Disclosing Party,
regardless of the form in which it is stored, and certify to the Disclosing
Party when such return or destruction is complete.

            9.6.2 Elimination of License and Termination of Obligations. Subject
to Sections 9.4.2 and 9.5, upon termination of this Agreement, the License and
sublicense right granted under Article 2 shall immediately terminate and all of
the obligations of the Parties under this Agreement shall also terminate at such
time.

                                   ARTICLE 10
                               DISPUTE RESOLUTION

      10.1 Dispute Resolution Process. Both Parties understand that their long
term mutual interest will be best served by affecting a rapid and fair
resolution of any claims or disputes which may arise out of services performed
under this contract or from any dispute concerning the terms of this Agreement.
Therefore, both Parties agree to use their commercially reasonable best efforts
to resolve all such disputes as rapidly as possible on a fair and equitable
basis. Toward this end, both Parties agree to develop and follow a process for
presenting, rapidly assessing, and settling claims on a fair and equitable basis


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that takes into account the precise subject and nature of the dispute. All
discussions, summaries and papers generated in connection with such dispute
resolution process shall be considered settlement negotiations for the purpose
of any applicable rules of discovery or evidence.

      10.2 Dispute Resolution Panel. If any dispute or claim arising under this
Agreement cannot be readily resolved by the Parties pursuant to the process
described above, then the Parties agree to refer the matter to a panel
consisting of the Chief Executive Officer of PharmAthene and the Chief Executive
Officer of GTC or their duly authorized designees for review and pursuit of a
resolution. A copy of the terms of this Agreement, agreed upon facts (and areas
of disagreement), and concise summary of the basis for each side's contentions
will be provided to both such officers who shall review the same, confer and
attempt to reach a mutual resolution of the issue. All discussions, summaries
and papers generated in connection with such dispute resolution panel shall be
considered settlement negotiations for the purpose of any applicable rules of
discovery or evidence.

      10.3 Arbitration. If the matter has not been resolved utilizing the
foregoing process and/or the Parties are unwilling to accept the non-binding
decision of the dispute resolution panel, the Parties may elect to pursue
definitive resolution through binding arbitration, in lieu of litigation or
other legally available remedies (with the exception of injunctive relief where
such relief is necessary to protect a Party from irreparable harm pending the
outcome of any such arbitration proceeding). If the Parties elect to settle a
dispute by binding arbitration, the arbitration shall be settled in accordance
with the Rules of the International Chamber of Commerce by a panel of three
arbitrators chosen in accordance with such Rules. If such dispute relates
primarily to the Transgenic Technology Patent Rights or otherwise relate to
transgenic product processing, molecular biology, and/or recombinant protein
secretion by transgenic mammals, such arbitrators shall be selected in such a
manner to ensure that they will have sufficient technical expertise and training
to handle such a dispute. The arbitration and all hearings and proceeding in
connection therewith will be held in Boston, Massachusetts or other mutually
agreeable location. Judgment upon the award rendered may be entered in any court
having jurisdiction and the Parties irrevocably agree that a judgment or order
in any such proceeding shall be conclusive and binding upon the Parties and may
be enforced in any court of competent jurisdiction.

      10.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the substantive laws of the State of Delaware and the federal
laws of the United States of America, applicable therein without reference to
its conflicts of laws principles.

                                   ARTICLE 11
                            MISCELLANEOUS PROVISIONS

      11.1 Entire Agreement. This Agreement and each of the Schedules hereto
constitute and contain the entire understanding and agreement of the Parties
respecting the subject matter of this Agreement and cancels and supersedes any
all prior negotiations, correspondence, understandings and agreements between
the Parties, whether oral or written, regarding such subject matter.


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      11.2 Further Actions. Each Party agrees to execute, acknowledge and
deliver such further instruments and to do all such other acts as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.

      11.3 Binding Effect. This Agreement and the rights and obligations granted
herein shall be binding upon and shall inure to the benefit of PharmAthene, GTC
and their respective successors and permitted assigns.

      11.4 Assignment. Neither Party shall assign this Agreement and GTC shall
not assign any intellectual property licensed or to be licensed hereunder
without the prior written consent of the other Party, which consent shall not be
unreasonably withheld or delayed; provided, however, that either Party may
assign this Agreement without the prior written consent of the other to an
Affiliate or in connection with the Change of Control of such Party if such
permitted assignee first assumes (by operation of law or otherwise) all
obligations of its assignor under this Agreement.

      GTC shall not assign any intellectual property licensed or to be licensed
hereunder, without the prior written consent of PharmAthene, which consent shall
not to be unreasonably withheld, provided, however, that GTC may assign its
intellectual property licensed or to be licensed hereunder without the prior
written consent of PharmAthene to an Affiliate in connection with the Change of
Control of GTC if such permitted assignee first assumes (by operation of law or
otherwise) all obligations of GTC under this Agreement.

      11.5 No Waiver. No waiver, modification or amendment of any provision of
this Agreement shall be valid or effective unless made in writing and signed by
a duly authorized officer of each Party. The failure of either Party to assert a
right hereunder or to insist upon compliance with any term or condition of this
Agreement shall not constitute a waiver of that right or excuse a similar
subsequent failure to perform any such term or condition.

      11.6 Independent Contractors. Both Parties are independent contractors
under this Agreement. Nothing contained in this Agreement is intended nor is to
be construed so as to constitute PharmAthene or GTC as partners or joint
venturers with respect to this Agreement. Neither Party shall have any express
or implied right or authority to assume or create any obligations on behalf of
or in the name of the other Party or to bind the other Party to any other
contract, agreement or undertaking with any third party.

      11.7 Notices and Deliveries. Any formal notice, request, delivery,
approval or consent required or permitted to be given under this Agreement shall
be in writing and shall be deemed to have been sufficiently given when it is
received, whether delivered in person, transmitted by facsimile with
contemporaneous confirmation, delivered by registered letter (or its equivalent)
or delivered by certified overnight courier service, to the Party to which it is
directed at its address shown below or such other address as such Party shall
have last given by notice to the other Parties.


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             If to PharmAthene:

             PharmAthene, Inc.
             175 Admiral Cochrane Drive, Suite 101
             Annapolis, Maryland 21401
             Attention: David P. Wright
                        President and Chief Executive Officer
             Telephone: (410) 571-8921
             Facsimile: (410) 571-8927

             If to GTC:

             GTC Biotherapeutics, Inc.
             175 Crossing Boulevard
             Suite 410
             Framingham, MA  01702
             Attention: Daniel S. Woloshen,
                        Senior Vice President and General Counsel
             Telephone: (508) 620-9700
             Facsimile: (508) 370-3797

      11.8 Publicity. Except to the extent already disclosed in the initial
press release or other public communication and subject to Section 3.5, no
public announcement concerning the existence or the terms of this Agreement or
concerning the transactions described herein or any other publicity or
publication shall be made, either directly or indirectly, without first
obtaining the approval of the other Party and agreement upon the nature, text,
and timing of such announcement or publication, which approval and agreement
shall not be unreasonably withheld.

      11.9 Notice. The Party desiring to make any such public announcement shall
provide the other Party with a written copy of the proposed announcement in
sufficient time prior to public release to allow such other Party to comment
upon such announcement, prior to public release.

      11.10 Non-Disparagement. Neither Party shall disparage the other regarding
their respective technologies, programs, or marketing strategies relative to the
Transgenic Technology Patent Rights or the BChE development program.

      11.11 Headings. The captions to the sections and articles in this
Agreement are not a part of this Agreement, and are included merely for
convenience of reference only and shall not affect its meaning or
interpretation.

      11.12 Severability. If any provision of this Agreement becomes or is
declared by a court of competent jurisdiction or binding arbitration panel to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision, so long as the Agreement, taking into account
said voided provision(s), continues to provide the Parties with the same
practical economic benefits as the Agreement containing said voided provision(s)
did prior to the voiding of such provision. If, after taking into account said
voided provision(s), the Parties are unable to realize the practical economic


18 of 20


benefit contemplated, the Parties shall negotiate in good faith to amend this
Agreement to reestablish the practical economic benefit contemplated by the
Parties prior to the voiding of such provision.

      11.13 Counterparts. This Agreement may be executed in counterparts, or
facsimile versions, each of which shall be deemed to be an original, and both of
which together shall be deemed to be one and the same agreement.

      11.14 Force Majeure. If the performance of this Agreement or any
obligation hereunder is prevented, restricted or interfered with by reason of
fire or other casualty or accident, strikes or labor disputes, inability to
procure raw materials, power or supplies, terrorist act or other violence, any
law, order, proclamation, regulation, ordinance, demand or requirement of any
government agency, or any other act or condition whatsoever beyond the control
of a Party hereto, the Party so affected, upon giving prompt notice to the other
Party, shall be excused from such performance to the extent of such prevention,
restriction or interference; provided, however, that the Party so affected shall
use reasonable efforts to avoid or remove such causes of non-performance and
shall continue performance hereunder with reasonable dispatch whenever such
causes are removed.

      11.15 Non-Solicitation of Employees. Neither Party shall solicit for
employment or hire any employee of the other party without the prior written
consent of such other party. This restriction shall apply for the term of this
Agreement, and any extensions thereto and for one (1) year after thereafter.

                 THE REST OF THIS PAGE LEFT INTENTIONALLY BLANK


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      IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their respective duly authorized officers as of the Effective Date, each copy
of which shall for all purposes be deemed to be an original.

                                   PHARMATHENE, INC.


                                   By: /s/ David P. Wright
                                       -----------------------------------------
                                       David P. Wright
                                       President and Chief Executive Officer

                                   GTC BIOTHERAPEUTICS, INC.


                                   By: /s/ John B. Green
                                       -----------------------------------------
                                       John B. Green
                                       Senior Vice President and Chief Financial
                                       Officer


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                                   SCHEDULE 1

                                   DEFINITIONS

      "Affiliate" means, with respect to any Party, any corporation, partnership
or other business entity that controls, is controlled by, or is under common
control with such Party. A corporation, partnership or other entity shall be
regarded as in control of another corporation, partnership or entity if it owns
or directly or indirectly controls at least fifty percent (50%) of the voting
stock or other ownership interest of the other corporation, partnership or
entity (or alternatively with respect to any non-USA entities, if it owns the
maximum such ownership interest permitted by law), or if it possesses, directly
or indirectly, the power to direct or cause the direction of the management and
policies of the corporation, partnership or other entity or the power to elect
or appoint at least fifty percent (50%) of the members of the governing body of
the corporation, partnership or other entity.

      "BChE" means recombinant butyrylcholinesterase (BChE) or an amino acid
sequence substantially similar to the human BChE sequence that has the same
physiological mode of action and activity thereof in all its variants.

      "BChE Field" means the development or production (including any
purification process) of BChE.

      "BLA" means Biological License Application.

      "Change of Control" means with respect to a Party: (i) a sale or
assignment, by operation of law or otherwise, of all or substantially all of
such Party's assets (or, with respect to PharmAthene, of all or substantially
all of its assets relating to the BChE Field) to an entity not an Affiliate of
such Party; (ii) an amalgamation, plan of arrangement, merger or consolidation
by such Party with or into an entity that is not an Affiliate of such Party
where, as a result of such transaction, the stockholders of the unaffiliated
entity own more than fifty percent (50%) of the combined entity; or (iii) a sale
of beneficial ownership of a Party's voting securities to an entity that is not
an Affiliate of such Party, where such entity, as a result of such sale, owns
more than fifty percent (50%) of the outstanding voting securities of such
Party. PharmAthene's pending transaction with Healthcare Acquisition Corporation
shall not be deemed a Change of Control for purposes of this Agreement.

      "Commercial Sale" means any sale by PharmAthene or an Affiliate, as the
case may be, of Products within the Territory following the filing and obtaining
of a BLA with the FDA or an equivalent filing or approval within another
jurisdiction in the Territory

      "Confidential Information" shall mean any and all confidential and
non-public information of a Party, which includes but is not limited to, trade
secrets, privileged records, proprietary information, data, case report forms,
laboratory work sheets, slides, reports, results, material, or information,
whether in written, verbal, physical, electronic, tangible or intangible form,
made available, disclosed, or otherwise made known to a Party and its employees,
including without limitation as a result of services to be rendered under the
Services Agreement.


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      "Effective Date" means the execution date hereof.

      "FDA" means the United States Foods and Drug Administration, or its
successors.

      "GTC Intellectual Property" means an exclusive license under the
Transgenic Technology Patent Rights to develop, test, manufacture, use, sell,
offer for sale, export and import recombinant BChE only produced from the milk
of transgenic goats or mice and an exclusive license to all inventions,
processes, know-how, trade secrets, improvements, other intellectual property,
including but not limited to data processes, technology, means or know-how
developed by GTC which relate to animal maintenance and management, analytical
methods, procedures and techniques related to the purification and processing of
proteins in the milk of transgenic animals, regulatory policies and procedures,
and filings (excluding any preclinical or clinical information relating to
specific products) which have been independently developed without the benefit
of any information or support provided by PharmAthene.

      "IND" means an Investigational New Drug Application or the equivalent
filing in another jurisdiction.

      "Net Sales" means: (a) the gross amount of payment received (whether
structured as an up-front payment, milestone payment, R&D reimbursement, success
payment or other form of compensation) for the Commercial Sale of Products by
PharmAthene to a third party or to an end user in the Territory, excluding
Commercial Sales of Product to an Affiliate; and (b) in the case of Commercial
Sales of the Product to an Affiliate, the gross amount of payment received
(whether structured as an up-front payment, milestone payment, R&D
reimbursement, success payment or other form of compensation) for the Commercial
Sale of Products by the Affiliate to a third party or an end-user in the
Territory, in each case, after deduction of the following items (to the extent
actually incurred or reasonably estimated and accrued and to the extent not
already deducted in the amount invoiced): (i) customary trade, quantity and cash
discounts, wholesaler-charge backs, or rebates (including, but not limited to,
rebates to governmental agencies, managed care organizations, health management
organizations, pharmacy benefit managers and group purchasing organizations);
(ii) customary credits or allowances for rejection or return of previously sold
Products; (iii) withholding excise, sales and other consumption taxes and
customs duties; and, (iv) any charge for freight or insurance if separately
stated on the same invoice as for the sale of Products and directly related to
the sale or distribution of the Products.

      "Product" means BChE produced for therapeutic use.

      "Services Agreement" means that certain agreement entered into between the
Parties of even date herewith with respect to the clarification, downstream
process and analytical methods development program and pre-clinical services
relating to the Product.

      "Territory" means all countries World-Wide.


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      "Transgenic Technology Patent Rights" means the patents and patent
applications listed in Appendix A in the United States, and their issued or
pending counterparts in various European Jurisdictions or other specific
countries. Moreover, with respect to any particular patent or patent application
listed in attached Appendix A it also includes all predecessor or priority
patent applications upon which such patent or patent application is based in
whole or in part, all continuation or divisional applications for such patent or
patent application and its predecessor patent or priority applications, any
patent, reissue, re-examination, renewal or extension (including any
supplemental patent certificate) of any of the foregoing patents or patent
applications or resulting from any of the foregoing patent applications, all
confirmation patent or registration patent or patent of addition based upon any
of the foregoing, and all international counterparts or equivalents of any of
the foregoing.

      "USD" means United States dollars.

      Other Defined Terms

      In addition to the defined terms in this Schedule I, each of the following
capitalized terms shall have the meaning ascribed thereto in the corresponding
Sections:

            Term                                       Section
            ----                                       -------
            Agreement .............................    Preamble
            Disclosing Party.......................    3.1
            Effective Date ........................    Preamble
            First Period ..........................    2.1.4(c)(i)
            GTC ...................................    Preamble
            GTC Indemnitees .......................    8.2.1
            Insolvency Event ......................    9.4.1
            Insolvent Party .......................    9.4.1
            License ...............................    2.1.1
            Losses ................................    8.1.1
            PharmAthene ...........................    Preamble
            PharmAthene Indemnitees ...............    8.1.1
            Non-Exclusive Third Party Patents......    2.1.1
            Notified Party ........................    5.1
            Notifying Party .......................    5.1
            Option.................................    1.1.1
            Option Notice..........................    1.1.1
            Option Period..........................    1.1.1


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            Parties ...............................    Preamble
            Receiving Party........................    3.1
            Royalties .............................    2.1.4(b)
            Second Period..........................    2.1.4(c)
            Term ..................................    9.1


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                                                                      Appendix A

                     TRANSGENIC ANIMAL PRODUCTION TECHNOLOGY



PATENT NO.           INVENTOR                EXPIRATION DATE                ASSIGNEE/OWNER
- ------------------------------------------------------------------------------------------
                                                                   
4,873,316            Meade et al.            6/23/2007                      Biogen, Inc. / Pharming
Title: Isolation of exogenous recombinant proteins from the milk of transgenic mammals

5,610,053            Chung et al.            3/11/2014                      National Institutes of Health
Title: DNA sequence which acts as a Chromatin insulator element to protect expressed genes from cis-acting regulatory sequences
in mammalian cells

EP 264166            Gordon et al.                                          Genzyme Corporation
Title: Transgenic Animals secreting desired proteins into milk              (exclusively licensed by GTC)

PATENT NO.           INVENTOR                EXPIRATION DATE                ASSIGNEE/OWNER
- ------------------------------------------------------------------------------------------
6,580,017            Echelard et al.         11/02/2018                     GTC Biotherapeutics, Inc.
Title:  Methods of Reconstructed Goat Embryo Transfer

6,727,405            Katherine Gordon        4/27/2021                      Genzyme Corporation
Title:  Transgenic Animals Secreting Desired Proteins into Milk             (exclusively licensed by GTC)

EP 347431            Meade et al.                                           Gene Pharming Europe BV
Title: Expression of proteins in milk


Country                     Sub Case    Case Type    Status      Application Number     Filing Date     Patent Number    Issue Date
                                                                                                       
Japan                          D           DIV       Pending     341067/96              20-Dec-1996
United States of America       C2          CON       Pending     07/938,322             31-Aug-1992                      (Pre-GATT)
United States of America       D3          DIV       Pending     07/839,194             20-Feb-1992                      (Pre-GATT)


Abstract:A DNA sequence containing a gene encoding a protein, the gene being
under the transcriptional control in the DNA sequence of a mammalian milk
protein promoter which does not naturally control the transcription of the gene,
such DNA sequence including DNA enabling secretion of the protein.


5 of 5

EX-10.27

                                                                   Exhibit 10.27

           CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT
                 HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
                 SECURITIES AND EXCHANGE COMMISSION (THE "SEC")
  PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT WITH RESPECT TO THE OMITTED
                                    PORTIONS.
                    OMITTED PORTIONS ARE INDICATED BY [***].

                          BIOPHARMACEUTICAL DEVELOPMENT

                      AND MANUFACTURING SERVICES AGREEMENT

                                     Between

                                PHARMATHENE, INC.

                                       And

                              LAUREATE PHARMA, INC.



                                TABLE OF CONTENTS

                                                                     Page Number
                                                                     -----------

Section 1.  Definitions........................................................1
Section 2.  Scope of Work; Orders for Products.................................5
Section 3.  Program Performance................................................7
Section 4.  Program Materials..................................................8
Section 5.  Use of Subcontractors..............................................9
Section 6.  Compliance with Government Regulations............................10
Section 7.  Facility Visits, Audits and FDA Inspections.......................10
Section 8.  Compensation......................................................11
Section 9.  Change Orders.....................................................12
Section 10. Confidential Information/Legal Proceedings........................13
Section 11. Work Product......................................................14
Section 12. Inventions and Patents............................................14
Section 13. Independent Contractor............................................16
Section 14. Insurance.........................................................16
Section 15. Shipping; Risk of Loss; Inspection................................17
Section 16. Default...........................................................17
Section 17. Dispute Resolution................................................18
Section 18. Indemnification; Limitation of Liability..........................19
Section 19. Representations, Warranties and Covenants.........................21
Section 20. Force Majeure.....................................................23
Section 21. Use of Names......................................................23
Section 22. Term; Termination.................................................24
Section 23. Assignment; Third Party Beneficiary...............................25
Section 24. Notice............................................................25
Section 25. Choice of Law.....................................................26
Section 26. Headings..........................................................26
Section 27. Waiver/Severability...............................................26
Section 28. Entire Agreement; Modification/Counterparts.......................26

Annex A         Letter of Intent
Appendix 1      Cell Lines and Their Products
Appendix 2      Approved Subcontractors and Services
Appendix 3      Access and Audits
Appendix 4      Scope Documents
Appendix 5      Shipping
Appendix 6      Termination Fees
Appendix 7      FAR Clauses
Schedule 4(b)   Medarex Authorizations
Schedule 5(c)   Medarex Consent for Pre-approved Subcontractors


                                       -i-


                        BIOPHARMACEUTICAL DEVELOPMENT AND
                        MANUFACTURING SERVICES AGREEMENT

      This BIOPHARMACEUTICAL DEVELOPMENT AND MANUFACTURING SERVICES AGREEMENT,
effective as of this 15th day of June 2007 (the "Effective Date"), between
PharmAthene, Inc., a Delaware corporation ("Customer"), having its principal
place of business at 175 Admiral Cochrane Drive, Suite 101, Annapolis, MD 21401
and LAUREATE PHARMA, INC., a Delaware corporation ("Laureate"), having a
principal place of business at 201 College Road East, Princeton, NJ 08540, (each
a "Party", collectively the "Parties").

                              W I T N E S S E T H:

      WHEREAS, Laureate provides a full range of bioprocessing services to the
biopharmaceutical industry, including cell line development, process
development, protein production, cell culture, protein purification,
bioanalytical chemistry, aseptic filling and QC testing.

      WHEREAS, on July 31, 2006, Laureate entered into a letter of intent and
purchase order with Customer (the "LOI") and a Material and Technology Transfer
Agreement (the "Medarex MTA") with Medarex, Inc. ("Medarex"), Customer's
strategic partner with respect to the Drug Product, pursuant to which Laureate
commenced the performance of certain bioprocessing services for Customer.

      WHEREAS, on April 12, 2007, Laureate and Medarex entered into an amended
and restated Medarex MTA (the "Amended and Restated Medarex MTA").

      WHEREAS, for reference purposes only, a copy of the LOI is attached hereto
as Annex A of this Agreement.

      WHEREAS, Customer now desires Laureate to continue to perform those
bioprocessing services and to perform additional bioprocessing services in
accordance with the terms of this Agreement and any executed Scope (as
hereinafter defined) related to the cGMP production and purification of a
monoclonal antibody, produced by an engineered cell line, and Laureate desires
to perform such services on behalf of Customer.

      NOW, THEREFORE, in consideration of the above statements and other good
and valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, the Parties hereto agree as follows:

Section 1. Definitions.

      Terms defined elsewhere in this Agreement shall have the meanings set
forth therein for all purposes of this Agreement unless otherwise specified to
the contrary. The following terms shall have the meanings set forth below in
this Section 1:

      (a) "Affiliate(s)" for purposes of this Agreement shall mean any person,
firm, trust, partnership, corporation, company or other entity or combination
thereof which directly or indirectly: (i) controls a Party; (ii) is controlled
by a Party; or (iii) is under common control with a Party. As used in this
definition, the terms "control" and "controlled" shall mean ownership of fifty



percent (50%) or more (including ownership by trusts with substantially the same
beneficial interests) of the voting and equity rights of such person, firm,
trust, partnership, corporation, company or other entity or combination thereof
or the power to direct the management of such person, firm, trust, corporation
or other entity or combination thereof.

      (b) "Agreement" means this document as signed by the Parties including the
Scope and any referenced attachments and any amendments and additions to this
document.

      (c) "Assumptions" shall have the meaning as set forth in Section 9.

      (d) "Batch" means a number of vials each filled at the same time with the
same Lot or a group of Lots of Drug Product.

      (e) "Batch Record" means a complete manufacturing record for a Batch
generated by Laureate and approved by Customer made concurrently with the
performance of each step of the production, purification and aseptic filling
process for the Drug Substance, Drug Substance testing and lot release data,
such that successive steps in such processes may be traced.

      (f) "Cell Line" means the Chinese Hamster Ovary ("CHO") cell line that has
been designed and engineered to produce the corresponding monoclonal antibody
product as shown in Appendix 1, supplied by Medarex to Laureate pursuant to the
Medarex MTA, particulars of which are set out in the Scope.

      (g) "Certificate of Analysis" means a document signed by an authorized
representative of Laureate, describing Specifications for, and testing methods
applied to, any Drug Product, Drug Substance, samples or other Materials, and
the results thereof.

      (h) "Claim" shall have the meaning set forth in Section 18.

      (i) "Compound" means the monoclonal antibody product candidate known as
MDX-1303 or Valortim(TM).

      (j) "Compound Materials" shall have the meaning given such term in the
Amended and Restated Medarex MTA.

      (k) "Contaminants" shall have the meaning set forth in Section 18(c).

      (l) "Customer Confidential Information" means any information, business,
technical or financial data related to the Program that is provided to Laureate
by Customer.

      (m) "Customer Know How" means all scientific, technical and other
information relating to the Drug Product or the Process provided by Customer or
Medarex other than Laureate Confidential Information.

      (n) "Debarred Entity" means an entity that has been debarred by the FDA
pursuant to 21 U.S.C. ss. 335(a) or (b).

      (o) "Debarred Individual" means an individual that has been debarred by
the FDA pursuant to 21 U.S.C. ss. 335(a) or (b).


                                      -2-


      (p) "Drug Product" means the final dosage form pharmaceutical medicine
containing Drug Substance that Customer or its Affiliates will use for clinical
trials or for commercial supply, as applicable.

      (q) "Drug Substance" is the bulk purified Compound produced using the Cell
Line and the Process.

      (r) "Facility" means Laureate's manufacturing facility located at 201
College Road East, Princeton, NJ 08540.

