sc13dza

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IBqVKmvSbkvBnsTROdEZaaUbmXDlCjLVXJv9kbUaTyq9pTCeonyUoz8yplYt/cuv BzvSD7+KjPlldlFneoZwew== 0000950144-02-007612.txt : 20020724 0000950144-02-007612.hdr.sgml : 20020724 20020724172333 ACCESSION NUMBER: 0000950144-02-007612 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20020724 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: NOVAVAX INC CENTRAL INDEX KEY: 0001000694 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 222816046 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-48948 FILM NUMBER: 02710168 BUSINESS ADDRESS: STREET 1: 8320 GUILFORD RD STREET 2: STE C CITY: COLUMBIA STATE: MD ZIP: 21046 BUSINESS PHONE: 3078543900 MAIL ADDRESS: STREET 1: 8320 GUILFORD ROAD SUITE C STREET 2: 12111 PARKLAWN DR CITY: COLUMBIA STATE: MD ZIP: 21046 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: KING PHARMACEUTICALS INC CENTRAL INDEX KEY: 0001047699 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 541684963 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 501 FIFTH ST CITY: BRISTOL STATE: TN ZIP: 37620 BUSINESS PHONE: 4239898000 MAIL ADDRESS: STREET 1: 501 FIFTH ST CITY: BRISTOL STATE: TN ZIP: 37620 SC 13D/A 1 g76829a2sc13dza.htm NOVAVAX, INC./KING PHARMACEUTICALS, INC. sc13dza

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

UNDER THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 2)*

NOVAVAX, INC.

(Name of Issuer)

Common Stock, $.01 par value

(Title of Class Of Securities)

670002104

(CUSIP Number)

LINDA M. CROUCH
BAKER, DONELSON, BEARMAN & CALDWELL
207 MOCKINGBIRD LANE
JOHNSON CITY, TENNESSEE 37604
(423) 975-7623

(Name, Address and Telephone Numbers of Person Authorized to
Receive Notices and Communications)

June 26, 2002

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this Schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box [ ].

NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See ss.240.13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).



CUSIP NO. 670002104	PAGE 2


1.	Names of Reporting Persons. S.S. or	King Pharmaceuticals, Inc.
	I.R.S. Identification Nos. of Above Persons	54-1684963

2.	Check the Appropriate Box if a Member	(a)
	of a Group (See Instructions)
		(b)

3.	SEC Use Only

4.	Source of Funds (See Instructions)	WC

5.	Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e)

6.	Citizenship or Place of Organization	Tennessee


Number of Shares	7. Sole Voting Power	4,748,309
Beneficially
Owned by Each	8. Shared Voting
Reporting Person	Power	0
with
	9. Sole Dispositive	4,748,309
	Power

	10. Shared Dispositive
	Power	0


11.	Aggregate Amount Beneficially Owned	4,748,309
	by Each Reporting Person

12.	Check if the Aggregate Amount is Row (11) Excludes Certain Shares (See Instructions)

13.	Percent of Class Represented by Amount	16.2%
	in Row (11)

14.	Type of Reporting Person (See	CO
	Instructions)

This Amendment No. 2 to the Schedule 13D relating to shares of common stock, $.01 par value (the “Common Stock”), of Novavax, Inc., a Delaware corporation (the “Issuer”), which is issuable upon conversion of the Issuer’s Convertible Notes (as hereinafter defined), is being filed by King Pharmaceuticals, Inc., a Tennessee corporation (“King”) to report an increase in its beneficial ownership of the Common Stock of the Issuer and to otherwise amend Items 1, 2, 4, 5, 6 and 7 of the Schedule 13D filed on December 29, 2001, as amended.

Schedule 13D was filed on December 29, 2000 reflecting the initial acquisition by King of the Issuer’s 4% Convertible Senior Note No. 1 dated December 19, 2000 (the “First Note”).

Amendment No. 1 to the Schedule 13D was filed on September 19, 2001 reflecting the initial acquisition by King of the Issuer’s 4% Convertible Senior Note No. 2 dated September 7, 2001 (the “Second Note”) and the Issuer’s 4% Convertible Senior Note No. 3 dated September 7, 2001 (the “Third Note”).

ITEM 1. SECURITY AND ISSUER.

The title and class of equity securities to which this statement relates is the common stock, $.01 par value (the “Common Stock”), of Novavax, Inc., a Delaware corporation (the “Issuer”), which is issuable upon conversion of the First Note, the Second Note, the Third Note and the Issuer’s 4% Convertible Senior Note No. 4 dated June 26, 2002 (the “Fourth Note”, and collectively with the First Note, the Second Note and the Third Note, the “Convertible Notes”) and Common Stock of the Issuer owned by King. The Issuer’s principal executive offices are located at 8320 Guilford Road, Suite C, Columbia, Maryland 21046.

The First Note, the Second Note, the Third Note and the Fourth Note are presently convertible into 2,047,921 shares, 511,980 shares, 372,218 shares and 1,788,561 shares, respectively, of the Common Stock (collectively, the “Conversion Shares”) by King, subject to adjustment under certain circumstances as provided in the Amended and Restated Investor Rights Agreement between the Issuer and King dated as of June 26, 2002 (the “Investor Rights Agreement”). King presently owns 17,629 shares of Common Stock of the Issuer that were issued to King by Novavax in lieu of interest on the Convertible Notes.

ITEM 2. IDENTITY AND BACKGROUND.

(a)-(c) and (f). King is the entity filing this Amendment No. 2 to the Schedule 13D and its principal business address and principal office address is 501 Fifth Street, Bristol, Tennessee 37620. King is a vertically integrated pharmaceutical company that manufactures, markets and sells primarily branded prescription pharmaceutical products.

Each executive officer and each director of King is a citizen of the United States. The name, business address and present principal occupation of each executive officer and director is set forth in Annex A to this Amendment No. 2 to the Schedule 13D and incorporated herein by reference.

Other than executive officers and directors, there are no persons or corporations controlling or ultimately in control of King.

(d) and (e). King has not, during the last five years, (i) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws.

ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.

The source and amount of funds from this transaction were provided and will be provided from King’s working capital.

ITEM 4. PURPOSE OF TRANSACTION.

King purchased the First Note, in the principal amount of $20 million, from the Issuer pursuant to a Note Purchase Agreement between the Issuer and King dated as of December 19, 2000 (the “December 2000 Note Purchase Agreement”) in a private transaction for investment purposes. The maturity date of the First Note is December 19, 2007. The First Note is convertible at any time and was initially convertible into 2,000,000 shares of the Common Stock. After accounting for adjustments made to the Conversion Price (as hereinafter defined) applicable to the First Note pursuant to the Investor Rights Agreement, the First Note is presently convertible into 2,047,921 shares of its Common Stock so long as King converts, at any one time, the lesser of (i) 350,000 shares or (ii) the maximum number of shares purchasable at that time.

Pursuant to the December 2000 Note Purchase Agreement, King agreed to purchase the Second Note and consummated the purchase of the Second Note on September 7, 2001 in a private transaction for investment purposes. The Second Note is in the principal amount of $5 million and, except as described in this Amendment No. 2 to the Schedule 13D, has substantially the same terms as the First Note, the Third Note, and the Fourth Note. The Second Note was initially convertible into 500,000 shares of the Common Stock. After accounting for adjustments made to the Conversion Price applicable to the Second Note pursuant to the Investor Rights Agreement, the Second Note is presently convertible into 511,980 shares of the Common Stock so long as King converts, at any one time, the lessor of (i) 350,000 shares or (ii) the maximum number of shares purchasable at that time. King was required to purchase the Second Note when the United States Food and Drug Administration accepted for filing the Issuer’s New Drug Application for its topical transdermal estrogen replacement therapy, ESTRASORB™ on September 5, 2001, all subject to the terms and conditions of the December 2000 Note Purchase Agreement.

-3-

King purchased the Third Note, in the principal amount of $5 million, from the Issuer pursuant to the September 2001 Note Purchase Agreement between the Issuer and King dated as of September 7, 2001 in a private transaction for investment purposes. Except as described in this Amendment No. 2 to the Schedule 13D, the Third Note has substantially the same terms as the First Note, the Second Note and the Fourth Note. The Third Note is convertible at any time and was initially convertible into 360,490 shares of the Common Stock. After accounting for adjustments to the Conversion Price applicable to the Third Note pursuant to the Investor Rights Agreement, the Third Note is presently convertible into 372,218 shares of the Common Stock so long as King converts, at any one time, the lesser of (i) 350,000 shares or (ii) the maximum number of shares purchasable at that time.

King purchased the Fourth Note, in the principal amount of $10 million, from the Issuer pursuant to the June 2002 Note Purchase Agreement between the Issuer and King dated as of June 26, 2002 (the “June 2002 Note Purchase Agreement”) in a private transaction for investment purposes. Except as described in this Amendment No. 2 to the Schedule 13D, the Fourth Note has substantially the same terms as the First Note, the Second Note and the Third Note. The Fourth Note is convertible at any time and is initially convertible into 1,798,561 shares of the Common Stock so long as King converts, at any one time, the lesser of (i) 350,000 shares or (ii) the maximum number of shares purchasable at that time.

Pursuant to the Investor Rights Agreement, the Convertible Notes are subject to mandatory redemption upon 30 days notice by the Issuer at any time after January 1, 2005 at 102%, 101% and 100% of the principal amount thereof, plus accrued and unpaid interest in years 2005, 2006 and 2007, respectively. The Issuer must also offer to purchase the Convertible Notes from the holder in the event of a change in control of the Issuer at 101% of the principal amount thereof plus accrued and unpaid interest.

Pursuant to the Investor Rights Agreement, the Issuer has granted to the holder of the Convertible Notes certain anti-dilution rights. At the closing of the purchase of both the First Note and the Second Note, the initial conversion price for the First Note and the Second Note (the “Conversion Price”) was $10.00. At the closing of the purchase of the Third Note the initial Conversion Price of the Third Note was $13.87. At the closing of the purchase of the Fourth Note the initial Conversion Price of the Fourth Note was $5.56. The Conversion Price will be adjusted whenever the Issuer is deemed to have issued or sold any shares of the Common Stock for a consideration per share that is less than the Conversion Price applicable to each Convertible Note that is in effect immediately prior to any such issuance or sale. As a result of Novavax’s sale to King of the Fourth Note, the Conversion Prices applicable to the First Note, the Second Note and the Third Note have been adjusted. The Conversion Price currently applicable to the First Note and Second Note is $9.766. The Conversion Price currently applicable to the Third Note is $13.433. Other events which may result in changes to the Conversion Price include the issuance of rights or options, the issuance of convertible securities, changes in option prices or conversion rates of convertible securities, the expiration of options and the failure to exercise convertible securities, among other things. If at any time between January 1, 2002 and December 31, 2004, the closing price of the Common Stock exceeds 180% of the Conversion Price then in effect for the particular Convertible Note for at least 30 trading days in any period of 45 consecutive trading days, the Issuer may, within 20 business days after the end of such 45 day period, require the holder to convert the Convertible Notes into Common Stock at the Conversion Price applicable to the particular Convertible Note in effect on the day of the conversion.

Subject to the terms and conditions set forth in the Convertible Notes, if the average closing price of the Convertible Notes exceeds the initial Conversion Price applicable to the particular Convertible Note and no event of default shall have occurred, the Issuer will have the option of paying one-half of the interest then due under the Convertible Notes in the form of Common Stock.

King has no current plans to dispose of the shares of Common Stock issuable upon the conversion of or as interest payments on the Convertible Notes. However, King in the future may dispose of such shares or other shares of Common Stock in the market, in privately negotiated transactions or otherwise.

-4-

Pursuant to the Investor Rights Agreement, if at any time the Issuer grants, issues or sells any options, convertible securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of Common Stock, then each holder of the Convertible Notes will have the same rights on an as-if-converted basis. The Issuer has also agreed that, prior to the consummation of any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Issuer’s assets or other transaction in which holders of the Common Stock are entitled to receive stock, securities or assets with respect to or in exchange for their Common Stock (an “Organic Change”), the Issuer will take whatever action is necessary to insure that the holders of the Convertible Notes shall thereafter have the right to acquire or receive such shares of stock, securities or assets as such holder would have received in connection with such Organic Change if such holder had converted its Convertible Notes immediately prior to such Organic Change.

Without the prior consent of the holders of a majority of the Convertible Notes, the Common Stock issued or issuable upon the conversion of the Convertible Notes and any securities issued with respect to the foregoing securities (collectively, the “Purchaser Securities”), the Issuer is restricted under the Investor Rights Agreement from taking certain actions. These actions include, without limitation and subject to specified exceptions, the incurrence of indebtedness in excess of $1.5 million; the creation of certain liens; the acquisition of any business; the acquisition of assets in excess of $5 million; the entering into the active management or operation of any business that is unrelated to the current business of the Issuer; election to make certain payments in cash rather than Common Stock; the liquidation, dissolution or winding up of the Issuer; the filing of a voluntary petition in bankruptcy or certain other types of reorganization; the adoption of amendments to the certificate of incorporation or bylaws of the Issuer or otherwise take action which could reasonably be expected to affect adversely the rights of holders of the Convertible Notes.

Under the Investor Rights Agreement, King has certain rights relating to the Issuer’s board of directors for so long as King and its affiliates collectively hold a majority of the Purchaser Securities. King is entitled to designate a board observer who shall be entitled to receive notice of any meeting or any proposed action by written consent of the Issuer’s board of directors and shall be entitled to attend any meeting of the Issuer’s board of directors.

The Convertible Notes contain customary events of default and contain cross-default provisions whereby a default on any Convertible Note is deemed to be a default under all other Convertible Notes. In the event of a default on the Convertible Notes, the Issuer will take action to increase the size of its board of directors by one (1) member and to have a designee of King appointed to the Issuer’s board of directors for so long as the event of default is continuing. King’s rights relating to the Issuer’s board terminate upon a change of control of King.

Pursuant to the Investor Rights Agreement, King also has certain information and inspection rights. Among other things, the Issuer is required to deliver to King annual audited financial reports, quarterly unaudited financial reports, certain budgets and business plans, copies of all filings with the Securities and Exchange Commission (the “Commission”) or any stock exchange, copies of press releases and copies of all financial statements, proxy statements, reports and any other general written communications sent by the Issuer to its stockholders. King will be permitted to send a designee to inspect the properties of the Issuer and its subsidiaries. The designee will be permitted to inspect and copy the corporate and financial records of the Issuer and discuss the affairs, finances and accounts of the Issuer with the directors and executive officers of the Issuer and its independent public accountants. King has agreed to maintain the confidentiality of all information obtained by it pursuant to these rights.

-5-

ITEM 5. INTEREST IN SECURITIES OF ISSUER.

(a) The calculations in this Item are based upon 29,391,637 shares of Common Stock issued and outstanding as of August 10, 2001 (based on disclosures made by the Issuer in the June 2002 Note Purchase Agreement and including the 4,730,680 Conversion Shares. For purposes hereof, King is now the beneficial owner of 4,730,680 Conversion Shares, issuable upon the exercise of the Convertible Notes, and 17,629 shares of Common Stock that were issued to King by Novavax in lieu of interest on the Convertible Notes, comprising 16.2% of the issued and outstanding shares of Common Stock of the Issuer. The foregoing calculation is made pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of 1934.

(b) King is the sole owner of the Convertible Notes and, upon any exercise of the Convertible Notes, King will also have the sole power to vote or to direct the vote, and the sole power to dispose or to direct the disposition, of all of the underlying Conversion Shares. King is the sole owner of the Common Stock that was issued by the Issuer in lieu of interest on the Convertible Notes and has the sole power to vote or direct the vote, and the sole power to dispose or direct the disposition of the Common Stock or any other Common Stock that may be issued in lieu of interest on the Convertible Notes.

(c) Neither King nor, to King’s knowledge, any of its directors or executive officers has effected any transactions in shares of the Issuer’s Common Stock or in any options or warrants to purchase such Common Stock in the past 60 days.

(d) King affirms that no other person has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of the Issuer’s Common Stock beneficially owned by King.

(e) Not Applicable.


ITEM 6.		CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.

Reference is made hereby to Item 4 hereof which is incorporated by reference in this Item 6.

Pursuant to the Second Amended and Restated Registration Rights Agreement between the Issuer and King dated as of June 26, 2002 (the “Registration Rights Agreement”), the Issuer has agreed to file an initial shelf registration statement with the Commission within ten business days of the closing of the sale of each of the Convertible Notes (the “Initial Shelf Registration Statements”). The Initial Shelf Registration Statements filed after the closing of the First Note, the Second Note and the Third Note permit the public offer and sale of the Conversion Shares issued or issuable upon the conversion of the First Note, the Second Note and the Third Note and any additional shares of Common Stock received by the holders with respect to such shares pursuant to a subsequent stock split, stock dividend or other recapitalization of the Issuer. The Initial Shelf Registration Statement to be filed after the closing of the purchase of the Fourth Note will cover the public offer and sale of the Conversion Shares issued or issuable upon the conversion of the Fourth Note and any additional shares of Common Stock received by the holders with respect to such shares pursuant to a subsequent stock split, stock dividend or other recapitalization of the Issuer. Failure to have an Initial Shelf Registration Statement declared effective by the Commission within 180 days after the issuance of the applicable Convertible Note constitutes an event of default under such Convertible Note.

Pursuant to the Registration Rights Agreement, at any time following the payment of interest in the form of Common Stock, the holders of a majority of the Convertible Notes then outstanding may request that the Issuer file a shelf registration statement with the Commission (the “Top-up Shelf Registration Statements”). The Top-up Registration Statements will cover the public offer and sale of all Common Stock issued or issuable as interest payments on the Convertible Notes and any shares of Common Stock received by the holders with respect to such shares pursuant to a subsequent stock split, stock dividend or other recapitalization of the Issuer.