      (s) "FDA" means the United States Food and Drug Administration, or any
successor entity thereto having substantially the same functions.

      (t) "Filling Components" means vials, stoppers and crimps used for an
aseptic fill of the Drug Product.

      (u) "Filled Product" means vials filled with Drug Product from an
identified Lot or Lots which are in a form ready for release and shipment from
the Facility.

      (v) "Good Manufacturing Practices" or "GMP" or "cGMP" means current good
manufacturing practices, as specified in regulations promulgated from time to
time by the FDA for the manufacture and testing of pharmaceutical products.
Laureate's operational quality standards are defined in internal cGMP policy
documents and are based on Laureate's current interpretation of cGMP, which
interpretation Laureate has reason to believe is in compliance with cGMP.

      (w) "Laureate Confidential Information" means any information, business,
technical or financial data, including, but not limited to, Laureate's
production, purification and aseptic filling process and techniques and Laureate
Know How, supplied by Laureate to Customer (excluding any such information or
data provided by Medarex to Laureate in writing pursuant to the Amended and
Restated Medarex MTA).

      (x) "Laureate Group" shall have the meaning set forth in Section 18(b).

      (y) "Laureate IP" shall have the meaning set forth in Section 12(b).

      (z) "Laureate Know-How" shall have the meaning set forth in Section 12(b).

      (aa) "Laureate SOP" means the written standard operating procedures and
methods of Laureate, as the same may be amended, in Laureate's sole discretion,
from time to time, but in any event, such SOPs will comply with all applicable
laws in the United States.

      (bb) "Loss" shall have the meaning set forth in Section 18.

      (cc) "Lot" means the Drug Substance produced in a single production run,
which may be contained in one or more containers thereof.

      (dd) "Materials Invention" means any invention relating to the Compound
Materials discovered or developed by Laureate, its employees, agents,
consultants or contractors, solely or jointly with Medarex and/or Customer, in
connection with the activities described in this Agreement or the Amended and
Restated Medarex MTA.


                                      -3-


      (ee) "Medarex" shall have the meaning set forth in the Recitals.

      (ff) "Media Fill" means a fill of bacteriological growth media into vials
for validation purposes.

      (gg) "Modification" shall have the meaning set forth in Section 9.

      (hh) "Permitted Regulatory Authority" shall have the meaning set forth in
Section 7(b).

      (ii) "Person" means an individual, partnership, corporation, limited
liability company, joint stock company, unincorporated organization or
association, trust or joint venture, or a governmental agency or political
subdivision thereof.

      (jj) "Process" means the production methods, purification processes and
other know-how as provided by PharmAthene or Medarex pursuant to the Amended and
Restated Medarex MTA for use by Laureate in the manufacture of Drug Substance
and Drug Product from the Cell Line, and (ii) any modifications, enhancements or
improvements to such methods or processes that may be made by Laureate, its
employees, agents, consultants or contractors, solely or jointly with Customer,
or Medarex from time-to-time.

      (kk) "Process Consumables" means raw materials, filters, membranes,
disposable analytical test kits, tubing, filling needles, disposable bags,
disposable glass/plasticware, cleaning supplies and other changeover parts
consumed during the manufacture of Drug Substance or Drug Product.

      (ll) "Process Invention" means any invention relating to the Process
discovered or developed by either Party or by Medarex (including each of its
respective employees, agents, consultants or contractors, solely or jointly, in
connection with the activities described in this Agreement or the Amended and
Restated Medarex MTA.

      (mm) "Product-Dedicated Equipment" means equipment such as chromatography
columns and resins and filters and filter housings that will be used by Laureate
solely for the manufacture of Drug Substance or Drug Products pursuant to a
Scope under this Agreement.

      (nn) "Product Invention" means any improvement or invention relating to
the Compound (but excluding any Materials Invention or Process Invention) that
is discovered by Laureate, its employees, agents, consultants or contractors,
solely or jointly with Medarex and/or Customer, in connection with the
activities described in this Agreement or the Amended and Restated Medarex MTA.

      (oo) "Program" means the services to be performed by Laureate for Customer
as described in a particular Scope.

      (pp) "Quality Agreement" shall have the meaning set forth in Section 3(c).


                                      -4-


      (qq) "Scope" means a detailed scope-of-work document entered into by the
parties for the performance by Laureate of certain services on behalf of
Customer relating to the Drug Substance, which shall be governed by, made part
of, and be subject to this Agreement.

      (rr) "Specification" means the requirements for tests, analysis, test
procedures and acceptable test results with which Drug Substance and, as
applicable, Drug Product, raw materials and excipients shall conform as set
forth in a Scope, as amended from time-to-time by the Parties.

      (ss) "Third Party" shall mean any party other than Customer or Laureate
and their respective Affiliates.

Section 2. Scope of Work; Orders for Products.

      (a) From time to time, the parties will prepare and enter into detailed
Scopes for the Program and mutually agree to the associated Service Fees for
each Scope. The Scopes shall be prepared by Laureate under Customer's direction
and shall be subject to the final approval of Customer and shall be attached as
an Appendix 4 to this Agreement. The first Scope document is attached hereto as
Appendix 4-1. Each additional Scope shall be sequentially numbered (i.e., Scope
#2, Scope #3) and shall be attached as additional appendices and numbered as
follows: Appendix 4-2, Appendix 4-3, etc. Laureate will perform the services for
Customer in accordance with each executed Scope. Each Scope will specify the
Program design, information desired, estimated duration of the Program, and all
other matters pertinent to completion of the Program, and will be deemed to be a
part of this Agreement and incorporated herein by reference. Scope #1 was
prepared by Laureate under Customer's direction and approved by Customer. The
Service Fees associated with Scope #1 are attached to this Agreement as Appendix
4-1, Section II - "Service Fees and Payment Schedule."

      (b) During the Term the parties will undertake the following procedures
with respect to submitting forecasts and purchase orders for production runs
under a Scope:

            (i) Within [***], Customer will submit to Laureate for acceptance a
written forecast for the scheduling of the bioreactor runs described in Scope
#1. Within [***] of acceptance of the foregoing forecast by Laureate (the "Scope
#1 Forecast"), Customer will submit to Laureate a purchase order (and
corresponding reservation fees) for all production runs scheduled to take place
within the [***] of the Scope #1 Forecast. Customer will submit to Laureate
additional purchase orders (and corresponding reservation fees), on a [***]
basis, if additional production runs are scheduled to occur on the Scope #1
Forecast but are scheduled to take place more than [***] after the delivery of
the Scope #1 Forecast, provided such production runs have not been canceled as
permitted by Section 22 of this Agreement. Each subsequently submitted purchase
order shall include production runs scheduled to take place within [***] of the
date of the purchase order.

            (ii) Within [***] of the Effective Date, Customer shall, for Scope
#2, submit to Laureate a written non-binding (except as set forth below), [***]
rolling forecast setting forth the number of production runs of Drug Substance

- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                      -5-


Customer reasonably believes it will require for each [***] during that period
and the estimated timing for the delivery of those production runs of Drug
Substance. Upon agreement by the Parties in writing, such forecast shall be
deemed to be the initial forecast (the "Initial Forecast"). The Parties
acknowledge that the Initial Forecast assumes the successful completion of [***]
pursuant to Scope #1. If any consistency Lots are not completed successfully, as
determined by Company in its reasonable discretion based on mutually agreed
specifications for the consistency Lots, then the Initial Forecast shall be
resubmitted by Customer to Laureate pursuant to this subsection (ii) and any
[***] paid by Customer under the previously submitted [***], notwithstanding any
other provision of this Agreement.

            (iii) At the time that the [***] is determined by the Parties,
Customer shall also submit to Laureate a purchase order for the total number of
production runs of Drug Substance for the [***], if any, and the requested
delivery dates for such production runs of Drug Substance, which dates will be
the same as the dates set forth in the [***].

            (iv) Customer will provide additional forecasts within [***] of the
end of each calendar quarter during the period that the Scope is being
performed, updating the information set forth in the Initial Forecast or any
updated forecast (each, a "Forecast") for the [***] period following the
completion of the first quarter of the immediately prior Forecast. For each
additional Forecast, Laureate and Customer shall agree as to the delivery dates
for production runs of Drug Substance not previously agreed to in a prior
Forecast.

            (v) At the time that each Forecast (other than the Initial Forecast)
is agreed to by Customer and Laureate, Customer shall also deliver a purchase
order for production runs of Drug Substance for the [***] of the Forecast. For
the avoidance of doubt, the purchase order for the [***] of each subsequently
delivered Forecast will already have been submitted to Laureate with the prior
period's Forecast.

Any purchase order submitted under clauses (i), (iii) and (v) above, shall be
firm and binding on Laureate and Customer at the time that Laureate receives the
reservation fee for such production runs (such reservation fee to be determined
in accordance with the appropriate Appendix 4). The purchase price for any
purchase order for production runs shall be determined in accordance with, and
shall be payable at the times set forth in the appropriate Appendix 4.

Additionally, if [***] notifies Laureate (either pursuant to a notification by
Customer or a solicitation by Laureate) that it intends to schedule a production
run [***], then Laureate shall promptly provide Customer with [***]. The notice
from Laureate to Customer shall include the specific production runs of Drug
Substance [***]. Customer shall have five (5) business days from the receipt of
the notice to notify Laureate [***], at which time, such notification shall
require Customer to pay Laureate a reservation fee in the manner set forth
below. Failure by Customer to notify Laureate within such five (5) business day
period shall be deemed to be [***]. Within ten (10) days after such notification
by Customer, Customer will provide Laureate with the corresponding reservation
fees for the Conflicting Customer Production Runs. [***] Laureate shall act in
good faith and with a reasonable belief with respect to the notices that it is

- ----------
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Confidential Treatment filed separately with the SEC.


                                      -6-


obligated to Provide Customer under this paragraph and such notices shall be
provided by Laureate to Customer via electronic mail to the Customer project
manager and to a member of Customer's senior management to be identified by
Customer. Reservation fees paid by Customer under this paragraph shall be
nonrefundable except as provided by Section 22(c); provided that once Customer
notifies Laureate of its request to have [***], Customer shall be required to
pay such reservation fees to Laureate, in the manner set forth above.

      (c) Laureate shall consult with Customer in developing the Program design
in a manner consistent with Laureate's current reasonable understanding of
United States (the "US") regulatory guidelines, including cGMP. Provided that
the Drug Product meets the Specifications in accordance with the terms of this
Agreement (which Specifications may require compliance with cGMP), Laureate does
not represent or warrant that any Program and/or any Program results will result
in obtaining marketing approval for the Drug Product at the time of submission
of the Program's results to such agencies.

      (d) Laureate's performance of the Program will be based on technical
information provided by or for the Customer. This information will be
incorporated by Laureate into Program documents (scale up plans, Batch Records,
Specifications, etc.) that will be reviewed and approved by the Customer prior
to use by Laureate. These Program documents will form the sole basis upon which
manufacturing runs will be performed. Laureate makes no representations or
warranties that the execution of the Program according to the Program documents
will result in any specific quantity of Drug Product or Drug Substance. Until
the successful production of three (3) consistency Lots of Drug Substance,
Laureate makes no representations or warranties that the execution of the
Program according to the Program documents will result in any specific quality
of Drug Substance.

      (e) In addition to routine Program meetings, senior representatives of the
Parties shall meet on an occasional basis or as necessary, the first meeting
being no later than one (1) month from the Effective Date of a particular Scope,
to review progress of the Program relative to the Scope and to agree on any
necessary changes to the Scope. Any disagreement between the Parties concerning
a Scope (including, without limitation, the failure of the Parties to agree upon
any necessary changes to the Scope) shall be resolved in accordance with the
dispute-resolution procedures set forth in Section 17 hereof.

Section 3. Program Performance.

      (a) Laureate shall provide the Facility, supplies, and staff necessary to
complete the Program as provided in a particular Scope, as it may be modified as
provided herein, in accordance with the terms of this Agreement. In the event of
any conflict between the terms and provisions of this Agreement and a Scope, the
terms of this Agreement shall control.

      (b) Laureate will appoint a Laureate representative (the "Program
Manager") to be responsible for the completion of the Program pursuant to a
Scope by Laureate. The Program Manager will coordinate performance of the
Program with a representative designated by Customer (the "Customer
Representative"), which representative shall have responsibility over all
matters relating to performance of the Program on behalf of Customer. Unless
otherwise agreed in a Scope, or mutually agreed to by the Parties, all
communications between Laureate and the Customer regarding the conduct of the
Program pursuant to a Scope shall be addressed to or routed through the Program

- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                      -7-


Manager and Customer Representative. Laureate may, at its option, substitute the
Program Manager during the course of the Program, on the condition that the
substitute Program Manager is reasonably acceptable to Customer. Customer may,
at its option, substitute the Customer Representative during the course of the
Program.

      (c) The parties have prepared and executed a detailed document ("Quality
Agreement") specifying the quality and regulatory procedures and
responsibilities of the parties hereunder with respect to the manufacture of
Drug Substance and Drug Product.

Section 4. Program Materials.

      (a) Laureate acknowledges that the Cell Line has been provided to Laureate
by Medarex under the Medarex MTA. Customer is responsible for providing Laureate
with sufficient amounts of Cell Line as reasonably requested by Laureate. Under
any Scope, Customer is responsible for providing Laureate with reference
standards and other substances, with which to perform the Program as specified
in a particular Scope, as well as all documentation and such other data as may
be necessary for Laureate to perform the Program as specified in a particular
Scope and to apprise Laureate of the stability of the Compound and Compound
Materials, process characteristics, proper storage, and manufacturing and safety
requirements including, without limitation, the Certificate of Analysis and/or
Material Safety Data Sheet, as applicable, relating to the Cell Line and
reference standards as specified in a relevant Scope.

      (b) Laureate shall procure the Compound, Filling Components, cell culture
media, and Process Consumables for use in the Program and each manufacturing run
all of which will comply with the Specifications. By written notice to Laureate,
Customer may procure certain Filling Components specified in a Scope, such as
media, resins, vials, overseals or stoppers. By written notice to Laureate from
Customer, Laureate will procure and store, at Customer's sole cost and expense,
materials, Filling Components, cell culture media, and Process Consumables in
sufficient quantities to serve as "safety stock" for the completion of one 2000L
production run. For clarity, the Parties acknowledge and agree that some
materials described in this Section 4(b) may be obtained by Laureate from
Medarex's supplier of media pursuant to written authorizations from Medarex to
Laureate and from Medarex to its supplier of media, authorizing direct
procurement by Laureate from Medarex's media supplier of media relating to the
Program; copies of such authorizations attached hereto as Schedule 4(b).

      (c) Laureate shall procure any Product-Dedicated Equipment and pass
through the costs to the Customer consistent with Section 8. For any Scope,
Laureate will obtain the written consent of Customer prior to procuring any
single piece of Product-Dedicated Equipment that costs $[***] or more, or
multiple pieces of Product-Dedicated Equipment that cost more than [***], in the
aggregate. By written notice to Laureate, Customer may procure and provide
certain Product-Dedicated Equipment for use in the Program at its own expense.
If Customer provides any Product-Dedicated Equipment to Laureate, such equipment
shall be in good operating condition and free from all material defects and
Contaminants. All right, title and interest in any Product-Dedicated Equipment

- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                      -8-


shall be vested in Customer. Customer may file financing statements or other
similar documentation in order to serve as notice or otherwise perfect its
interest in any Product-Dedicated Equipment.

      (d) Upon completion of the Program, (i) the Product-Dedicated Equipment
will be returned to the Customer, at the Customer's expense and (ii) any
remaining samples of the Compound or other substances, documentation or data
provided to Laureate will be returned, at the Customer's request, to Customer or
retained by Laureate in compliance with applicable regulatory requirements or
destroyed/disposed of by Laureate under written authorization from Customer.

Section 5. Use of Subcontractors.

      (a) Laureate reserves the right to employ subcontractors from time-to-time
to undertake certain activities related to the Program. All such subcontractors
will be pre- approved by Customer, in any case, and by Medarex, in the case that
such subcontractor will perform activities relating to the Process or that
require access to the Process, Process Inventions, Compound Materials, or
Materials Inventions. All approved subcontractors for the Program will perform
services under a separate written agreement. A list of the pre-approved
subcontractors as of the Effective Date is attached hereto as Appendix 2.
Laureate will use commercially reasonable efforts to have each written agreement
with a subcontractor for the Program contain (i) obligations of confidentiality
and non-use consistent with Section 10 of the Agreement, (ii) obligations
regarding compliance with laws consistent with Sections 19(h), 19(i) and any
Scope specific terms which are mutually agreed to by the Parties in writing, and
(iii) assignments, licenses or similar transfers of intellectual property rights
to the extent any intellectual property rights are vested in the subcontractor
as a result of performing services for Customer, in each case for the benefit of
Customer (or, in the case of Materials Inventions, Process Inventions and the
Process, for the direct benefit of Medarex). If Laureate's written agreements
with its subcontractors do not contain these provisions or Laureate is not able
to obtain written agreements, then Laureate will notify Customer prior to
commencing work with that subcontractor and Laureate will not commence work with
that subcontractor for the Program until Customer provides its consent, or in
the case where such subcontractor will perform activities relating to the
Process or such subcontractor requires access to the Process, Medarex also
provides its consent. Customer will be responsible for obtaining Medarex's
consent to use subcontractors other than those set forth on Appendix 2. Customer
will be responsible for delays to the performance of the Program resulting from
Customer unreasonably delaying, conditioning or hindering this consent. No
subcontracting arrangement will relieve Laureate of its obligations under this
Agreement, and Laureate shall remain primarily liable for the performance of all
obligations delegated to any subcontractor, provided, however, that if a
subcontractor agrees in writing that Customer is and shall be a third party
beneficiary of the applicable service agreement(s) between Laureate and such
subcontractor, with full right of enforcement, then Laureate shall not be liable
for any breach of this Agreement by subcontractor.

      (b) Laureate will not be held responsible or liable for the performance of
any Third Party retained directly by Customer or Medarex to perform services
related to the Program, including, without limitation, distributors, consultants
and testing entities.


                                      -9-


      (c) Laureate acknowledges that it shall not transfer the Compound in a
manner not permitted in the Amended and Restated MTA. Notwithstanding the
foregoing, Medarex has provided Laureate with consent to transfer Compound to
such pre-approved subcontractors as set forth on Schedule 5(c). In the event
that Medarex revokes its consent to use such pre- approved subcontractors,
Laureate shall not be responsible for any delays associated with obtaining such
revocation.

Section 6. Compliance with Government Regulations.

      (a) Laureate will perform each Program in accordance with the Scope.
Subject to paragraph (c) of this Section 6, Laureate will comply with applicable
government regulatory requirements concerning cGMP appropriate to a particular
Program.

      (b) Should such government regulatory requirements concerning cGMP
applicable to the Program be changed or Customer requires Laureate to comply
with regulatory requirements other than those of the United States, Laureate
will comply with the new requirements or foreign requirements, as applicable,
subject to the remaining terms of this Section 6(b). In the event that
compliance with such new or foreign regulatory requirements necessitates, in the
reasonable discretion of Laureate, a change in the Scope or the Program or the
cost of the services provided by Laureate, Laureate will submit to Customer a
revised technical and cost proposal for Customer's acceptance. This technical
and cost proposal may take into account undue burden or interruption to
Laureate's business. Unless the parties agree to a revised Scope or Program or
cost structure, as the case may be, Laureate will not be obligated to continue
to perform the Program as Customer has requested that it be revised.

      (c) In the event of a conflict in government regulations, Customer will
designate, in writing, which regulations shall be followed by Laureate in its
performance of the Program and shall hold Laureate harmless for following such
written designation.

Section 7. Facility Visits, Audits and FDA Inspections.

      (a) Customer's representatives may visit the Facility at appropriate times
consistent with the Program to observe the progress of the Program or to audit
the Program subject to the limitations provided in Appendix 3 to this Agreement.
In addition, Customer will use its reasonable efforts to include a right of
audit by Laureate in all its agreements with sites, laboratories and analytical
subcontractors used by Customer (except for Customer's contract manufacturers)
or any Third Party analytical subcontractor engaged by Customer in connection
with the Compound, Cell Line, the Drug Product, Drug Substance, Compound
Materials and other materials provided by or on behalf of Customer to Laureate.
The foregoing right to "audit by Laureate" may only be exercised to the extent
Customer and Laureate agree that such audit is required to comply with
applicable law, rule or regulation.

      (b) Laureate acknowledges and agrees that the FDA or the EMEA (each a
"Permitted Regulatory Authority") may visit Laureate's Facility in accordance
with this Section 7(b) and Appendix 3. If Customer believes or wishes to have
any other regulatory authority having jurisdiction or oversight authority over a
particular Program (each an "Additional Regulatory Authority") visit a Laureate
Facility for the Program-related Visit (as defined herein), Customer shall
provide Laureate with reasonable prior written notice and such Program-related


                                      -10-


Visit may take place upon terms reasonably acceptable to Laureate. If Laureate
permits the Program-related Visit by an Additional Regulatory Authority in
accordance with the preceding sentence, then that Additional Regulatory
Authority shall be considered a Permitted Regulatory Authority for the purposes
of this Section 7(b). If a Permitted Regulatory Authority notifies a Party that
it plans to visit Laureate's Facility or the facility of a subcontractor for any
purposes related to the Program (a "Program-related Visit"), then that Party
shall provide the other Party with notice thereof within [***] (or a shorter
period, if possible) of receiving the notice from the Permitted Regulatory
Authority. If the Permitted Regulatory Authority performs the Program-related
Visit without notice, then the applicable Party shall provide the other Party
with notice thereof within [***] of the Program-related Visit. Each Party shall
also provide the other Party with copies (or summaries) of any written or oral
inquiries by the Permitted Regulatory Authority concerning the Program, the Drug
Substance or the Drug Product, subject to applicable confidentiality
obligations. To the extent practicable, the Parties shall consult with one
another in an effort to arrive at a mutually acceptable response to the
Permitted Regulatory Authority. Each Party shall promptly furnish to the other
Party any report or correspondence issued by or provided to any Permitted
Regulatory Authority in connection with such Program-related Visit, redacted
only of any information that is unrelated to the Program, Drug Substance or Drug
Product, as the case may be, subject to any confidentiality obligation with
respect to Laureate's or its Affiliate's or subcontractors. If prior notice of
the Program-related Visit is provided, then Customer shall have the right to be
present at Laureate's facility during that visit to the extent permissible by
the Permitted Regulatory Authority.

      (c) Customer shall have the responsibility for communications with any
Permitted Regulatory Authority and Additional Regulatory Authority relating to
the Program. Laureate shall provide Customer in a timely manner, all information
reasonably in its (or its Affiliate's) control concerning the Program reasonably
necessary to meet Customer's regulatory obligations, at Customer's cost and
expense, and Customer shall provide Laureate or its Affiliates, in a timely
manner, all information reasonably in its control concerning the Program
necessary to meet Laureate's or its Affiliates regulatory obligations.

      (d) Subject to the next to last sentence of subsection (b) above (i.e.,
Laureate's confidentiality obligations to its other customers), within
forty-five (45) days following any inspection of Laureate's facility by a
Permitted Regulatory Authority (in each case, an "Inspection"), Laureate shall
provide Customer with [***]. Additionally, within [***] of the receipt by
Laureate of the [***] referred to above, Laureate will provide Customer with
[***], subject to Laureate's confidentiality obligations to third parties. In
addition, Medarex and Customer agree that Laureate may provide [***] related to
the Program in accordance with this Section 7(d) to customers of Laureate if
requested by such customers.

Section 8. Compensation.

      Laureate shall be paid the development and service fees as set forth in a
Scope (the "Service Fees") as specified in the applicable Appendix 4 to perform
the services set forth therein, which Service Fees shall be subject to increase
in accordance with the provisions of Section 9. Customer shall pay Laureate the

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                                      -11-


Service Fees in accordance with the payment schedule set forth in the relevant
Scope. Laureate will invoice the Customer for Product-Dedicated Equipment
purchased for the Program. An administrative fee equal to [***] of Laureate's
actual cost of Product-Dedicated Equipment purchased for the Program will be
added to Product-Dedicated Equipment invoices. Invoices containing charges
related to Product-Dedicated Equipment shall be accompanied by supporting
documentation, including Third Party invoices. Payments shall be wired to an
account designated by Laureate and are due thirty (30) days from the date of
receipt, except that the Service Fees' payments are due at the times indicated
in the relevant Scope. For the purposes of this Section 8, if Laureate sends an
invoice via electronic mail (e-mail), receipt shall be deemed to occur on the
business day following the day such e-mail is transmitted by Laureate to the
email addresses designated in Section 24 for the receipt of invoices. Late
payments are subject to an interest charge of one percent (1%) per month.

Section 9. Change Orders.

      (a) The Service Fees are subject to a number of specific and general
assumptions described in the particular Scope. The specific assumptions relate
to each particular Scope and Program design and objectives, timing, capital
expenditure requirements, if any, and other matters relating to the completion
of the Program as set forth in a Scope (the "Program Assumptions"). Laureate
also assumes that the Customer will cooperate and perform its obligations under
the Agreement and Scope in a timely manner and to the extent reasonably
consistent with similarly situated customers, that no event outside the
reasonable control of Laureate will occur, including, without limitation, the
events described in Section 20, and that there are no changes to any applicable
laws, rules or regulations that materially affect the Program (the foregoing
assumptions together with the Program Assumptions, collectively, the
"Assumptions"). In the event that any of the Assumptions require material
modification or the Program objectives cannot be achieved based on the
Assumptions (each being, a "Modification") then the Scope may be amended as
provided in paragraph (b) of this Section 9.

      (b) In the event a Modification is identified by the Customer or by
Laureate, the identifying Party shall notify the other Party as soon as is
reasonably possible. Laureate shall provide the Customer with a change order
containing an estimate of the required adjustments to the Service Fees within
[***] of receiving or delivering such notice (the "Change Order"). The Customer
shall respond in writing to such Change Order promptly. If Customer does not
approve such Change Order and has not terminated this Agreement, the relevant
Scope and Program in accordance with Section 22, but wants the Program to be
modified to take into account the Modification, then Customer and Laureate shall
use commercially reasonable efforts to agree on a Change Order that is mutually
acceptable. If in any way practicable in the context of the prospective change
order, Laureate will continue to work on the Program during any such
negotiations. Laureate shall not commence work with respect to a Change Order
unless authorized in writing. Any disagreement between the Parties concerning a
Change Order (including, without limitation, the failure of the Parties to agree
upon a mutually acceptable Change Order) shall be resolved in accordance with
the dispute-resolution procedures set forth in Section 17 hereof.

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                                      -12-


Section 10. Confidential Information/Legal Proceedings.

      (a) Laureate will not disclose, without Customer's written permission,
Customer Confidential Information to any Third Party or use any Customer
Confidential Information for any purpose other than the performance of Programs
under this Agreement. Notwithstanding the foregoing, Laureate may disclose
Customer Confidential Information (i) to an Affiliate of Laureate that is under
a similar obligation to keep such information confidential; (ii) to Medarex; or
(iii) to a subcontractor of Laureate that has been pre-approved pursuant to
Section 5(a) above and that is under a similar obligation to keep such
information confidential. Laureate may also make disclosures of Customer
Confidential Information to the extent required by any law, rule, regulation,
order decision, decree, subpoena or other legal process to be disclosed;
provided, that if such disclosure is required by law, Laureate will make all
reasonable efforts to notify Customer as applicable, of this request promptly
prior to any disclosure to permit Customer to oppose such disclosure by
appropriate legal action and, in any event, will make only such disclosures as
are necessary to comply with the applicable order. Additionally, if such
disclosure is being made in connection with a filing with the Securities
Exchange Commission, Laureate will use commercially reasonable efforts to obtain
"confidential treatment" for the disclosure and to redact such information as
Customer may reasonably request. The foregoing obligations of confidentiality
and non-use will not apply with respect to any Customer Confidential Information
that: (i) is or becomes publicly available other than as a result of a breach of
this Agreement by Laureate; (ii) is disclosed to Laureate by a Third Party which
Laureate reasonably believes is entitled to disclose it without restriction;
(iii) is already known to Laureate as shown by its prior written records other
than through Customer; or (iv) is independently developed by Laureate without
the use of Customer Confidential Information, as evidenced by contemporaneous
written records.

      (b) Customer will not disclose, without Laureate's written permission,
Laureate Confidential Information to any Third Party or use any Laureate
Confidential Information for any purpose other than the performance of Programs
under this Agreement. Notwithstanding the foregoing, Customer may disclose
Laureate Confidential Information (i) to Medarex (provided that Medarex shall be
required to keep such information confidential pursuant to the confidentiality
agreement between Medarex and Laureate dated June 1, 2004) or to an Affiliate of
Customer that is under a similar obligation to keep such information
confidential; (ii) to the extent necessary, is required pursuant to a United
States Government contract or grant; provided that Laureate shall be given
reasonable prior notice of such disclosure; or (iii) to a subcontractor of
Customer that has been pre-approved by Laureate and that is under a similar
obligation to keep such information confidential. Customer may also make
disclosures of Laureate Confidential Information to the extent required by any
law, rule, regulation, order decision, decree, subpoena or other legal process
to be disclosed; provided, that if such disclosure is required by law, Customer
will make all reasonable efforts to notify Laureate of this request promptly
prior to any disclosure to permit Laureate to oppose such disclosure by
appropriate legal action and, in any event, will make only such disclosures as
are necessary to comply with the applicable order. Additionally, if such
disclosure is being made in connection with a filing with the Securities
Exchange Commission, Customer will use commercially reasonable efforts to obtain
"confidential treatment" for the disclosure and to redact such information as
Laureate may reasonably request. The foregoing obligations of confidentiality
and non-use will not apply with respect to any Laureate Confidential Information
that: (i) is or becomes publicly available other than as a result of a breach of


                                      -13-


this Agreement by Customer; (ii) is disclosed to Customer by a Third Party which
Customer reasonably believes is entitled to disclose it without restriction;
(iii) is already known to Customer as shown by its prior written records other
than through Laureate; or (iv) is independently developed by Customer without
the use of Laureate Confidential Information, as evidenced by contemporaneous
written records.

      (c) Laureate will not transfer any Compound without Customer's written
permission to any Third Party unless such transfer is to a pre-approved
subcontractor, is consistent with the relevant Program and is permitted by the
Amended and Restated Medarex MTA. Medarex acknowledges that it has provided its
consent to transfer such Compound to pre-approved subcontractors as of June 13,
2007, pursuant to the written consent attached hereto as Schedule 5(c).

      (d) If Laureate shall be obliged to provide testimony or records regarding
a particular Program in any legal or administrative proceeding, then Customer
shall reimburse Laureate for its reasonable and documented out-of-pocket costs
plus a reasonable hourly fee for its employees or representatives at Laureate's
standard commercial rates.

      (e) Notwithstanding the provisions of subsection (b) above, Customer may
only disclose standard operating procedures used by Laureate that are directly
related to the Process, and the Batch Record to any party manufacturing Drug
Substance or Drug Product on Customer's behalf, including (i) to Medarex, or
(ii) to a Third Party that needs to know such information to manufacture Drug
Substance or Drug Product and that agrees to be bound by the provisions of
subsection (b) with respect to such information and further agrees not to use
the information for any other purpose.

Section 11. Work Product.

All work outputs (e.g., reports) under this Agreement and any Scope will be
prepared on Laureate's standard format unless otherwise specified in the Scope.

Section 12. Inventions and Patents.

      (a) With respect to any Materials Invention, Process Invention, or Product
Invention, Laureate shall comply with the provisions of Section 5(f) of the
Amended and Restated Medarex MTA.

      (b) Laureate shall retain all rights to (i) any manufacturing methods and
processes including, without limitation, any production, purification and
aseptic filling processes, discovered or developed by Laureate prior to the
effective date of the Medarex MTA ("Laureate IP"), (ii) any inventions, and
enhancements, improvements, or modifications made by Laureate to the Laureate IP
(but excluding any Materials Inventions, Process Inventions, or Product
Inventions), and (iii) all scientific, technical, or other information that are
generally applicable to the maintenance or operation of a manufacturing facility
or operation of a manufacturing business and that are generated by Laureate as a
result of performing the activities described in this Agreement (including any
enhancements, modifications or improvements thereto) ("Laureate Know-How").
Customer acknowledges that all Laureate IP and Laureate Know-How is vested in
Laureate and, except as expressly set forth in Article 12 of this Agreement or
in Section 5(i) of the Amended and Restated Medarex MTA, Customer shall not have
at any time any right, title, license or interest in or to such Laureate IP or
Laureate Know-How.


                                      -14-


      (c) Laureate hereby grants to Customer a [***].

      (d) To the extent requested by Customer, Laureate shall provide reasonable
technology transfer assistance services to Customer in the event that Customer
transfers the services provided hereunder by Laureate to a third party
manufacturer. Customer shall compensate Laureate for these transfer assistance
services as follows: (i) services shall be performed on a [***] basis at
Laureate's standard rates, (ii) the cost of reasonable third party out of pocket
expenses incurred by Laureate in performing those services; and (iii) a mutually
agreed upon and commercially reasonable technology transfer fee for work not
covered by the fees charged under subsection (i) above, if such work is
requested by Customer. If this Agreement is terminated by Laureate pursuant to
Section 22(e), then [***]:

                                      [***]

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                                      -15-


Section 13. Independent Contractor.

      Laureate shall perform each Program as an independent contractor of
Customer and shall have complete and exclusive control over its Facility,
equipment, employees and agents. Nothing in this Agreement or other arrangements
for which it is made shall constitute Laureate, or anyone furnished or used by
Laureate in the performance of the Program, as an employee, joint venture,
partner, or servant of Customer. Laureate also agrees that it shall not have any
rights to receive any employee benefits such as health insurance and accident
insurance, sick leave or vacation as are in effect generally for employees of
Customer. Laureate will not enter into any agreements or incur obligations on
behalf of Customer nor commit Customer in any other manner without prior written
consent from a duly authorized officer or representative of Customer.

Section 14. Insurance.

      (a) Laureate agrees to maintain standard insurance policies covering the
Drug Product, Compound and Product-Dedicated Equipment while under control and
care of Laureate, during the performance of any Program, including general
liability insurance in the amount of [***] Dollars (US $[***]) per occurrence
and [***] Dollars (US $[***]) in the aggregate. Customer agrees to maintain (i)
general liability insurance in the amount of [***] Dollars (US $[***]) per
occurrence and [***] Dollars (US $[***]) in the aggregate and (ii) clinical
trial insurance in the amount of [***] Dollars (US $[***]) per occurrence and
[***] Dollars (US $[***]) in the aggregate covering the Cell Line, Drug
Substance, Drug Product and Compound or any harm caused by the Cell Line, Drug
Substance, Drug Product and Compound, and to name Laureate as an additional
insured under such policy at no cost to Laureate. Upon the commencement of the
commercial manufacturing or supply of the Drug Product, Customer will have the
appropriate levels of insurance which are customary to cover the Cell Line, Drug
Substance, Drug Product and Compound or any harms caused by the Cell Line, Drug
Substance, Drug Product and Compound, and to name Laureate as an additional
insured under such policy at no cost to Laureate; provided that in no event will
such insurance levels be less than [***] Dollars (US $[***]) per occurrence and
[***] Dollars (US $[***]) in the aggregate. Customer further agrees to provide
Laureate with a Certificate(s) of Insurance issued to Customer for an insurance
policy or policies directed to the aforementioned insurance coverage, in which
Laureate is named as an additional insured.

      (b) Prior to the delivery of the Drug Substance, Drug Product, or Compound
under Section 15(a) below, Laureate shall [***]. If the Drug Substance, Drug
Product or Compound is lost due to any reason other than a Laureate Failure,
then Customer shall bear the risk of loss therefore.

      (c) Prior to the delivery of the Drug Substance, Drug Product, or Compound
under Section 15(a) below. Laureate shall [***]. If the Drug Substance, Drug
Product or Compound is lost due to destabilization, then Customer shall bear the
risk of loss therefore, unless the destabilization is due to Laureate's
negligence or intentional misconduct.

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                                      -16-


Section 15. Shipping; Risk of Loss; Inspection.

      (a) Laureate shall package for shipment Drug Substance, Drug Product,
samples or other Compound in accordance with Customer's written instructions and
at the Customer's expense, including the procurement of reasonable insurance.
Laureate shall not knowingly ship any Drug Substance, Drug Product, samples or
other Compound that do not conform to the Specifications. Delivery of Drug
Substance, Drug Product, samples or other materials by Laureate will be F.C.A.
(Incoterms 2000) the Facility and Customer shall bear all packaging, shipping
and insurance charges as per Appendix 5. Subject to the provisions of Section
14(b) above, title and risk of loss shall transfer to Customer on transfer to
carrier at the Facility.

      (b) Each shipment of Drug Substance or Drug Product shall be accompanied
by quality assurance documents as required under the Quality Agreement,
including a Certificate of Analysis and/or Material Safety Data Sheet, as
applicable, attesting to the compliance of each Batch with Specifications for
each of the Drug Substance and Drug Product as set forth in the relevant Scope.
Customer shall carry out appropriate visual inspection of the shipment, as well
as any other analysis which Customer may deem appropriate or necessary, upon
receipt. Should it occur that any of the Drug Substance, Drug Product or
corresponding samples do not meet the stated Specifications, Customer shall, as
soon as possible and in any case within [***], give notice in writing to
Laureate specifying in detail the claimed non-conforming characteristics of the
shipment. In the absence of Customer's notification within the said term,
Customer shall be deemed to have accepted such Drug Substance or Drug Product,
samples or other Compound. Should Laureate agree that such Drug Substance or
Drug Product does not meet the approved Specifications or it is determined that
the Specifications are not met under the last sentence of this subsection (b),
and provided that Customer demonstrates that the Drug Substance, Drug Product or
related samples has been properly handled and stored after delivery, Laureate
shall [***] such Drug Substance or Drug Product and shall use commercially
reasonable efforts to make replacement Drug Substance or Drug Product as soon as
practicable (i.e., Laureate shall use its best efforts to promptly reschedule
production of Drug Substance or Drug Product for Customer [***]. Regardless, in
no event shall Laureate [***] following the date that the Drug Substance or Drug
Product was identified as not meeting Specifications (the "Identification
Date"), provided that in the case of a Disputed Defect (as defined below),
Laureate shall not be required to commence such manufacturing in [***]. Should
Laureate not be in agreement with Customer's claim of defect (a "Disputed
Defect"), a sample of the alleged defective Drug Substance or Drug Product shall
be submitted to an agreed upon independent laboratory and the decision of such
laboratory shall be final and binding for both Laureate and Customer and the
corresponding expense will be paid by the party found to be in error.

      (c) Laureate shall retain representative samples of Drug Product and
Filled Products solely for record keeping, testing and regulatory purposes.

Section 16. Default.

      (a) If Laureate is in default of its obligations under this Agreement or
any Scope, then Customer shall promptly notify Laureate in writing of any such

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                                      -17-


default. Laureate shall have a period of [***] from the date of receipt of such
notice within which to cure such default, or if the default is not capable of
being cured within such [***] period, then Laureate shall have commenced actions
to cure the default within such period and shall have an [***] to cure the
default. If, however, the default renders a production run unusable, then
Laureate shall, at Customer's option, either [***]. If Laureate shall fail to
cure such default within the specified cure period or repeat the Program, as the
case may be, then the particular Scope and/or this Agreement shall, at
Customer's option, immediately terminate. In the event that Customer chooses the
remedy specified in this Section 16(a)(l) or Section 16(a)(2), then such remedy
shall be Customer's sole and exclusive remedy for Laureate's default hereunder
and Laureate's liability to Customer shall be subject to the limitations set
forth in Section 18(e).

      (b) If Customer is in default of its material obligations under this
Agreement or any Scope, Laureate shall promptly notify Customer in writing of
any such default. Customer shall have a period of [***] from the date of receipt
of such notice within which to cure such default; provided, that, if Customer
fails to cure such breach within the specified cure period, then the particular
Scope and/or this Agreement shall, at Laureate's option, immediately terminate.
Notwithstanding the cure period specified in the preceding sentence, if Customer
fails to make any payment to Laureate within the time period specified in a
Scope, Laureate may, in its discretion, suspend performance of the relevant
Program until Laureate receives such outstanding payment.

Section 17. Dispute Resolution.

      (a) In the event any dispute shall arise between the Customer and Laureate
with respect to any of the terms and conditions of this Agreement, a Scope or
the Program, then senior executives of the Customer and Laureate shall meet (in
person or telephonically) as promptly as practicable after notice of such
dispute (but in no event more than 7 business days after) to resolve in good
faith such dispute.

      (b) If the Customer and Laureate are unable to satisfactorily resolve the
dispute, then such dispute shall be finally settled by arbitration in accordance
with this Section 17. The arbitration will be held in the State of New York, and
except as noted below, shall be conducted in accordance with the rules of the
American Arbitration Association (or such successor organization) by two (2)
arbitrators appointed, one by each Party. If the arbitrators appointed cannot
agree on the resolution of the dispute within [***] after the dispute is
submitted to them, they shall thereupon appoint a third arbitrator, and if they
fail to agree upon a third arbitrator within [***] after a deadlock is declared
by either arbitrator, a third arbitrator will be appointed by the American
Arbitration Association (or such successor organization) upon the request of
either arbitrator. The arbitrators shall have no authority to vary from or
ignore the terms of this Agreement or the relevant Scope and shall be bound by
controlling law. Finally, the Parties may seek judicial intervention for
emergency relief, such as restraining orders and injunctions where appropriate.

      (c) Any decision by the initial two (2) arbitrators or the third
arbitrator and either one of the initial two (2) arbitrators shall be binding
upon the Parties and may be entered as final judgment in any court having

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                                      -18-


jurisdiction. The cost of any arbitration proceeding shall be borne by the
Parties as the arbitrators shall determine if the Parties have not otherwise
agreed. The arbitrators shall render their final decision in writing to the
Parties.

Section 18. Indemnification; Limitation of Liability.

      (a) Laureate shall indemnify Customer, their respective Affiliates and
their respective officers, directors and employees from any loss, cost, damage
or expense (a "Loss") from any lawsuit, action, claim, demand, assessment or
proceeding (a "Claim") to the extent arising from or related to (i) personal
injury to Program participants or to any employee of Customer or its Affiliates
or property damage arising or occurring during the conduct of the Program as a
result of Laureate's gross negligence or intentional misconduct; (ii) Laureate's
breach of any of the representations, warranties or covenants (including [***])
contained in this Agreement or a Scope; (iii) the gross negligence or
intentional misconduct or wilfull omission of Laureate in the performance of its
obligations under this Agreement or a Scope related to the Program; or (iv) the
infringement by Laureate of any patents or other intellectual property rights
vested in any Third Party to the extent arising from Laureate Know-How or
Laureate IP; provided, that, if such Loss or Claim arises in whole or in part
from any circumstance for which Customer is required to indemnify Laureate
pursuant to Section 18(b) below, then the amount of the Loss that Laureate shall
indemnify Customer for pursuant to this Section 18 shall be reduced by an amount
in proportion to the percentage of Customer's responsibilities for such Loss as
determined in accordance with Section 17 or in a binding settlement between the
Parties.

      (b) Customer shall indemnify Laureate and Laureate's Affiliates and their
respective officers, directors, employees and agents (the "Laureate Group") from
any Loss from any Claim to the extent arising from or related to (i) personal
injury or property damage to a participant in the Program, any employee of the
Laureate Group or any Third Party directly or indirectly caused by the Cell
Line, Compound, Product-Dedicated Equipment, Process Consumables, cell culture
media, Drug Product, Drug Substance or the Program except to the extent the
injury or damage was due to Laureate's failure to follow any applicable U.S.
laws, regulations, or guidelines, or the applicable Scope, Specifications, or
Laureate SOPs; (ii) the harmful or otherwise unsafe effect of the Compound,
Process Consumables, cell culture media, Drug Product or Drug Substance
including, without limitation, a Claim based upon Customer's or any other
person's use, consumption, sale, distribution or marketing of any substance,
including the Compound, Process Consumables, cell culture media, the Drug
Substance or the Drug Product; (iii) the negligence, gross negligence or
intentional misconduct or wilfull omission of Customer in the performance of its
obligations under this Agreement or a Scope related to the Program; (iv)
Customer's breach of any of the representations, warranties or covenants
contained in this Agreement or a Scope, (v) a breach of the representation set
forth in Section 19(a) if that representation was affirmatively stated [***], or
(vi) breaches or the representations set forth in Sections 19(c) and (d) if
those representations were affirmatively stated and without [***]; provided,
that, if such Loss or Claim arises in whole or in part from any circumstance for
which Laureate is required to indemnify Customer pursuant to Section 18(a)
above, then the amount of such Loss that Customer shall indemnify the Laureate
Group for pursuant to this Section 18 shall be reduced by an amount in
proportion to the percentage of Laureate's responsibilities for such Loss as
determined in accordance with Section 17 or in a binding settlement between the
Parties.

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                                      -19-


      (c) Customer assumes full responsibility and liability for any and all
direct damages to Laureate in the event that the handling of Cell Line,
Compound, Compound Materials, Process Consumables, cell culture media, Drug
Product or Drug Substance on its premises, or the use of the Product-Dedicated
Equipment, in accordance with Laureate SOP, a Scope and the terms of this
Agreement results in contamination of equipment, facilities, personnel or Third
Parties by noxious, toxic, infectious, and/or corrosive agents (collectively,
"Contaminants") in the Cell Line, Compound, Compound Materials, Process
Consumables, cell culture media, Drug Product, Drug Substance or associated
materials, as initially received by Laureate, and to the extent that said
contamination can be conclusively determined to have arisen from such materials,
wherein infectious agents refers to any microbiological or viral agents of
infection, including but not limited to bacteria, fungae, mycoplasmas, prions,
and viruses. To the extent that any contamination of equipment, facilities,
personnel or Third Parties results from Laureate's negligence or failure to
follow its SOP or the terms of this Agreement or a Scope, then Laureate will
assume full responsibility and liability for any such direct damages, provided,
however, that Laureate's conduct in this regard had an effect that contributed
materially to the contamination or its consequences. Laureate agrees to use
commercially reasonable efforts to mitigate any direct damages in the event of a
contamination incident caused by Compound, Compound Materials, Process
Consumables, cell culture media, Drug Products, Drug Substance or associated
materials.

      (d) Upon receipt of notice of any Claim that may give rise to a right of
indemnity from the other Party hereto, the Party seeking indemnification (the
"Indemnified Party") shall give written notice thereof to the other Party (the
"Indemnifying Party"), of the Claim for indemnity within thirty (30) days of
receiving such notice. Such Claim for indemnity shall indicate the nature of the
Claim and the basis therefore. Promptly after a claim is made for which the
Indemnified Party seeks indemnity, the Indemnified Party shall permit the
Indemnifying Party, at its option and expense, to assume the complete defense of
such Claim, provided, that, (i) the Indemnified Party will have the right to
participate in the defense of any such Claim at its own cost and expense; (ii)
the Indemnifying Party will conduct the defense of any such Claim with due
regard for the business interests and potential related liabilities of the
Indemnified Party; and (iii) the Indemnifying Party will, prior to making any
settlement, consult with the Indemnified Party as to the terms of such
settlement. The Indemnifying Party will not, in defense of any such Claim,
except with the consent of the Indemnified Party, consent to the entry of any
judgment or enter into any settlement which does not include, as an
unconditional term thereof, the giving by the claimant or plaintiff to the
Indemnified Party of a release from all liability in respect thereof. After
notice to the Indemnified Party of the Indemnifying Party's election to assume
the defense of such Claim, the Indemnifying Party shall only be liable to the
Indemnified Party for such reasonable legal or other expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof at the
request of the Indemnifying Party. As to those Claims with respect to which the
Indemnifying Party does not elect to assume control of the defense, the
Indemnifying Party shall be liable for all reasonable legal or other expenses
incurred by the Indemnified Party in connection with the defense thereof and the
Indemnified Party will afford the Indemnifying Party an opportunity to
participate in such defense at the Indemnifying Party's own cost and expense,
and will not settle or otherwise dispose of any of the same without the consent
of the Indemnifying Party, which consent shall not be unreasonably withheld.


                                      -20-


      (e) Limitations on Total Liability of Laureate.

            (i) Consequential Damages Waiver. EXCEPT AS OTHERWISE SET FORTH IN
SECTION 18(C) OR TO THE EXTENT RESULTING FROM A BREACH OF SECTION 10, UNDER NO
CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY
FOR INCIDENTAL, INDIRECT, CONSEQUENTIAL OR SPECIAL DAMAGES ARISING IN CONNECTION
WITH THIS AGREEMENT, A SCOPE OR ANY DOCUMENTS OR APPENDICES RELATED THERETO.
Except in the case of [***], in no event shall Laureate's maximum liability
under this Agreement for all claims (whether or not brought by Third Parties),
whether in connection with a warranty claim, an indemnity claim, a combination
thereof, or otherwise and whether arising under contract, warranty, tort
(including negligence), strict liability, product liability, a combination
thereof, or any other theory of liability or indemnification [***]. The
limitations of liability reflect the allocation of risk between the parties. The
limitations specified in this Section 18(e) will survive and apply even if any
limited remedy specified in this Agreement is found to have failed of its
essential purpose.

            (ii) Product Loss. By way of clarification, Laureate's aggregate
liability resulting from the loss, destabilization, alteration or contamination
of Drug Product of a particular Batch in crude or purified form as a result of
Laureate's breach of this Agreement or a Scope, failure to comply with Master
Batch Record or negligence, wherein such Drug Product is lost, destabilized,
altered or contaminated such that it cannot be used in clinical trials or cannot
be placed into commerce, shall not exceed the Service Fees to be received by
Laureate with respect to the Batch giving rise to the liability in question.

            (iii) For purposes of the limitations set forth in Section 18(e)(i)
above, direct damages shall be deemed to include all third party damages,
including consequential or incidental damages, for which the arbitrators, in
accordance with Section 17 or a court of law or other governing tribunal or
agency, determines a party to be responsible and/or liable.

Section 19. Representations, Warranties and Covenants.

      (a) Customer hereby represents and warrants to Laureate that prior to the
first commercial sale of Drug Product, Customer shall have legal title and/or a
valid license to the Cell Line, Process, Compound, Compound Materials, Drug
Product and Drug Substance (with rights to allow Laureate to perform the
Services hereunder) and that Laureate's performance of the Program (including
its use of the Process) will not violate or infringe on the patents, industrial
property rights, trade secrets, trademarks, tradenames, servicemarks, copyrights
or any other intellectual property rights of any Third Party. Customer further
represents and warrants that prior to the commencement of any Program under this
Agreement it shall be entitled to supply Cell Line, Compound, Compound
Materials, Drug Product, Drug Substance and Customer Confidential Information to
Laureate.

- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                      -21-


      (b) Customer will notify Laureate immediately if Customer knows or should
know that it is no longer entitled through Medarex or directly to supply the
Cell Line, Compound, Compound Materials, process patents, Drug Products, Drug
Substance, any other materials and/or the Customer Confidential Information to
Laureate or that the use by Laureate of such materials and/or information
infringes or is alleged to infringe any rights (including any intellectual or
industrial property rights) vested in any Third Party.