Pursuant to the Registration Rights Agreement, the Issuer has also agreed to provide notice to the holders of the Common Stock issued or issuable under Convertible Notes of any proposed filing of a registration statement relating to a public offering of Common Stock for the Issuer’s own account or for the account of any other common stockholder. Subject to the terms and limitations set forth in the Registration Rights Agreement, if the Issuer files such registration statement, the Issuer will register any such Common Stock requested to be included in such registration by the holders thereof.

Pursuant to the Registration Rights Agreement, the Issuer will maintain the effectiveness of each Initial Shelf Registration Statement and each Top-up Shelf Registration Statement until the earlier of the date on which the Common Stock registered thereunder has been sold pursuant to such registration statement or the date such Common Stock may be sold by the holders thereof pursuant to Rule 144(k) under the Securities Act of 1933.

Except as set forth in this Amendment No. 2 to the Schedule 13D, neither King, nor to King’s knowledge, any of its directors or executive officers have any contract, arrangement, understanding or relationship (legal or otherwise) with any person with respect to any securities of the Issuer.

-6-

ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.


Exhibit		Description

1		Convertible Note No. 1 of Novavax, Inc., dated December 19, 2000¹

2		Note Purchase Agreement by and between Novavax, Inc. and King Pharmaceuticals, Inc., dated as of December 19, 2000¹

3		Amended and Restated Investor Rights Agreement by and between Novavax, Inc. and King Pharmaceuticals, Inc. dated as of June 26, 2002

4		Convertible Note No. 2 of Novavax, Inc., dated September 7, 2001²

5		Convertible Note No. 3 of Novavax, Inc., dated September 7, 2001²

6		Allonge to 4% Convertible Senior Note of Novavax, Inc.²

7		Convertible Note No. 4 of Novavax, Inc. dated June 26, 2002

8		Second Amended and Restated Registration Rights Agreement by and between Novavax, Inc. and King Pharmaceuticals, Inc., dated as of June 26, 2002

9		September 2001 Note Purchase Agreement by and between Novavax, Inc. and King Pharmaceuticals, Inc., dated as of September 7, 2001²

10		June 2002 Note Purchase Agreement by and between Novavax, Inc. and King Pharmaceuticals, Inc., dated as of June 26, 2002

-7-

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.


Date: July 24, 2002

	KING PHARMACEUTICALS, INC.


	By:	/s/ Jefferson J. Gregory

		Jefferson J. Gregory Chairman of the Board and Chief Executive Officer

ANNEX A

DIRECTORS AND EXECUTIVE OFFICERS
KING PHARMACEUTICALS, INC.

The names, business addresses and present principal occupations of the directors and executive officers of King Pharmaceuticals, Inc. (“King”) are set forth below. If no business address is given, the director’s or executive officer’s business address is 501 Fifth Street, Bristol, Tennessee, 37620. All directors and executive officers listed below are citizens of the United States.


		Present Principal Occupation or Employment and
Name		Business Address


Jefferson J. Gregory		Chairman of the Board and Chief Executive Officer

Joseph R. Gregory		Vice Chairman of the Board and Secretary

Kyle P. Macione		President

James R. Lattanzi		Chief Financial Officer

Ernest C. Bourne		Director of King and President of King’s International Division

John A. A. Bellamy		Executive Vice President and General Counsel

Earnest W. Deavenport		Director of King; Former Chairman of the Board and Chief Executive Officer of Eastman Chemical Company
		Eastman Road
		Kingsport, TN 37660

Frank W. DeFriece, Jr.		Director of King; Serves in various capacities with the Massengill DeFriece Foundation
		113 Landmark Lane
		Bristol, TN 37620

James E. Gregory		Director of King; Former Executive Vice President/General Manager of King

Gregory D. Jordan		Director of King; President of King College
		1350 King College Road
		Bristol, TN 37620

R. Charles Moyer		Director of King Dean of Babcock Graduate School of Management Wake Forest University – Worrell Center
		7659 Reynolda Station
		Winston-Salem, NC 27109

D. Greg Rooker		Director of King; Former President of Family Community Newspapers of Southwest Virginia

EXHIBIT INDEX


Exhibit		Description

1		Convertible Note No. 1 of Novavax, Inc., dated December 19, 2000¹

2		Note Purchase Agreement by and between Novavax, Inc. and King Pharmaceuticals, Inc., dated as of December 19, 2000¹

3		Amended and Restated Investor Rights Agreement by and between Novavax, Inc. and King Pharmaceuticals, Inc., dated as of June 26, 2002

4		Convertible Note No. 2 of Novavax, Inc., dated September 7, 2001²

5		Convertible Note No. 3 of Novavax, Inc., dated September 7, 2001²

6		Allonge to 4% Convertible Senior Note of Novavax, Inc.²

7		Convertible Note No. 4 of Novavax, Inc. dated June 26, 2002

8		Second Amended and Restated Registration Rights Agreement by and between Novavax, Inc. and King Pharmaceuticals, Inc., dated as of June 26, 2002

9		September 2001 Note Purchase Agreement by and between Novavax, Inc. and King Pharmaceuticals, Inc., dated as of September 7, 2001²

10		June 2002 Note Purchase Agreement by and between Novavax, Inc. and King Pharmaceuticals, Inc., dated as of June 26, 2002

¹ Previously filed with the Securities and Exchange Commission as an exhibit to the Schedule 13D filed by King Pharmaceuticals, Inc. on December 29, 2000 and incorporated herein by reference.

² Previously filed with the Securities and Exchange Commission as an exhibit to Amendment No. 1 to the Schedule 13D filed by King Pharmaceuticals, Inc. on September 19, 2001 and incorporated herein by reference.