      (c) To the best of Customer's knowledge, it hereby represents and warrants
to Laureate that the Customer has performed testing to assure itself reasonably
that the Compound, Compound Materials, Cell Line, Drug Substance and Drug
Product are safe and stable and are and will be in compliance with all federal,
state and local laws and regulations required for use, distribution and testing
of such materials and that such materials pose no environmental risk. Customer
hereby represents and warrants to Laureate that the Process has been operated by
Medarex in a manner that can be consistently reproduced at the scale of a 35
liter bioreactor.

      (d) To the best of Customer's knowledge, it hereby represents to Laureate
that any technical or regulatory information or documentation supplied by
Customer or on its behalf to Laureate (including, but not limited to, process
details, analytical methods, Specifications, development reports, technology
transfer documents, plans, engineering documents and other documents) and
required for execution of the Program is accurate and suitable for its intended
use in all material respects.

      (e) Each Party hereby represents and warrants to the other Party that it
has full power and authority to enter into, deliver and perform its obligations
under this Agreement, and it has taken all action required to authorize the
execution and delivery of this Agreement and to consummate the transactions
contemplated hereby, and the person signing this Agreement on behalf of such
Party has been duly authorized to act on behalf of and to bind such Party.

      (f) Laureate warrants and represents that (i) each Program will be
performed in accordance in with standard industry custom, (ii) it will use all
commercially reasonable efforts to achieve the estimated deadlines for the
Program, (iii) the Drug Product will meet the Specifications set forth in the
Program at the time of delivery to Customer, and (iv) after applicable
regulatory approval of the Process and the Drug Product, Laureate will not
knowingly ship Drug Substance to Customer that is considered to be adulterated
or misbranded, within the meaning of the U.S. Food, Drug & Cosmetics Act, or any
comparable U.S. laws, rules or regulations as a result of any act or omission of
Laureate, unless Customer has authorized Laureate in writing to do so.

      (g) Laureate warrants and represents that (i) it has never been, is not
currently, and during the term of this Agreement will not become, a Debarred
Entity and (ii) to the best of its knowledge no Debarred Entity or Debarred
Individual, including any subcontractors or third parties, will perform any
services on the Customer's behalf. In the event that Laureate becomes aware of
FDA investigations of, or debarment proceedings against, Laureate or any Person
performing the Program, Laureate will immediately notify the Customer of any
such circumstances during the term of this Agreement.

      (h) Laureate represents and warrants that the services provided pursuant
to this Agreement shall be in compliance with all applicable laws in the United
States.


                                      -22-


      (i) Customer is a holder of U.S. Government contracts and is subject to
certain additional statutory, regulatory, and contract requirements by virtue
thereof. If this Agreement is issued under a U.S. Government prime contract or a
subcontract under a U.S. Government prime contract, Laureate agrees to use
commercially reasonable efforts to comply with all statutory, regulatory, and
contract requirements applicable to the prime contract or subcontract, copies of
which shall be furnished to Laureate.

      (j) THE EXPRESS WARRANTIES OF LAUREATE SET FORTH IN SECTIONS 19 OF THIS
AGREEMENT AND THE CERTIFICATIONS REGARDING THE FEDERAL ACQUISITION REGULATIONS
SET FORTH IN THE APPLICABLE SCOPE ARE IN LIEU OF ALL CONDITIONS, WARRANTIES AND
STATEMENTS IN RESPECT OF THE PROGRAM AND/OR THE DRUG PRODUCT, WHETHER EXPRESS OR
IMPLIED BY STATUTE, CUSTOM OF THE TRADE OR OTHERWISE INCLUDING ANY SUCH
CONDITION, WARRANTY OR STATEMENT RELATING TO THE DESCRIPTION OR QUALITY OF THE
DRUG PRODUCT UPON COMPLETION OF LAUREATE'S SERVICES, ITS FITNESS FOR A
PARTICULAR PURPOSE OR USE UNDER ANY CONDITIONS, WHETHER OR NOT KNOWN TO
LAUREATE, AND THAT ANY SUCH CONDITION, WARRANTY OR STATEMENT IS EXCLUDED FROM
THIS AGREEMENT.

Section 20. Force Majeure.

      Either Party shall be excused from performing its respective obligations
under this Agreement or any Scope if its performance is delayed or prevented by
any event beyond such Party's reasonable control, including, but not limited to,
acts of God, fire, explosion, weather, disease, war, terrorism, insurrection,
civil strife, riots, government action, or power failure, provided that such
performance shall be excused only to the extent of and during such disability.
Any time specified for completion of performance under a Scope falling due
during or subsequent to the occurrence of any or such events shall be
automatically extended for a period of time reasonably necessary to recover from
such disability. Laureate will promptly notify Customer if, by reason of any of
the events referred to herein, Laureate is unable to meet any such time for
performance specified in a Scope and will, upon written request from Customer,
but at Customer's sole cost and expense, repeat that part of the Program
affected by the disability. If the event of force majeure continues for a period
greater than ninety (90) days, then the unaffected Party may terminate this
Agreement immediately by notice in writing to the affected Party.

Section 21. Use of Names.

      Subject to the prior approval of the other party (such approval not to be
unreasonably withheld), each party shall be permitted to use the name and logo
of the other Party in the "promotion of its business." The promotion of a
Party's business means use in (i) sales and marketing materials, (ii) web sites,
and (iii) other customary promotional business uses agreed to by the Parties.
Neither party shall issue a press release or make any other public statement
regarding this Agreement without the prior written consent of the other party;
provided, however, disclosures to the United States Securities Exchange
Commission shall be governed by Sections 10(a) and 10(b), as applicable.


                                      -23-


Section 22. Term; Termination.

      (a) Unless earlier terminated in accordance with the other provisions of
this Agreement, this Agreement shall commence on the Effective Date and shall
continue in full force and effect until December 31, 2017. [***]:

            (i) [***];

      (b) For purposes of clarification, reservation fees are not refundable and
are not creditable toward the termination payments indicated above and will be
forfeited by Customer in addition to the termination payments indicated above,
except that [***].

      (c) [***]

      (d) Notwithstanding anything to the contrary contained in this Agreement,
Customer may terminate this Agreement at any time, with or without cause,
effective upon written notice to Laureate of not less than [***]. If Customer
terminates this Agreement pursuant to the foregoing sentence, Customer shall
[***].

      (e) Notwithstanding anything to the contrary contained in this Agreement,
Laureate may terminate this Agreement [***], effective upon written notice to
Customer of not less than [***]. Upon issuance of such termination notice,
Laureate will solely be required to complete any production runs for which a
reservation fee has been paid for a then-current Program, wind down any
then-current Programs under which there is a current supply of Drug Product, and
to provide the technology transfer assistance services pursuant to Section
12(d), but shall not be required to begin any new or additional Programs or
enter into any additional Scopes unless such Scope or Program can be completed
within such [***] period.

      (f) Either party shall have the right to immediately terminate this
Agreement, effective upon written notice of such termination, in the event that:
(i) voluntary or involuntary proceedings by or against the other party are
instituted in bankruptcy under any insolvency law, (ii) a receiver or custodian
is appointed for the other party, (iii) proceedings are instituted by or against
the other party for corporate reorganization or dissolution of such party, which
proceedings, if involuntary, shall not have been dismissed within sixty (60)
days after the date of filing, (iv) the other party makes an assignment for the
benefit of creditors, or (v) substantially all of the assets of the other party
are seized or attached and not released within sixty (60) days thereafter.

      (g) The termination of this Agreement for any reason shall not relieve
either Party of its obligation to the other Party for obligations in respect of
(i) compensation for services performed (Sections 8, 9 and 22 and pursuant to
any effective Scope) (ii) confidentiality and non-use of information (Section
10), (iii) work product (Section 11), (iv) inventions and patents (Section 12),
(v) insurance (Section 14), (vi) indemnification (Section 18), and (vii)
consents for advertising purposes and publications (Section 23).

- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                      -24-


Section 23. Assignment; Third Party Beneficiary.

      (a) This Agreement or any Scope entered into hereunder may not be assigned
or otherwise transferred by either Party without the prior written consent of
the other Party (or, in the case of assignment by Laureate, the prior written
consent of Customer); provided, however, either Party may, without such consent,
assign this Agreement or any Scope entered into hereunder (i) in connection with
the transfer or sale of all or substantially all of the assets of such Party or,
in the case of Customer, its rights to the Cell Line, Drug Substance or Drug
Product; (ii) in the event of the merger or consolidation of a Party hereto with
another company, except in the case of a merger or consolidation of Laureate
with a competitor of Customer; (iii) to any Affiliate of the assigning Party; or
(iv) to Medarex, in the case of Customer. Any purported assignment in violation
of the preceding sentence shall be void. Any permitted assignee shall assume all
obligations of its assignor under this Agreement and any existing Scopes,
provided however that if Customer assigns this Agreement or a Scope to an
Affiliate, the Customer shall continue to remain obligated under this Agreement.
[***]

      (b) The parties acknowledge and agree that Medarex is an intended third
party beneficiary of provisions in this Agreement applicable to Medarex and,
accordingly, will be entitled to full right of enforcement of such provisions.

Section 24. Notice.

      All notices to be given as required in the Agreement shall be in writing
and may be delivered personally, or mailed either by a reputable overnight
carrier with required receipt signature or certified mail, postage prepaid to
the Parties at the addresses set forth above or at such other address as either
Party may provide by written notice to the other Party in accordance with the
provisions of this Section 24. Such notice shall be effective: (i) on the date
sent, if delivered personally or by facsimile (receipt of which is confirmed);
(ii) the date after delivery if sent by overnight carrier; or (iii) on the date
received if sent by certified mail.

             If to Customer:

             PharmAthene, Inc.
             175 Admiral Cochrane Drive, Suite 101
             Annapolis, MD 21401
             Attn: David P. Wright, President and Chief Executive Officer
             Telefax: (410)571-8927

             with a copy to:

             Elizabeth Mackessy-Lloyd
             Contracts Manager
             PharmAthene, Inc.
             175 Admiral Cochrane Drive, Suite 101
             Annapolis, MD 21401

- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                      -25-


             If an invoice is to be delivered by email to:

             Ms. Maxine Berritt (accounts payable): berrittm(q)pharmathene.com
             Ms. Penny Schnell (accounts payable): schnellp@pharmathene.com

             If to Laureate:

             Laureate Pharma, Inc.
             201 College Road East
             Princeton, NJ 08540
             Attn: Robert J. Broeze, Ph.D., President & Chief Executive Officer
             Telefax: (609)520-3963

             With a copy to:
             Safeguard Scientifics, Inc.
             800 The Safeguard Building
             435 Devon Park Drive
             Wayne, PA 19087
             Attn: Legal Department
             Fax: (610)975-0261

Section 25. Choice of Law.

      This Agreement, any Scopes entered into hereunder, and all matters arising
directly or indirectly hereunder, shall be governed by, and construed in
accordance with the laws of the State of New York.

Section 26. Headings.

      The heading of each paragraph of this Agreement is for descriptive
purposes only and shall not be deemed to modify or qualify any of the
provisions, rights, or obligations set forth in this Agreement.

Section 27. Waiver/Severability.

      No waiver of any provision of this Agreement, whether by conduct or
otherwise, in any one or more instances shall be deemed to be or be construed as
a further or continuing waiver of any such provision, or of any other provision
or condition of this Agreement. The invalidity of any portion of this Agreement
shall not affect the validity, force or effect of the remaining portions of this
Agreement. If it is ever held that any provision hereunder is too broad to
permit enforcement of such provision to its fullest extent, such provision shall
be enforced to the maximum extent permitted by law.

Section 28. Entire Agreement; Modification/Counterparts.

      (a) This document (and any Scope and Appendices attached hereto) sets
forth the entire Agreement between the Parties hereto with respect to the
performance of any Program by Laureate for Customer and as such, supersedes all


                                      -26-


prior and contemporaneous negotiations, agreements, representations,
understandings, and commitments with respect thereto and shall take precedence
over all terms, conditions and provisions on any purchase order form or form of
order acknowledgment or other document purporting to address the same subject
matter, except that if there is any conflict between the terms of this Agreement
and the Quality Agreement, the Quality Agreement shall govern; provided,
however, that the Amended and Restated Medarex MTA and the confidentiality
agreement between Laureate and Medarex dated June 1, 2004 and the LOI; will
continue in full force and effect in accordance with its terms. This Agreement
and any Scope shall not be waived, released, discharged, changed or modified in
any manner except by an instrument signed by the duly authorized officers of
each of the Parties hereto, which instrument shall make specific reference to
this Agreement and any Scope and shall express the plan or intention to modify
same. This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument. In the event of any conflict between this Agreement, as it
may be modified as provided herein, and a Scope, the terms of this Agreement
shall control. For purposes of execution, facsimile signatures shall be deemed
originals.

      (b) This Agreement becomes effective and binding on both Parties as of the
Effective Date. Should terms contained herein be at variance with the terms and
conditions specified in Customer's written acceptance, then the terms and
conditions contained herein take precedence.

                            (signature page follows)


                                      -27-


                                         LAUREATE PHARMA, INC.


                                         By: /s/Robert J. Broeze
                                             -----------------------------------
                                             Robert J. Broeze, Ph.D
                                             President & Chief Executive Officer

                                         PHARMATHENE, INC.


                                         By: /s/David P Wright
                                             -----------------------------------
                                             David P. Wright
                                             President & Chief Executive Officer


                                      -28-

EX-10.28

                                                                   Exhibit 10.28

           CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT
                 HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
                 SECURITIES AND EXCHANGE COMMISSION (THE "SEC")
  PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT WITH RESPECT TO THE OMITTED
                                    PORTIONS.
                    OMITTED PORTIONS ARE INDICATED BY [***].

                         FIRST AMENDMENT TO OFFICE LEASE

      THIS FIRST AMENDMENT TO OFFICE LEASE (this "Amendment") is made as of
January 22, 2007, by and between Park Place Trust, a Maryland business trust
("Landlord") and PharmAthene, Inc., a Delaware corporation ("Tenant").

                                   WITNESSETH:

      WHEREAS, Landlord and Tenant entered into that certain Office Lease dated
September 14, 2006 (the "Lease").

      WHEREAS, pursuant to the Lease, Landlord has agreed to lease to Tenant and
Tenant has agreed to lease from Landlord certain space (the "Premises"),
consisting of approximately [***] rentable square feet of office space located
on the fourth (4th) floor of the building known as Park Place Office Building
One and located at West Street and Taylor Avenue, Annapolis, Maryland (the
"Building"), as more particularly described in the Lease.

      WHEREAS, Landlord has agreed to lease to Tenant, and Tenant has agreed to
lease from Landlord, approximately [***] square feet of additional rentable area
on the fourth (4th) floor of the Building (the "Expansion Space") as shown on
Exhibit A-1 attached hereto.

      WHEREAS, Landlord and Tenant have agreed that the Commencement Date as to
the Demised Premises Expanded (defined below) occurred on January __, 2007 and
simultaneously with the execution hereof, Landlord and Tenant have executed and
delivered Exhibit D to the Lease confirming such facts.

      WHEREAS, Landlord and Tenant desire to amend the Lease upon the terms and
conditions set forth in this Amendment.

      WHEREAS, except as otherwise defined herein, all terms used in this
Amendment that are defined in the Lease shall have the same meaning as set forth
in the Lease.

      NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00) cash
in hand paid, the mutual covenants hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:


                                      -1-


1. Landlord hereby leases the Expansion Space to Tenant, and Tenant hereby
leases the Expansion Space from Landlord. With the addition of the Expansion
Space, the Demised Premises (as so expanded, the "Demised Premises Expanded")
shall contain approximately [***] rentable square feet.

      The Monthly Rent for the Expansion Space ("Expansion Space Monthly Rent")
shall be as follows:

                                        Expansion Space               Rate Per
                 Period                   Monthly Rent              Square Foot
                 ------                   ------------              -----------

                                      [***]


      With the addition of the Expansion Space, Tenant's Share of Operating
Expenses shall be increased from [***]% to [***]%, Tenant's Share of Operating
Costs shall be increased from [***]% to [***]% and Tenant's Share of Real Estate
Taxes shall be increased from [***]% to [***]%.

      The Allowance, computed as [***] Dollars ($[***]) per rentable square
foot, shall be increased from [***] Dollars ($[***]) to [***] Dollars ($[***]),
of which [***] Dollars ($[***]) may be utilized to pay the costs of installing
voice and data cabling in the Demised Premises.

      The advance rent deposit referenced in Section 6(A) shall be increased
from [***] Dollars ($[***]) to [***] Dollars ($[***]). The Security Deposit
Letter of Credit referenced in Section 6(B) shall be increased from [***]

- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                      -2-


Dollars ($[***]) to [***] Dollars ($[***]). The Letter of Credit Reduction chart
contained in Section 6(B) shall be deemed deleted and replaced with the
following:

                               Security Deposit       Security Deposit Remaining
         Reduction Date        Reduction Amount            After Reduction
         --------------        ----------------            ---------------

                                      [***]


      Exhibit F to the Lease is deemed deleted and replaced with Exhibit F
attached hereto.

      Except as herein set forth the Expansion Space shall be deemed part of the
Demised Premises and the Lease shall apply to the Expansion Space in the same
manner it applies to the space originally demised.

      2. Landlord agrees to abate and forgive Monthly Rent in the aggregate
amount of [***] Dollars ($[***]), such abatement to be applied against Monthly
Rent first due and owing.

      3. The provisions of Exhibit C to the Lease notwithstanding, Landlord
shall permit Tenant to have one or more free standing water coolers (i.e., not
connected to the Building's water system) within the Demised Premises Expanded
and to allow its personnel to bring dogs into the Demised Premises Expanded,
such circumstances to be governed by reasonable mutually acceptable arrangements
established with Landlord's property manager.

      4. This Amendment shall be binding upon and inure to the benefit of the
parties hereto, their successors and assigns.

      5. This Amendment may be executed in multiple counterparts, each of which
shall be an original, but all of which shall constitute one and the same
Amendment. Faxed signatures shall have the same binding effect as original
signature, and a faxed Amendment containing the signatures (original or faxed)
of the parties shall be binding.

      6. In all other respects the Lease shall continue in full force and effect
in accordance with its terms.

- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                      -3-


      IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to be
executed under seal as of the date first above written.

                                    LANDLORD:

                                    PARK PLACE TRUST,
                                    a Maryland business trust

                                    By: JBJ/Carlyle Park Place LP, a
                                        Delaware limited partnership,
                                        as Trustee

                                    By: JBJ Management Company,
                                        Inc., a Maryland limited
                                        liability company, Managing
                                        General Partner


                                    By: /s/ J. Jeremy Parks              [SEAL]
                                        ---------------------------------
                                    Name: J. Jeremy Parks
                                    Date: 1-22-07


                                    TENANT:

                                    PHARMATHENE, INC.,
                                    a Delaware corporation


                                    By: /s/ Christopher Camut            [SEAL]
                                        ---------------------------------
                                    Name: Christopher Camut
                                    Title: CFO/VP


                                      -4-


                                  OFFICE LEASE

                                       FOR

                                PHARMATHENE, INC.

                                  Suite No. 450
                                   Park Place
                               Office Building One
                                 200 Park Place
                               Annapolis, Maryland



                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

1.   BASIC LEASE INFORMATION ...............................................  1
2.   DEMISED PREMISES ......................................................  2
3.   TERM ..................................................................  3
4.   USE ...................................................................  4
5.   RENT ..................................................................  4
6.   DEPOSITS ..............................................................  5
7.   OPERATING EXPENSES. OPERATING COSTS AND REAL ESTATE TAXES .............  8
8.   PARKING ...............................................................  15
9.   RIGHT OF FIRST OFFER ..................................................  15
10.  ASSIGNMENT AND SUBLETTING .............................................  16
11.  ALTERATIONS ...........................................................  18
12.  LIENS .................................................................  20
13.  MAINTENANCE ...........................................................  20
14.  SIGNS AND ADVERTISEMENTS ..............................................  20
15.  DELIVERIES AND MOVING OF TENANT'S PROPERTY ............................  21
16.  TENANT'S EQUIPMENT ....................................................  21
17.  SERVICES AND UTILITIES ................................................  22
18.  TENANT'S RESPONSIBILITY FOR DAMAGE ....................................  24
19.  ENTRY FOR INSPECTIONS. REPAIRS AND INSTALLATIONS ......................  24
20.  INSURANCE RATING ......................................................  25
21.  INDEMNITY AND PUBLIC LIABILITY INSURANCE ..............................  25
22.  WORKER'S COMPENSATION INSURANCE .......................................  26
23.  ALL RISK PROPERTY INSURANCE ...........................................  26
24.  TENANT'S CONTRACTOR'S INSURANCE .......................................  26
25.  REQUIREMENTS FOR TENANT'S INSURANCE POLICIES ..........................  27
26.  LIABILITY FOR DAMAGE TO PERSONAL PROPERTY AND PERSON ..................  27
27.  DAMAGE TO THE BUILDING AND/OR THE DEMISED PREMISES ....................  28
28.  DEFAULT OF TENANT .....................................................  29
29.  REPEATED DEFAULTS .....................................................  29
30.  WAIVER ................................................................  30
31.  SUBORDINATION .........................................................  30
32.  CONDEMNATION ..........................................................  31
33.  RULES AND REGULATIONS .................................................  31
34.  RIGHT OF LANDLORD TO CURE TENANT'S DEFAULT ............................  32
35.  LATE CHARGES ..........................................................  32
36.  NO PARTNERSHIP ........................................................  33
37.  NO REPRESENTATIONS BY LANDLORD ........................................  33
38.  BROKER AND AGENT ......................................................  33
39.  WAIVER OF JURY TRIAL ..................................................  33
40.  ENFORCEMENT OF LEASE ..................................................  33
41.  NOTICES ...............................................................  34
42.  ESTOPPEL CERTIFICATES .................................................  34
43.  HOLDING OVER ..........................................................  34


                                       -i-


44.  RIGHTS RESERVED BY LANDLORD ...........................................  35
45.  COVENANTS OF LANDLORD .................................................  35
46.  LIEN FOR RENT .........................................................  36
47.  NO OPTION .............................................................  36
48.  LENDER APPROVAL .......................................................  36
49.  GENDER ................................................................  37
50.  BENEFIT AND BURDEN ....................................................  37
51.  RENTABLE AREA .........................................................  37
52.  GOVERNING LAW .........................................................  37
53.  BANKRUPTCY ............................................................  37
54.  SAVINGS CLAUSE ........................................................  38
55.  AUTHORITY OF TENANT ...................................................  38
56.  JOINT AND SEVERAL LIABILITY ...........................................  38
57.  FINANCIAL STATEMENTS ..................................................  39
58.  BUSINESS DAY/WORKING DAY ..............................................  39
59.  CONFIDENTIALITY .......................................................  39
60.  RENT RELATED REQUIREMENTS .............................................  39
61.  ENVIRONMENTAL REQUIREMENTS ............................................  39
62.  ENTIRE AGREEMENT ......................................................  40


                                      -ii-


                                    Exhibits

A.    Floor Plan, Demised Premises

A-1   Legal Description of the Land

B.    Work Agreement

C.    Rules and Regulations

D.    Declaration as to Date of Delivery and Acceptance of Possession of Demised
      Premises

D-1   Declaration as to Rent Commencement Date

E.    Specifications for Office Cleaning

F.    Form Letter of Credit

G.    Current Lender's Form SNDA


                                     -iii-


                                  OFFICE LEASE

      THIS LEASE, made and entered into on this 14th day of September, 2006 by
and between Park Place Trust, a Maryland Business Trust, hereinafter called
"Landlord," and PharmAthene, Inc., a Delaware corporation, hereinafter called
"Tenant."

      WITNESSETH, That, for and in consideration of the rents, mutual covenants,
and agreements hereinafter set forth, the parties hereto do hereby mutually
agree as follows:

            1. BASIC LEASE INFORMATION

      Landlord: Park Place Trust, a Maryland Business Trust

      Landlord's Address: c/o Jerome J. Parks Companies, 15 School Street,
                          Annapolis, Maryland 21404, Attn: Jerome J. Parks.

      Tenant: PharmAthene.

      Tenant's Current Address: 175 Admiral Cochrane Drive, Suite 101,
                                Annapolis, Maryland 21401.

      Building: Park Place Office Building One, Annapolis, Maryland.

      Land: See Exhibit A-1.

      Demised Premises: As shown on Exhibit A and known as Suite 450 on the
                        fourth floor.

      Rentable Area of the Demised Premises: approximately [***] rentable square
                                             feet.

      Rentable Area of the Building: 160,358 rentable square feet.

      Term: ten (10) years.

      Anticipated Commencement Date: January 1, 2007.

      Rent Commencement Date: three (3) months following the Commencement Date
                              (See Section 3(B)), but not earlier than
                              March 1, 2007. See Section 5.

      Anticipated Rent Commencement Date: April 1, 2007.

      Anticipated Expiration Date: March 31, 2017.

      Security Deposit: See Section 6(B).

      Monthly Rent: See chart following:

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                                                                 Annual Rate Per
             Period                   Monthly Rent                 Square Foot
             ------                   ------------                 -----------

                                     [***]


      Right of First Offer: See Section 9.

      Tenant's Special Right to Terminate: See Section 3(E).

      Base Year: calendar year 2007.

      Tenant's Share of Operating Expenses: [***]%.

      Tenant's Share of Operating Costs: [***]%.

      Tenant's Share of Real Estate Taxes: [***]%.

      Parking: Four (4) reserved spaces. See Section 8.

      Allowance: [***] Dollars ($[***]) per rentable square foot. See Exhibit B.

      Tenant's Broker: CB Richard Ellis

      Landlord's Broker: CB Richard Ellis

      Lease Year: The term "Lease Year" shall mean a period of twelve (12)
consecutive months commencing on the Rent Commencement Date, and each successive
twelve (12) month period thereafter; provided, however, that if the Rent
Commencement Date is not the first day of a month, then the second Lease Year
shall commence on the first day of the month following the month in which the
first anniversary of the Rent Commencement Date occurs.

            2. DEMISED PREMISES

      Landlord does hereby lease to Tenant, and Tenant does hereby lease from
Landlord, for the term and upon the conditions hereinafter provided,
approximately [***] square feet of rentable area on the fourth (4th) floor of

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                                      -2-


the office building known as Park Place Office Building One situated at West
Street and Taylor Avenue, Annapolis, Maryland (such building being hereinafter
referred to as the "Building" and such rentable area being hereinafter referred
to as the "Demised Premises"). The Demised Premises has been assigned Suite No.
450, and is outlined on the floor plan attached hereto and made a part hereof as
Exhibit A.

      The Building and the Land (defined below) is part of Park Place, a
Condominium (the "Condominium") and more specifically described on that certain
Phase One Condominium Plat for Park Place, a Condominium dated February 15, 2005
and recorded among the land records of Anne Arundel County, Maryland.

            3. TERM

      (a) The initial term of this Lease shall commence on the Commencement
Date. The initial term of this Lease shall expire on the last day of the tenth
(10th) Lease Year (the "Expiration Date"). The term of this Lease (the "Lease
Term") shall also include any properly exercised renewal or extension of this
Lease.

      (b) The "Commencement Date" shall be the later of (i) the date on which
the shell improvements referenced in Schedule 1 to Exhibit B are substantially
complete and the Building is Ready for Occupancy (as defined in Exhibit B) other
than Deferrable Base Building Work, or January 1, 2007. Promptly after the
Commencement Date is ascertained, Landlord shall provide and Tenant shall
execute a certificate confirming the Commencement Date in the form attached
hereto as Exhibit D. "Deferrable Base Building Work" shall mean those portions
of base building work that can be completed during the period from the
Commencement Date to the Rent Commencement Work without interfering with the
construction of tenant improvements in the Demised Premises.

      (c) For the purposes of this Lease, the term "Commencement Date" shall
also mean any extended Commencement Date which may be established pursuant to
the operation of the provisions of this section of this Lease.

      (d) It is presently anticipated that the shell improvements referenced in
Schedule 1 to Exhibit B will be substantially complete and the Building will be
Ready for Occupancy (other than Deferrable Base Building Work), on or about
January 1, 2007; provided, however, that if those events do not occur by such
date, Landlord shall not have any liability whatsoever, and this Lease shall not
be rendered void or voidable, as a result thereof.

      (e) Notwithstanding anything to the contrary herein, Tenant shall have the
right to terminate this Lease for any or no reason ("Tenant's Special Terminate
Right") upon written notice to Landlord given no later than October 1, 2006,
time being of the essence. Along with Tenant's notice, Tenant shall pay to
Landlord a termination fee of Thirty-Five Thousand Dollars ($35,000.00) (the
"Termination Fee"), and the payment thereof along with such notice shall be a
condition to the effectiveness of such notice. In the event Tenant exercises
Tenant's Special Termination Right, Landlord shall promptly return Tenant's
Deposits and thereafter neither party shall have any farther rights or
obligations hereunder.


                                      -3-


            4. USE

      Tenant shall use and occupy the Demised Premises solely for general office
purposes in accordance with the applicable zoning regulations, including
reasonable ancillary uses thereto not inconsistent with the operation of a first
class office building. The Demised Premises shall not be used for any other
purpose without the prior written consent of Landlord. Tenant shall not use or
occupy the Demised Premises for any unlawful purpose, and will comply with all
present and future laws, including without limitation the Americans With
Disabilities Act of 1990 and the regulations promulgated thereunder, as the same
may be amended from time to time, ordinances, regulations, and orders of all
governments, government agencies and any other public authority concerning the
use, occupancy and condition of the Demised Premises and all machinery,
equipment and furnishings therein.

            5. RENT

      (a) Tenant covenants and agrees to pay to Landlord rent of any kind or
nature, including Monthly Rent (as hereinafter defined) and any sums, charges,
expenses and costs identified in the Lease as additional rent to be paid by
Tenant to Landlord. Tenant's obligation to pay rent shall begin on the earlier
of (i) the date Tenant commences to utilize the Demised Premises for the actual
conduct of business or (ii) the date which is three (3) months following the
Commencement Date (the "Rent Commencement Date") and shall continue to remain an
obligation of Tenant until completely satisfied. Promptly after the Rent
Commencement Date is ascertained, Landlord and Tenant shall execute a
certificate confirming the Rent Commencement Date in the form attached hereto as
Exhibit D-l.

      Tenant shall make all payments of rent by check, payable to Park Place
Trust or to such other party as Landlord may designate from time to time by
written notice to Tenant, and to such address as Landlord may designate from
time to time by written notice to Tenant, without demand and without deduction,
set-off or counterclaim. If Landlord at any time or times accepts rent after it
shall become due and payable, such acceptance shall not excuse delay upon
subsequent occasions, or constitute, or be construed as, a waiver of any or all
of Landlord's rights hereunder.

      (b) The monthly rent for the Demised Premises (hereinafter referred to as
"Monthly Rent") as of the Rent Commencement Date, which Tenant hereby agrees to
pay in advance to Landlord and Landlord hereby agrees to accept, shall be as
follows:


                                      -4-


                                                                   Annual Rate
            Period                    Monthly Rent               Per Square Foot
            ------                    ------------               ---------------

                                     [***]


      (c) Monthly Rent as specified above shall be payable in advance on the
first day of each calendar month during the term of this Lease. Tenant shall
also pay to Landlord with the payment of Monthly Rent such payments of
additional rent provided for in the section of the Lease entitled, "OPERATING
EXPENSES, OPERATING COSTS AND REAL ESTATE TAXES."

      (d) If the Rent Commencement Date, and therefore the obligation under the
Lease to pay Monthly Rent hereunder, begins on a day other than the first day of
a calendar month, then Monthly Rent from such date until the first day of the
following calendar month shall be prorated at the rate of one-thirtieth (l/30th)
of Monthly Rent for each day of that month from and including the Rent
Commencement Date, payable in advance, as specified above.

            6. DEPOSITS

      (a) Simultaneously with the execution of this Lease by Tenant, Tenant
shall deposit with Landlord the sum of [***] Dollars ($[***]), as a deposit
towards payment of Monthly Rent for the first (1st) full calendar month. Any
good faith deposit made at the time Tenant executed and delivered to Landlord
any letter of intent or proposal to Lease shall be applied toward the amount of
this deposit. Such deposit, prior to its being applied to the payment of Monthly
Rent, shall be security for the payment and performance by Tenant of all
Tenant's obligations, covenants, conditions and agreements under this Lease, and
Landlord shall have the right, but shall not be obligated, to apply all or any
portion of the deposit to cure any default by Tenant, in which event Tenant
shall be obligated to promptly deposit with Landlord the amount necessary to
restore the deposit to its original amount In the event Tenant fails to perform
its obligations and to take possession of the Demised Premises on the
appropriate Commencement Date provided herein, said deposit shall not be deemed
liquidated damages and Landlord may apply the deposit to reduce Landlord's
damages, and such application of the deposit shall not preclude Landlord from
recovering from Tenant all additional damages incurred by Landlord.

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                                      -5-


      (b) Simultaneously with the execution of this Lease by Tenant, Tenant
shall deliver to Landlord an unconditional, irrevocable letter of credit in the
amount of [***] Dollars ($[***]) (the "Security Deposit") as security for the
payment and performance by Tenant of all Tenant's obligations, covenants,
conditions and agreements under this Lease, subject to the following terms and
conditions. Such letter of credit shall be (a) hi form and substance
satisfactory to Landlord in its sole discretion; (b) at all times in the amount
of the Security Deposit (it being agreed that if at any time the amount drawable
by Landlord under the letter of credit is less than the amount of the Security
Deposit, whether as a result of a draw by Landlord or otherwise, then Tenant
shall, within one (1) business day thereafter, cause the amount drawable under
the letter of credit to be increased to the amount of the Security Deposit); (c)
issued by a commercial bank reasonably acceptable to Landlord from time to time
and located in the Baltimore/Annapolis metropolitan area, (d) made payable to,
and expressly transferable and assignable at no charge by, the owner from time
to time of the Building or its mortgagees (which transfer/assignment shall be
conditioned only upon the execution by such owner of a written document hi
connection with such transfer/assignment); (e) payable at sight upon presentment
to a local branch of the issuer of Landlord's sight draft drawn on the issuer
and accompanied by a notarized certificate stating that Landlord is entitled to
draw the amount sought; (f) of a term not less than one year; and (g) at least
thirty (30) days prior to the then-current expiration date of such letter of
credit, renewed (or automatically and unconditionally extended) from time to
time through the sixtieth (60th) day after the expiration of the Lease Term. If
Landlord transfers the Security Deposit to any transferee of the Building or
Landlord's interest therein, then such transferee shall be liable for the return
of the Security Deposit, and Landlord shall be released from all liability for
the return thereof. Notwithstanding the foregoing, Tenant hereby agrees not to
look to Landlord's mortgagees, as mortgagee, mortgagee in possession, or
successor in title to the property, for accountability for any Security Deposit
required by Landlord hereunder, unless said sums have actually been received by
said mortgagees as security for Tenant's performance of this Lease. If Tenant
fails to timely comply with the requirements of subsection (g) above, then
Landlord or its mortgagees shall have the right to immediately draw upon the
letter of credit without notice to Tenant and/or opportunity to cure. Any
amounts drawn under the letter of credit shall be applied by Landlord from time
to time to amounts owed in connection with (or arising from) any default
(including damages), with any remaining proceeds to be held without interest
until the sixtieth (60th) day after the expiration of the Lease as cash
collateral to secure the payment and performance by Tenant of all of Tenant's
obligations, covenants, conditions and agreements under this Lease. Each letter
of credit shall be issued by a commercial bank that has a credit rating with
respect to certificates of deposit, short term deposits or commercial paper of
at least P-2 (or equivalent) by Moody's Investor Service, Inc., or at least A-2
(or equivalent) by Standard & Poor's Corporation, and shall be otherwise
acceptable to Landlord in its sole and absolute discretion. If the issuer's
credit rating is reduced below P-2 (or equivalent) by Moody's Investors Service,
Inc. or below A-2 (or equivalent) by Standard & Poor's Corporation, or if the
financial condition of such issuer changes in any other materially adverse way,
then Landlord shall have the right to require that Tenant obtain from a
different issuer a substitute letter of credit that complies in all respects
with the requirements of this Section, and Tenant's failure to obtain such
substitute letter of credit within thirty (30) days following Landlord's written

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                                      -6-


demand therefor (with no other notice or cure or grace period being applicable
thereto, notwithstanding anything in this Lease to (he contrary) shall entitle
Landlord or its mortgagees to immediately draw upon the then existing letter of
credit in whole or in part, without notice to Tenant and to apply and hold such
proceeds in the manner set forth above. In the event the issuer of any letter of
credit held by Landlord is placed into receivership or conservatorship by the
Federal Deposit Insurance Corporation, or any successor or similar entity, then,
effective as of the date such receivership or conservatorship occurs, said
letter of credit shall be deemed to not meet the requirements of this Section,
and, within thirty (30) days thereof, Tenant shall replace such letter of credit
with other collateral acceptable to Landlord in its sole and absolute discretion
(and Tenant's failure to do so shall, notwithstanding anything in this Lease to
the contrary, constitute a default under the section of this Lease entitled
"DEFAULT OF TENANT" for which there shall be no notice or grace or cure periods
being applicable thereto other than the aforesaid thirty (30) day period).
Except as otherwise expressly set forth in this Lease, Landlord or its
mortgagees shall only draw upon the Letter of Credit upon the occurrence of a
default and the expiration of any applicable cure or grace period (or if
Landlord is precluded by law from sending any notice necessary to establish that
a default has occurred, the failure of Tenant to make any payment of rent within
five (5) business days after the same is due). Upon the occurrence of a default
and the expiration of any applicable cure or grace period, Landlord or its
mortgagees shall be entitled to draw on the Letter of Credit in whole or in part
and apply cash then held as a Security Deposit (including any amounts) drawn on
the Letter of Credit) in the amount necessary to cure the applicable default.
Any failure or refusal of the issuer to honor the letter of credit shall be at
Tenant's sole risk and shall not relieve Tenant of its obligations hereunder
with respect to the Security Deposit. The form Letter of Credit attached hereto
as Exhibit F is hereby approved by Landlord.

      (c) Provided (a) no default then exists and (b) Landlord has not imposed
(nor had the right to impose) a late charge pursuant to Section 35 below during
the twelve (12) months preceding the applicable Reduction Date (as hereinafter
defined) with respect to any installment of Monthly Rent or Estimated Payments,
Tenant shall have the right with respect to each Reduction Date to reduce the
Security Deposit by the Security Deposit Reduction Amount set forth below with
respect to each Reduction Date. Each reduction of the Security Deposit shall
occur by means of delivery by Tenant to Landlord of a substitute letter of
credit in such reduced amount and in strict conformity with the terms of this
Section 5(B), in which event, the previous letter of credit will be returned to
Tenant. Alternatively, if the terms of the letter of credit permit reduction of
the stated amount thereof upon delivery by Landlord to the issuer of the letter
of credit of notice of reduction, then, in such case, the reduction of the
Security Deposit shall occur by Landlord's delivery to the issuer of a letter of
credit a notice of reduction complying in all respects with the letter of credit
(which Landlord agrees to do promptly upon Tenant meeting the requirements set
forth in clauses (a) and (b) above).

                                                                Security Deposit
                           Security Deposit Reduction            Remaining After
     Reduction Date                 Amount                         Reduction
     --------------                 ------                         ---------

                                     [***]

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                                      -7-


            7. OPERATING EXPENSES. OPERATING COSTS AND REAL ESTATE TAXES

      (a) If the Operating Expenses (as defined below) of the Building increase
during any calendar year after calendar year 2007(hereafter called the "Base
Year"), Tenant shall pay to Landlord, as additional rent, Tenant's proportionate
share of the increase in such Operating Expenses. Tenant's proportionate share
shall be the percentage which the total rentable square feet of the Demised
Premises bears to the total rentable square feet of all office and retail areas
in the Building, which percentage as of the date of this Lease is [***]%. The
amount of such percentage to be paid by Tenant for any calendar year shall be
the percentage of the calendar year that the Demised Premises were leased by
Tenant.

      (b) The term "Operating Expenses" shall mean any and all expenses, charges
and fees incurred in connection with managing, owning, operating, maintaining,
servicing, insuring and repairing the Building, atrium (if any), related
exterior appurtenances (including the Plaza) and the land upon which the
Building is located (the "Land") including all of the following:

            (1) premiums and other charges for insurance related solely to the
Building (including, but not limited to, property insurance, rent loss insurance
and liability insurance);

            (2) all management fees incurred in the management of the Building,
whether such services are provided by Landlord, an affiliate of Landlord or an
independent management company;

            (3) all costs incurred in connection with service and maintenance
contracts (except elevator maintenance contracts);

            (4) maintenance and repair expenses and supplies;

            (5) amortization (calculated over the Approved Period (as
hereinafter defined), with interest at Landlord's cost of funds or (if the
improvement is not financed) at the prime rate reported in The Wall Street
Journal) for capital expenditures made by Landlord subsequent to calendar year
2007 for the purpose of (x) complying with legal or insurance requirements
imposed subsequent to the date hereof or (y) that are intended to result in a
net decrease in Operating Expenses or Operating Costs. The "Approved Period"
shall mean the estimated useful life of the improvement except that with respect
to an improvement made for the purpose of reducing Operating Expenses or
Operating Costs, Landlord may amortize the expense over the period such that the
yearly amortization amount is equal to the projected annual savings as
reasonably estimated by Landlord;

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                                      -8-


            (6) salaries, wages, benefits and other expenses of Building
personnel, including any General Manager (such costs with respect to personnel
serving multiple buildings to be prorated among the buildings receiving such
services using a method selected by Landlord in its reasonable discretion);

            (7) legal fees for the Building (except as excluded below),
administrative expenses, and accounting, architectural and other professional
fees and expenses;

            (8) costs of any service not provided to the Building on the
Commencement Date but thereafter provided by Landlord in the prudent management
of the Building;

            (9) charges for lobby attendant or security services;

            (10) charges for cleaning services and supplies furnished to common
and public areas of the Building;

            (11) costs associated with the provision or operation of any common
facilities and service amenities;

            (12) any vault rent or charges for the use of vault space;

            (13) the cost of maintaining management or engineering offices for
the Building, including rent thereon; and

            (14) any and all fees and charges relating to the Condominium.

Exclusions from "Operating Expenses"

      Notwithstanding the foregoing to the contrary, "Operating Expenses" shall
not include the following (collectively, "Excluded Items"):

                  (i) debt service, including interest, financing costs and
amortization of mortgages;

                  (ii) painting or decorating other than in common or public
areas of the Building;

                  (iii) any tenant work performed or alteration of space leased
to tenants or occupants of the Building whether such work or alteration is
performed for the initial occupancy by such tenant or occupant or thereafter;

                  (iv) the cost of alterations, capital improvements and
replacements which under generally-accepted accounting principles are properly
classified as capital expenditures, except as set forth in subsection (B)(5)
above;

                  (v) any cash or other consideration paid by Landlord on
account of, with respect to, or in lieu of tenant work or alterations described
in clause (iii) above;


                                      -9-


                  (vi) base ground rent (if any), plus escalations thereto, but
exclusive of real estate taxes, utilities and other "net" elements constituting
rent under a ground lease;

                  (vii) depreciation to work spent on matters unrelated to the
Building; or amortization on the Building except as provided in subsection
(B)(5) above;

                  (viii) repairs or replacements (a) necessitated by the gross
negligence or willful misconduct of Landlord or its employees or agents, or (b)
required to cure violations of governmental laws, ordinances, rules and
regulations applicable to the Building as of the date hereof;

                  (ix) costs of enforcement of leases;

                  (x) salaries, commissions, fringe benefits and other
compensation paid to (a) officers or executives of Landlord, Landlord's Agent
(except as specifically permitted herein, it being understood that compensation
of personnel above the level of General Manager shall in no event be included in
Operating Expenses) Or their affiliates or (b) employees of Landlord who devote
only a portion of their time to the maintenance or operation of the Building to
the extent that such salaries, fringe benefits and other compensation are
properly allocated;

                  (xi) leasing commissions, advertising and promotional expenses
and any other comparable expenses directly related to leasing or procuring
tenants or negotiating with prospective tenants;

                  (xii) legal fees, accounting fees and other professional and
consulting fees (a) incurred hi procuring tenants for the Building, (b) incurred
in connection with Landlord's gross negligence or willful misconduct or
non-compliance with any mortgage, deed of trust or ground lease relating to the
Building, (c) relating to enforcing any leases or any landlord/tenant
proceeding, (d) relating to the defense of Landlord's title to, or interest in,
the Building, (e) relating to the refinancing or sale of the Building or any
interest therein; or (f) relating to the internal affairs of the ownership
entity or entities constituting Landlord;

                  (xiii) the cost of repairs incurred by reasons of fire or
other casualty or condemnation to the extent that either (a) Landlord is
compensated therefor through proceeds of insurance or condemnation awards; or
(b) Landlord is not fully compensated therefor due to the failure of Landlord to
obtain insurance against such fire or casualty or the decision of Landlord to
self-insure; or (c) if Landlord is not fully compensated by reason of the
coinsurance provisions of its insurance policies due to Landlord's failure to
obtain and maintain a sufficient amount of insurance coverage;

                  (xiv) any cost representing an amount paid for services or
materials to a related person, firm or entity to the extent such amount exceeds
the amount that would be paid for such services or materials of comparable
quality at the then-existing market rates to an unrelated person, firm or
corporation (no management fee or related fees meeting the standard set forth in
exclusion (xxiii), or portion thereof, shall be excluded from Operating Expenses
pursuant to the provisions hereof);


                                      -10-


                  (xv) all expenses for which Landlord has received
reimbursement (such as by insurance and by other tenants of the Building) except
as additional rent under comparable provisions in this Section of this Lease;

                  (xvi) income or franchise taxes or such other taxes imposed
upon or measured by Landlord's net income from the operation of the Building;

                  (xvii) costs allocable to properties other than the Building
in which Landlord or any partner thereof has a direct or indirect interest;

                  (xviii) rentals and other related expenses incurred in leasing
air-conditioning systems, elevators or other equipment ordinarily considered to
be of a capital nature;

                  (xix) direct and indirect costs incurred to clean up, contain,
abate, remove, or otherwise remedy asbestos or hazardous waste (as determined by
federal, state or local laws or regulations) from the Building unless the wastes
were in or on the Demised Premises or the Building because of Tenant's acts or
those of its agents, invitees, or subtenants;

                  (xx) the cost of performing special services or installations
to or for tenants or occupants to the extent such service exceeds that provided
by Landlord to Tenant without charge hereunder;

                  (xxi) electricity costs or overtime HVAC costs, if charged
separately to any other tenant in the Building;

                  (xxii) recordation and transfer taxes and transfer gain taxes,
including, without limitation, any such taxes incurred if this Lease is
recorded;

                  (xxiii) fees or expenses of property management services
provided by Landlord or parties related to or affiliated with Landlord, except
to the extent such fees or expenses are not in excess of the market rate for
services of comparable quality as charged by unaffiliated parties (provided that
in no event will the following be deemed in excess of the market rate: property
management fees equal to three percent (3%) of gross income derived from the
Building, including net parking income (or rent under a garage lease, as
applicable) and amounts received as reimbursements for Operating Expenses and
Operating Costs and Real Estate Taxes, but excluding reimbursements of a capital
nature (insurance or otherwise));

                  (xxiv) expenses incurred in connection with the management,
repair, maintenance, and replacement of the garage facilities, such as by way of
example, but not in limitation, parking management fees and restriping of
parking spaces; however, utilities, Real Estate Taxes and building security
expenses are not separately allocated to the garage and the management services
fee included in Operating Expenses will include a percentage of the net income
from parking garage operation (or rent under a garage lease, as applicable); and

                  (xxv) Operating Costs (as hereinafter defined);

                  (xxvi) Real Estate Taxes (as hereinafter defined);


                                      -11-


                  (xxvii) advertising and promotional expenses;

                  (xxviii) the cost of installing, operating, and maintaining
any specialty facility such as an observatory, broadcasting facility, restaurant
or luncheon club, athletic or recreational club, theater or cafeteria;

                  (xxix) the cost of any additions to the Building that result
in a larger building;

                  (xxx) the cost of artwork;

                  (xxxi) costs or payments associated with Landlord's obtaining
air rights or development rights;

                  (xxxii) assessments, common charges or the like imposed by the
Condominium to the extent the same are imposed to pay for items which if
incurred directly by Landlord would constitute Excluded Items.

      (c) If the Operating Costs (as defined below) of the Building increase
during any calendar year after the Base Year, Tenant shall pay to Landlord, as
additional rent, Tenant's proportionate share of the increase in such Operating
Costs. Tenant's proportionate share shall be the percentage which the total
rentable square feet of the Demised Premises bears to the total rentable square
feet of all office areas in the Building, which percentage as of the date of
this Lease is [***]%. The amount of such percentage to be paid by Tenant for any
calendar year shall be the percentage of the calendar year that the Demised
Premises were leased by Tenant.

      (d) The term "Operating Costs" shall mean the costs of (i) the cleaning
contract and cleaning supplies, (ii) electricity and water and (iii) elevator
maintenance contracts. Operating Costs shall not include Operating Expenses and
Excluded Items.

      (e) If the Real Estate Taxes (as defined below) of the Building increase
during any calendar year after the Base Year, Tenant shall pay to Landlord, as
additional rent, Tenant's proportionate share of the increase in such Real
Estate Taxes. Tenant's proportionate share shall be the percentage which the
total rentable square feet of the Demised Premises bears to the total rentable
square feet of all office and retail areas in the Building, which percentage as
of the date of this Lease is [***]%. The amount of such percentage to be paid by
Tenant for any calendar year shall be the percentage of the calendar year that
the Demised Premises were leased by Tenant.

      (f) The term "Real Estate Taxes" shall mean (i) any and all real estate
taxes and ad valorem taxes, surcharges, special assessments and impositions,
general and special, ordinary and extraordinary, foreseen or unforeseen, of any
kind levied against the Building or land upon which the Building is located, or
in connection with the use thereof (including any transit, personal property,
sales, rental, use, gross receipts and occupancy tax and other similar charges),
any other present or future taxes or governmental charges that are imposed upon
Landlord which are in the nature of or in substitution for real estate taxes,

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                                      -12-


including any tax levied or measured by the rents payable by tenants of the
Building, and business improvement district taxes and (iii) expenses (including
reasonable attorneys' fees and appraisers' fees) incurred in reviewing,
protesting or seeking a reduction of Real Estate Taxes. Real Estate Taxes shall
not, however, include (x) income or franchise taxes or such other taxes imposed
directly upon Landlord's net income from the operation of the Building and (y)
recordation and transfer taxes. If Landlord's contest of Real Estate Taxes for
the Base Year results in a decrease in Real Estate Taxes for such year, the Real
Estate Taxes for the Base Year shall mean the amount incurred following such
appeals, and Landlord shall have the right to bill Tenant for prior
underpayments of Real Estate Taxes thereby resulting.

      (g) Landlord shall notify Tenant prior to the beginning of calendar year
2008 and each calendar year thereafter of Landlord's estimate of the amount of
Operating Expenses (the "Estimated Operating Expenses"), the amount of Operating
Costs (the "Estimated Operating Costs") and the amount of Real Estate Taxes (the
"Estimated Real Estate Taxes") that Landlord likely will incur for the Building
during the coming calendar year, and pursuant to paragraph (H) hereof, shall
advise Tenant of the amount of its Estimated Payments for the coming calendar
year.