EX-3 3 g76829a2exv3.txt AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT EXHIBIT 3 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT BY AND BETWEEN NOVAVAX, INC. AND KING PHARMACEUTICALS, INC. DATED AS OF JUNE 26, 2002 TABLE OF CONTENTS
Page ---- SECTION 1. DEFINITIONS.................................................................. 2 SECTION 2. CONVERSION RIGHTS............................................................ 9 2.1 Optional Conversion.............................................................. 9 2.2 Mandatory Conversion............................................................. 10 2.3 Mechanics of Conversion.......................................................... 10 2.4 Undertakings by the Company...................................................... 12 2.5 Adjustments to Conversion Price.................................................. 13 2.6 Effect on Conversion Price of Certain Events..................................... 13 2.7. Subdivision or Combination of Common Stock....................................... 16 2.8. Reorganization, Reclassification, Consolidation, Merger or Sale.................. 17 2.9. Certain Events................................................................... 17 2.10. Notices.......................................................................... 18 2.11. No Avoidance..................................................................... 19 2.12. Hart-Scott-Rodino................................................................ 19 SECTION 3. MANDATORY REDEMPTION......................................................... 19 SECTION 4. [RESERVED.].................................................................. 20 SECTION 5. PURCHASE RIGHTS.............................................................. 20 SECTION 6. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL................................. 20 SECTION 7. BOARD OF DIRECTORS........................................................... 22 7.1 Effective Period of Rights....................................................... 22 7.2 Board Observer Rights............................................................ 22 7.3 Board Representation Rights...................................................... 22 SECTION 8. RESTRICTIVE COVENANTS........................................................ 23 SECTION 9. INFORMATION AND INSPECTION RIGHTS............................................ 25 9.1 Information Rights............................................................... 25 9.2 Inspection Rights................................................................ 26 9.3 Confidentiality.................................................................. 26 SECTION 10. MISCELLANEOUS................................................................ 27 10.1 Remedies......................................................................... 27 10.2 Entire Agreement; Consent to Amendments.......................................... 27 10.3 Successors and Assigns........................................................... 27 10.4 Severability..................................................................... 28 10.5 Counterparts..................................................................... 28 10.6 Descriptive Headings; Interpretation; No Strict Construction..................... 28 10.7 Governing Law.................................................................... 29 10.8 Notices.......................................................................... 29 10.9 Jurisdiction; Venue.............................................................. 30 10.10 Business Day..................................................................... 32 10.11 Delivery by Facsimile............................................................ 32
-ii- AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT THIS AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (this "Agreement") is made as of the 26th day of June, 2002 by and between NOVAVAX, INC., a Delaware corporation (the "Company"), and KING PHARMACEUTICALS, INC., a Tennessee corporation ("King"). WHEREAS, King and the Company entered into an Investor Rights Agreement dated as of December 19, 2000, which was amended by the First Amendment to Investor Rights Agreement dated September 7, 2001 (as so amended, the "Original Agreement"); WHEREAS, pursuant to that certain Note Purchase Agreement dated as of December 19, 2000 between the Company and King, the Company has sold to King, and King has purchased from the Company, (a) a 4% Convertible Senior Note dated December 19, 2000 in the aggregate principal amount of Twenty Million Dollars ($20,000,000), and (b) a 4% Convertible Senior Note dated September 7, 2001 in the aggregate principal amount of Five Million Dollars ($5,000,000); WHEREAS, pursuant to that certain September 2001 Note Purchase Agreement dated as of September 7, 2001 between the Company and King, the Company has sold to King, and King has purchased from the Company, a 4% Convertible Senior Note in the aggregate principal amount of Five Million Dollars ($5,000,000); WHEREAS, pursuant to that certain June 2002 Note Purchase Agreement dated as of June 26, 2002 (the "June 2002 Note Purchase Agreement") between King and the Company, the Company has agreed, subject to the satisfaction of certain conditions described therein, to sell to King, and King has agreed, subject to the satisfaction of certain conditions described therein, to purchase from the Company, a 4% Convertible Senior Note of the Company in the aggregate principal amount of $10,000,000; and WHEREAS, the Company and King have agreed to amend and restate the Original Agreement as a condition to the closing of the June 2002 Note Purchase Agreement. NOW THEREFORE, in consideration of the foregoing premises and the representations, warranties, covenants and agreements herein contained, the Original Agreement is hereby amended and restated as follows: SECTION 1. DEFINITIONS. The capitalized terms defined below have the following meanings when used in this Agreement: "Affiliate" of any particular Person means any other Person controlling, controlled by or under common control with such particular Person, where "control" means the possession, directly or indirectly, of the power to direct the management and policies of a person whether through the ownership of voting securities, contract or otherwise and, if such Person is a partnership or limited liability company, any partner or member thereof. "Agreement" has the meaning set forth in the Preamble. "Board Observer" has the meaning set forth in Section 7.2(a). "Board of Directors" means the Board of Directors of the Company. "Business Day" means a day other than Saturday, Sunday or any day on which banks located in the State of Maryland are authorized or obligated by law to close. "Change of Control" means, with respect to any Person, such time as (a) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than fifty percent (50%) of the total voting power of the Voting Stock of such Person on a fully diluted basis; (b) individuals who on December 19, 2000 constituted the board of directors of such Person (together with any new directors whose election by the board of directors of such Person or whose nomination by the board of directors of such Person for election by the stockholders of such Person was approved by a vote of at least two-thirds of the members of the board of directors of such Person then in office who either were members of the board of directors of such Person on December 19, 2000 or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the members of the board of directors of such Person then in office; or (c) the stockholders of such Person approve a complete liquidation or dissolution of such Person. "Closing Price" means, with respect to each share of Common Stock, for any day, the reported last sales price regular way per share or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way, in either case (a) on the principal (as determined by the Board of Directors) national securities exchange on which the Common Stock is listed or admitted to trading or (b) if not listed or admitted to trading -2- on any national securities exchange, on the Nasdaq National Market, or, if the Common Stock is not listed or admitted to trading on any national securities exchange or quoted on the Nasdaq National Market, the average of the closing bid and asked prices in the over-the-counter market as furnished by any American Stock Exchange member firm selected from time to time by the Company for that purpose. If no such prices are available, the Closing Price per share of Common Stock shall be the fair value of a share as determined in good faith by the Board of Directors. "Common Stock" means the Common Stock, $.01 par value per share, of the Company, any stock into which such Common Stock shall have been changed, or any stock resulting from any capital reorganization or reclassification of such Common Stock, and all other stock of any class or classes (however designated) of the Company the holders of which have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions of any shares entitled to preference. "Common Stock Deemed Outstanding" means, at any given time, the number of shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock deemed to be outstanding pursuant to Sections 2.5(b), whether or not the Options or Convertible Securities are actually exercisable at such time, without duplication. "Company" has the meaning set forth in the Preamble. "Confidentiality Agreement" has the meaning set forth in Section 7.2(b). "Conversion Price" for any Note means the Initial Conversion Price for such Note, as adjusted pursuant to Section 2 hereof. "Conversion Shares" means the shares of Common Stock to be received upon the conversion of any Note. "Convertible Securities" means any stock or securities directly or indirectly convertible into or exchangeable for Common Stock. "December 2000 Note Purchase Agreement" means the Note Purchase Agreement, dated as of December 19, 2000, between the Company and King. "Event of Default" means an Event of Default under any of the Notes. "Exchange Act" means the Securities Exchange Act of 1934, as amended. -3- "Excluded Issuance" means the issue or deemed issue of shares of Common Stock (a) upon conversion of Notes; (b) as a payment of interest on the Notes; (c) to officers, directors or employees of, or consultants to, or other permitted grantees of, the Company and its Subsidiaries pursuant to the Existing Plans or pursuant to any employee stock option plan subsequently adopted by the Board of Directors and approved by the stockholders of the Company; provided, that any Options granted pursuant to the Existing Plans or any such subsequently adopted plans shall have an exercise price per share of Common Stock not less than the fair market value of the Common Stock at the time of such grant; (d) upon exercise of the Existing Warrants; (e) upon the exercise of warrants or options granted to consultants of the Company; provided, that the total number of shares of Common Stock issuable upon the exercise of all such options and warrants shall not exceed one hundred thousand (100,000) (as adjusted to reflect any stock split, stock dividend, reclassification, recapitalization or otherwise); provided, further, that any such option or warrant shall have an exercise price per share of Common Stock not less than the Market Price at the time of such grant; (f) into the Company's 401(k) Plan in accordance with the terms thereof to satisfy the Company's obligations to make matching contributions thereunder to the extent that such issuances are made in the ordinary course of business and consistent with past practice and (g) for which adjustment of the then-applicable Conversion Price is made pursuant to Section 2. "Existing Plans" means (a) the Novavax, Inc. 1995 Stock Option Plan adopted by the Board of Directors and approved by the stockholders of the Company on September 13, 1995, as amended by that First Amendment to Novavax, Inc. 1995 Stock Option Plan adopted by the Board of Directors on March 16, 1998, and approved by the stockholders of the Company on May 14, 1998, that Second Amendment to Novavax, Inc. 1995 Stock Option Plan adopted by the Board of Directors on March 7, 2000, and approved by the stockholders of the Company on May 9, 2000, that Third Amendment to Novavax, Inc. 1995 Stock Option Plan adopted by the Board of Directors on June 28, 2001, and approved by the stockholders of the Company on May 8, 2002, and that Fourth Amendment to Novavax, Inc. 1995 Stock Option Plan adopted by the Board of Directors on March 6, 2002, and approved by the stockholders of the Company on May 8, 2002; and (b) the Director Stock Option Plan adopted by the Board of Directors and approved by the stockholders of the Company on September 13, 1995. "Existing Warrants" means warrants outstanding as of December 12, 2000 to purchase one million four hundred seventy-eight thousand eight hundred twenty-six (1,478,826) shares of Common Stock, including the following: (a) warrants to purchase fifty-four thousand nine hundred twenty-four (54,924) shares of Common Stock issued in connection with the Stock -4- Purchase Agreement dated October 30, 1996, by and between the Company and the purchasers named therein; (b) warrants to purchase fifty thousand (50,000) shares of Common Stock issued in consideration for services performed by The Research Works, Inc.; (c) warrants to purchase four hundred fifty-four thousand one hundred eighty-two (454,182) shares of Common Stock issued in connection with the Stock and Warrant Purchase Agreement dated April 14, 1999, by and between the Company and the purchasers named therein; and (d) warrants to purchase nine hundred nineteen thousand seven hundred twenty (919,720) shares of Common Stock issued in connection with the Stock and Warrant Purchase Agreement dated January 28, 2000, by and between the Company and the purchasers named therein. "First December 2000 Note" means the Note issued by the Company pursuant to Section 1.1 of the December 2000 Note Purchase Agreement, together with all notes issued by the Company in substitution or exchange therefor pursuant to this Agreement. "GAAP" has the meaning set forth in Section 9.1(a). "HSR Act" has the meaning set forth in Section 2.12. "Indebtedness" means, with respect to any Person at any date of determination (without duplication), (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto), (d) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services, except trade payables, (e) all capitalized lease obligations of such Person, (f) all Indebtedness of other Persons secured by a lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person, (g) all Indebtedness of other persons guaranteed by such Person to the extent such Indebtedness is guaranteed by such Person and (h) to the extent not otherwise included in this definition, obligations under currency agreements and interest rate agreements. Indebtedness shall not be construed to include any principal or interest owed by the Company to King under the Notes; provided, however, that in the event of a default, or upon the occurrence of an event which with notice or lapse of time or both would constitute a default, under the Notes, Indebtedness shall include the principal and interest owed by the Company to King under the Notes. -5- "Initial Conversion Price" means Ten Dollars ($10) for each of the First December 2000 Note and the Second December 2000 Note. The "Initial Conversion Price" means Thirteen Dollars and Eighty-Seven Cents ($13.87) for the September 2001 Note. The "Initial Conversion Price" means Five Dollars and Fifty-Six Cents ($5.56) for the June 2002 Note. "June 2002 Note" means the 4% Convertible Senior Note issued by the Company pursuant to the June 2002 Note Purchase Agreement, together with all notes issued by the Company in substitution or exchange therefor pursuant to this Agreement. "June 2002 Note Purchase Agreement" has the meaning set forth in the Recitals to this Agreement. "King" has the meaning set forth in the Preamble. "Lien" means any encumbrance, lien (statutory or other) or other security interest. "majority of the Notes" means, as of any date of determination, the holders of a majority in principal amount of the Notes outstanding as of such date. "Mandatory Conversion Notice" has the meaning set forth in Section 2.2(a). "Mandatory Conversion Period" has the meaning set forth in Section 2.2(a). "Market Price" of any security means the average of the closing prices of such security's sales on all securities exchanges on which such security may at the time be listed, or, if there has been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted on The Nasdaq National Market, Inc. as of 4:00 P.M., New York time, or, if on any day such security is not quoted on The Nasdaq National Market, Inc., the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization, in each such case averaged over a period of ten (10) days consisting of the day as of which "Market Price" is being determined and the nine (9) consecutive trading days prior to such day. If at any time such security is not listed on any securities exchange or quoted on The Nasdaq National Market, Inc. or the over-the-counter market, the "Market Price" shall be the fair value thereof determined by -6- jointly by the Company and the holders of a majority of the Notes. If such parties are unable to reach agreement within a reasonable period of time, such fair value shall be determined by an independent appraiser experienced in valuing securities jointly selected by the Company and the holders of a majority of the Notes. The determination of such appraiser shall be final and binding upon the parties, and the Company shall pay the fees and expenses of such appraiser. "Maryland Process Agent" has the meaning set forth in Section 10.9(c). "Notes" mean the First December 2000 Note, the Second December 2000 Note, the September 2001 Note and the June 2002 Note, together with all notes issued by the Company in substitution or exchange therefor pursuant to this Agreement. "Offer to Purchase" has the meaning set forth in Section 6(a). "Options" means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities. "Organic Change" has the meaning set forth in Section 2.8. "Original Agreement" has the meaning set forth in the Recitals to this Agreement. "Payment Date" has the meaning set forth in Section 6(b). "Permitted Indebtedness" has the meaning set forth in Section 8(a)(i). "Person" means an individual, a partnership, a corporation, a limited liability company, a limited liability partnership, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "Purchase Rights" has the meaning set forth in Section 5. "Purchaser Securities" means (a) the Notes, (b) any Common Stock issued or issuable upon conversion of the Notes referred to in clause (a) above, and (c) any securities issued directly or indirectly with respect to any of the foregoing securities by way of a stock split, stock dividend, or other division of securities, or in connection with a combination of securities, recapitalization, merger, consolidation, or other reorganization. As to any particular securities constituting Purchaser Securities, such securities shall cease to be Purchaser Securities when such securities have been (a) registered under the Securities Act and disposed of in accordance with the registration statement covering -7- such securities, (b) distributed to the public through a broker, dealer or market maker pursuant to Rule 144 under the Securities Act (or any similar provision then in force), or (c) repurchased or otherwise acquired by the Company (or its assignee). Any reference herein to a "majority of the Purchaser Securities" for purposes of comparison or calculation shall refer, with respect to any particular Purchaser Securities, to the number shares of Common Stock (or equivalent common equity securities of the Company) then represented by such Purchaser Securities on an as-if-converted basis. "Qualified Holder" means any holder of Purchaser Securities which, together with such holder's Affiliates, holds Purchaser Securities with an original purchase price of at least $5 million. "Redemption Date" has the meaning set forth in Section 3(a). "Related Documents" means collectively, this Agreement, the Notes, the December 2000 Note Purchase Agreement, the September 2001 Note Purchase Agreement, the June 2002 Note Purchase Agreement and the Second Amended and Restated Registration Rights Agreement, all as may be amended, restated, supplemented or otherwise modified from time to time. "Second Amended and Restated Registration Rights Agreement" means the Second Amended and Restated Registration Rights Agreement, dated as of the date hereof between King and the Company. "Second December 2000 Note" means the Note issued by the Company pursuant to Section 1.2 of the December 2000 Note Purchase Agreement, together with all notes issued by the Company in substitution or exchange therefor pursuant to this Agreement. "Securities Act" means the Securities Act of 1933, as amended. "September 2001 Note" means the 4% Convertible Senior Note issued by the Company pursuant to the September 2001 Note Purchase Agreement, together with all notes issued by the Company in substitution or exchange therefor pursuant to this Agreement. "September 2001 Note Purchase Agreement" means that certain September 2001 Note Purchase Agreement dated as of September 7, 2001, between King and the Company. "Subsidiary" means, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which (a) if a corporation, a majority of the total voting power of the Voting Stock of such -8- corporation is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (b) if a limited liability company, partnership, association or other business entity, a majority of the partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control the managing general partner of such limited liability company, partnership, association or other business entity. For purposes of Section 2, if the context does not otherwise indicate in respect of which Person the "Subsidiary" is used, the term "Subsidiary" shall refer to any Subsidiary of the Company. "Tennessee Process Agent" has the meaning set forth in Section 10.9(b). "Voting Stock" means, with respect to any Person, capital stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person. Without limiting the foregoing, Voting Stock of the Company includes the Common Stock. SECTION 2. CONVERSION RIGHTS. 2.1 OPTIONAL CONVERSION. (a) Subject to and in compliance with the provisions of this Section 2, at the option of the holder thereof, any Note may be converted in whole or in part into fully paid and nonassessable shares (calculated as to each conversion to the nearest one one-hundredth of a share) of Common Stock at the Conversion Price, determined as hereinafter provided, in effect at the close of business on the day of conversion, but not for less than three hundred fifty thousand (350,000) shares at a time (or such lesser number of shares which may then constitute the maximum number purchasable; such number being subject to adjustment as provided for herein). Such conversion right with respect to any Note shall commence on the issue date of such Note and expire on the later of (i) the close of business on the maturity date of such Note or (ii) the date the full principal amount of such Note has been paid in full. (b) Any Note converted pursuant to Section 2.1(a) shall be converted into a number of full shares of Common Stock computed by dividing the principal amount of such Note or portion thereof surrendered -9- for conversion by the Conversion Price in effect at the close of business on the day of conversion. The Conversion Price shall be adjusted in certain instances as provided in this Section 2. 2.2 MANDATORY CONVERSION. (a) If at any time during the period commencing on January 1, 2002, and ending on December 31, 2004 (the "Mandatory Conversion Period"), the Closing Price shall exceed 180% of the Conversion Price for any Note then in effect for at least thirty (30) trading days in any period of forty-five (45) consecutive trading days, then the Company may, by providing written notice to the holder of such Note (a "Mandatory Conversion Notice") within twenty (20) Business Days after the end of such forty-five (45) day period, require that such holder convert such Note, in whole or in part, into fully paid and nonassessable shares (calculated as to each conversion to the nearest one one-hundredth of a share) of Common Stock at the Conversion Price of such Note, determined as hereinafter provided, in effect at the close of business on the day of conversion. Each Mandatory Conversion Notice shall (i) specify in reasonable detail the computations of the Closing Price and the Conversion Price on the basis of which the Company is electing to exercise its right to require conversion of the Note pursuant to this Section 2.2, and (ii) the principal amount of the Note that the Company is requiring the holder to convert pursuant to this Section 2.2. Notwithstanding anything to the contrary contained herein, the Company shall not be entitled to require any holder of a Note to convert such Note, in whole or in part, into Common Stock pursuant to this Section 2.2 unless a Shelf Registration Statement (as defined in the Second Amended and Restated Registration Rights Agreement) covering resales of the Common Stock issuable upon conversion of such Note is effective and available for use for at least sixty (60) days after the Conversion Shares are issued to such holder upon such conversion. (b) Any Note converted pursuant to Section 2.2(a) shall be converted into a number of full shares of Common Stock computed by dividing the principal amount of such Note or portion thereof surrendered for conversion by the Conversion Price in effect at the close of business on the day of conversion. The Conversion Price shall be adjusted in certain instances as provided in this Section 2. 