      (h) Tenant shall pay to Landlord, as additional rent, an amount equal to
the sum of (a) one-twelfth (l/12th) of Tenant's proportionate share of the
amount by which Estimated Operating Expenses exceed the Operating Expenses for
the Base Year, (b) one-twelfth (l/12th) of Tenant's proportionate share of the
amount by which Estimated Operating Costs exceed the Operating Costs for the
Base Year, and (c) one-twelfth (l/12th) of Tenant's proportionate share of the
amount by which Estimated Real Estate Taxes exceed the Real Estate Taxes for the
Base Year (collectively the "Estimated Payments"). The components of the
Estimated Payments described in clauses (a), (b) and (c) of the immediately
preceding sentence shall be calculated independently without reference to one
another. Tenant shall commence to make its first Estimated Payments on January
1, 2008. Thereafter, Tenant shall make its Estimated Payments on the first day
of each calendar month. Tenant shall pay the same amount of the Estimated
Payments until the amount is adjusted, effective the next succeeding January 1,
based upon Landlord's determination of the Estimated Operating Expenses,
Estimated Operating Costs and Estimated Real Estate Taxes for the following
calendar year.

      (i) Within ninety (90) days after the expiration of each calendar year
(including the calendar years in which the Rent Commencement Date and expiration
or earlier termination of this Lease occurs), or as soon as reasonably practical
thereafter, a firm of certified public accountants selected by Landlord, shall
audit Landlord's books and records for the Building. Thereafter, Landlord shall
determine any increase in the Operating Expenses, Operating Costs and Real
Estate Taxes for such calendar year over the Operating Expenses, Operating Costs
and Real Estate Taxes for the Base Year. The Operating Expenses, Operating Costs
and Real Estate Taxes for each calendar year shall be those actually incurred
provided, however, that if the Building was not at least [***] percent ([***]%)
occupied during the entire calendar year on a monthly weighted average basis,
the Operating Expenses and Operating Costs shall be adjusted to project the

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                                      -13-


Operating Expenses and Operating Costs as if the Building were [***] percent
([***]%) occupied on a monthly weighted average basis. The categories of
expenses to be so adjusted in such event shall be limited to (i) electricity,
(ii) nighttime janitorial services, (iii) (if and so long as the management fee
varies proportionately with the gross income of the Building) the management fee
and (iv) water and sewer charges.

      (j) Landlord shall submit to Tenant a statement setting forth Landlord's
determination of (i) any increases in Operating Expenses, Operating Costs and
Real Estate Taxes over the Operating Expenses, Operating Costs and Real Estate
Taxes, respectively for the Base Year; (ii) Tenant's proportionate share of such
increases; and (iii) Tenant's net obligation for such Operating Expenses,
Operating Costs and Real Estate Taxes for the calendar year ("Tenant's Net
Obligation") which reflects the credit of Tenant's Estimated Payments for
Estimated Operating Expenses, Estimated Operating Costs and Estimated Real
Estate Taxes during the prior calendar year. In computing Tenant's Net
Obligation, Tenant's obligations with respect to each of (x) increases in
Operating Expenses, (y) increases in Operating Costs and (z) increases in Real
Estate Taxes shall be computed independently without reference to one another.
Within thirty (30) days after the delivery of such statement (including any
statement delivered after the expiration or earlier termination of this Lease),
Tenant shall pay Landlord the full stated amount of Tenant's Net Obligation. If
the aggregate amount of Tenant's Estimated Payments for Estimated Operating
Expenses, Estimated Operating Costs and Estimated Real Estate Taxes during the
prior calendar year exceeds Tenant's proportionate share of (i) the increases in
Operating Expenses, (ii) the increases in Operating Costs and (iii) the
increases in Real Estate Taxes, the excess, at Landlord's option, shall be
refunded to Tenant or credited to Tenant's next Estimated Payments), until such
excess is fully refunded to Tenant.

      (k) Tenant, and/or an independent certified public accounting firm
offering a full range of accounting services retained by Tenant on a
non-contingent fee basis, may, at Tenant's expense, at reasonable times, upon
reasonable notice, audit Landlord's books and records for the Building relating
to Landlord's determination of any increase in the Operating Expenses, Operating
Costs and Real Estate Taxes for (i) the calendar year for which Landlord's
current determination is being made, and (ii) the Base Year. In any and all
events any such request to audit Landlord's books and records with respect to
(x) the Base Year, shall be made no later than one hundred eighty (180) days
following the date on which Tenant's first Estimated Payment is due and payable,
and (y) any subsequent year, shall be made no later than one hundred eighty
(180) days following Tenant's receipt of Landlord's annual statement setting
forth Tenant's Net Obligation. Tenant shall (and shall cause its employees,
agents and consultants to) keep the results of any such audit or audited
statements strictly confidential. Landlord shall compute the Operating Expenses,
Operating Costs and Real Estate Taxes on the accrual basis.

      (l) Notwithstanding anything herein to the contrary, if it is determined
pursuant to an audit undertaken by Tenant pursuant to subsection (K) hereinabove
that Landlord overstated (or in the case of the Base Year, understated) the
aggregate of Operating Expenses, Operating Costs and Real Estate Taxes for any
year, then Landlord shall promptly refund any excess payment to Tenant. If
Landlord overstated such aggregate by more than [***] percent ([***]%), then

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                                      -14-


Landlord shall reimburse Tenant for the reasonable out-of-pocket costs
(exclusive of travel related expenses) of any audit undertaken with respect to
such year pursuant to subsection (K) hereinabove. Tenant may not audit any
calendar year more than once.

      (m) Subject to Section 52 hereof, no payment by Tenant of any amount
hereunder shall constitute a waiver of any claim that such amount is in fact not
due and owing, in whole or in part.

            8. PARKING

      Landlord shall obtain for Tenant an allocation of four (4) contracts for
reserved parking spaces for use by Tenant and its employees in the parking
facility serving the Building, provided that Tenant notifies Landlord in writing
of its desire to obtain all or a specified number of said parking contracts, and
Tenant enters into said contracts with the parking facility operator (the
"Operator") within sixty (60) days after the Rent Commencement Date.

      Tenant shall be directly responsible to the Operator for the payment of
any and all fees or charges thereunder, and Landlord shall be under no
obligation to pay the Operator for said parking contracts. The parking contracts
shall contain the same terms and conditions as are usually contained in such
contracts with other monthly parking customers of the Operator, and the monthly
rate to be paid by Tenant shall be the prevailing monthly rate charged to other
monthly parking customers which are office tenants in the Building, (said rate
to be established from time to time by the City of Annapolis) and to increase
and decrease as the prevailing monthly parking rate for other applicable monthly
parking customers increases and decreases from time to time, hi the event Tenant
fails to execute with the Operator the monthly parking contracts within the
sixty (60) day period, or subsequently relinquishes in any manner its parking
contracts, Landlord shall be under no obligation to seek restoration of the
relinquished contracts or waive Tenant's failure to execute said contracts prior
to expiration of the applicable sixty (60) day period.

      Tenant hereby agrees to comply with all traffic and parking rules and
regulations imposed from time to time by Landlord, the Operator or the City of
Annapolis,

            9. RIGHT OF FIRST OFFER

      During the term hereof (provided Tenant (x) is not in default under this
Lease beyond any applicable cure period on the date Tenant notifies Landlord of
its intent to exercise this right and (y) has not sublet more than [***] percent
([***]%) of the Demised Premises or assigned the Lease in a transaction
requiring Landlord consent), Tenant shall have the right of first offer for the
leasing of any space on the fourth (4th) floor of the Building (the "ROFO
Space") when it becomes available after the initial lease up thereof. For
purposes hereof, the ROFO Space will be available when it is vacant or otherwise
ready, in Landlord's commercially reasonable judgment, to be marketed by
Landlord to parties other than the then existing tenant or then current occupant
thereof.

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                                      -15-


      Landlord shall give Tenant written notice of the availability of the ROFO
Space and the terms for the leasing thereof, which shall provide for rent equal
to [***] percent ([***]%) of the then current market rent as determined by
Landlord in its reasonable discretion. Tenant shall have ten (10) business days
from the receipt of Landlord's notice to notify Landlord whether it is accepting
Landlord's offer.

      In the event Tenant timely accepts the right of first offer, the term for
which such available space is leased shall be coterminous with the term of this
Lease. The ROFO Space shall be delivered in its "as is" condition, the Rent
Commencement Date with respect thereto shall be sixty (60) days following
delivery of possession thereof to Tenant. In the event Tenant fails to timely
accepts the right of first offer, Tenant's right of first offer shall be null
and void and of no further force and effect and Landlord shall be free to lease
the ROFO Space to any person, partnership, corporation or other entity upon any
terms and for any purpose. After the ROFO Space has been leased by Landlord to
another person, partnership, corporation or other entity, if the ROFO Space
should again become available, Tenant shall again have the first right to lease
with respect thereto.

            10. ASSIGNMENT AND SUBLETTING

      (a) Tenant may not assign or otherwise transfer this Lease, or sublet
(including permitting occupancy or use by another party) the Demised Premises,
or any part thereof, without giving Landlord thirty (30) days prior written
notice of Tenant's intention to assign this Lease or sublet all or any part of
the Demised Premises. In the event Tenant seeks permission to sublease a part of
the Demised Premises, the notice shall also identify the area of the Demised
Premises Tenant seeks to sublease. Within thirty (30) days after receipt of said
notice of intent to assign or sublease, Landlord shall have the option (i) to
elect to terminate the Lease, if Tenant desires to assign this Lease, or (u) if
Tenant desires to sublet a portion of the Demised Premises that (1) when
combined with all other portions of the Demised Premises then being sublet,
exceeds [***] percent ([***]%) of the rentable area of the Demised Premises, or
(2) has a proposed sublet term in excess of [***] percent ([***]%) of the
remaining term of this Lease, to terminate the Lease with regard to that portion
of the Demised Premises which Tenant seeks to sublet, or alternately to sublet
that portion of the Demised Premises from Tenant for the term which Tenant
desires to sublet that portion of the Demised Premises, at the rate and upon the
same terms and conditions as Tenant is leasing the Demised Premises from
Landlord. Landlord may exercise the option by giving Tenant written notice of
its election to exercise the option within said thirty (30) day period.

      (b) The effective date of termination, or the effective date of
commencement of the sublease to Landlord, shall be mutually agreed upon by
Landlord and Tenant. If the parties cannot agree upon a termination date or upon
a sublease commencement date, the termination date or sublease commencement date
shall be the date that is sixty (60) days after the date Landlord received the
notice that Tenant desired to assign the Lease or sublet all or any portion of
the Demised Premises. Upon termination, all of the rights and obligations of
Landlord and Tenant under the terms of this Lease shall be terminated, or
terminated with regard to that portion of the Demised Premises that Tenant

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                                      -16-


notified Landlord that Tenant desired to sublet, except that Tenant shall
continue to be obligated to pay rent and all other charges for the Demised
Premises which accrue to the date of termination.

      (c) If Landlord does not exercise its option to terminate or sublet,
Tenant may assign this Lease or sublet all or any part of the Demised Premises
within one hundred twenty (120) days after the date that the thirty (30) day
period referenced above expires. Tenant shall be required however to obtain
Landlord's prior written consent to any assignee or any subtenant, which consent
may not be unreasonably withheld, contingent upon the proposed assignee or
subtenant being similar in kind and character to Tenant and financially
reliable, hi the event that Tenant fails to present to Landlord any sublease or
assignment agreement, fully executed by the parties thereto, within said one
hundred twenty (120) day period, Tenant may not assign this Lease or sublet the
Demised Premises without first affording Landlord the option to terminate or
sublease as previously provided for in this section. The form of documentation
implementing any assignment or subletting shall be on Landlord's approved form
of sublease or assignment.

      (d) Tenant shall reimburse to Landlord, as additional rent, all reasonable
costs and expenses, including reasonable attorney's fees, which Landlord incurs
by reason of or in connection with any assignment, sublease, or leasehold
mortgage proposed or granted by Tenant (whether or not permitted under this
Lease), and all negotiations and actions with respect thereto, such additional
rent to be due and payable within fifteen (15) days of receipt of a statement of
such costs and expenses from Landlord.

      (e) No assignment of this Lease shall be effectuated by operation of law
or otherwise without the prior written consent of Landlord. For the purposes of
this Lease, the transfer of fifty percent (50%) or more of the ownership
interest of Tenant or the transfer and/or issuance of more than fifty percent
(50%) of the voting stock of Tenant, if Tenant is not a publicly held
corporation, to any persons or entities that are not owners or stockholders of
Tenant on the date of execution of this Lease shall be deemed an assignment of
this Lease thereby giving Landlord the option to terminate this Lease as
provided above.

      (f) Notwithstanding any other provision of this Lease to the contrary,
Tenant has the right to assign this Lease or sublet the Demised Premises in
whole or in part to any subsidiary or affiliate upon giving Landlord ten (10)
days prior written notice of such assignment or subleasing. Such an assignment
or sublease shall not trigger Landlord's right to terminate the Lease or
subsequently require Landlord's consent to any assignee or subtenant. A
"subsidiary" of Tenant shall mean any corporation not less than fifty percent
(50%) of whose outstanding voting stock shall, at the time, be owned, directly
or indirectly, by Tenant. An "affiliate" of Tenant shall mean any corporation
which, directly or indirectly, controls or is controlled by or is under common
control with Tenant. For purpose of the definition of "affiliate," the word
"control" (including "controlled by" and "under common control with"), as used
with respect to any corporation, partnership, or association, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policy of a particular corporation, partnership
or association, whether through the ownership of voting securities or by
contract or otherwise. Notwithstanding the foregoing definition of affiliate,
SiGA Technologies, Inc., shall be deemed an affiliate of Tenant for the purposes
of this Lease.


                                      -17-


      (g) Notwithstanding any other provision of this Lease to the contrary,
Tenant shall have no right to transfer, assign, sublet, enter into license or
concession agreements, or mortgage or hypothecate this Lease or Tenant's
interest in the Demised Premises or any part thereof to a foreign government or
to any individual or entity whereby enforcement of the obligations of the Tenant
under this Lease might be limited by sovereign immunity. Any such attempted
transfer, assignment, subletting, license or concession agreement, mortgage or
hypothecation shall be void and confer no rights on such foreign government or
individual or entity.

      (h) The consent by Landlord to any assignment or subletting to any party
other than Landlord, including a subsidiary or affiliate, shall not be construed
as a waiver or release of Tenant from the terms of any covenant or obligation
under this Lease. Landlord's collection or acceptance of rent from any assignee
of Tenant shall not constitute a waiver or release of Tenant of any covenant or
obligation contained in this Lease, nor shall any such assignment or subletting
be construed to relieve Tenant from giving Landlord said thirty (30) days notice
or from obtaining the consent in writing of Landlord to any further assignment
or subletting. In the event that Tenant is in default of any term or provision
of this Lease, Tenant hereby assigns to Landlord the rent due from any subtenant
of Tenant and hereby authorizes and directs each such subtenant, upon notice
from Landlord, to pay said rent directly to Landlord, the collection or
acceptance of rent from any subtenant in such instance not to constitute a
waiver or release of Tenant of any covenant or obligation contained in this
Lease.

      (i) Tenant may not mortgage or encumber this Lease without the prior
written consent of Landlord.

      (j) If any sublease, assignment or other transfer (whether by operation of
law or otherwise) provides that the subtenant, assignee or other transferee is
to pay any amount in excess of the sum of (i) the rent and other charges due
under this Lease and (ii) the reasonable, out-of-pocket costs (including
brokerage commissions, marketing costs and construction costs) incurred and paid
by Tenant to obtain the assignment or sublease, then, whether such excess is in
the form of an increased monthly or annual rental, a lump sum payment, payment
for the sale, transfer or lease of Tenant's fixtures, leasehold improvements,
furniture and other personal property, or any other form (and if the subleased
or assigned space does not constitute the entire Demised Premises, the existence
of such excess shall be determined on a pro rata basis), Tenant shall pay [***]
percent ([***]%) of any such excess to Landlord as additional rent no later than
ten (10) days after Tenant's receipt thereof. Landlord shall have the right to
inspect and audit Tenant's books and records relating to any sublease,
assignment or other transfer.

            11. ALTERATIONS

      Tenant shall make no alterations, installations, additions or improvements
(hereinafter collectively called "Alterations") in or to the Demised Premises or
the Building (other than Immaterial Alterations, hereinafter defined) without
Landlord's prior written consent. Consent by Landlord to Tenant's Alterations
shall not be unreasonably withheld, except that Landlord may withhold its
consent for any reason with regard to requested Alterations by Tenant which (i)

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                                      -18-


affect the structure of the Building or the mechanical, plumbing or electrical
systems of the Building, or (ii) could cause the imposition of additional costs
or obligations on Landlord. Tenant, at its sole cost and expense, shall provide
Landlord with a copy of the original or revised full-floor mechanical and
electrical plans for the floor or floors on which the Alterations are to be
made, revised by the Building architect and engineers to show Tenant's proposed
Alterations. If any Alterations are made without the prior written consent of
Landlord, Landlord may correct or remove the same, and Tenant shall be liable
for any and all expenses incurred by Landlord in the performance of this work.
All Alterations shall be made (i) at Tenant's sole expense, (ii) at such limes
and in such manner as Landlord may designate, (iii) in a good, workmanlike,
first class and prompt manner, (iv) using new materials only, (v) in accordance
with all applicable legal requirements and the requirements of any insurance
company insuring the Building, (vi) in accordance with Landlord's then
Construction Rules and (vii) only by such contractors or mechanics as are
approved in writing by Landlord. Approval of contractors or mechanics by
Landlord, which approval may not be unreasonably withheld, shall be based upon
the contractors or mechanics being properly licensed, their financial posture,
experience and past job performance. Prior to the commencement of any
Alterations in the Demised Premises, Tenant shall submit to Landlord copies of
all permits required in connection therewith, and upon the completion of any
Alterations, Tenant, at its expense, shall furnish to Landlord a set of the
"as-built" plans for such Alterations constructed or installed in the Demised
Premises. An "Immaterial Alteration" is defined as an Alteration which (i) is
not visible from the exterior of the Demised Premises or the Building and (ii)
is cosmetic in nature and does not affect the Building structure or any Building
system.

      All Alterations to the Demised Premises, whether made by Landlord or
Tenant, and whether at Landlord's or Tenant's expense, or the joint expense of
Landlord and Tenant, shall be and remain the property of Landlord. Any
replacements of any property or improvements of Landlord, whether made at
Tenant's expense or otherwise, shall be and remain the property of Landlord.

      Landlord, at the expiration or earlier termination of the term of the
Lease, may elect to require Tenant to remove all or any part of the Alterations
made by Tenant subsequent to the Rent Commencement Date, unless Landlord agrees
in writing not to require the removal of any Alterations at the time Landlord
consents to the Alterations. Removal of Tenant's Alterations shall be at
Tenant's cost and expense, and Tenant shall, at its cost and expense, repair any
damage to the Demised Premises or the Building caused by such removal.

      Tenant shall remove all of Tenant's property at the expiration or earlier
termination of the Lease. In the event Tenant does not remove Tenant's property
at the expiration or earlier termination of the Lease, such property shall
become the property of Landlord.

      In the event Tenant fails to remove its property or the Alterations
requested to be removed by Landlord on or before the expiration or earlier
termination of the term of the Lease, then Landlord may remove such property and
Alterations from the Demised Premises at Tenant's expense, and Tenant hereby
agrees to pay to Landlord, as additional rent, the cost of such removal together
with any and all damages which Landlord may suffer and sustain by reason of the
failure of Tenant to remove the same. Said amount of additional rent shall be
due and payable upon receipt by Tenant of a written statement of costs and
damages from Landlord.


                                      -19-


      Without limiting the generality of the foregoing provisions of this
Section, the term "Alterations" shall include, without limitation, all telephone
and data wiring and cabling installed by or on behalf of Tenant (collectively,
"Cabling"). Notwithstanding anything to the contrary contained in this Section,
at the expiration or earlier termination of the term of the Lease, Tenant shall
remove all Cabling (whether installed as part of the initial tenant improvements
or as a subsequent Alteration) at its cost and expense, and Tenant shall, at its
cost and expense, repair any damage to the Demised Premises or the Building
caused by such removal.

            12. LIENS

      If any mechanic's or other lien is filed against the Demised Premises, or
the Building of which the Demised Premises are a part, for work claimed to have
been done for Tenant or materials claimed to have been furnished to Tenant, such
lien shall be discharged by Tenant, at its sole cost and expense, within ten
(10) days from the date Tenant receives written demand from Landlord to
discharge said lien, by the payment thereof or by filing any bond required by
law. If Tenant shall foil to discharge any such lien, Landlord may, at its
option, discharge the same and treat the cost thereof as additional rent, due
and payable upon receipt by Tenant of a written statement of costs from
Landlord. It is hereby expressly covenanted and agreed that such discharge of
any lien by Landlord shall not be deemed to waive or release Tenant from its
default under the Lease for failing to discharge the same.

      Tenant will indemnify and hold harmless Landlord and its mortgagees from
and against any and all claims, damages and expenses incurred by Landlord,
arising from any liens placed against the Demised Premises or the Building and
the land upon which it is situated, as a result of Tenant undertaking
construction work in the Demised Premises at its own cost and under its own
control and direction, or making any Alterations to the Demised Premises.

            13. MAINTENANCE

      Tenant, at its sole cost and expense, shall keep the Demised Premises and
the fixtures and equipment therein in clean, safe and sanitary condition, shall
take good care thereof and shall suffer no waste or injury thereto. At the
expiration or earlier termination of the term of this Lease, Tenant shall
surrender the Demised Premises broom clean and in the same order and condition
in which they were on the Rent Commencement Date, ordinary wear and teat and
damage by the elements, fire and other insured casualty excepted.

      Landlord shall keep and maintain in good order and repair the
base-building structure and systems, including the roof, exterior walls,
elevators, electrical, plumbing and HVAC systems, and the ground floor lobby and
other common areas and facilities of the Building.

            14. SIGNS AND ADVERTISEMENTS

      No sign, advertisement or notice shall be inscribed, painted, affixed or
displayed on any part of the outside or the inside of the Building, except with
Landlord's prior written consent and then only in such place, number, size,
color and style (i.e., Building standard lettering) as is authorized by
Landlord. If any such sign, advertisement or notice is exhibited without first
obtaining Landlord's written consent, Landlord shall have the right to remove
the same, and Tenant shall be liable for any and all expenses incurred by
Landlord by said removal, as additional rent. Nothing herein shall restrict
Tenant's right to post signs or notices within the Demised Premises not visible
from common areas of the Building or from the exterior of the Building.


                                      -20-


      Landlord agrees to display Tenant's name on the Building directory in the
size and style of lettering used by Landlord, at Tenant's expense. Tenant may
display its name on the main entry door of the Demised Premises in Building
standard color, size and style of lettering, at Tenant's expense.

      Landlord shall have the right to prohibit any published advertisement of
Tenant which in its reasonable opinion tends to impair the reputation of the
Building or its desirability as a high-quality office building, and, upon
written notice from Landlord, Tenant shall immediately refrain from and
discontinue any such advertisement.

            15. DELIVERIES AND MOVING OF TENANT'S PROPERTY

      No furniture, equipment or other bulky matter of any description shall be
received into the Building or carried in the elevators except in the manner and
during the times approved by Landlord. Tenant shall obtain Landlord's
determination prior to moving said property into the Building. All moving of
furniture, equipment and other material within the public areas shall be under
the direct control and supervision of Landlord who shall, however, not be
responsible for any damage to or charges for moving the same. Landlord shall
have the sole right to determine the load capacities of the elevators of the
Building and to determine if Tenant's property can be safely transported in the
elevators. Tenant agrees promptly to remove from the sidewalks adjacent to the
Building any of the Tenant's furniture, equipment or other material there
delivered or deposited.

            16. TENANT'S EQUIPMENT

      Tenant will not install or operate in the Demised Premises any
electrically operated equipment or other machinery, other than typewriters, word
processing machines, personal desk . top computers, adding machines, radios,
televisions, tape recorders, dictaphones, bookkeeping machines, copying
machines, clocks, and other business machines and equipment normally employed
for general office use which do not require high electricity consumption for
operation, but specifically including supplemental HVAC equipment, computer
rooms, and cafeterias), without first obtaining the prior written consent of
Landlord, who may (without reference to the aggregate amount of electricity
consumed within the Demised Premises) (i) condition such consent upon payment by
Tenant of additional rent as compensation for additional consumption of
electricity and/or other utility services, or (ii) require that such equipment
be separately metered or submetered, with Tenant paying the cost of electricity
so consumed as measured by such meter or submeter. Such additional rent shall be
in addition to Tenant's obligations, pursuant to the section of this Lease
entitled, "OPERATING EXPENSES, OPERATING COSTS AND REAL ESTATE TAXES," to pay
its proportionate share of increases in Operating Costs.

      If any or all of Tenant's equipment requires electricity consumption in
excess of the capacity of the electrical system installed by Landlord in the
Demised Premises, all additional transformers, distribution panels and wiring
that may be required to provide the amount of electricity required for Tenant's


                                      -21-


equipment shall be installed by Landlord at the cost and expense of Tenant. If
Tenant's equipment causes Tenant's consumption of electricity to exceed an
average of eight (8) watts per rentable square foot (of which two and one-half
(2.5) watts per rentable square foot shall be high voltage for lighting and five
and one half (5.5) watts per rentable square foot shall be low voltage for
general power and equipment), or if such equipment is to be consistently
operated beyond the normal Building hours of 8:00 a.m. to 6:00 p.m., Monday
through Friday, and 8:00 a.m. to 1:00 p.m. on Saturday, Landlord at its option
may install (i) a separate electric meter for the Demised Premises at Tenant's
sole cost and expense, or (ii) a separate meter for the specific equipment that
is causing Tenant's excessive consumption of electricity at Tenant's sole cost
and expense. In the event Landlord installs a separate meter for the Demised
Premises, Tenant shall then pay the cost of electricity it consumes as recorded
by such meter directly to the electric company, and an appropriate adjustment
shall be made to Tenant's proportionate share of Operating Costs to reflect
Tenant's reduced consumption of electricity because of such separate metering of
the Demised Premises. In the event Landlord separately meters the specific
equipment, Tenant shall be billed periodically by Landlord based upon such
consumption, but no adjustment shall be made to Tenant's proportionate share of
Operating Costs.