2.3 MECHANICS OF CONVERSION. (a) In order to convert a Note into Common Stock pursuant to Section 2.1 or Section 2.2, the holder of such Note to be converted shall surrender such Note, duly endorsed or assigned to the Company or in blank, at the Company's principal executive offices located at 8320 Guilford Road, Columbia, Maryland 21046 (or such other office or agency of the Company as -10- the Company may designate by notice in writing to each holder of Notes), accompanied by a completed "Conversion Notice" in the form attached to such Note, at such office that the holder elects to convert such Note or, if less than the entire principal amount thereof is to be converted, the portion thereof to be converted. (b) A Note shall be deemed to have been converted immediately prior to the close of business on the day of surrender of such Note for conversion in accordance with the foregoing provisions, and at such time the rights of the holder of such Note, as a holder thereof, shall cease to the extent of the portion of such Note converted, and the Person or Persons entitled to receive the Conversion Shares shall be treated for all purposes as the record holder or holders thereof at such time. As promptly as practicable on or after the date of any conversion in full or in part of any Note, but in no event later than five (5) Business Days thereafter, the Company shall issue and deliver to the holder of such Note, or as such holder may direct, a certificate or certificates for the number of full Conversion Shares, together with (i) payment in lieu of any fraction of a share, as provided in Section 2.3(d), and (ii) interest on the principal amount of such Note, or the portion thereof converted, accrued and unpaid to and including the date of such conversion, without any adjustment in respect of any dividend or other distribution payable on the Conversion Shares. (c) Upon any partial conversion of a Note, the Company shall forthwith issue and deliver to or upon the order of the holder thereof, at the expense of the Company, a new Note or Notes in aggregate principal amount equal to the unpaid and unconverted portion of the principal amount of such partially converted Note. Such new Note or Notes shall be registered in the name of such holder and dated as of the date of the converted Note. (d) No fractional shares of Common Stock shall be issued upon conversion of any Note or Notes. If more than one Note shall be surrendered for conversion at one time (or substantially at the same time) by the same holder, the number of full shares which shall be issuable upon conversion thereof shall be computed on the basis of the aggregate principal amount of the Notes so surrendered. In place of any fractional share of Common Stock which would otherwise be issuable upon conversion of any Note or Notes, the Company shall calculate and pay a cash adjustment in respect to such fraction (calculated to the nearest one one-hundredth of a share) in an amount equal to the same fraction of the current Market Price per share of Common Stock at the close of business on the day of conversion. (e) Notwithstanding any other provision hereof, if a conversion of Notes is to be made under this Section 2 in connection with a transaction affecting the Company, the conversion of such Notes may, at the election of the -11- holder thereof, be conditioned upon the consummation of such transaction, in which case such conversion shall not be deemed to be effective until consummation of such transaction or immediately prior thereto (at the election of such holder). 2.4 UNDERTAKINGS BY THE COMPANY. (a) The issuance of certificates for shares of Common Stock upon conversion of Notes shall be made without charge to the holders of such Notes for any issuance tax in respect thereof or other cost incurred by the Company in connection with such conversion and the related issuance of Conversion Shares. (b) The Company shall not close its books against the transfer of Notes or of Common Stock issued or issuable upon conversion of Notes in any manner which interferes with the timely conversion of Notes. The Company shall assist and cooperate with any holder of Notes required to make any governmental filings or obtain any governmental approval prior to or in connection with any conversion of Notes hereunder (including, without limitation, making any filings required to be made by the Company). (c) The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of issuance upon the conversion of the Notes, such number of shares of Common Stock which are issuable upon the conversion of all outstanding Notes. All shares of Common Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, Liens and charges. The Company shall take all such actions as may be necessary to assure that all such shares of Common Stock may be so issued without violation of any applicable law or governmental regulation (other than laws or regulations governing a regulated Person's investment authority) or any requirements of any domestic securities exchange upon which shares of Common Stock may be listed (except for official notice of issuance, which shall be immediately delivered by the Company upon each such issuance). The Company shall not take any action which would cause the number of authorized but unissued shares of Common Stock to be less than the number of such shares required to be reserved hereunder for issuance upon conversion of all of the Notes from time to time outstanding. (d) If the shares of Common Stock issuable by reason of conversion of Notes are convertible into or exchangeable for any other stock or securities of the Company, the Company shall, at the converting holder's option, upon surrender of the Notes to be converted by such holder as provided herein together with any notice, statement or payment required to effect such conversion or exchange of Common Stock, deliver to such holder or as -12- otherwise specified by such holder a certificate or certificates representing the stock or securities into which the shares of Common Stock issuable by reason of such conversion are so convertible or exchangeable, registered in such name or names and in such denomination or denominations as such holder has specified. 2.5 ADJUSTMENTS TO CONVERSION PRICE. (a) In order to prevent dilution of the conversion rights granted under this Section 2, the Conversion Price shall be subject to adjustment from time to time pursuant to this Section 2.5. (b) If and whenever the Company issues or sells, or in accordance with Section 2.6 is deemed to have issued or sold, any shares of Common Stock for a consideration per share (as calculated pursuant to Section 2.6) less than the Conversion Price in effect immediately prior to the time of such issue or sale or deemed issue and sale, then immediately upon such issue or sale or deemed issue or sale the Conversion Price shall be reduced to an amount equal to: (A) the sum of (1) the product derived by multiplying (x) the Conversion Price in effect immediately prior to such issue or sale by (y) the number of shares of Common Stock Deemed Outstanding immediately prior to such issue or sale, plus (2) the consideration (as calculated pursuant to Section 2.6(e)), if any, received or deemed to have been received by the Company upon such issue or sale or deemed issue or sale, divided by (B) the number of shares of Common Stock Deemed Outstanding immediately after such issue or sale. (c) Notwithstanding the foregoing, there shall be no adjustment in the Conversion Price as a result of any issue or sale or deemed issue or sale of Common Stock in an Excluded Issuance. 2.6 EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS. For purposes of determining the adjusted Conversion Price under Section 2.5, the following provisions shall be applicable: (a) Issuance of Rights or Options. If the Company in any manner grants or sells any Options and the price per share for which Common Stock is issuable upon the exercise of such Options, or upon conversion or exchange of any Convertible Securities issuable upon exercise of such Options, is less than the Conversion Price in effect immediately prior to the time of the granting or sale of such Options, then the "price per share for which Common Stock is issuable" shall be determined by dividing (A) the total amount, if any, received or receivable by the Company as consideration for the granting or sale -13- of such Options, plus the minimum aggregate amount of additional consideration payable to the Company upon exercise of all such Options, plus in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Company upon the issuance or sale of such Convertible Securities and the conversion or exchange thereof, by (B) the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options. For the purposes of this Section 2.6(a), the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such Options shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Options for such price per share. No further adjustment of the Conversion Price shall be made when Convertible Securities are actually issued upon the exercise of such Options or when Common Stock is actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities. (b) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the price per share for which Common Stock is issuable upon conversion or exchange of such Convertible Securities is less than the Conversion Price in effect immediately prior to the time of such issue or sale, then the "price per share for which Common Stock is issuable" shall be determined by dividing (A) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (B) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. For the purposes of this Section 2.6(b), the maximum number of shares of Common Stock issuable upon conversion or exchange of such Convertible Securities shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale of such Convertible Securities for such price per share. No further adjustment of the Conversion Price shall be made when Common Stock is actually issued upon the conversion or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustments of the Conversion Price had been or are to be made pursuant to the provisions of Section 2.5, no further adjustment of the Conversion Price shall be made by reason of such issue or sale. (c) Change in Option Price or Conversion Rate. If (i) the purchase price provided for in any Options, the additional consideration, if any, -14- payable upon the conversion or exchange of any Convertible Securities or the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be immediately adjusted to the Conversion Price which would have been in effect at such time had such changed purchase price, additional consideration or conversion rate, as the case may be, occurred at the time such Options or Convertible Securities were initially granted, issued or sold. For purposes of this Section 2.6, if the terms of any Option or Convertible Security which was outstanding as of December 19, 2000 or at any time thereafter are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change; provided that no such change shall at any time cause the Conversion Price hereunder to be increased. (d) Treatment of Expired Options and Unexercised Convertible Securities. Upon the expiration of any Option or the termination of any right to convert or exchange any Convertible Security without the exercise of any such Option or right, the Conversion Price then in effect hereunder shall be adjusted immediately to the Conversion Price which would have been in effect had such Option or Convertible Security, to the extent outstanding immediately prior to such expiration or termination, never been issued; provided that the expiration or termination of any Option or Convertible Security which was outstanding as of December 19, 2000 or at any time thereafter shall not cause the Conversion Price hereunder to be adjusted unless, and only to the extent that, a change in the terms of such Option or Convertible Security causes such Option or Convertible Security to be deemed to have been issued after December 19, 2000. (e) Calculation of Consideration Received. If any Common Stock, Option or Convertible Security is issued or sold or deemed to have been issued or sold for cash, the consideration received therefor shall be deemed to be the aggregate amount of cash received by the Company therefor (net of discounts, commissions and related expenses). If any Common Stock, Option or Convertible Security is issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of such consideration received by the Company shall be the Market Price thereof as of the date of receipt. If any Common Stock, Option or Convertible Security is issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of -15- the non-surviving entity which is attributable to such Common Stock, Option or Convertible Security, as the case may be. The fair value of any consideration other than cash and securities shall be determined jointly by the Company and the holders of a majority of the Notes. If such parties are unable to reach agreement within a reasonable period of time, the fair value of such consideration shall be determined by an independent appraiser experienced in valuing such type of consideration jointly selected by the Company and the holders of a majority of the Notes. The determination of such appraiser shall be final and binding upon the parties, and the fees and expenses of such appraiser shall be borne by the Company. (f) Integrated Transactions. In case any Option is issued in connection with the issue or sale of other securities of the Company, together constituting one integrated transaction in which no specific consideration is allocated to such Option by the parties thereto, the Option shall be deemed to have been issued for a consideration of $.01. (g) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any Subsidiary, and the disposition of any shares so owned or held shall be considered an issue or sale of Common Stock. (h) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling such holders (i) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (ii) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or upon the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. 2.7. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at any time subdivides (by any stock split, stock dividend, reclassification, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced, and if the Company at any time combines (by reverse stock split, reclassification or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased. -16- 2.8. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. Any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company's assets or other transaction, in each case which is effected in such a manner that the holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, is referred to herein as an "Organic Change". Prior to the consummation of any Organic Change, the Company shall make appropriate provisions (in form and substance reasonably satisfactory to the holders of a majority of the Notes) to insure that each of the holders of Notes shall thereafter have the right to acquire and receive, in lieu of or in addition to (as the case may be) the shares of Common Stock immediately theretofore acquirable and receivable upon the conversion of such holder's Notes, such shares of stock, securities or assets as such holder would have received in connection with such Organic Change if such holder had converted its Notes immediately prior to such Organic Change. In each such case, the Company shall also make appropriate provisions (in form and substance reasonably satisfactory to the holders of a majority of the Notes) to insure that the provisions of this Section 2 and Section 4 and Section 5 shall thereafter be applicable to the Notes (including, in the case of any such consolidation, merger or sale in which the successor entity or purchasing entity is other than the Company, an immediate adjustment of the Conversion Price to the value for the Common Stock reflected by the terms of such consolidation, merger or sale, and a corresponding immediate adjustment in the number of shares of Common Stock acquirable and receivable upon conversion of any of the Notes, if the value so reflected is less than the Conversion Price in effect immediately prior to such consolidation, merger or sale). The Company shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof, the successor entity (if other than the Company) resulting from consolidation or merger or the entity purchasing such assets assumes by written instrument (in form and substance reasonably satisfactory to the holders of a majority of the Notes), the obligation to deliver to each such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire. 2.9. CERTAIN EVENTS. If any event occurs of the type contemplated by the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Board of Directors shall make an appropriate adjustment in the Conversion Price so as to protect the rights of the holders of the Notes; provided that no such adjustment shall -17- increase the Conversion Price as otherwise determined pursuant to this Section 2 or decrease the number of shares of Common Stock issuable upon conversion of any Note. 2.10. NOTICES. (a) Whenever the Conversion Price is adjusted as provided in this Section 2, the Company shall promptly (and, in any event, not later than fifteen (15) days following the occurrence of the event requiring such adjustment) compute the adjusted Conversion Price in accordance with this Section 2 and shall prepare a report setting forth such adjustment and showing in detail the method of calculation and the facts upon which such adjustment is based. Such report shall include a statement of (i) the consideration received or to be received by the Company for any additional shares of Common Stock issued or sold or deemed to have been issued, (ii) the number of shares of Common Stock outstanding or deemed to be outstanding, and (iii) the Conversion Price in effect immediately prior to such issue or sale and as adjusted on account therefor. Upon the request of any holder of the Notes, the Company shall cause certified public accountants of recognized national standing (which may be the regular auditors of the Company) selected by the Company to verify such computation and report, if not previously verified at the request of any holder. The Company shall promptly (and, in any event, not later than thirty (30) days following such verification request) furnish a copy of such verification to the holder of any Note, and shall, upon the written request at any reasonable time of the holder of any Note, furnish to such holder a like report setting forth the Conversion Price at the time in effect and showing how such Conversion Price was calculated. The Company shall keep copies of all such reports and such verifications at its principal office, and shall cause such reports and verifications to be available for inspection at such office during normal business hours by the holder of any Note or any prospective purchaser of any Note designated by the holder of such Note. (b) The Company shall give written notice to all holders of Notes at least twenty (20) days prior to the date on which the Company closes its books or fixes a record date (i) with respect to any dividend or distribution upon Common Stock, (ii) with respect to any pro rata subscription offer to holders of Common Stock or (iii) for determining rights to vote with respect to any Organic Change. (c) The Company shall also give written notice to the holders of Notes at least twenty (20) days prior to the date on which any Organic Change shall take place. -18- 2.11. NO AVOIDANCE. If the Company shall enter into any transaction for the purpose of avoiding the application of the provisions of this Section 2, the benefits of such provisions shall nevertheless apply and be preserved. 2.12. HART-SCOTT-RODINO. Issuance of the Common Stock upon conversion of, or as interest payments on, the Notes hereunder may be subject to expiration or termination of all applicable waiting periods under the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), if applicable. Each of King and the Company shall cooperate in making filings under the HSR Act, if any, and shall use its reasonable best efforts to take, or cause to be taken, all actions necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement, including using its reasonable best efforts to resolve such objections, if any, as the Antitrust Division of the Department of Justice or the Federal Trade Commission or state antitrust enforcement or other governmental entities may assert under antitrust laws with respect to the transactions contemplated hereby. All filing fees payable in connection with any such filings under the HSR Act shall be split equally between the Company and King. SECTION 3. MANDATORY REDEMPTION (a) The Notes shall be redeemable, at the Company's option, in whole (and not in part), at any time after January 1, 2005, and prior to maturity of the Notes, upon not less than thirty (30) nor more than sixty (60) days' prior notice to all holders of the Notes, at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest to the date fixed for redemption (the "Redemption Date"), subject to the right of Note holders of record on the relevant Interest Payment Date (as defined in the Notes) that is prior to the Redemption Date to receive interest due on such Interest Payment Date:
Year Redemption Price ---- ---------------- ~~2005 102% 2006 101% 2007 100%~~
(b) With respect to any redemption of Notes, at least thirty (30) days but not more than sixty (60) days before a Redemption Date, the -19- Company shall mail a notice of redemption by first-class mail to each holder whose Notes are to be redeemed. The notice shall identify the notes to be redeemed and shall state the Redemption Date and the redemption price. (c) Once notice of redemption is mailed, Notes called for redemption become due and payable on the Redemption Date and at the redemption price; provided, however, that the holders of the Notes shall be permitted to convert the Notes into Common Stock pursuant to Section 2 at any time prior to the Redemption Date. Upon surrender of any Notes to the Company, such Notes shall be paid at the redemption price, plus accrued interest, if any, to the Redemption Date. Unless the Company defaults in making the redemption payment, interest on Notes called for redemption shall cease to accrue on and after the Redemption Date and the only remaining right of the holders of the Notes shall be to receive payment of the Redemption Price plus accrued interest to the Redemption Date upon surrender of the Notes to the Company. SECTION 4. [RESERVED.] SECTION 5. PURCHASE RIGHTS. If at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the "Purchase Rights"), then each holder of Notes shall be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such holder could have acquired if such holder had held the number of shares of Common Stock acquirable upon conversion of such holder's Notes immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. SECTION 6. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL. (a) The Company shall commence, within thirty (30) days after the occurrence of a Change of Control of the Company, and shall consummate, an offer to purchase from the holders thereof all Notes then outstanding, at a purchase price equal to one hundred one percent (101%) of the principal -20- amount thereof, plus accrued interest to the Payment Date (the "Offer to Purchase"). (b) The Company shall commence the Offer to Purchase by mailing a notice to each holder of Notes stating: (i) the covenant pursuant to which the offer is being made and that all Notes validly tendered will be accepted for payment on a pro rata basis; (ii) the purchase price and the date of purchase (which shall be a Business Day no earlier than thirty (30) days nor later than sixty (60) days from the date such notice is mailed) (the "Payment Date"); (iii) that any Note not tendered will continue to accrue interest pursuant to its terms; (iv) that, unless the Company defaults in the payment of the purchase price, any Note accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest on and after the Payment Date; (v) that holders electing to have a Note purchased pursuant to the Offer to Purchase will be required to surrender such Note, together with the form entitled "Option of the Holder to Elect Purchase" attached to such Note completed, to the Company at the address specified in the notice prior to the close of business on the Business Day immediately preceding the Payment Date; (vi) that holders will be entitled to withdraw their election if the Company receives, not later than the close of business on the third Business Day immediately preceding the Payment Date, a facsimile transmission or letter setting forth the name of such holder, the principal amount of Notes delivered for purchase and a statement that such holder is withdrawing such holder's election to have such Notes purchased; and (vii) that holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of One Hundred Thousand Dollars ($100,000) or integral multiples thereof. (c) On the Payment Date, the Company shall accept for payment the Notes or portions thereof tendered pursuant to an Offer to Purchase. Promptly following the Payment Date, the Company shall mail to the holders of Notes so accepted payment in an amount equal to the purchase price and mail to such holders a new Note equal in principal amount to any unpurchased portion of the Note surrendered; provided that, upon the request of any holder of at least Five Million Dollars ($5,000,000) in principal amount of Notes accepted for payment, the Company shall make such payment by wire transfer; and provided further, that each Note purchased and each new Note issued shall be in a principal amount of One Hundred Thousand Dollars ($100,000) or integral multiples thereof. In the event that the Company is required to repurchase Notes pursuant to an Offer to Purchase, the Company shall comply with all securities laws and regulations applicable to such repurchase. -21- SECTION 7. BOARD OF DIRECTORS. 