      Tenant shall not install any equipment of any kind or nature whatsoever
which will or may necessitate any changes, replacements or additions to, or in
the use of, the water system, heating system, plumbing system, air-conditioning
system, or electrical system of the Demised Premises or the Building without
first obtaining the prior written consent of Landlord. Business machines and
mechanical equipment belonging to Tenant which cause noise or vibration that may
be transmitted to the structure of the Building or to any space therein to such
a degree as to be objectionable to Landlord or to any tenant in the Building
shall be installed and maintained by Tenant, at Tenant's expense, on vibration
eliminators or other devices sufficient to eliminate such noise and vibration.

      Landlord shall have the right to prescribe the weight and position of all
heavy equipment and fixtures, including, but not limited to, data processing
equipment, record and file systems, and safes which Tenant intends to install or
locate within the Demised Premises. Tenant shall obtain Landlord's prior review
and approval before installing or locating heavy equipment and fixtures in the
Demised Premises, and if installation or location of such equipment or fixtures,
in Landlord's opinion, requires structural modifications or reinforcement of any
portion of the Demised Premises or the Building, Tenant agrees to reimburse
Landlord, as additional rent, for any and all costs incurred by Landlord to make
such required modifications or reinforcements, and such modifications or
reinforcements shall be completed prior to Tenant installing or locating such
equipment or fixtures in the Demised Premises. Tenant shall reimburse Landlord
within thirty (30) days of receipt of any statement setting forth those costs.

            17. SERVICES AND UTILITIES

      (a) Landlord shall provide the following utilities and services:

            (1) Hot and cold water and lavatory supplies, it being understood
and agreed that hot and cold water shall be furnished by Landlord only at those
points of supply provided for general use of other tenants in the Building.


                                      -22-


            (2) Automatically operated elevator service at all times.

            (3) Cleaning and char services, as specified in Exhibit E, after
normal business hours, Monday through Friday of each week, except on the
holidays listed in subparagraph (4) below.

            (4) Heat and air-conditioning in season, Monday through Friday from
8:00 a.m. to 6:00 p.m., and on Saturday from 8:00 a.m. to 1:00 p.m., except for
the following holidays: New Year's Day, Dr. Martin Luther King, Jr. Day,
Presidents' Day, Memorial Day, Fourth of July, Labor Day, Columbus Day, Veterans
Day, Thanksgiving Day, and Christmas Day, and any other national holiday
promulgated by a Presidential Executive Order or Congressional Act. Landlord
shall provide heat and air-conditioning at times in addition to those specified
in the preceding sentence at Tenant's expense, provided Tenant gives Landlord
notice prior to 1:00 p.m. on a business day in the case of after-hours service
on that business day and prior to 3:00 p.m. on the immediately preceding
business day in the case of after-hours service on a Saturday, a Sunday or a
holiday. Landlord shall charge Tenant for said after-hours services the same
rate it charges other tenants, which is $50.00 per hour per zone (each floor of
the Building being one (1) zone) on the date of execution of this Lease.
Landlord reserves the right, in its sole discretion, to reasonably increase the
hourly charge for said after-hours service, but in no event shall the rate per
hour charged Tenant be more than the rate per hour charged other tenants. In the
event the same after-hours service is also requested by other tenants of the
Building in addition to Tenant, the charge therefor to each tenant requesting
such after-hours service shall be prorated among all requesting tenants based
upon the respective square footages of each of the demised premises of the
tenants requesting such after-hours service.

            (5) Maintenance, painting and electric lighting service for all
public areas and special service areas in the Building.

            (6) A controlled-access system to the Building comparable to other
first-class office buildings in the city or county where the Building is
located.

            (7) Electricity and proper electrical facilities to furnish
sufficient electricity for equipment of Tenant installed pursuant to the section
of this Lease entitled, "TENANT'S EQUIPMENT."

      (b) In the event any public utility supplying energy requires, or
government law, regulation, executive or administrative order results in a
requirement, that Landlord or Tenant must reduce, or maintain at a certain
level, the consumption of electricity for the Demised Premises or Building,
which affects the heating, air-conditioning, lighting, or hours of operation of
the Demised Premises or Building, Landlord and Tenant shall each adhere to and
abide by said laws, regulations or executive orders without any reduction in
rent.

      (c) Landlord's inability to furnish, to any extent, these defined
services, or any cessation thereof, resulting from, but not limited to, any
causes including from entry from inspections, repairs, alterations, improvements
and installations by Landlord, its agents, employees or contractors pursuant to
the section of this Lease entitled "ENTRY FOR INSPECTIONS, REPAIRS AND
INSTALLATION," or from renovation, redecoration or rehabilitation of any area of


                                      -23-


the Building, including the lobby, or any of the surrounding public spaces,
shall not render Landlord liable for damages to either person or property, nor
be construed as an eviction of Tenant, nor work an abatement of any portion of
rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof.
Should any of the Building equipment or machinery cease to function properly for
any cause, Landlord shall use reasonable diligence to repair the same promptly,
but Tenant shall have no claim for damages or for a rebate of any portion of
rent on account of any interruptions in any services occasioned thereby or
resulting therefrom.

      (d) Notwithstanding the foregoing, if for reasons within the control of
Landlord and not caused by force majeure, any interruption, curtailment,
stoppage or suspension of the Essential Services (as hereinbelow defined) shall
continue for more than five (5) consecutive business days and shall render the
Demised Premises unusable, and if Tenant shall in fact vacate and cease using
the Demised Premises, then so long as Tenant is not in default hereunder, all
rent and additional rent due hereunder shall be abated for the period beginning
on the first (1st) consecutive business day of such failure and shall continue
until use of the Demised Premises is restored to Tenant. If due to a force
majeure event or an event beyond the control of Landlord, any interruption,
curtailment, stoppage or suspension of the Essential Services shall continue for
more than twenty (20) consecutive business days and shall render the Demised
Premises unusable, and if Tenant shall in fact vacate and cease using the
Demised Premises, then so long as Tenant is not in default hereunder, all rent
and additional rent payable hereunder shall be abated for the period beginning
on the first (1st) consecutive business day of such failure and shall continue
until use of the Demised Premises is restored to Tenant. For purposes hereof,
"Essential Services" shall mean the provision of (a) cold water, (b) one (1)
automatically-operated elevator, (c) heat and air conditioning in season, in
reasonably sufficient amounts, during the hours and days provided for in the
first sentence of item (4) of subsection (A) of this Section, and (d)
electricity.

            18. TENANT'S RESPONSIBILITY FOR DAMAGE

      Any and ail injury, breakage or damage to the Demised Premises or the
Building arising solely from any cause done by Tenant or its agents,
contractors, servants, employees and visitors, or by individuals and persons
making deliveries to or from the Demised Premises solely for the benefit of
Tenant, except as provided for in the section of this Lease entitled, "ALL RISK
PROPERTY INSURANCE," shall be repaired by Landlord at the sole expense of
Tenant. Payment of the cost of such repairs by Tenant shall be due as additional
rent with the next installment of Monthly Rent after Tenant receives a bill for
such repairs from Landlord. This provision shall not be in limitation of any
other rights and remedies which Landlord has or may have in such circumstances.

            19. ENTRY FOR INSPECTIONS. REPAIRS AND INSTALLATIONS

      Tenant shall permit Landlord, or its agents, employees or contractors,
without notice to Tenant, to enter the Demised Premises at all reasonable tunes
and in a reasonable manner, without charge to Landlord or diminution of Monthly
Rent payable by Tenant, to examine, inspect and protect the Building, and, upon
one (1) day written notice, to make such repairs as in the judgment of Landlord
may be deemed necessary to maintain or protect the Building, or to exhibit the


                                      -24-


Demised Premises to prospective tenants during the last year of the term of this
Lease. Landlord shall use reasonable efforts to minimize interference to
Tenant's business when making repairs, but Landlord shall not be required to
perform the repairs at a time other than during normal working hours. In
connection with any such non-emergency entry, Tenant shall have the right to
have one of its personnel accompany Landlord's representative(s) throughout the
Demised Premises.

      In the event of an emergency, Landlord may enter the Demised Premises
without notice and make whatever repairs are necessary to protect the Building.

      Tenant shall permit Landlord, or its agents, employees or contractors,
upon no less than ten (10) days prior written notice to Tenant, to enter the
Demised Premises at reasonable times and in a reasonable manner, without charge
to Landlord or diminution of Monthly Rent payable by Tenant, to make
installations related to the construction of pre-occupancy tenant work being
performed by Landlord for other tenants of the Building, to make repairs,
alterations and improvements arising due to repairs, alterations and
improvements to any areas adjoining the Demised Premises, to erect, use and
maintain pipes and conduits in and through the Demised Premises, or to make
installations, improvements and repairs to utility services of the Building
located in or about the Demised Premises. Landlord shall use reasonable efforts
to minimize interferences with Tenant's business operations, but except in
unusual circumstances, Landlord shall not be required to perform such work at a
time other than normal working hours. In connection with any such non-emergency
entry, Tenant shall have the right to have one of its personnel accompany
Landlord's representative(s) throughout the Demised Premises.

            20. INSURANCE RATING

      Tenant shall not conduct or permit to be conducted any activity, or place
any equipment or property in or about the Demised Premises that will increase in
any way the rate of All Risk Property insurance or other insurance on the
Building, unless consented to by Landlord. Landlord's consent may be conditioned
upon Tenant's payment of any costs arising directly or indirectly from such
increase. If any increase in the rate of All Risk Property insurance or other
insurance on the Building is stated by any insurance company or by the
applicable Insurance Rating Bureau to be due to Tenant's activity, equipment or
property in or about the Demised Premises, said statement shall be conclusive
evidence that the increase in such rate is due to such activity, equipment or
property and, as a result thereof, Tenant shall be liable for such increase. Any
such rate increase and related costs incurred by Landlord shall be deemed
additional rent due and payable by Tenant to Landlord upon receipt by Tenant of
a written statement of the rate increase and costs. Tenant may contest, at its
sole cost and expense, any insurance rate increase, provided such action by
Tenant will not adversely affect the insurance coverage of Landlord.

            21. INDEMNITY AND PUBLIC LIABILITY INSURANCE

      (a) Tenant shall indemnify and save harmless Landlord, or its mortgagees
and its Agent from any and all liability, damage, expense, cause of action,
suits, claims, judgments and cost of defense arising from injury to person or
personal property in and on the Demised Premises, or upon any adjoining
sidewalks or public areas of the Building, which arise out of the act, failure
to act or negligence of Tenant, its agents or employees.


                                      -25-


      (b) Tenant shall, at its sole cost, carry and keep in full force and
effect at all times during the term of this Lease, a commercial general
liability policy with (i) no exclusion for contractual liability assumed
hereunder, (ii) a severability of interest endorsement, and (iii) limits of not
less then Two Million Dollars ($2,000,000) combined single limit per occurrence
and not less then Two Million Dollars ($2,000,000) in the aggregate for bodily
injury, sickness or death and property damage, and umbrella coverage of not less
then Five Million Dollars ($5,000,000). Landlord shall have the right to
reasonably increase such coverage limits consistent with requirements of owners
of first class office buildings in Annapolis, Maryland from time to time.

            22. WORKER'S COMPENSATION INSURANCE

      Tenant shall carry and keep in full force and effect at all times during
the term of this Lease, at its sole cost, worker's compensation or similar
insurance in form and amounts required by law. Such insurance shall contain
waiver of subrogation provisions in favor of Landlord, its mortgagees and its.
Agent.

            23. ALL RISK PROPERTY INSURANCE

      Landlord shall obtain and maintain All Risk Property insurance covering
the Building. Tenant shall obtain and maintain throughout the term of this Lease
and any extension periods All Risk Property insurance insuring against damage to
and loss of tenant improvements, fixtures, equipment, furniture, and all other
personal property in and about the Demised Premises, which policy shall name
Landlord and its mortgagees as loss payee. Landlord and Tenant hereby release
each other and waive any claims they may have against the other for loss or
damage to the Building, Demised Premises, tenant improvements, fixtures,
equipment and/or any other personal property arising from a risk insured against
under the All Risk Property insurance policies to be carried by Landlord and
Tenant, as required above, even though such loss or damage was caused by the
negligence of Landlord and Tenant, their agents or employees. Landlord and
Tenant agree to obtain and maintain throughout the term of this Lease
endorsements to their respective All Risk Property policies waiving the right of
subrogation of their insurance companies against the other party and its agents
and employees and Landlord's mortgagees. Except to the extent expressly provided
herein, nothing contained in this Lease shall relieve Landlord or Tenant of any
liability to each other or to their insurance carriers which Landlord or Tenant
may have under law or the provisions of this Lease in connection with any damage
to the Building, Demised Premises, tenant improvements, fixtures, equipment,
furniture, and all other personal property, by fire or other casualty.

            24. TENANT'S CONTRACTOR'S INSURANCE

      Tenant shall require any contractor of Tenant performing work on the
Demised Premises to carry and maintain, at no expense to Landlord:

      (a) commercial general liability insurance, including contractor's
liability coverage, contractual liability coverage, completed operations
coverage for a period of not less than two years following substantial
completion of the applicable work, waiver of subrogation against Landlord and
its mortgagees and contractor's protective liability coverage, to afford
protection with limits, for each occurrence, of not less than One Million
Dollars ($1,000,000.00) with respect to personal injury, death, or property
damage; and


                                      -26-


      (b) worker's compensation or similar insurance in form and amounts
required by law.

            25. REQUIREMENTS FOR TENANT'S INSURANCE POLICIES

      The company or companies writing any insurance which Tenant is required to
carry and maintain or cause to be carried or maintained pursuant to this Lease
as well as the form of such insurance shall at all times be subject to
Landlord's approval and any such company or companies shall be a good and
responsible insurance company, licensed to do business in the State of Maryland.
Tenant's and Tenant's contractors' public liability insurance policies and
certificates evidencing such insurance shall name Landlord, its mortgagees and
its Agent as additional insured. All of Tenant's insurance policies and
certificates evidencing such insurance shall contain a provision by which the
insurer agrees that such policy shall not be cancelled except after thirty (30)
days written notice to Landlord. Tenant agrees to provide to Landlord no later
than five (5) days prior to taking possession of the Demised Premises (and no
later than five (5) days prior to each renewal date thereof) the certificates
evidencing all insurance required hereunder; Landlord may withhold delivery of
the Demised Premises without delaying the Commencement Date, or triggering any
abatement of rent, if Tenant fails to provide Landlord with these certificates.

      Any insurance carried or to be carried by Tenant hereunder shall be
primary over any policy that might be carried by Landlord or its Agent If Tenant
shall fail to perform any of its obligations regarding the acquisition and
maintenance of insurance, Landlord may perform the same and the cost of same
shall be deemed additional rent, payable upon Landlord's demand.

            26. LIABILITY FOR DAMAGE TO PERSONAL PROPERTY AND PERSON

      All personal property of Tenant, its employees, agents, subtenants,
business invitees, licensees, customers, clients, family members, guests or
trespassers, in and on the Demised Premises shall be and remain in and on the
Demised Premises and the Building at the sole risk of said parties and Landlord
shall not be liable to any such person or party for any damage to, or loss of
personal property thereof, including loss or damage arising from, (a) any act,
including theft, or any failure to act, of any other persons, (b) the leaking of
the roof, (c) the bursting, rupture, leaking or overflowing of water, sewer or
steam pipes, (d) the rupture or leaking of heating or plumbing fixtures,
including security and protective systems, (e) short-circuiting or malfunction
of electrical wires or fixtures, including security and protective systems or
(f) the failure of the heating or air conditioning systems. Landlord shall also
not be liable for the interruption or loss to Tenant's business arising from any
of the above-described acts or causes. Tenant specifically agrees to save
Landlord harmless in all such cases.

      Landlord shall not be liable for any personal injury to Tenant, Tenant's
employees, agents, business invitees, licensees, customers, clients, family
members, guests or trespassers arising from the use, occupancy and condition of
the Demised Premises or the Building, unless such party establishes that there
has been negligence or a willful act or failure to act on the part of Landlord,
its agents or employees.


                                      -27-


            27. DAMAGE TO THE BUILDING AND/OR THE DEMISED PREMISES

      If the Demised Premises is damaged by fire, casualty or other event
insured against by Landlord's All Risk Property insurance policy covering the
Building, and the Demised Premises can be fully repaired, in Landlord's opinion,
within 180 days from the date of the insured fire, casualty or other event,
Landlord, at Landlord's expense, shall repair such damage, provided, however,
Landlord shall have no obligation to repair any damage to, or to replace,
Tenant's non building standard tenant improvements or any other property located
in the Demised Premises. Except as otherwise provided herein, if the entire
Demised Premises is rendered untenantable by reason of the insured fire,
casualty or other event, then Monthly Rent shall abate for the period from the
date of such damage to the date when such damage is repaired, and if only a
portion of the Demised Premises is so rendered untenantable, then Monthly Rent
shall abate for such period in the proportion which the area of the portion of
the Demised Premises so rendered untenantable bears to the total area of the
Demised Premises, provided, however, if, prior to the date when all of such
damage is repaired, any portion of the Demised Premises so damaged shall be
rendered tenantable and shall be used or occupied by Tenant or any person
claiming through or under Tenant, then the amount by which the Monthly Rent
shall abate shall be equitably apportioned for the period from the date of any
such use or occupancy to the date when all such damage is repaired. No
compensation or claim or reduction of rent will be allowed or paid by Landlord
by reason of inconvenience, annoyance, or injury to business arising from the
necessity of repairing the Demised Premises or any portion of the Building of
which they are a part.

      Notwithstanding the foregoing, if, prior to or during the term of this
Lease, (a) the Demised Premises is so damaged that, in Landlord's opinion, the
Demised Premises cannot be fully repaired within 180 days from the date the
damage occurred, or (b) the Building is so damaged that, in Landlord's opinion,
substantial repair or reconstruction of the Building shall be required (whether
or not the Demised Premises is damaged or rendered untenantable), then, in any
of such events, Landlord, at its option, may give to Tenant, within sixty (60)
days after such fire or other casualty, thirty (30) days notice of termination
of this Lease and, in the event such notice is given, this Lease shall terminate
(whether or not the term shall have commenced) upon the expiration of such
thirty (30) days with the same effect as if the date of expiration of such
thirty (30) days were the date definitely fixed for expiration of the term of
the Lease, and the then-applicable Monthly Rent shall be apportioned as of such
date, including any rent abatement as provided above.

      In the event that Landlord's restoration of the Demised Premises or access
thereto is not substantially completed by Landlord within two hundred ten (210)
days from the date of the damage, Tenant shall also have the right to terminate
this Lease by delivering thirty (30) days prior written notice to Landlord and
its mortgagees, no later than two hundred and forty (240) days from the date of
the damage, of the exercise of such right. In the event the restoration of the
Demised Premises is substantially completed within such thirty (30) day period,
such right of termination shall be deemed to be void and without effect.


                                      -28-


            28. DEFAULT OF TENANT

      This Lease shall, at the option of Landlord, cease and terminate if (i)
Tenant fails to pay rent, including any installment of Monthly Rent or any
additional rent, although no legal or formal demand has been made, and such
failure to pay rent continues for a period of five (5) days after written notice
addressed to Tenant has been delivered by Landlord to the Demised Premises, or
(ii) Tenant violates or fails to perform any of the other conditions, covenants
or agreements of this Lease made by Tenant, and any violation or failure to
perform any of those conditions, covenants or agreements continues for a period
often (10) days after written notice thereof has been delivered by Landlord to
Tenant, or, in cases where the violation or failure to perform cannot be
corrected within ten (10) days, Tenant does not begin to correct the violation
or failure to perform within ten (10) days after receiving Landlord's written
notice and/or Tenant thereafter does not diligently pursue the correction of the
violation or failure to perform. Any said violation or failure to perform or to
pay any rent, if left uncorrected, shall operate as a notice to quit, any
further notice to quit or notice of Landlord's intention to re-enter being
hereby expressly waived. Landlord may thereafter proceed to recover possession
under and by virtue of the provisions of the laws of the jurisdiction in which
the Building is located or by such other proceedings, including re-entry and
possession, as may be applicable. If Landlord elects to terminate this Lease,
everything herein contained on the part of Landlord to be done and performed
shall cease without prejudice to the right of Landlord to recover from Tenant
all rent accruing up to and through the date of termination of this Lease or the
date of recovery of possession of the Demised Premises by Landlord, whichever is
later. Should this Lease be terminated before the expiration of the term of this
Lease by reason of Tenant's default as hereinabove provided, or if Tenant
abandons or vacates the Demised Premises before the expiration or termination of
the term of this Lease, the Demised Premises may be relet by Landlord for such
rent and upon such terms as are not unreasonable under the circumstances, and,
if the full rent hereinabove provided is not realized by Landlord, Tenant shall
be liable for all damages sustained by Landlord, including, without limitation,
deficiency in rent, reasonable attorneys' fees, brokerage fees, and expenses of
placing the Demised Premises in first-class rentable condition. In the event
Landlord terminates the Lease, Landlord shall use reasonable efforts to mitigate
its damages in accordance with applicable law. Any damage or loss of rent
sustained by Landlord may be recovered by Landlord, at Landlord's option, at the
time of the reletting, or in separate actions, from time to time, as said damage
shall have been made more easily ascertainable by successive relettings, or, at
Landlord's option, may be deferred until the expiration of the term of this
Lease, in which event the cause of action shall not be deemed to have accrued
until the date of expiration of said term. The provisions contained in this
section shall be in addition to and shall not prevent the enforcement of any
claim Landlord may have against Tenant for anticipatory breach of the unexpired
term of this Lease.

            29. REPEATED DEFAULTS

      If Tenant is in default of this Lease for the same or substantially the
same reason more than twice during any twelve (12) month period during the term
of this Lease (Tenant having received notice of each such default), then, at
Landlord's election, Tenant shall not have any right to cure such repeated
default, the terms and conditions of the section of this Lease entitled,
"DEFAULT OF TENANT," notwithstanding. In the event of Landlord's election not to
allow a cure of a repeated default, Landlord shall have all of the rights
provided for in that section of this Lease for an uncured default.


                                      -29-


            30. WAIVER

      If Landlord institutes legal or administrative proceedings against Tenant
and a compromise or settlement thereof is made, the same shall not constitute a
waiver of Tenant's obligations to comply with any covenant, agreement or
condition, nor of any of Landlord's rights hereunder. No waiver by Landlord of
any breach of any covenant, condition, or agreement specified herein shall
operate as an invalidation or as a continual waiver of such covenant, condition
or agreement itself, or of any subsequent breach thereof. No payment by Tenant
or receipt by Landlord (or any party designated by Landlord to receive any
payments of rent) of a lesser amount than the amount of rent due Landlord shall
be deemed to be other than on account of the earliest stipulated rent, nor shall
any endorsement or statement on any check or letter accompanying a check for
payment of such rent be deemed an accord and satisfaction, and Landlord, or any
party designated by Landlord, may accept such check or payment without prejudice
to Landlord's right to recover the balance of such rent or to pursue any other
remedy provided for in this Lease or in the governing law of the jurisdiction in
which the Building is located. No re-entry by Landlord, and no acceptance by
Landlord of keys from Tenant, shall be considered an acceptance of a surrender
of the Lease.

            31. SUBORDINATION

      Unless Mortgagee shall otherwise elect as provided for in this Section,
this Lease is subject and subordinate to the lien of all and any mortgages
(which term "mortgages" shall include both construction and permanent financing
and shall include deeds of trust and similar security instruments) which may now
or hereafter encumber or otherwise affect the real estate (including the
Building) of which the Demised Premises is a part, or Landlord's leasehold
interest therein, and to all and any renewals, extensions, modifications,
recastings or refinancings thereof. In confirmation of such subordination,
Tenant shall, at Landlord's request, promptly execute any requisite or
appropriate certificate or other document. Tenant hereby constitutes and
appoints Landlord as Tenant's attorney-in-fact to execute any such certificate
or other document for or on behalf of Tenant if Tenant does not execute said
certificate or document within five (5) days after receipt thereof. Landlord
shall provide to Tenant a Subordination, Non-Disturbance and Attornment
Agreement from its current lender and from any future lenders on such lender's
standard form. The current lender's standard form is attached hereto as Exhibit
G.

      Tenant agrees that in the event any proceedings are brought for the
foreclosure of any such mortgage, Tenant shall attorn to the purchaser at such
foreclosure sale, if requested to do so by such purchaser. Tenant shall also
recognize such purchaser as the Landlord under this Lease. Tenant waives the
provisions of any statute or rule of law, now or hereafter in effect, which may
give or purport to give Tenant any right to terminate or otherwise adversely
affect this Lease and the obligations of Tenant hereunder in the event that any
such foreclosure proceeding is prosecuted or completed.

      If the Building, the Demised Premises or any part respectively thereof is
at any time subject to a mortgage or a deed of trust or other similar
instrument, and this Lease or the rents are assigned to such mortgagees, trustee


                                      -30-


or beneficiary, and Tenant is given written notice thereof including the post
office address of such assignee, then Tenant may not terminate this Lease for
any default on the part of Landlord without first giving written notice by
certified or registered mail, return receipt requested, to such Assignee,
Attention: Mortgage Loan Department. The notice shall specify the default in
reasonable detail, and afford such assignee a reasonable opportunity to make
performance, at its election, for and on behalf of Landlord.