7.1 EFFECTIVE PERIOD OF RIGHTS. The provisions of Sections 7.2 and 7.3 shall remain in effect for so long as King and King's Affiliates collectively shall be the holders of a majority of the Purchaser Securities. The provisions of Sections 7.2 and 7.3 shall automatically terminate upon a Change of Control of King. 7.2 BOARD OBSERVER RIGHTS. (a) King shall be entitled to designate one individual reasonably acceptable to the Company (the "Board Observer") who shall not be a member of the Board of Directors and who shall have the following rights and such other rights as agreed to with the Company: (i) the Company shall provide the Board Observer with written notice and a copy of materials distributed to the Board of Directors and committees thereof at least three (3) days in advance of all meetings of the Board of Directors and committees thereof (or if a shorter period of notice is provided to the Board of Directors or committee members, then within such shorter period); (ii) the Board Observer, or another individual designated by the Board Observer, shall have the right to attend each such meeting; and (iii) if the Company proposes to take any action by written consent in lieu of a meeting of the Board of Directors or any committee thereof, the Company shall give the Board Observer written notice thereof prior to the effective date of such consent, describing in reasonable detail the nature and the substance of such action. (b) King shall, and shall cause each Board Observer to, keep confidential all proprietary and confidential information of the Company disclosed to the Board Observer pursuant to Section 7.2(a), all in accordance with and subject to the terms and conditions of the Confidentiality Agreement dated September 1, 2000 between the Company and King (the "Confidentiality Agreement"). 7.3 BOARD REPRESENTATION RIGHTS. If and for so long as an Event of Default shall have occurred and be continuing, upon the written request of King, the Company shall take all corporate action necessary to increase by one the total number of directors then constituting the entire Board of Directors and to cause one individual designated by King to be appointed to the Board of Directors by the directors -22- then in office and to cause such designee of King to be nominated for election and reelection at any annual or special meeting of the Company's stockholders. Whenever such Event of Default shall have terminated or been waived, the right of King to have such individual appointed and nominated for election and reelection to the Board of Directors shall cease (but subject always to the same provisions for King's exercise of its rights under this Section 7.3 in the case of any subsequent Event of Default), and the term of service on the Board of Directors of such individual designated by King shall forthwith terminate. King shall continue to have the Board Observer rights set forth in Section 7.2 during any period in which it exercises its rights under this Section 7.3. SECTION 8. RESTRICTIVE COVENANTS. (a) Without the prior written consent of the holders of a majority of the Purchaser Securities (or, in the case of clause (iii), the holders of a majority of the Notes), the Company shall not take (or permit any Subsidiary to take) any of the following actions: (i) except as set forth on Schedule 8(a)(i), incur any Indebtedness, except to the extent that such Indebtedness, together with all other Indebtedness of the Company and its Subsidiaries taken as a whole (other than the Indebtedness described on Schedule 8(a)(i)), does not exceed One Million Five Hundred Thousand Dollars ($1,500,000) ("Permitted Indebtedness"); (ii) create, incur, assume or suffer to exist any Lien upon any of its right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible including, without limitation, capital stock except for Liens securing Permitted Indebtedness that do not at any time encumber any property other than the property financed by such Permitted Indebtedness. (iii) acquire any business or any Person or division thereof by merging or consolidating with, or by purchasing a substantial portion of the assets of, such business, Person or division, or by effecting any such acquisition in any other manner; (iv) acquire any assets, including the acquisition or license of any pharmaceutical or similar products, except for the acquisition or license of any product pursuant to a transaction (or series of transactions) whereby the aggregate consideration payable (including any contingent or deferred payments) is less than Five Million Dollars ($5,000,000); -23- (v) enter into the active management or operation of any business that is not primarily related to, or in furtherance of, being a biopharmaceutical company focused on the research, development and commercialization of proprietary healthcare products; (vi) elect to pay any additional consideration under Section 1.3 of the Fielding Acquisition Agreement (as defined in the December 2000 Note Purchase Agreement) in cash rather than in Common Stock; (vii) liquidate, dissolve or wind up the Company; (viii) file a voluntary petition in bankruptcy or commence a voluntary legal procedure for reorganization, arrangement, adjustment, relief or composition of indebtedness under bankruptcy or other similar law now or hereafter in effect, consent to the entry of an order for relief in an involuntary case under any such law or apply for or consent to the appointment of a receiver, liquidator, assignee, custodian or trustee (or similar official) of the Company or any Subsidiary; (ix) adopt any amendment to the certificate of incorporation or bylaws of the Company or take any other action that, in any case, would reasonably be expected to affect adversely the rights of the holders of the Purchaser Securities under the Notes, this Agreement or any other Related Document; (x) grant any put, registration or similar rights to any Person that would reasonably be expected to affect adversely in any material respect the rights of the holders of the Purchaser Securities under the Notes, this Agreement or any other Related Document; (xi) grant any power of attorney to any Person to do or perform any of the foregoing; or (xii) take any action, directly or indirectly, in contemplation of any of the foregoing. (b) Notwithstanding anything to the contrary set forth in this Agreement, the Company agrees that it shall not take or fail to take any action which would cause any holder of the Notes, together with such holder's Affiliates, to be the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than eighteen percent (18%) of the Common Stock then outstanding (assuming the conversion of all Notes then outstanding). If, notwithstanding the foregoing covenant, any holder of the Notes, together with such holder's Affiliates, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than eighteen percent (18%) of the Common -24- Stock then outstanding (assuming the conversion of all Notes then outstanding), then such holder shall have the right, in addition to and without limitation of any other rights or remedies available to such holder, to require the Company to prepay enough of the outstanding principal under the Notes held by such holder (as specified by such holder in writing, with such notice to specify the Note or Notes to which the prepayment shall be applied), so that such holder, together with such holder's Affiliates, is the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of less than eighteen percent (18%) of the Common Stock then outstanding (assuming the conversion of all Notes then outstanding). Any principal amount required to be prepaid by the Company pursuant to this Section 8(b) shall be made within five (5) business days after receipt of written notice from the holder, and shall be made by wire transfer of immediately available funds to an account specified by the holder. (c) Without the prior written consent of the Company, no holder of any Note shall offer any Common Stock in transactions to cover short sales at any time (i) within thirty (30) days prior to conversion of such Note or (ii) within thirty (30) days prior to the date of issuance of such Note. SECTION 9. INFORMATION AND INSPECTION RIGHTS. 9.1 INFORMATION RIGHTS. The Company shall deliver the following information to each Qualified Holder: (a) as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company, an income statement for such fiscal year, a balance sheet of the Company and statement of stockholders' equity as of the end of such year, and a statement of cash flows for such year, such year-end financial reports to be in reasonable detail, prepared in accordance with generally accepted accounting principles, consistently applied ("GAAP"), and audited and certified by independent public accountants of nationally recognized standing selected by the Company; (b) as soon as practicable, but in any event within forty-five (45) days after the end of each quarter of each fiscal year of the Company, unaudited financial statements (including income statements, balance sheets, cash flow statements and summaries of bookings and backlog) and management commentary as of the end of such fiscal quarter in accordance with GAAP; -25- (c) as soon as practicable any budget or business plan provided to the Board of Directors and as soon as prepared, any other budgets or revised budgets prepared by the Company; (d) within ten (10) business days after transmission thereof, copies of all financial statements, proxy statements, reports and any other general written communications which the Company sends to its stockholders and copies of all registration statements and all periodic and current reports which it files with the Securities and Exchange Commission or with any securities exchange on which any of its securities are then listed, and copies of all press releases and other statements made available generally by the Company to the public concerning material developments in the businesses of the Company and its Subsidiaries; and (e) with reasonable promptness, such other information and financial data concerning the Company and its Subsidiaries as any Qualified Holder entitled to receive information under this Section 9.1 may reasonably request. 9.2 INSPECTION RIGHTS. The Company shall permit any representatives designated by any Qualified Holder, upon reasonable notice and during normal business hours and at such other times as any such Qualified Holder may reasonably request, to (a) visit and inspect any of the properties of the Company and its Subsidiaries, (b) examine the corporate and financial records of the Company and its Subsidiaries and, at the expense of such Qualified Holder, make copies thereof or extracts therefrom, and (c) discuss the affairs, finances and accounts of the Company and its Subsidiaries with the directors and executive officers thereof and the Company's independent public accountants. The presentation of an executed copy of this Agreement (or photocopy thereof) by any Qualified Holder or representative thereof to the Company's independent accountants shall constitute the Company's permission to its independent accountants to participate in discussions with such Persons. 9.3 CONFIDENTIALITY. All information received by any representatives designated by any Qualified Holder shall be deemed received pursuant to the Confidentiality Agreement or, if such Qualified Holder is not King or other Person subject to the Confidentiality Agreement, pursuant to another confidentiality agreement mutually acceptable to the Company and such Qualified Holder. -26- SECTION 10. MISCELLANEOUS. 10.1 REMEDIES. Each holder of Purchaser Securities shall have all the rights and remedies set forth in this Agreement and the other Related Documents and all the rights and remedies which such holders have under any law or at equity. Any Person having any rights under any provision of this Agreement and the other Related Documents shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement and the other Related Documents and to exercise all other rights granted by law or at equity. 10.2 ENTIRE AGREEMENT; CONSENT TO AMENDMENTS. This Agreement and the other Related Documents contain the entire agreement between the parties with respect to the subject matter hereof, and supersede all prior written agreements and negotiations and oral understandings, if any, with respect to their subject matter, including the Original Agreement. Except as otherwise expressly provided herein, the provisions of this Agreement may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the holders of a majority of the Purchaser Securities; provided, that if any such amendment, modification or waiver would adversely affect any holder of Purchaser Securities relative to the holders of Purchaser Securities voting in favor of such amendment, modification, or waiver, such amendment, modification or waiver shall also require the written consent of the holders of a majority of the Purchaser Securities held by all holders so adversely affected; and provided further that if such amendment, modification or waiver is to a provision in this Agreement that requires a specific vote to take an action thereunder or to take an action with respect to the matters described therein, such amendment, modification or waiver shall not be effective unless such vote is obtained with respect to such amendment, modification or waiver. No other course of dealing between the Company and the holder of any Purchaser Securities or any delay in exercising any rights hereunder or under the Notes or the Company's certificate of incorporation shall operate as a waiver of any rights of any such holders. For purposes of this Agreement, Purchaser Securities held by the Company or any of its Subsidiaries shall not be deemed to be outstanding. 10.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties -27- hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto, whether so expressed or not. In addition, whether or not any express assignment has been made and except as provided in this Agreement, the provisions of this Agreement which are for the benefit of King as a purchaser or holder of Purchaser Securities are also for the benefit of, and enforceable by, any subsequent holder of such Purchaser Securities. 10.4 SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. 10.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together shall constitute one and the same Agreement. 10.6 DESCRIPTIVE HEADINGS; INTERPRETATION; NO STRICT CONSTRUCTION. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a substantive part of this Agreement. Whenever required by the context, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular forms of nouns, pronouns, and verbs shall include the plural and vice versa. Reference to any agreement, document or instrument means such agreement, document or instrument as amended or otherwise modified from time to time in accordance with the terms thereof, and if applicable hereof. The use of the words "include" or "including" in this Agreement shall be by way of example rather than by limitation. The use of the words "or", "either" or "any" shall not be exclusive. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, 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. -28- 10.7 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. 10.8 NOTICES. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when (i) delivered personally to the recipient, (ii) telecopied to the recipient (with hard copy sent to the recipient by reputable overnight courier service (charges prepaid) that same day) if telecopied before 5:00 p.m. New York time on a Business Day, and otherwise on the next Business Day, or (iii) one (1) Business Day after being sent to the recipient by reputable overnight courier service (charges prepaid). Such notices, demands and other communications shall be sent to the following Persons at the following addresses: To the Company: 8320 Guilford Road Columbia, Maryland 21046 Attn: Chief Executive Officer Telecopy: (301) 854-3902 with a copy (which shall not constitute notice) to: Novavax, Inc. 8320 Guilford Road Columbia, Maryland 21046 Attn: Ann P. McGeehan, Esq. Vice President and General Counsel Telecopy: (301) 854-3902 To King: 501 Fifth Street Bristol, Tennessee 37620 Attn: Executive Vice President of Legal Affairs and General Counsel Telecopy: (423) 989-6282 -29- with a copy (which shall not constitute notice) to: Hogan & Hartson L.L.P. 8300 Greensboro Drive McLean, Virginia 22102 Attn: Richard T. Horan, Jr. Thomas E. Repke Telecopy: (703) 610-6200 or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notice to any other holder of Purchaser Securities shall be addressed to such holder at the address set forth for such holder in the Company's records or at such other address and/or to the attention of such other Person as such holder may designate by written notice to the Company. 10.9 JURISDICTION; VENUE. (a) Each of the Company and King hereby waives personal service of any process upon it in connection with any suit, action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, and hereby covenants and agrees that all such service of process may be made in the manner set forth in Section 10.8 with the same effect as though served on it personally. (b) The Company hereby covenants and agrees that any suit, action or proceeding initiated by the Company against King, its affiliates, subsidiaries, successors and/or assigns arising out of or relating to this Agreement or the transactions contemplated hereby shall be brought exclusively in the federal courts located in and/or state courts of the State of Tennessee. In the event of any such suit, action or proceeding initiated by the Company, each of the Company and King hereby submits to the exclusive jurisdiction and venue of the federal courts located in and state courts of the State of Tennessee and hereby waives any and all objections based on jurisdiction or venue that such party may have under applicable law or the Federal Rules of Civil Procedure. The Company hereby irrevocably designates CT Corporation in the State of Tennessee (the "Tennessee Process Agent") as its designee, appointee and agent to receive, for and on its behalf, service of process in the State of Tennessee in any such suit, action or proceedings with respect to this Agreement and the transactions contemplated hereby. Service on the Tennessee Process Agent shall be deemed complete upon delivery thereof to the Tennessee Process Agent, provided that, in the case of any such service upon the Tennessee Process Agent, King shall also deliver a copy thereof to the Company in accordance with the notice provision set forth in Section 10.8. The Company shall take all such action as may be necessary to -30- continue the appointment of the Tennessee Process Agent in full force and effect or to appoint another agent, who shall thereafter be referred to herein as the "Tennessee Process Agent", so that the Company shall at all times have an agent for service for the foregoing purposes in the State of Tennessee. (c) King hereby covenants and agrees that any suit, action or proceeding initiated by King against the Company, its affiliates, subsidiaries, successors and/or assigns arising out of or relating to this Agreement or the transactions contemplated hereby shall be brought exclusively in the federal courts located in and/or state courts of the State of Maryland. In the event of any such suit, action or proceeding initiated by King, each of the Company and King hereby submits to the exclusive jurisdiction and venue of the federal courts located in and state courts of the State of Maryland and hereby waives any and all objections based on jurisdiction or venue that such party may have under applicable law or the Federal Rules of Civil Procedure. King hereby irrevocably designates CT Corporation in the State of Maryland (the "Maryland Process Agent"), as its designee, appointee and agent to receive, for and on its behalf, service of process in the State of Maryland in any such suit, action or proceedings with respect to this Agreement and the transactions contemplated hereby. Service on the Maryland Process Agent shall be deemed complete upon delivery thereof to the Maryland Process Agent, provided that in the case of any such service upon the Maryland Process Agent, the Company shall also deliver a copy thereof to King in accordance with the notice provision set forth in Section 10.8. King shall take all such action as may be necessary to continue the appointment of the Maryland Process Agent in full force and effect or to appoint another agent, who shall thereafter be referred to herein as the "Maryland Process Agent", so that King shall at all times have an agent for service for the foregoing purposes in the State of Maryland. (d) The Company acknowledges that the Executive Vice President of Legal Affairs and General Counsel of King is the registered agent for King in the State of Tennessee. Consequently, for purposes of any Related Documents which require King to appoint CT Corporation as King's registered agent in the State of Tennessee, for so long as the General Counsel of King shall be the registered agent for King in the State of Tennessee, King shall have no obligation to appoint CT Corporation or any other third party as its agent to receive service of process in the State of Tennessee. Instead, all service of process in the State of Tennessee shall be served on King at the address set forth in Section 10.8 of this Agreement. (e) King acknowledges that the General Counsel of the Company is the registered agent for the Company in the State of Maryland. Consequently, for purposes of any Related Documents which require the Company to appoint CT Corporation as the Company's registered agent in the -31- State of Maryland, for so long as the General Counsel of the Company shall be the registered agent for the Company in the State of Maryland, the Company shall have no obligation to appoint CT Corporation or any other third party as its agent to receive service of process in the State of Maryland. Instead, all service of process in the State of Maryland shall be served on the Company at the address set forth in Section 10.8 of this Agreement. 10.10 BUSINESS DAY. If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday, or any other day in which the banks located in the State of Maryland are authorized or obligated by law to close, then the time period shall automatically be extended to the Business Day immediately following such Saturday, Sunday or any other day in which the banks located in the State of Maryland are authorized or obligated by law to close. 10.11 DELIVERY BY FACSIMILE. This Agreement, the agreements referred to herein, and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine as a defense to the formation or enforceability of a contract, and each such party forever waives any such defense. [SIGNATURE PAGES FOLLOW] -32- IN WITNESS WHEREOF, the parties have executed this Amended and Restated Investor Rights Agreement as of the date first above written. COMPANY: NOVAVAX, INC. By: /s/ John Spears -------------------------------------- Name: John Spears ------------------------------------ Title: President & CEO ----------------------------------- KING: KING PHARMACEUTICALS, INC. By: /s/ John A. A. Bellamy -------------------------------------- Name: John A. A. Bellamy ------------------------------------ Title: Executive Vice President and ----------------------------------- General Counsel ----------------------------------- EX-7 4 g76829a2exv7.txt CONVERTIBLE NOTE NO. 4 EXHIBIT 7 CONVERTIBLE NOTE THIS NOTE AND THE SHARES OF COMMON STOCK OF NOVAVAX, INC. (OR OTHER SECURITIES) WHICH MAY BE ISSUABLE AS INTEREST ON OR UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY OF THE STATES OF THE UNITED STATES, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL (I) SUCH SECURITIES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, OR (II) THE HOLDER HEREOF PROVIDES (A) A WRITTEN OPINION OF LEGAL COUNSEL, WHICH COUNSEL AND OPINION (IN FORM AND SUBSTANCE) SHALL BE REASONABLY SATISFACTORY TO NOVAVAX, INC., TO THE EFFECT THAT THE PROPOSED TRANSFER OF SUCH SECURITIES MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT, OR (B) A "NO ACTION" LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") REASONABLY SATISFACTORY TO NOVAVAX, INC. TO THE EFFECT THAT UNDER THE SECURITIES ACT THE PROPOSED TRANSFER OF THE SECURITIES WITHOUT REGISTRATION WILL NOT RESULT IN A RECOMMENDATION BY THE STAFF OF THE COMMISSION THAT ACTION BE TAKEN WITH RESPECT THERETO, OR (C) SUCH OTHER EVIDENCE AS MAY BE REASONABLY SATISFACTORY TO NOVAVAX, INC. THAT THE PROPOSED TRANSFER OF SUCH SECURITIES MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT. 4% CONVERTIBLE SENIOR NOTE No. 4 June 26, 2002 $10,000,000 NOVAVAX, INC., a Delaware corporation (the "Company"), for value received, hereby promises to pay to the order of KING PHARMACEUTICALS, INC., a Tennessee corporation, or its registered assigns ("Payee"), the principal amount of Ten Million Dollars ($10,000,000), on December 19, 2007, with interest from the date hereof on the unpaid balance of such principal amount as provided herein, which interest is payable semi-annually on June 30 and December 31 of each year commencing June 30, 2002, and on the date such unpaid balance shall become due and payable in full (whether at maturity or at a date fixed for repurchase or by declaration or otherwise) (each an "Interest Payment Date"). Capitalized terms used and not defined in this Note shall have the meanings assigned to them in the Amended and Restated Investor Rights Agreement dated as of the date hereof, as amended, restated, supplemented or otherwise modified from time to time (the "Amended and Restated Investor Rights Agreement"), by and between the Company and Payee. Interest payable on this Note shall be computed on the basis of a 360-day year of twelve 30-day months and applied to the actual number of days elapsed and shall accrue at a fixed rate equal to four percent (4%) per annum. All payments with respect to this Note shall be credited first to the payment of accrued but unpaid interest and then to the repayment of principal. The rate of interest payable hereunder shall in no event exceed the maximum rate permitted by applicable law. Payments of principal on this Note shall be made in lawful money of the United States in immediately available funds at the address of Payee set forth below. Except as provided in the following sentence, payments of interest on this Note shall be made in lawful money of the United States in immediately available funds at the address of Payee set forth below. If the Average Closing Price calculated with respect to an Interest Payment Date is equal to or greater than the Conversion Price then in effect and no Event of Default shall have occurred and be continuing as of such Interest Payment Date, the Company, at its option, shall have the right to pay up to the full amount of the Stock Interest Portion of the interest due on such Interest Payment Date by issuing to Payee the number of fully paid and nonassessable shares of Common Stock which is determined by dividing such Stock Interest Portion by the Average Closing Price calculated with respect to such Interest Payment Date and by delivering a certificate or certificates for shares of such Common Stock in such denomination or denominations as Payee may request at the address specified by Payee. For purposes of the foregoing provision: "Average Closing Price" means, with respect to any Interest Payment Date, the average Closing Price per share, rounded up to four (4) decimal points, of the Common Stock during the twenty (20) consecutive trading days ending with and including the third trading day immediately preceding such Interest Payment Date. "Closing Price" means, with respect to each share of Common Stock, for any day, the reported last sales price regular way per share or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way, in either case (a) on the - 2 - principal (as determined by the Board of Directors) national securities exchange on which the Common Stock is listed or admitted to trading or (b) if not listed or admitted to trading on any national securities exchange, on the Nasdaq National Market, or, if the Common Stock is not listed or admitted to trading on any national securities exchange or quoted on the Nasdaq National Market, the average of the closing bid and asked prices in the over-the-counter market as furnished by any American Stock Exchange member firm selected from time to time by the Company for that purpose. If no such prices are available, the Closing Price per share of Common Stock shall be the fair value of a share as determined in good faith by the Board of Directors. "Stock Interest Portion" shall mean one-half of the interest due and payable on this Note at any Interest Payment Date. This Note is the Company's 4% Convertible Senior Note authorized for issuance pursuant to and in accordance with the June 2002 Note Purchase Agreement dated as of the date hereof by and between the Company and Payee (the "June 2002 Note Purchase Agreement"). The registered holder of this Note is entitled to the benefits of the Amended and Restated Investor Rights Agreement and may enforce the agreements of the Company contained therein and exercise the remedies provided for thereby or otherwise available in respect thereof and is subject to the provisions thereof and limitations of rights provided therein. The Amended and Restated Investor Rights Agreement contains provisions permitting the amendment or waiver of certain of the terms thereof. Except in connection with a prepayment of a portion of this Note pursuant to Section 8(b) of the Amended and Restated Investor Rights Agreement, a mandatory redemption of this Note pursuant to Section 3 of the Amended and Restated Investor Rights Agreement, or a repurchase of the Notes pursuant to Section 6 of the Amended and Restated Investor Rights Agreement, this Note may not be prepaid by the Company without the prior written consent of Payee. At the option of the holder hereof, the principal amount of this Note or any portion of such principal amount may, at the times and upon the conditions set forth in the Amended and Restated Investor Rights Agreement, be converted into fully paid and nonassessable shares of Common Stock, as such shares shall be constituted at the time of such conversion at the Conversion Price in effect at the time of such conversion. - 3 - At the option of the holder hereof, the Company may be required to prepay or repurchase this Note in whole or in part under certain circumstances as specified in the Amended and Restated Investor Rights Agreement. At the option of the Company, the Company may have the right to redeem this Note (in whole, but not in part) under certain circumstances as specified in the Amended and Restated Investor Rights Agreement. If any payment of principal or interest on this Note shall become due on a Saturday, Sunday, or a public holiday under the laws of the State of Maryland, such payment shall be made on the next succeeding business day and such extension of time shall be included in computing interest in connection with such payment. Upon payment in full of all principal and interest payable hereunder, this Note shall be surrendered to the Company for cancellation. The Company waives presentment, demand, notice of nonperformance, protest, notice of protest, and notice of dishonor. No delay on the part of Payee in exercising any right or remedy hereunder, under the Amended and Restated Investor Rights Agreement or under applicable law shall operate as a waiver of such right or remedy. NOTWITHSTANDING ANYTHING IN THIS NOTE TO THE CONTRARY, THE COMPANY HEREBY EXPRESSLY WAIVES, AND SHALL BE PROHIBITED FROM ENFORCING OR SEEKING TO ENFORCE, ANY RIGHT OR REMEDY (INCLUDING, WITHOUT LIMITATION, ANY COMMON LAW RIGHT OR REMEDY) TO SET OFF, COUNTERCLAIM, DEDUCT OR OTHERWISE REDUCE ANY AMOUNT WHICH THE COMPANY MAY BE ENTITLED TO RECEIVE FROM PAYEE OR ITS AFFILIATES AGAINST ANY AMOUNTS PAYABLE UNDER THIS NOTE. In the case of the happening of any of the following events (herein called "Events of Default"): (a) any representation or warranty made by the Company in or in connection with this Note, the June 2002 Note Purchase Agreement, the Amended and Restated Investor Rights Agreement or the Second Amended and Restated Registration Rights Agreement dated as of the date hereof between the Company and Payee (the "Second Amended and Restated Registration Rights Agreement" and, collectively with the June 2002 Note Purchase Agreement and the Amended and Restated Investor Rights Agreement, the "Related Documents") or the borrowings hereunder or - 4 - thereunder, shall prove to have been false or misleading in any material respect when made or deemed to be made; (b) default shall be made by the Company in the payment of any interest of this Note when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise and such default shall continue for fifteen (15) days after such payment shall have become due and payable; (c) default shall be made by the Company in the payment of any principal of this Note when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment or redemption thereof or by acceleration thereof or otherwise; (d) the Company shall have failed to make or consummate an Offer to Purchase in accordance with the Amended and Restated Investor Rights Agreement; (e) default shall be made by the Company in the due observance or performance of any covenant or agreement contained in this Note or any of the Related Documents and such default shall continue for thirty (30) days after written notice thereof to the Company by the holder of this Note; (f) default shall be made by the Company or any subsidiary of the Company in the due observance or performance of any covenant or agreement contained in any Material Contract (as defined below) and the other party to such Material Contract shall have declared default thereunder; (g) there occurs with respect to any Material Indebtedness (as defined below), whether such Material Indebtedness now exists or shall hereafter be created, (i) an event of default that has caused the holder thereof to declare such Material Indebtedness to be due and payable prior to its stated maturity and such Material Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within fifteen (15) days of such acceleration and/or (ii) the failure to make a principal payment at the final fixed maturity and such defaulted payment shall not have been made, waived or extended within fifteen (15) days of such payment default; (h) the Company or any subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of - 5 - the United States Code or any other federal, state or foreign bankruptcy, insolvency, liquidation or similar law, (ii) consent to the institution of, or fail to contravene in a timely and appropriate manner, any such proceeding or the filing of any such petition, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator or similar official for the Company or for a substantial part of its property or assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally, to pay its debts as they become due or (vii) take corporate action for the purpose of effecting any of the foregoing; (i) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Company or of a substantial part of its property or assets under Title 11 of the United States Code or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator or similar official for the Company or for a substantial part of the property or assets of the Company, or (iii) the winding-up or liquidation of the Company, and such proceeding or petition shall continue undismissed for ninety (90) days or an order or decree approving or ordering any of the foregoing shall continue unstayed and in effect for thirty (30) days; (j) this Note or any of the Related Documents shall for any reason cease to be, or be asserted by the Company not to be, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms; (k) the Initial Shelf Registration Statement (as defined in the Second Amended and Restated Registration Rights Agreement) with respect to the shares of Common Stock issuable upon the conversion of this Note shall not have been declared effective by the Commission within one hundred eighty (180) calendar days after the issuance of this Note; (l) there occurs an event of default under any of the Other Notes (as defined below); or (m) any final judgment or order (not covered by insurance) for the payment of money in excess of Fifty Thousand Dollars ($50,000) in the aggregate for all such final judgments or orders shall be rendered against the Company or any subsidiary which shall not be paid or discharged within thirty - 6 - (30) days following entry of the final judgment or order that causes the aggregate amount of all such final judgments and orders outstanding and not paid or discharged to exceed Fifty Thousand Dollars ($50,000); then, and in any such event (other than an event described in paragraph (h) or (i) above, and at any time thereafter during the continuance of such event), (i) the unpaid principal of this Note shall bear interest (computed on the basis of a 360-day year of twelve 30-day months), at a fixed rate equal to ten (10%) per annum, (ii) the holder of this Note may, by written notice to the Company, accelerate the maturity of this Note whereupon the entire principal amount of this Note, together with all accrued and unpaid interest thereon and all other liabilities of the Company hereunder, shall become due and payable immediately, without presentment, demand, notice of nonperformance, protest, notice of protest, and notice of dishonor, all of which are hereby expressly waived by the Company, anything contained herein to the contrary notwithstanding; provided, however, that with respect to a default described in paragraph (h) or (i) above, this Note, and all of such principal, interest and other liabilities shall automatically become due and payable without presentment, demand, notice of nonperformance, protest, notice of protest, and notice of dishonor, all of which are hereby expressly waived by the Company, anything contained herein to the contrary notwithstanding, and (iii) the holder of this Note may exercise all or any other remedies provided by the Amended and Restated Investor Rights Agreement or available at law or equity. For purposes of the foregoing provisions: "Material Contract" shall mean any contract, agreement or commitment that involves performance of services or delivery of goods or materials by or to the Company or any of its subsidiaries in an amount or value in excess of Two Million Dollars ($2,000,000) during any twelve (12) month period. "Material Indebtedness" shall mean any Indebtedness of the Company and/or its subsidiaries having an outstanding principal or other amount of more than Fifty Thousand Dollars ($50,000). "Other Notes" shall mean (i) the First December 2000 Note, (ii) the Second December 2000 Note, (iii) the September 2001 Note, and (iv) any other promissory notes or evidence of Indebtedness issued by the Company to Payee. - 7 - The Company agrees to pay, in addition to all other sums payable hereunder, reasonable attorneys' fees and costs incurred by Payee in connection with the collection of this Note. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Note shall be in writing and shall be deemed to have been given when (i) delivered personally to the recipient, (ii) telecopied to the recipient (with hard copy sent to the recipient by reputable overnight courier service (charges prepaid) that same day) if telecopied before 5:00 p.m. Eastern time on a business day, and otherwise on the next business day, or (iii) one business day after being sent to the recipient by reputable overnight courier service (charges prepaid). Such notices, demands and other communications shall be sent to the following Persons at the following addresses: To the Company: Novavax, Inc. 8320 Guilford Road Columbia, Maryland 21046 Attn: Chief Executive Officer Telecopy: (301) 854-3902 with a copy (which shall not constitute notice) to: Novavax, Inc. 8320 Guilford Road Columbia, Maryland 21046 Attn: Ann P. McGeehan, Esq. Vice President and General Counsel Telecopy: (301) 854-3902 To Payee: King Pharmaceuticals, Inc. 501 Fifth Street Bristol, Tennessee 37620 Attn: Executive Vice President of Legal Affairs and General Counsel Telecopy: (423) 989-6282 - 8 - with a copy (which shall not constitute notice) to: Hogan & Hartson L.L.P. 8300 Greensboro Drive McLean, Virginia 22102 Attn: Richard T. Horan, Jr. Thomas E. Repke Telecopy: (703) 610-6200 or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notice to any other holder shall be addressed to such holder at the address set forth for such holder in the Company's records or at such other address and/or to the attention of such other person as such holder may designate by written notice to the Company. This Note may be modified or amended only by a writing signed by the Company and Payee. This Note may be transferred only upon surrender of the original Note for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument of transfer in form reasonably satisfactory to the Company. Thereupon, a new Note or Notes of denominations of One Million Dollars ($1,000,000) (or integral multiples thereof) having an aggregate principal amount and accrued and unpaid interest equal to the principal amount and accrued and unpaid interest of such original Note will be issued to, and registered in the name of, the transferee or transferees. Interest and principal are payable only to the registered holder of this Note. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of, or interest on, or other amount payable under this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law. Each of the Company and Payee hereby waives personal service of any process upon it in connection with any suit, action or proceeding arising out of or relating to this Note or the transactions contemplated hereby, - 9 - and hereby covenants and agrees that all such service of process may be made in the manner set forth above with the same effect as though served on it personally. The Company hereby covenants and agrees that any suit, action or proceeding initiated by the Company against Payee, its affiliates, subsidiaries, successors and/or assigns arising out of or relating to this Note or the transactions contemplated hereby shall be brought exclusively in the federal courts located in and/or state courts of the State of Tennessee. In the event of any such suit, action or proceeding initiated by the Company, each of the Company and Payee hereby submits to the exclusive jurisdiction and venue of the federal courts located in and state courts of the State of Tennessee and hereby waives any and all objections based on jurisdiction or venue that such party may have under applicable law or the Federal Rules of Civil Procedure. The Company hereby irrevocably designates CT Corporation in the State of Tennessee (the "Tennessee Process Agent") as its designee, appointee and agent to receive, for and on its behalf, service of process in the State of Tennessee in any such action, suit or proceedings with respect to this Note and the transactions contemplated hereby. Service on the Tennessee Process Agent shall be deemed complete upon delivery thereof to the Tennessee Process Agent, provided that, in the case of any such service upon the Tennessee Process Agent, Payee shall also deliver a copy thereof to the Company in accordance with the notice provision set forth herein. The Company shall take all such action as may be necessary to continue the appointment of the Tennessee Process Agent in full force and effect or to appoint another agent, who shall thereafter be referred to herein as the "Tennessee Process Agent", so that the Company shall at all times have an agent for service for the foregoing purposes in the State of Tennessee. Payee hereby covenants and agrees that any suit, action or proceeding initiated by Payee against the Company, its affiliates, subsidiaries, successors and/or assigns arising out of or relating to this Note or the transactions contemplated hereby shall be brought exclusively in the federal courts located in and/or state courts of the State of Maryland. In the event of any such suit, action or proceeding initiated by Payee, each of the Company and Payee hereby submits to the exclusive jurisdiction and venue of the federal courts located in and state courts of the State of Maryland and hereby waives any and all objections based on jurisdiction or venue that such party may have under applicable law or the Federal Rules of Civil Procedure. Payee hereby irrevocably designates CT Corporation in the State of Maryland (the "Maryland Process Agent"), as its designee, appointee and agent to receive, for and on its behalf, service of process in the State of Maryland in any such suit, action or - 10 - proceedings with respect to this Note and the transactions contemplated hereby. Service on the Maryland Process Agent shall be deemed complete upon delivery thereof to the Maryland Process Agent, provided that, in the case of any such service upon the Maryland Process Agent, the Company shall also deliver a copy thereof to Payee in accordance with the notice provision set forth herein. Payee shall take all such action as may be necessary to continue the appointment of the Maryland Process Agent in full force and effect or to appoint another agent, who shall thereafter be referred to herein as the "Maryland Process Agent", so that Payee shall at all times have an agent for service for the foregoing purposes in the State of Maryland. This Note shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.] - 11 - IN WITNESS WHEREOF, the Company has caused this Note to be duly executed and delivered on its behalf on and as of the day and year first written above. NOVAVAX, INC. By: /s/ John Spears -------------------------------------- Name: John Spears ------------------------------------ Title: President & CEO ----------------------------------- OPTION OF THE HOLDER TO ELECT PURCHASE TO: NOVAVAX, INC. The undersigned registered owner of this Note hereby irrevocably acknowledges receipt of a notice from NOVAVAX, INC. (the "Company") as to the occurrence of a Change of Control with respect to the Company and requests and instructs the Company to repay the entire principal amount of this Note, or the portion thereof (which is $100,000 or an integral multiple thereof) below designated, in accordance with the terms of the Amended and Restated Investor Rights Agreement referred to in this Note at the repurchase price, together with accrued interest to, but excluding, such date, to the registered holder hereof. Date: --------------------- ----------------------------------------- ----------------------------------------- Signature(s) NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever. Principal amount to be repaid (if less than all): $ ---------------- ----------------------------------------- Social Security or Other Taxpayer Identification Number CONVERSION NOTICE TO: NOVAVAX, INC. The undersigned registered owner of this Note hereby irrevocably exercises the option to convert this Note, or the portion thereof (which is One Thousand Dollars ($1,000) or an integral multiple thereof) below designated, into shares of Common Stock of Novavax, Inc. in accordance with the terms of the Amended and Restated Investor Rights Agreement referred to in this Note, and directs that the shares issuable and deliverable upon such conversion, together with any check in payment for fractional shares and any Notes representing any unconverted principal amount hereof, be issued and delivered to the registered holder hereof unless a different name has been indicated below. If shares or any portion of this Note not converted are to be issued in the name of a person other than the undersigned, the undersigned will provide the appropriate information below and pay all transfer taxes payable with respect thereto. Any amount required to be paid to the undersigned on account of interest accompanies this Note. Date: ------------------ ----------------------------------------- ----------------------------------------- Signature(s) EX-8 5 g76829a2exv8.txt AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT EXHIBIT 8 SECOND AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT THIS SECOND AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this "Agreement") is dated as of this 26th day of June, 2002, by and between NOVAVAX, INC., a Delaware corporation (the "Company"), and KING PHARMACEUTICALS, INC., a Tennessee corporation ("King"). WHEREAS, pursuant to a Note Purchase Agreement, dated as of December 19, 2000 (the "December 2000 Note Purchase Agreement"), by and between the Company and King, King purchased from the Company, and the Company sold to King, (i) a 4% Convertible Senior Note of the Company in the aggregate principal amount of $20,000,000 (the "First December 2000 Note") and (ii) a 4% Convertible Senior Note in the aggregate principal amount of $5,000,000 (the "Second December 2000 Note" and together with the First December 2000 Note, the "December 2000 Notes"); WHEREAS, pursuant to the September 2001 Note Purchase Agreement, dated as of September 7, 2001 (the "September 2001 Note Purchase Agreement"), by and between the Company and King, King purchased from the Company, and the Company sold to King, a 4% Convertible Senior Note of the Company in the aggregate principal amount of $5,000,000 (the "September 2001 Note"); WHEREAS, pursuant to the June 2002 Note Purchase Agreement, dated as of June 26, 2002 (the "June 2002 Note Purchase Agreement"), by and between the Company and King, King has agreed, subject to the satisfaction of certain conditions described therein, to purchase from the Company, and the Company has agreed, subject to the satisfaction of certain conditions described therein, to sell to King, a 4% Convertible Senior Note of the Company in the aggregate principal amount of $10,000,000 (the "June 2002 Note"); WHEREAS, each of the December 2000 Note Purchase Agreement, the September 2001 Note Purchase Agreement and the June 2002 Note Purchase Agreement contemplates that the Company will grant shelf and piggyback registration rights with respect to the shares of Common Stock (as defined hereafter) issued or issuable by the Company upon the conversion of, and as interest payments on the Notes issued pursuant to such agreements; WHEREAS, the Company and King entered into a certain Amended and Restated Registration Rights Agreement dated as of September 7, 2001 (the "Amended and Restated Registration Rights Agreement") pursuant to which the Company granted certain registration rights to King; and WHEREAS, the Company and King have agreed to amend and restate the Amended and Restated Registration Rights Agreement as a condition to the closing of the June 2002 Note Purchase Agreement. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements of the parties contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Amended and Restated Registration Rights Agreement is hereby amended and restated as follows: 1. Definitions. The following terms as used herein shall have the following meanings: "Amended and Restated Registration Rights Agreement" has the meaning specified in the recitals to this Agreement. "Business Day" means a day other than Saturday, Sunday or any day on which banks located in the State of Maryland are authorized or obligated by law to close. "Commission" means the Securities and Exchange Commission and any other similar or successor agency of the federal government then administering the Securities Act or the Exchange Act. "Common Stock" means the Common Stock, par value $.01 per share, of the Company and any other securities issued or issuable upon the conversion of, or as interest payments on, the Notes pursuant to the terms thereof. "December 2000 Notes" has the meaning specified in the recitals to this Agreement. "December 2000 Note Purchase Agreement" has the meaning specified in the recitals to this Agreement. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar federal statute then in effect, and any reference to a particular section thereof shall include a reference to the comparable section, if any, of any such similar federal statute, and the rules and regulations thereunder. "First December 2000 Note" has the meaning specified in the recitals to this Agreement. "First Note Closing Date" means December 19, 2000. -2- "Holder" or "Holders" shall mean King and the other beneficial owners from time to time of Registrable Securities, but in each case only so long as each such Person continues to hold any Registrable Securities. "Initial Shelf Registrable Securities" means the shares of Common Stock issued or issuable upon the conversion of the Notes and any additional shares of Common Stock received by the Holders with respect to such shares pursuant to a subsequent stock split, stock dividend or other recapitalization of the Company. "Initial Shelf Registration Statement" means a Shelf Registration Statement relating to the Initial Shelf Registrable Securities. "Initiating Holder" has the meaning specified in Section 3.3(a). "June 2002 Note" has the meaning specified in the recitals to this Agreement. "June 2002 Note Purchase Agreement" has the meaning specified in the recitals to this Agreement. "Maryland Process Agent" has the meaning specified in Section 7.11(c). "Notes" mean the December 2000 Notes, the September 2001 Note and the June 2002 Note. "Person" means any individual, corporation, partnership, limited liability company or partnership, association, trust or other entity or organization, including a government or a political subdivision or an agency or instrumentality thereof. "Piggyback Registration Statement" means a registration statement of the Company filed pursuant to Section 3.3 and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Plan of Distribution" has the meaning specified in Section 3.1(d). "Prospectus" means the prospectus included in a Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any of the Registrable Securities covered by a Registration Statement and by all other amendments and supplements to the prospectus, including pre-effective amendments and post-effective amendments to a Registration Statement and all material incorporated by reference in such prospectus. -3- "Registered Securities" means the securities covered by a Registration Statement. "Registrable Securities" means the Initial Shelf Registrable Securities and the Top-up Shelf Registrable Securities. For purposes of this Agreement, the shares of Common Stock constituting Initial Shelf Registrable Securities or Top-up Shelf Registrable Securities shall cease to be Registrable Securities when (a) a registration statement covering such shares of Common Stock has been declared effective under the Securities Act and such shares of Common Stock have been sold or disposed of pursuant to such effective registration statement or (b) such shares of Common Stock have been distributed to the public pursuant to Rule 144 under the Securities Act. "Registration Statement" means a Shelf Registration Statement or a Piggyback Registration Statement, as the case may be. "Requesting Holder" has the meaning specified in Section 3.3(a). "Second December 2000 Note" has the meaning specified in the recitals to this Agreement. "Second Note Closing Date" means September 7, 2001. "Securities Act" means the Securities Act of 1933, as amended, or any similar federal statute then in effect, and any reference to a particular section thereof shall include a reference to a comparable section, if any, of any such similar federal statute, and the rules and regulations thereunder. "September 2001 Note" has the meaning specified in the recitals to this Agreement. "September 2001 Note Purchase Agreement" has the meaning specified in the recitals to this Agreement. "Shelf Registration" means the registration of Registrable Securities effected pursuant to Section 3.1 or Section 3.2. "Shelf Registration Effective Date" means, with respect to any Shelf Registration Statement, the date on which such Shelf Registration Statement is declared effective by the Commission. -4- "Shelf Registration Period" means, with respect to any Shelf Registration Statement, the shorter of (a) the period from and including the Shelf Registration Effective Date to and including the Shelf Registration Termination Date or (b) the period from and including the Shelf Registration Effective Date to and including the date on which all of the Holders of the Registrable Securities covered by such Shelf Registration Statement shall have disposed of such Registrable Securities. "Shelf Registration Statement" means a shelf registration statement of the Company filed pursuant to the provisions of Section 3.1 or Section 3.2 which covers the Registrable Securities on an appropriate form under Rule 415 of the Securities Act, or any similar rule that may be adopted by the Commission, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Shelf Registration Statement" shall include the Initial Shelf Registration Statement and each Top-up Shelf Registration Statement. "Shelf Registration Termination Date" means, with respect to any Shelf Registration Statement, the date on which all of the Registrable Securities covered by such Shelf Registration Statement may be sold by the respective Holders thereof pursuant to Rule 144(k) under the Securities Act. "Tennessee Process Agent" has the meaning specified in Section 7.11(b). "Third Note Closing Date" means the issue date of the June 2002 Note sold under the June 2002 Note Purchase Agreement. "Top-up Shelf Registrable Securities" means the shares of Common Stock issued or issuable as interest payments on the Notes and any additional shares of Common Stock received by the Holders with respect to such shares pursuant to a subsequent stock split, stock dividend or other recapitalization of the Company. "Top-up Shelf Registration Statement" means a Shelf Registration Statement relating to Top-up Shelf Registrable Securities. 2. Effectiveness of Agreement. This Agreement shall become effective on the date hereof. -5- 3. Registrations. 3.1 Initial Shelf Registration Statements. (a) The Company shall file an Initial Shelf Registration Statement with the Commission not later than ten (10) Business Days following the First Note Closing Date, and shall use its best efforts to cause such Initial Shelf Registration Statement to be declared effective by the Commission as soon as reasonably practicable thereafter and in any event within one hundred eighty (180) calendar days following the First Note Closing Date. The failure to have such Initial Shelf Registration Statement declared effective by the Commission within such one hundred eighty (180) calendar day period shall constitute an Event of Default under the Notes. Such Initial Shelf Registration Statement shall register the offering of Initial Shelf Registrable Securities issued or issuable upon conversion of the First December 2000 Note. The Company shall promptly notify the Holders of the date and time of declaration of effectiveness of such Initial Shelf Registration Statement. (b) The Company shall file an Initial Shelf Registration Statement with the Commission not later than ten (10) Business Days following the Second Note Closing Date, and shall use its best efforts to cause such Initial Shelf Registration Statement to be declared effective by the Commission as soon as reasonably practicable thereafter and in any event within one hundred eighty (180) days following the Second Note Closing Date. The failure to have such Initial Shelf Registration Statement declared effective by the Commission within such one hundred eighty (180) calendar day period shall constitute an Event of Default under the Notes. Such Initial Shelf Registration Statement shall register the offering of Initial Shelf Registrable Securities issued or issuable upon conversion of the Second December 2000 Note and the September 2001 Note. The Company shall promptly notify the Holders of the date and time of declaration of effectiveness of such Initial Shelf Registration Statement. (c) The Company shall file an Initial Shelf Registration Statement with the Commission not later than ten (10) Business Days following the Third Note Closing Date, and shall use its best efforts to cause such Initial Shelf Registration Statement to be declared effective by the Commission as soon as reasonably practicable thereafter and in any event within one hundred eighty (180) days following the Third Note Closing Date. The failure to have such Initial Shelf Registration Statement declared effective by the Commission within such one hundred eighty (180) calendar day period shall constitute an Event of Default under the Notes. Such Initial Shelf Registration Statement shall register (i) the offering of Initial Shelf Registrable Securities issued or issuable upon conversion of the June 2002 Note and (ii) the offering of the shares of Common Stock issued to King as interest payments on the December 2000 Notes in December 2001. The Company shall promptly notify the Holders -6- of the date and time of declaration of effectiveness of such Initial Shelf Registration Statement. (d) Each Initial Shelf Registration Statement shall cover the offer and sale of the Initial Shelf Registrable Securities in accordance with the methods of distribution included in the plan of distribution substantially in the form attached to this Agreement as Exhibit A (the "Plan of Distribution"). The Plan of Distribution shall be included in each Initial Shelf Registration Statement and shall not be modified without the written consent of the holder of a majority of the Registrable Securities. 3.2 Top-up Shelf Registration Statements. (a) At any time following the issuance of Common Stock as interest payments on the Notes, the holders of a majority in principal amount of the Notes then outstanding may request the Company in writing to file a Top-up Shelf Registration Statement with the Commission registering the offering of some or all Top-up Shelf Registrable Securities which the Company has not previously registered. The Company shall file such Top-up Shelf Registration Statement with the Commission not later than twenty (20) Business Days following its receipt of such request and shall use its best efforts to cause such Top-up Shelf Registration Statement to be declared effective by the Commission as soon as reasonably practicable thereafter. Within five (5) Business Days following receipt of such request, the Company shall give written notice to each Holder of unregistered Top-up Shelf Registrable Securities then outstanding, specifying the approximate date on which the Company proposes to file such Top-up Shelf Registration Statement and advising such Holder of its right to have any or all of the unregistered Top-up Shelf Registrable Securities then held by such Holder included among the securities to be covered thereby. At the written request of any such Holder given to the Company within ten (10) Business Days after such Holder's receipt of written notice from the Company, the Company shall include among the securities covered by such registration statement the number of Top-up Shelf Registrable Securities which such Holder shall have requested be so included. (b) Each Top-up Shelf Registration Statement shall cover the offer and sale of the Top-up Shelf Registrable Securities in accordance with the methods of distribution included in the Plan of Distribution substantially in the form attached hereto. The Plan of Distribution shall be included in each Top-up Shelf Registration Statement and shall not be modified without the written consent of the holders of a majority of the Registrable Securities. 3.3 Piggy-Back Registration Statements. (a) Whenever the Company shall propose to file a registration statement under the Securities Act relating to the public offering of Common -7- Stock for the Company's own account (other than pursuant to a registration statement on Form S-4 or Form S-8 or any successor forms, or filed in connection with an exchange offer or an offering of securities solely to existing stockholders or employees of the Company) or for the account of any holder of Common Stock (the "Initiating Holder") and on a form and in a manner that would permit registration of Registrable Securities for sale to the public under the Securities Act, the Company shall (i) give written notice at least fifteen (15) Business Days prior to the filing thereof to each Holder of Registrable Securities then outstanding, specifying the approximate date on which the Company proposes to file such registration statement and advising such Holder of its right to have any or all of the Registrable Securities then held by such Holder included among the securities to be covered thereby and (ii) at the written request of any such Holder given to the Company within eight (8) Business Days after such Holder's receipt of written notice from the Company, include among the securities covered by such registration statement the number of Registrable Securities which such Holder (the "Requesting Holder") shall have requested be so included (subject, however, to reduction in accordance with Section 3.3(b)). (b) Each Holder of Registrable Securities desiring to participate in an offering pursuant to Section 3.3(a) may include shares of Common Stock in any registration statement relating to such offering to the extent that the inclusion of such shares of Common Stock shall not reduce the number of shares of Common Stock to be offered and sold by the Company or any Initiating Holder pursuant thereto. If the lead managing underwriter selected for an underwritten offering pursuant to Section 3.3(a) determines that marketing factors require a limitation on the number of shares of Common Stock to be offered and sold by Requesting Holders in such offering, there shall be included in the offering only that number of shares of Common Stock, if any, that such lead managing underwriter reasonably and in good faith believes will not jeopardize the success of the offering of all the shares of Common Stock that the Company desires to sell for its own account or that the Initiating Holder desires to sell for its own account, as the case may be. In such event and provided the lead managing underwriter has so notified the Company in writing, the shares of Common Stock, including the Registrable Securities, to be included in such offering shall be allocated in accordance with the following priorities: first, among the shares of Common Stock proposed to be included for the account of the Company or the Initiating Holder, as the case may be; second, on a pro rata basis with respect to (A) the Registrable Securities held by all Requesting Holders based on the number of Registrable Securities that each Requesting Holder has requested to be so included and (B) the shares of Common Stock held by holders of registration rights pursuant to the Agreement and Plan of Merger dated as of October 4, 2000, among the Company, The Fielding Pharmaceutical Company and the other persons named therein who have requested such shares to be so included; and third, among -8- the shares of Common Stock held by holders of any other Common Stock in accordance with the terms of their respective registration rights, if any. (c) Nothing in this Section 3.3 shall create any liability on the part of the Company to the Holders of Registrable Securities if the Company for any reason should decide not to file a registration statement proposed to be filed under Section 3.3(a) or to withdraw such registration statement subsequent to its filing, regardless of any action whatsoever that a Holder may have taken, whether as a result of the issuance by the Company of any notice hereunder or otherwise. (d) No Holder of Registrable Securities may participate in any underwritten offering pursuant to this Section 3.3 unless such Holder (i) agrees to sell such Holder's securities on the basis provided in any underwriting arrangements approved by the Company in its reasonable discretion and (ii) completes and executes all questionnaires, powers of attorney, custody agreements, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. (e) In the case of an underwritten offering of Common Stock in which the Holders have the right to participate pursuant to this Section 3.3, each Holder which holds, together with such Holder's affiliates, Registrable Securities representing more than 1% of the outstanding Common Stock (assuming conversion of all outstanding Notes) shall agree, if requested in writing by the managing underwriter of such underwritten offering, not to effect any public sale or distribution of such Registrable Securities or any Notes held by such Holder during the seven (7) days prior to and up to ninety (90) days after the effective date of the registration statement covering such underwritten offering, provided that if directors and officers of the Company holding Common Stock generally are subject to hold-back restrictions of shorter duration, such shorter periods shall apply to such Holder. If requested in writing by the managing underwriter of such underwritten offering, such Holder shall enter into a lock-up agreement with the applicable underwriters that is consistent with the agreement in the preceding sentence. 3.4 Registration Procedures. When the Company causes the registration of the Registrable Securities pursuant to a Registration Statement, the Company shall: (a) subject to the terms of Section 4, use its reasonable best efforts to keep any Shelf Registration Statement continuously effective during the Shelf Registration Period in order to permit the Prospectus forming a part thereof to be usable and deliverable by the Holders for the Shelf Registration Period; -9- (b) use its reasonable best efforts to cause the Registered Securities to be registered and qualified under the securities laws of such jurisdictions as shall reasonably be requested by the Holders to enable them to consummate the sale or disposition of the Registered Securities; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business, to subject itself to taxation or to file a general consent to service of process in any such jurisdiction in which it is not otherwise required to do so; (c) furnish to each Holder, as applicable, without charge, such number of copies of each preliminary prospectus and of the Prospectus as such Holder may reasonably request in order to facilitate the sale or disposition of the Registered Securities; (d) subject to the requirements of Section 4(b), if at any time when a prospectus is required by the Securities Act to be delivered in connection with the offering or sale of the Registered Securities, an event occurs or a fact exists as a result of which it is necessary, in the opinion of the Company, to amend the Registration Statement or amend or supplement the Prospectus in order that the Prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time the Prospectus is delivered to a purchaser, or if it shall be necessary, in the opinion of the Company, at any such time to amend the Registration Statement or amend or supplement the Prospectus to comply with the regulations of the Commission thereunder, (i) promptly notify each Holder of the occurrence of such event or existence of such fact or requirements and, consistent with the terms of Section 4, direct each Holder to cease making offers and sales of the Registered Securities pursuant to the Registration Statement or deliveries of the Prospectus contained therein for any purpose and (ii) prepare and file with the Commission in a timely manner such amendment or supplement as may be necessary or appropriate to correct such untrue statement or omission or to make the Registration Statement or the Prospectus comply with such requirements; (e) promptly notify each Holder when the Registration Statement or any post-effective amendment to the Registration Statement shall have become effective, or when any supplement to the Prospectus or any amended Prospectus shall have been filed, and furnish to each Holder copies of any amendment of or supplement to the Prospectus so that, as thereafter delivered to purchasers of the Registered Securities, the Prospectus shall not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances then existing; -10- (f) promptly notify the Holders of (i) the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of any Prospectus, or of the suspension of the qualification of the Registered Securities for offer or sale in any jurisdiction, or of the institution or threatening of any proceedings for any of such purposes, and (ii) the lifting of any such order or suspension or resolution of any such proceedings that permits the resumption of offers and sales of the Registered Securities; (g) provide a transfer agent and registrar for all the Registered Securities covered by any Registration Statement not later than the effective date of such Registration Statement; (h) promptly after the filing thereof with the Commission, and for so long as the Common Stock is listed on the Nasdaq National Market ("Nasdaq"), file copies of the Prospectus with Nasdaq; (i) comply with the requirements of the Securities Act and the Exchange Act applicable to issuers so as to permit the completion of the distribution of the Registered Securities in accordance with the intended method or methods of distribution thereof; and (j) provide counsel to the Holders with a reasonable opportunity to review and comment on each Registration Statement before such Registration Statement is filed with the Commission. 4. Agreements of Holders. (a) As a condition to the Company's obligation under this Agreement to cause the Shelf Registration Statements to be filed and the Registrable Securities of any Holder to be included in any Registration Statement, such Holder shall provide to the Company, in writing, with such information, including, without limitation, the information required by Items 507 and 508 of Regulation S-K under the Securities Act (or any successor provisions), as may reasonably be required by the Company in order to comply with applicable provisions of the Securities Act and the Exchange Act in connection with any registration of Registrable Securities. (b) If at any time when a Prospectus is required by the Securities Act to be delivered in connection with the offering or sale of the Registered Securities of a Holder, an event occurs or a fact exists affecting the Plan of Distribution as it relates to such Holder or affecting the information provided by such Holder pursuant to Section 4(a) hereof, such that it is necessary to amend the Registration Statement or amend or supplement the Prospectus in order that the Prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at -11- the time the Prospectus is delivered to a purchaser, then such Holder shall (i) promptly notify the Company of the occurrence of such event or existence of such fact and (ii) provide the Company with such information as may be necessary for the Company to comply with its obligations as set forth in Section 3.4(d) hereof. (c) Each Holder agrees that it shall not make offers of or sell the Registered Securities pursuant to any Registration Statement or make deliveries of the Prospectus contained therein for any purpose (i) after receipt by such Holder of the notice to cease making such offers and sales and such deliveries which is furnished by the Company pursuant to Section 3.4(d) until delivery by the Company to such Holder of copies of any amendment of or supplement to the Prospectus pursuant to Section 3.4(e) or (ii) after receipt by such Holder of the notice furnished by the Company pursuant to Section 3.4(f)(i) until delivery by the Company to such Holder of the notice referred to in Section 3.4(f)(ii). (d) Each Holder agrees that it shall not offer the Registered Securities in transactions to cover short sales. 5. Registration Expenses. (a) The Company shall pay and bear all costs and expenses incident to the performance of its obligations under this Agreement, including the following: (i) expenses related to the preparation and printing of each Registration Statement (including financial statements and exhibits), any preliminary prospectuses and the Prospectus, and the cost of furnishing copies thereof to the Holders, as the case may be; (ii) all Commission, self-regulatory organization, stock exchange and other registration and filing fees and listing fees; (iii) expenses related to the preparation, printing and distribution of certificates representing the Registered Securities and other documents relating to the Company's performance of and compliance with the terms of this Agreement; (iv) the fees and disbursements of the Company's counsel and independent accountants; and (v) expenses related to the qualification of the Registered Securities under United States and other applicable securities laws. (b) Each Holder shall pay and bear all costs and expenses incident to the delivery of the Registered Securities to be sold by such Holder, -12- including any stock transfer taxes payable upon the sale of such Registered Securities to the purchasers thereof, any discounts or commissions payable to brokers, dealers or agents in connection therewith, and the fees and disbursements of counsel to such Holder. 6. Indemnification; Contribution. 6.1 Indemnification by the Company. The Company agrees to indemnify and hold harmless each Holder, its officers, directors, agents, partners, trustees and stockholders and each Person who controls such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) against all losses, claims, damages, liabilities and expenses (including reasonable attorneys' fees, disbursements and expenses, as incurred) incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus or preliminary Prospectus or any amendment or supplement to any of the foregoing, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus or a preliminary Prospectus, in the light of the circumstances then existing) not misleading, except in each case insofar as the same arise out of or are based upon any such untrue statement or omission made in reliance on and in conformity with information with respect to such Holder or other indemnified party furnished in writing to the Company by such Holder or other indemnified party or its counsel expressly for use therein. In connection with an underwritten offering, the Company shall indemnify the underwriters thereof, their officers, directors, agents, partners, trustees and stockholders and each Person who controls such underwriters (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Holders. Notwithstanding the foregoing provisions of this Section 6.1, the Company shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) under the indemnity agreement in this Section 6.1 for any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense that arises out of such Person's failure to send or deliver a copy of the final Prospectus to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of the Registrable Securities to such Person if such statement or omission was corrected in such final Prospectus and the Company has previously furnished copies thereof to such Holder or other Person in accordance with this Agreement. -13- 6.2 Indemnification by the Holders. Each Holder agrees severally and not jointly to indemnify and hold harmless the Company and any underwriter, as the case may be, and their respective directors, officers, agents, partners, trustees, stockholders and controlling Persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) against any losses, claims, damages, liabilities and expenses (including reasonable attorneys' fees, disbursements and expenses, as incurred), incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation arising out of or based upon any untrue or alleged untrue statement of a material fact contained in, or any omission or alleged omission of a material fact required to be stated in, any Registration Statement, any Prospectus or preliminary Prospectus or any amendment or supplement to any of the foregoing or necessary to make the statements therein (in case of the Prospectus or a preliminary Prospectus, in the light of the circumstances then existing) not misleading, but only to the extent that any such untrue statement or omission is made in reliance on and in conformity with information furnished in writing to the Company by such Holder or its counsel specifically for inclusion therein; provided, however, that the liability of each Holder hereunder shall not in any event exceed the net proceeds (after deduction of underwriting discounts and commissions and offering expenses payable by such Holder) received by such Holder from the sale of Registrable Securities covered by the applicable Registration Statement. 