      If Landlord's mortgagee shall so elect by notice to Tenant or by the
recording of a unilateral declaration of subordination, this Lease and Tenant's
rights hereunder shall be superior and prior in right to the mortgage of which
such mortgagee has the benefit, with the same force and effect as if this Lease
had been executed, delivered and recorded prior to the execution, delivery and
recording of such mortgage, subject, nevertheless, to such conditions as may be
set forth in any such notice or declaration.

            32. CONDEMNATION

      If the whole or a substantial part of the Demised Premises or the Building
is condemned or acquired in lieu of condemnation by any governmental authority
for any public or quasi-public use or purpose, then the term of this Lease shall
cease and terminate as of the date when title vests in such governmental
authority. Tenant shall have no claim against Landlord or the condemning
authority for any portion of the amount of the condemnation award or settlement
that Tenant claims as its damages arising from such condemnation or acquisition,
or for the value of any unexpired term of the Lease. Tenant may make a separate
claim against the condemning authority for a separate award for the value of any
of Tenant's tangible personal property and trade fixtures, for moving and
relocation expenses and for such business damages and/or consequential damages
as may be allowed by law, provided the same shall not diminish the amount of
Landlord's award.

      If less than a substantial part of the Demised Premises is condemned or
acquired in lieu of condemnation by any governmental authority for any public or
quasi-public use or purpose, the rent shall be equitably adjusted on the date
when title vests in such governmental authority and the Lease shall otherwise
continue in full force and effect. For purposes of this section, a "substantial
part of the Demised Premises" shall be considered to have been taken if
twenty-five percent (25%) or more of the Demised Premises is condemned or
acquired in lieu of condemnation, or if less than twenty-five percent (25%) of
the Demised Premises is taken and the portion of the Demised Premises taken
renders the entire Demised Premises untenantable for the conduct of Tenant's
business.

      If twenty-five percent (25%) or more of the Building is condemned (whether
or not the Demised Premises shall have been condemned) and Landlord elects to
demolish the remainder of the Building, Landlord may elect to terminate this
Lease.

            33. RULES AND REGULATIONS

      Tenant, its agents and employees, shall abide by and observe the rules and
regulations attached hereto as Exhibit C and such other reasonable rules and
regulations as may be promulgated from time to time by Landlord for the
operation and maintenance of the Building, provided a copy thereof is sent to


                                      -31-


Tenant. Nothing contained in this Lease shall be construed to impose upon
Landlord any duty or obligation to enforce such rules and regulations, or the
terms, conditions or covenants contained in any other lease as against any other
tenant, and Landlord shall not be liable to Tenant for violation of the same by
any other tenant, any other tenant's employees, agents, business invitees,
licensees, customers, clients, family members or guests. Landlord shall not
discriminate against Tenant in the enforcement of any rule or regulation. Tenant
shall also comply with any rules and regulations which may be promulgated by the
Council of Unit Owners.

            34. RIGHT OF LANDLORD TO CURE TENANT'S DEFAULT

      If Tenant defaults in the making of any payment to any third party, or
doing any act required to be made or done by Tenant relating to the Demised
Premises, then Landlord may, but shall not be required to, make such payment or
do such act, and the amount of the expense thereof, if made or done by Landlord,
with interest thereon at a rate equal to two (2) percentage points above the
then applicable Wall Street Journal Prime Rate (U.S. money center commercial
banks) or its successor (or in the absence thereof such similar rate reasonably
designated by Landlord), accruing from the date paid by Landlord, shall be paid
by Tenant to Landlord and shall constitute additional rent hereunder due and
payable by Tenant upon receipt of a written statement of costs from Landlord.
The making of such payment or the doing of such act by Landlord shall not
operate to cure Tenant's default, nor shall it prevent Landlord from the pursuit
of any remedy to which Landlord would otherwise be entitled.

            35. LATE CHARGES

      If Tenant shall fail to pay any installment of rent, including Monthly
Rent, additional rent or other charges to be paid by Tenant pursuant to this
Lease within five (5) days after the same becomes due and payable, Tenant shall
be obligated to pay a late charge equal to [***] percent ([***]%) of any rent or
other charge not so paid when due. In addition, any installments of Monthly
Rent, additional rent or other charges to be paid by Tenant pursuant to this
Lease which are not paid by Tenant within five (5) days after the same becomes
due and payable shall bear interest at a rate equal to [***] percentage points
above the then applicable Wall Street Journal Prime Rate (U.S. money center
commercial banks) or its successor (or in the absence thereof such similar rate
reasonably designated by Landlord), accruing from the date such installment or
payment became due and payable to the date of payment thereof by Tenant. Such
interest shall constitute additional rent due and payable to Landlord by Tenant
upon the date of payment of the delinquent payment referenced above.
Notwithstanding the foregoing provisions of this Section to the contrary,
Landlord shall waive such late charge and interest the first time during any
twelve (12) month period that Tenant fails to pay any Monthly Rent, additional
rent or other charges to be paid by Tenant pursuant to this Lease within five
(5) days after the same becomes due and payable, provided that such failure is
cured prior to the expiration of the notice and cure period set forth in Section
28 of this Lease.

- ----------
*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                      -32-


            36. NO PARTNERSHIP

      Nothing contained in this Lease shall be deemed or construed to create a
partnership or joint venture of or between Landlord and Tenant, or to create any
other relationship between the parties hereto other than that of landlord and
tenant.

            37. NO REPRESENTATIONS BY LANDLORD

      Neither Landlord nor any agent or employee of Landlord has made any
representations or promises with respect to the Demised Premises or the Building
except as herein expressly set forth, and no rights, privileges, easements or
licenses are acquired by Tenant except as herein expressly set forth. Tenant, by
taking possession of the Demised Premises, shall accept the same in the then "as
is" condition, except for latent defects and punch list items.

            38. BROKER AND AGENT

      Landlord and Tenant each represent and warrant one to another that, except
as hereinafter set forth, neither of them has employed any broker in carrying on
the negotiations, or had any dealings with any broker, relating to this Lease.
Tenant represents that it has employed CB Richard Ellis as its broker; Landlord
represents that it has also employed CB Richard Ellis as its broker, and further
agrees to pay the commissions accruing to such identified broker pursuant to
certain outside agreements). Landlord shall indemnify and hold Tenant harmless,
and Tenant shall indemnify and hold Landlord and its mortgagees harmless, from
and against any claim or claims for brokerage or other commission arising from
or out of any breach of the foregoing representation and warranty by the
respective indemnitors.

      Landlord appoints and Tenant recognizes, until such time as Landlord
otherwise notifies Tenant in writing, CB Richard Ellis as Landlord's exclusive
agent (referred to in this Lease as "Agent") for the management and operations
of the Building and for the service of process, issuance and receipt of all
notices, and instituting and processing all legal actions on behalf of Landlord
under this Lease.

            39. WAIVER OF JURY TRIAL

      Landlord and Tenant hereby waive trial by jury in any action, proceeding
or counterclaim brought by either of the parties hereto against the other on or
with respect to any matter whatsoever arising out of or in any way connected
with this Lease, the relationship of Landlord and Tenant hereunder, Tenant's use
or occupancy of the Demised Premises, and/or any claim of injury or damage.

            40. ENFORCEMENT OF LEASE

      In the event either party is required or elects to take legal action to
enforce against the other party the performance of the other party's obligations
under this Lease, then the non-prevailing party shall immediately reimburse the
prevailing party for all costs and expenses including, without limitation,
reasonable attorneys' fees, incurred by the prevailing party in its successful
prosecution or defense of that legal action.


                                      -33-


            41. NOTICES

      All notices or other communications hereunder shall be in writing and
shall be deemed duly given if delivered in person; by nationally recognized
commercial delivery service, next business day delivery, certified mail, return
receipt requested; or by registered mail, postage prepaid: (A) if to Landlord,
at c/o Jerome J. Parks Companies, 15 School Street, Annapolis, Maryland 21404,
Attn: Jerome J. Parks; and (B) if to Tenant, at 175 Admiral Cochrane Drive,
Suite 101, Annapolis, Maryland 21401 prior to the Rent Commencement Date and at
the Demised Premises thereafter. The party to receive notices and the place
notices are to be sent for either Landlord or Tenant may be changed by notice
given pursuant to the provisions of this section.

            42. ESTOPPEL CERTIFICATES

      Tenant agrees, at any time and from time to time, upon not less than five
(5) days prior written notice by Landlord, to execute, acknowledge and deliver
to Landlord a statement in writing (i) certifying that this Lease is unmodified
and in full force and effect (or, if there have been modifications, that the
Lease is in full force and effect as modified and stating the modifications),
(ii) stating the dates to which the rent and other charges hereunder have been
paid by Tenant, (iii) stating whether or not, to the best knowledge of Tenant,
Landlord is in default in the performance of any covenant, agreement or
condition contained in this Lease, and, if so, specifying each such default of
which Tenant may have knowledge, (iv) stating the address to which notices to
Tenant should be sent and, if Tenant is a corporation, the name and address of
its registered agent in the jurisdiction in which the Building is located, (v)
agreeing not to pay Monthly Rent more than thirty (30) days in advance or to
amend the Lease without the consent of any mortgage lender having a security
interest in the Building, and (vi) certifying such other matters related to this
Lease as Landlord may reasonably request Any such statement delivered pursuant
hereto may be relied upon by any owner of the Building, any prospective
purchaser of the Building, any mortgagee or prospective mortgagee of the
Building or of Landlord's interest, or any prospective assignee of any such
mortgage.

            43. HOLDING OVER

      In the event Tenant does not immediately surrender the Demised Premises on
the date of expiration of the term of this Lease or any extension period
thereof, Tenant shall, by virtue of this section of the Lease, become a tenant
by the month and hereby agrees to pay to Landlord a Monthly Rent equal to twice
the amount of (a) the Monthly Rent in effect during the last month of the term
of this Lease as it may have been extended, plus (b) the one-twelfth (l/12th)
payment made with Monthly Rent pursuant to the section of this Lease entitled,
"OPERATING EXPENSES, OPERATING COSTS AND REAL ESTATE TAXES." The month-to-month
tenancy shall commence with the first day next after the expiration of the term
of this Lease. Tenant as a month-to-month tenant shall continue to be subject to
all of the conditions and covenants of this Lease. Tenant shall give to Landlord
at least thirty (30) days written notice of any intention to quit the Demised
Premises. Tenant shall be entitled to thirty (30) days written notice to quit
the Demised Premises, except in the event of nonpayment of the modified Monthly
Rent in advance, in which event Tenant shall not be entitled to any notice to
quit, the usual thirty (30) days notice to quit being hereby expressly waived.


                                      -34-


      Notwithstanding the foregoing, in the event Tenant holds over after the
expiration of the term of the Lease or extension period thereof, and Landlord
desires to regain possession of the Demised Premises promptly at the expiration
of the term of this Lease or extension period thereof, then at any time prior to
Landlord's acceptance of modified Monthly Rent from Tenant as a month-to-month
tenant hereunder, Landlord, at its option, may forthwith re-enter and take
possession of the Demised Premises without process, or by any legal process in
force in the jurisdiction in which the Building is located.

            44. RIGHTS RESERVED BY LANDLORD

      Landlord shall have the following rights, exercisable without notice to
Tenant, without liability for damage or injury to property, person or business
and without effecting an eviction, constructive or actual, or disturbance of
Tenant's use or possession of the Demised Premises or giving rise to any claim
for set-off, abatement of rent or otherwise:

      (a) To change the Building's name or street address;

      (b) To affix, maintain and remove any and all signs on the exterior and
interior of the Building;

      (c) To designate and approve, prior to installation, all window shades,
blinds, drapes, awnings, window ventilators, lighting and other similar
equipment to be installed by Tenant that may be visible from the exterior of the
Demised Premises or the Building;

      (d) To decorate and make repairs, alterations, additions and improvements,
whether structural or otherwise, in, to and about the Building and any part
thereof, and, during the continuance of any of such work, to temporarily close
doors, entry ways, and common areas in the Building and to interrupt or
temporarily suspend Building services and facilities, all without affecting
Tenant's obligations hereunder, so long as the Demised Premises remain
tenantable;

      (e) To grant to anyone the exclusive right to conduct any business or
render any service in the Building, provided Tenant is not thereby excluded from
uses expressly permitted herein;

      (f) To alter, relocate, reconfigure and reduce the common areas of the
Building, as long as the Demised Premises remain reasonably accessible; and

      (g) To alter, relocate, reconfigure, reduce and withdraw the common areas
located outside the Building, including parking and access roads, as long as the
Demised Premises remain reasonably accessible.

            45. COVENANTS OF LANDLORD

      Landlord covenants that it has legal title to the Building and has
(subject to Section 48 hereof) the right to make this Lease for the term of the
Lease aforesaid. Further Landlord covenants that if Tenant shall pay the rent
and shall perform all of the covenants, agreements and conditions specified in
this Lease to be performed by Tenant, Tenant shall, for the term of the Lease,
freely, peaceably and quietly occupy and enjoy the full possession of the


                                      -35-


Demised Premises without molestation or hindrance by Landlord, its agents or
employees. Entry in the Demised Premises for inspections, repairs, alterations,
improvements and installations by Landlord, its agents, employees or contractors
pursuant to the section of this Lease entitled "INSPECTIONS, REPAIRS AND
INSTALLATIONS" and the exercise by Landlord of Landlord's rights reserved in the
section of this Lease entitled "RIGHTS RESERVED BY LANDLORD" shall not
constitute a breach by Landlord of this covenant, nor entitle Tenant to any
abatement or reduction of rent. In addition, planned activities of Landlord,
whether in the form of renovation, redecoration or rehabilitation of any area of
the Building, including the lobby, and any of the surrounding public spaces by
Landlord or in the form of organized activities, public or private, shall not be
deemed violation by Landlord of Landlord's covenant of quiet enjoyment
benefiting Tenant

            46. LIEN FOR RENT

      In consideration of the mutual benefits arising under this Lease, Tenant
hereby grants to Landlord a lien on all tangible personal property of Tenant now
or hereafter placed in or upon the Demised Premises (except such part of any
tangible personal property as may be exchanged, replaced, or sold from time to
time in the ordinary course of business operations or trade of Tenant), and such
tangible personal property shall be and remain subject to such lien of Landlord
for payment of all rent and other sums agreed to be paid by Tenant herein. Said
lien shall be in addition to and cumulative upon Landlord's liens provided by
law. Said lien shall be second in priority to the rights of any landlord of, or
the mortgagee of, any equipment or personal property under any equipment lease
or mortgage, the rights of the seller under any conditional sales contract, or
the rights of the lender under any leasehold mortgage consented to by Landlord.
Tenant shall reimburse to Landlord, as additional rent, all costs and expenses,
including reasonable attorney's fees (not to exceed $[***], which Landlord
incurs by reason of or in connection with any request for waiver of Landlord's
lien hereunder or enforcement of Landlord's rights hereunders such costs and
expenses to be due and payable within fifteen (15) days of receipt of a
statement of such costs and expenses from Landlord.

            47. NO OPTION

      The submission of an unsigned copy of this document to Tenant shall not
constitute an offer or option to lease the Demised Premises. This Lease shall
become effective and binding only upon execution and delivery by both Landlord
and Tenant.

            48. LENDER APPROVAL

      If Landlord does not receive consent of Landlord's current lenders), if
any, with respect to the terms and provisions of this Lease, Landlord may
terminate this Lease.

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*** Portions of this page have been omitted pursuant to a Request for
Confidential Treatment filed separately with the SEC.


                                      -36-


            49. GENDER

      Feminine or neuter pronouns shall be substituted for those of the
masculine form, and the plural shall be substituted for the singular number, in
any place or places herein in which the context may require such substitution or
substitutions.

            50. BENEFIT AND BURDEN

      The terms and provisions of this Lease shall be binding upon and shall
inure to the benefit of the parties hereto and each of their respective
representatives, successors and permitted assigns. Landlord may freely and fully
assign its interest hereunder. In the event of any sale or transfer of the
Building by operation of law or otherwise by the party named as Landlord
hereunder (or any subsequent successor, transferee or assignee), then said
party, whose interest is thus sold or transferred shall be and is completely
released and forever discharged from and with respect to all covenants,
obligations and liabilities as Landlord hereunder after the date of such sale or
transfer, but only to the extent such obligations are assumed by the transferee
(which assumption may be documented pursuant to a general assignment of leases).

      In the event Landlord shall be in default under this Lease, and if as a
consequence of such default, Tenant shall recover a money judgment against
Landlord, such judgment shall be satisfied only out of the proceeds of sale
received upon execution of such judgment against the right, title and interest
of Landlord in the Building as the same may then be constituted and encumbered
and Landlord shall not be liable for any deficiency. In no event shall Tenant
have the right to levy execution against any property of Landlord other than its
interests in the Building.

            51. RENTABLE AREA

      Any representations in this Lease regarding the rentable square footage
figures for the Building and the Demised Premises have been conclusively
accepted and agreed upon by Landlord and Tenant; no remeasurement of the
Building or the Demised Premises shall result in any modification of this Lease
or adjustment of any rent payable hereunder. The Building and the Demised
Premises have been measured in accordance with the Standard Method of Measuring
Floor Areas in Office Buildings (ANSI/BOMA Z-65.1 - 1996).

            52. GOVERNING LAW

      This Lease and the rights and obligations of Landlord and Tenant hereunder
shall be governed by the laws of the jurisdiction in which the Building is
located. The parties acknowledge and agree that no suit for breach of lease may
be filed by either party which claim accrued more than three (3) years prior to
the date the suit is filed.

            53. BANKRUPTCY

      If Tenant or any guarantor of this Lease becomes bankrupt or insolvent, or
files any debtor proceedings, or if Tenant or any guarantor takes or has taken
against it in any court pursuant to any statute either of the United States or
of any State a petition in bankruptcy or insolvency or for reorganization or for
the appointment of a receiver or trustee of all or a portion of Tenant's or any


                                      -37-


such guarantor's property, or if Tenant or any such guarantor makes an
assignment for the benefit of creditors, or petitions for or enters into an
arrangement, then this Lease shall terminate and Landlord, in addition to any
other rights or remedies it may have, shall have the immediate right of reentry
and may remove all persons and property from the Demised Premises and such
property may be removed and stored in a public warehouse or elsewhere at the
cost of, and for the account of Tenant, all without service of notice or resort
to legal process and without being deemed guilty of trespass, or becoming liable
for any loss or damage which may be occasioned thereby.

            54. SAVINGS CLAUSE

      If any provision of this Lease or the application thereof to any person or
circumstance is to any extent held invalid, then the remainder of this Lease or
the application of such provision to persons or circumstances other than those
as to which it is held invalid shall not be affected thereby, and each provision
of the Lease shall be valid and enforced to the fullest extent permitted by law.

            55. AUTHORITY OF TENANT

      If Tenant executes this Lease as a corporation, limited partnership,
limited liability company or any other type of entity, Tenant does hereby
represent and warrant that Tenant is a duly organized and validly existing
corporation, limited partnership, limited liability company or other type of
entity, that Tenant is hi good standing and qualified to do business in the
jurisdiction where the Building is located, that Tenant has full right, power
and authority to enter into this Lease, and that each person signing on behalf
of Tenant is fully empowered and authorized to do so. Upon Landlord's request,
Tenant shall provide to Landlord evidence reasonably satisfactory to Landlord
confirming the foregoing representations and warranties. Further, Tenant agrees
to promptly execute all necessary and reasonable applications or documents
confirming Tenant's registration and qualification as requested by Landlord or
its representatives, or required by the jurisdiction in which the Building is
located to permit the issuance of necessary permits and certificates for
Tenant's use and occupancy of the Demised Premises. Any delay or failure by
Tenant in submitting such evidence, application or document so executed shall
not serve to delay the Commencement Date or delay or waive Tenant's obligations
to pay rent hereunder.

            56. JOINT AND SEVERAL LIABILITY

      If two or more individuals, corporations, partnerships or other business
associations (or any combination of two or more thereof) shall sign this Lease
as Tenant, the liability of each of them shall be joint and several. In like
manner, if Tenant is a partnership or other business association the members of
which are, by virtue of statute or general law, subject to personal liability,
the liability of each individual who was, is or becomes a member of such
partnership or association at any time from the date of execution of this Lease
to and including the expiration or earlier termination of the term of this
Lease, shall be joint and several.


                                      -38-


            57. FINANCIAL STATEMENTS

      Upon Landlord's written request Tenant shall (except when Tenant is
subject to the reporting requirements of Sections 12 or 15(d) of the Securities
Exchange Act of 1934, as amended) promptly furnish Landlord from time to time
with its most recent annual financial statements, and written evidence of
ownership and ownership interests if Tenant is other than a sole proprietorship.

            58. BUSINESS DAY/WORKING DAY

      The terms "business day" and "working day" are terms describing each
calendar day Monday through Friday except any holiday identified specifically or
generically in the section of this Lease entitled, "SERVICES AND UTILITIES"
falling on one of such calendar days.

            59. CONFIDENTIALITY

      Tenant acknowledges and agrees that the terms of this Lease are
confidential and constitute propriety information of Landlord. Disclosure of the
terms hereof could adversely affect the ability of Landlord to negotiate other
leases with respect to the Building and may impair Landlord's relationship with
other tenants of the Building. Tenant agrees that it and its partners, officers,
directors, employees, brokers, and attorneys, if any, shall not make any public
disclosure of the terms and conditions of this Lease other than in Tenant's
ordinary course of business to its lenders, accountants, and other consultants
without the prior written consent of Landlord. Nothing herein shall prevent any
disclosure required by applicable law or court order.

            60. RENT RELATED REQUIREMENTS

      (a) No rent or other payment in respect of the Demised Premises shall be
based in any way upon net income or profits from the Demised Premises. Tenant
may not enter into or permit any sublease or license or other agreement in
connection with the Demised Premises which provides for a rental or other
payment based on net income or profit.

      (b) If Landlord is advised by its counsel at any time that any part of the
payments by Tenant to Landlord under this Lease may be characterized as
unrelated business income under the United States Internal Revenue Code and its
regulations, then Tenant shall enter into any amendment proposed by Landlord to
avoid such income, so long as the amendment does not require Tenant to make more
payments or accept fewer services from Landlord, than this Lease provides.

            61. ENVIRONMENTAL REQUIREMENTS

      Tenant, its agents, employees, sublessees, contractors, invitees and
guests shall not use any portion or all of the Demised Premises or the Building
or land or other appurtenances thereto for the generation, treatment, storage or
disposal of "hazardous materials," "hazardous waste," "hazardous substances" or
"oil" (collectively "Materials") as such terms are defined under the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq., as amended, the Resource Conservation and Recovery Act of
1976, 42 U.S.C. 6901 et seq., as amended, and any and all other "environmental
statutes" which regulate the use of hazardous and/or dangerous substances, and


                                      -39-


the regulations promulgated thereunder and any and all state and local laws,
rules and regulations, without the express prior written consent of Landlord.
Tenant shall clean up and remove or cause to be cleaned up and removed from,
under or about the Demised Premises, the Building or the land or other
appurtenances thereto any Materials it or its agents or employees have or have
caused to be introduced to the Demised Premises or the Building, at its sole
cost and expense, and shall ensure that such removal is conducted in compliance
with all applicable laws, rules and regulations. Notwithstanding the foregoing,
however, Tenant may use Materials in the ordinary course of business and only as
customarily used in office environments and in types and quantities customarily
used in office environments, provided that such use is in accordance with all
applicable statutes, laws, rules and regulations, and any manufacturer
instructions; and provided further that Tenant may not discharge any Materials
in any public sewer or any drain and/or drainpipe leading or connected thereto.
Tenant shall promptly give written notice to Landlord of any communication
received by Tenant from any governmental authority or other person or entity
concerning any complaint, investigation or inquiry regarding any use or
discharge (or alleged use or alleged discharge) by Tenant of any Materials.
Landlord shall have the right (but not the obligation) to conduct such
investigations or tests (or both) as Landlord shall deem necessary with respect
to any such complaint, investigation or inquiry, and Tenant, at its expense,
shall take such action (or refrain from taking such action) as Landlord may
request in connection with such investigations and tests by Landlord. Tenant
shall indemnify, defend (with counsel selected by Landlord), and hold Landlord
and its mortgagees harmless from and against any such improper use or discharge
(or both) by Tenant, including any costs of all necessary clean-up activities
occasioned by Tenant's actions, whether during the term or after termination of
this Lease. This Section shall survive the expiration or earlier termination of
this Lease.

            62. ENTIRE AGREEMENT

      This Lease, together with Exhibits A, A-l, B, C, D, D-1, E, F and G
attached hereto and made a part hereof, contains and embodies the entire
agreement of the parties hereto, and no representations, inducements, or
agreements, oral or otherwise, between the parties not contained and embodied in
this Lease and said Exhibits shall be of any force or effect, and the same may
not be modified, changed or terminated in whole or in part hi any manner other
than by an agreement in writing duly signed by all parties hereto.


                                      -40-


      IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
signed as of the date first written above, in their names, under seal, by their
duly authorized representatives and delivered as their act and deed, intending
to be legally bound by its terms and provisions.

                                    LANDLORD:

                                    PARK PLACE TRUST,
                                    a Maryland Business Trust

                                    By: JBJ/Carlyle Park Place LP, a Delaware
                                        limited partnership, as Trustee

                                    By: JBJ Management Company, Inc., a

                                        Maryland limited liability company, its
                                        Managing General Partner


                                    By: /s/ Jerome J. Parks              (SEAL)
                                        ---------------------------------
                                        Name: /s/ Jerome J. Parks
                                        Title: VP


                                    TENANT:

                                    PHARMATHENE, INC.,
                                    a Delaware corporation


                                    By: /s/ David P. Wright              (SEAL)
                                        ---------------------------------
                                        Name:
                                        Title:


                                      -41-