6.3 Indemnification Proceedings. Any Person entitled to indemnification under Section 6.1 or Section 6.2 agrees to give prompt written notification to the indemnifying party after the receipt by such indemnified party of any written notice of the commencement of any action, suit, proceeding or investigation or threat thereof made in writing for which such indemnified party may claim indemnification or contribution pursuant to this Agreement; provided that failure to give such notification shall not affect the obligations of the indemnifying party pursuant to Section 6.1, Section 6.2 or Section 6.4 except to the extent the indemnifying party shall have been actually prejudiced as a result of such failure; provided, further, that if the indemnified party shall fail to provide such notice to the indemnifying party, then the indemnifying party shall not be required to pay the costs and expenses of such indemnified party incurred by such indemnified party during the period commencing on the date such indemnified party was required to provide such notice to the indemnifying party and ending on the date that the indemnifying party has knowledge of such action, suit, proceeding or investigation. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall -14- not be liable to such indemnified party under these indemnification provisions for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation, unless in the reasonable judgment of any indemnified party a conflict of interest is likely to exist, based on the written opinion of counsel, between such indemnified party and any other of such indemnified parties with respect to such claim. In the event of such a conflict of interest, the indemnifying party shall not be liable for the fees and expenses of (a) more than one counsel for all Holders of Registrable Securities who are indemnified parties, which counsel shall be selected by the Holders of a majority of the Registrable Securities covered by the applicable Registration Statement who are indemnified parties (and which selection shall be reasonably satisfactory to the Company), (b) more than one counsel for any underwriters or (c) more than one counsel for the Company in connection with any one action or separate but similar or related actions. An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claims, unless in the reasonable judgment of any indemnified party, based on the written opinion of counsel, a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. In the event of such a conflict of interest, the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels, provided that the indemnifying party shall not be liable for the fees and expenses of (a) more than one counsel for all Holders of Registrable Securities who are indemnified parties, which counsel shall be selected by the Holders of a majority of the Registrable Securities covered by the applicable Registration Statement who are indemnified parties (and which selection shall be reasonably satisfactory to the Company), (b) more than one counsel for any underwriters or (c) more than one counsel for the Company in connection with any one action or separate but similar or related actions. No indemnifying party, in defense of any such action, suit, proceeding or investigation, shall, except with the consent of each indemnified party, consent to the entry of any judgment or entry into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such action, suit, proceeding or investigation to the extent the same is covered by the indemnity obligations set forth in Section 6.1 or Section 6.2. No indemnified party shall consent to entry of any judgment or enter into any settlement without the consent of each indemnifying party, which consent shall not be unreasonably withheld or delayed. 6.4 Contribution. If the indemnification from the indemnifying party provided for in Section 6.1 or Section 6.2 is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to herein, then the indemnifying party, in lieu of indemnifying such -15- indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities and expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified party in connection with the actions which resulted in such losses, claims, damages, liabilities and expenses, as well as any other relevant equitable considerations; provided, however, that the liability of each Holder hereunder shall not in any event exceed the net proceeds (after deduction of underwriting discounts and commissions and offering expenses payable by such Holder) received by such Holder from the sale of Registrable Securities covered by the applicable Registration Statement. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 6.3, any legal or other fees and expenses reasonably incurred by such indemnified party in connection with any investigation or proceeding. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. 6.5 Other Liability. The provisions of Sections 6.1, 6.2, 6.3 and 6.4 shall be in addition to any liability which any indemnifying party may have to any indemnified party and shall survive the termination of this Agreement. 7. Miscellaneous. 7.1 Assignment. The registration rights contained in Section 3 may be transferred by a Holder in connection with the transfer by such Holder of the Registrable Securities to which such registration rights relate. As a condition to the effectiveness of any such transfer of registration rights hereunder, the transferee shall execute a counterpart of, and shall become a party to, this Agreement. -16- 7.2 Reports Under the Exchange Act. The Company agrees to: (a) file with the Commission in a timely manner all reports and other documents required to be filed by the Company under the Exchange Act; and (b) furnish to any Holder promptly upon request a written statement by the Company that it has complied with the current public information and reporting requirements of Rule 144 under the Securities Act. 7.3 Mergers, etc. The Company agrees that, as a condition to any merger, consolidation or the sale of all or substantially all of its assets in exchange for securities of another company, it shall use its commercially reasonable efforts in light of the circumstances then existing to require the surviving, consolidated or purchasing corporation to enter into an agreement to register the securities of such surviving, consolidated or purchasing corporation, to be received by the Holders, on substantially the same terms and provisions as are provided in this Agreement. 7.4 No Inconsistent Agreements. The Company shall not hereafter enter into any agreement with respect to its securities which is inconsistent with or in any way shall limit the registration rights granted to the Holders in this Agreement without the consent of the Holders of a majority of the Registrable Securities. 7.5 Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when (a) delivered personally to the recipient, (b) telecopied to the recipient (with hard copy sent to the recipient by reputable overnight courier service (charges prepaid) that same day) if telecopied before 5:00 p.m. Eastern time on a Business Day, and otherwise on the next Business Day, or (c) one Business Day after being sent to the recipient by reputable overnight courier service (charges prepaid). Such notices, demands and other communications shall be sent to the following Persons at the following addresses: To the Company: 8320 Guilford Road Columbia, Maryland 21046 Attn: Chief Executive Officer Telecopy: (301) 854-3902 -17- with a copy (which shall not constitute notice) to: Novavax, Inc. 8320 Guilford Road Columbia, Maryland 21046 Attn: Ann P. McGeehan, Esq. Vice President and General Counsel Telecopy: (301) 854-3902 To King: 501 Fifth Street Bristol, Tennessee 37620 Attn: Executive Vice President of Legal Affairs and General Counsel Telecopy: (423) 989-6282 with a copy (which shall not constitute notice) to: Hogan & Hartson L.L.P. 8300 Greensboro Drive McLean, Virginia 22102 Attn: Richard T. Horan, Jr. Thomas E. Repke Telecopy: (703) 610-6200 or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notice to any other Holder shall be addressed to such Holder at the address set forth for such Holder in the Company's records or at such other address and to the attention of such other Person as such Holder may designate by written notice to the Company. 7.6 Counterparts. This Agreement may be executed in one or more counterparts (including by facsimile transmission), each of which shall be deemed an original and all of which taken together shall constitute one and the same agreement. 7.7 Headings. Section headings are inserted herein for convenience only and do not form a part of this Agreement. 7.8 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. -18- 7.9 Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the parties hereunder shall be enforceable to the fullest extent permitted by law. 7.10 Entire Agreement; Amendment. This Agreement, the December 2000 Note Purchase Agreement, the September 2001 Note Purchase Agreement, the June 2002 Note Purchase Agreement and the Amended and Restated Investor Rights Agreement (as defined in the June 2002 Note Purchase Agreement), contain the entire agreement among the parties with respect to the transactions contemplated herein, and supersede all prior written agreements and negotiations and oral understandings, if any, with respect to their subject matter, including, without limitation, the Registration Rights Agreement dated as of December 19, 2000 between the Company and King, the Amended and Restated Registration Rights Agreement dated as of September 7, 2001 between the Company and King and the Investor Rights Agreement, as amended, dated as of December 19, 2000 between the Company and King. Except as otherwise expressly provided herein, the provisions of this Agreement may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holders of a majority of the Registrable Securities; provided, that if any such amendment, modification or waiver would adversely affect any Holder of Registrable Securities relative to the Holders of Registrable Securities voting in favor of such amendment, modification, or waiver, such amendment, modification or waiver shall also require the written consent of the holders of a majority of the Registrable Securities held by all Holders so adversely affected; and provided further that if such amendment, modification or waiver is to a provision in this Agreement that requires a specific vote to take an action thereunder or to take an action with respect to the matters described therein, such amendment, modification or waiver shall not be effective unless such vote is obtained with respect to such amendment, modification or waiver. No other course of dealing between the Company and any Holder or any delay in exercising any rights hereunder or under the Notes or the Company's certificate of incorporation shall operate as a waiver of any rights of any such Holder. 7.11 Jurisdiction; Venue. (a) Each of the Company and King hereby waives personal service of any process upon it in connection with any suit, action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, and hereby covenants and agrees that all such service of process may -19- be made in the manner set forth in Section 7.5 with the same effect as though served on it personally. (b) The Company hereby covenants and agrees that any suit, action or proceeding initiated by the Company against King, its affiliates, subsidiaries, successors and/or assigns arising out of or relating to this Agreement or the transactions contemplated hereby shall be brought exclusively in the federal courts located in and/or state courts of the State of Tennessee. In the event of any such suit, action or proceeding initiated by the Company each of the Company and King hereby submits to the exclusive jurisdiction and venue of the federal courts located in and state courts of the State of Tennessee and hereby waives any and all objections based on jurisdiction or venue that such party may have under applicable law or the Federal Rules of Civil Procedure. The Company hereby irrevocably designates CT Corporation in the State of Tennessee (the "Tennessee Process Agent") as its designee, appointee and agent to receive, for and on its behalf, service of process in the State of Tennessee in any such suit, action or proceedings with respect to this Agreement and the transactions contemplated hereby. Service on the Tennessee Process Agent shall be deemed complete upon delivery thereof to the Tennessee Process Agent, provided that, in the case of any such service upon the Tennessee Process Agent, King shall also deliver a copy thereof to the Company in accordance with the notice provision set forth in Section 7.5. The Company shall take all such action as may be necessary to continue the appointment of the Tennessee Process Agent in full force and effect or to appoint another agent, who shall thereafter be referred to herein as the "Tennessee Process Agent," so that the Company shall at all times have an agent for service for the foregoing purposes in the State of Tennessee. (c) King hereby covenants and agrees that any suit, action or proceeding initiated by King against the Company, its affiliates, subsidiaries, successors and/or assigns arising out of or relating to this Agreement or the transactions contemplated hereby shall be brought exclusively in the federal courts located in and/or state courts of the State of Maryland. In the event of any such suit, action or proceeding initiated by King, each of the Company and King hereby submits to the exclusive jurisdiction and venue of the federal courts located in and state courts of the State of Maryland and hereby waives any and all objections based on jurisdiction or venue that such party may have under applicable law or the Federal Rules of Civil Procedure. King hereby irrevocably designates CT Corporation in the State of Maryland (the "Maryland Process Agent"), as its designee, appointee and agent to receive, for and on its behalf, service of process in the State of Maryland in any such suit, action or proceedings with respect to this Agreement and the transactions contemplated hereby. Service on the Maryland Process Agent shall be deemed complete upon delivery thereof to the Maryland Process Agent, provided that in the case of any such service upon the Maryland Process Agent, the Company shall also deliver a copy thereof to King in accordance with the notice provision set forth in -20- Section 7.5. King shall take all such action as may be necessary to continue the appointment of the Maryland Process Agent in full force and effect or to appoint another agent, who shall thereafter be referred to herein as the "Maryland Process Agent," so that King shall at all times have an agent for service for the foregoing purposes in the State of Maryland. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.] -21- IN WITNESS WHEREOF, the parties hereto have caused this Second Amended and Restated Registration Rights Agreement to be duly executed as of the date first written above. COMPANY: NOVAVAX, INC. By: /s/ John Spears -------------------------------------- Name: John Spears ------------------------------------ Title: President & CEO ----------------------------------- KING: KING PHARMACEUTICALS, INC. By: /s/ John A. A. Bellamy -------------------------------------- Name: John A. A. Bellamy ------------------------------------ Title: Executive Vice President and ----------------------------------- General Counsel ----------------------------------- EXHIBIT A PLAN OF DISTRIBUTION Shares may be sold or distributed from time to time by the selling stockholders named in this prospectus and, to the extent permitted by their registration rights agreement with the Company, by their donees or transferees and their other successors in interest. The selling stockholders may sell their shares at market prices prevailing at the time of sale, at prices related to such prevailing market prices, at negotiated prices, or at fixed prices, which may be changed. Each selling stockholder reserves the right to accept or reject, in whole or in part, any proposed purchase of shares, whether the purchase is to be made directly or through agents. The selling stockholders may offer their shares at various times in one or more of the following transactions: - in ordinary brokers' transactions and transactions in which the broker solicits purchasers; - in transactions involving cross or block trades or otherwise on the Nasdaq National Market or any national securities exchange on which the Common Stock is listed; - in transactions "at the market" to or through market makers in the common stock or into an existing market for the common stock; - in other ways not involving market makers or established trading markets, including direct sales of the shares to purchasers or sales of the shares effected through agents; - through transactions in options, swaps or other derivatives which may or may not be listed on an exchange; - in privately negotiated transactions; or - in a combination of any of the foregoing transactions. The selling stockholders also may sell their shares in accordance with Rule 144 under the Securities Act. From time to time, one or more of the selling stockholders may pledge or grant a security interest in some or all of the shares owned by them. If the selling stockholders default in performance of their secured obligations, the pledgees or secured parties may offer and sell the shares from time to time by this prospectus. The selling stockholders also may transfer and donate shares in other circumstances. The number of shares beneficially owned by selling stockholders will decrease as and when the selling stockholders transfer or donate their shares or default in performing obligations secured by their shares. The plan of distribution for the shares offered and sold under this prospectus will otherwise remain unchanged, except that the transferees, donees, pledgees, other secured parties or other successors in interest will be selling stockholders for purposes of this prospectus. A selling stockholder may enter into hedging transactions with broker-dealers. A selling stockholder also may enter into option or other transactions with broker-dealers that involve the delivery of shares to the broker-dealers, who may then resell or otherwise transfer such shares. In addition, a selling stockholder may loan or pledge shares to a broker-dealer, which may sell the loaned shares or, upon a default by the selling stockholder of the secured obligation, may sell or otherwise transfer the pledged shares. The selling stockholders may use brokers, dealers, underwriters or agents to sell their shares. The persons acting as agents may receive compensation in the form of commissions, discounts or concessions. This compensation may be paid by the selling stockholders or the purchasers of the shares of whom such persons may act as agent, or to whom they may sell as principal, or both. The compensation as to a particular person may be less than or in excess of customary commissions. The selling stockholders and any agents or broker-dealers that participate with the selling stockholders in the offer and sale of the shares may be deemed to be "underwriters" within the meaning of the Securities Act. Any commissions they receive and any profit they realize on the resale of the shares by them may be deemed to be underwriting discounts and commissions under the Securities Act. Neither we nor any selling stockholders can presently estimate the amount of such compensation. If a selling stockholder sells shares in an underwritten offering, the underwriters may acquire the shares for their own account and resell the shares from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. In such event, we will set forth in a supplement to this prospectus the names of the underwriters and the terms of the transactions, including any underwriting discounts, concessions or commissions and other items constituting compensation of the underwriters and broker-dealers. The underwriters from time to time may change any public offering price and any discounts, concessions or commissions allowed or reallowed or paid to broker-dealers. Unless otherwise set forth in a supplement, the obligations of the underwriters to purchase the shares will be subject to certain conditions, and the underwriters will be obligated to purchase all of the shares specified in the supplement if they purchase any of the shares. Exhibit A - Page 2 We have informed the selling stockholders that during such time as they may be engaged in a distribution of the shares, they are required to comply with Regulation M under the Securities Exchange Act. With exceptions, Regulation M prohibits any selling stockholder, any affiliated purchasers and other persons who participate in such a distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase, any security which is the subject of the distribution until the entire distribution is complete. Under the Company's registration rights agreement with the selling stockholders, the Company is required to bear the expenses relating to this offering, excluding any underwriting discounts or commissions, stock transfer taxes and fees and disbursements of counsel to the selling stockholders. The Company has agreed to indemnify the selling stockholders and their respective controlling persons against certain liabilities, including certain liabilities under the Securities Act. The Company will not receive any of the proceeds from the sale by the selling stockholders of the shares offered by this document. This offering by any selling stockholder will terminate on the date specified in the selling stockholder's registration rights agreement with the Company, or, if earlier, on the date on which the selling stockholder has sold all of such selling stockholder's shares. Exhibit A - Page 3 EX-10 6 g76829a2exv10.txt JUNE 2002 NOTE PURCHASE AGREEMENT EXHIBIT 10 JUNE 2002 NOTE PURCHASE AGREEMENT BY AND BETWEEN NOVAVAX, INC. AND KING PHARMACEUTICALS, INC. DATED AS OF JUNE 26, 2002 TABLE OF CONTENTS
Page ---- SECTION 1. PURCHASE AND SALE OF THE CONVERTIBLE NOTE; USE OF PROCEEDS...................................3 1.1 Sale and Issuance of the Convertible Note.......................................................3 1.2 Closing.........................................................................................3 1.3 Use of Proceeds.................................................................................3 SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................3 2.1 Organization, Good Standing and Qualification...................................................3 2.2 Authorization...................................................................................4 2.3 Valid Issuance of the Note Shares and Listing...................................................4 2.4 Capitalization; Indebtedness....................................................................5 2.5 SEC Reports and Certain Changes.................................................................7 2.6 Financial Statements and Title to Assets........................................................7 2.7 Contracts.......................................................................................8 2.8 Compliance and Permits..........................................................................8 2.9 Compliance with Other Instruments...............................................................9 2.10 Governmental Consents...........................................................................9 2.11 Litigation......................................................................................9 2.12 Taxes..........................................................................................10 2.13 Intellectual Property..........................................................................10 2.14 Brokerage......................................................................................10 SECTION 3. REPRESENTATIONS AND WARRANTIES OF KING......................................................11 3.1 Organization, Good Standing and Qualification..................................................11 3.2 Authorization..................................................................................11 3.3 Governmental Consents..........................................................................11 3.4 Accredited Investor............................................................................11 3.5 Brokerage......................................................................................11 SECTION 4. FILINGS AND AUTHORIZATIONS..................................................................12 SECTION 5. CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT..............................................................................12 SECTION 6. CONDITIONS OF KING'S OBLIGATIONS AT THE CLOSING.....................................................................................13 SECTION 7. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT THE CLOSING.................................................................................14 SECTION 8. MISCELLANEOUS...............................................................................16 8.1 Survival.......................................................................................16 8.2 Assignment; Successors and Assigns.............................................................16 8.3 Governing Law..................................................................................16 8.4 Counterparts...................................................................................16 8.5 Titles and Subtitles...........................................................................17
8.6 Notices........................................................................................17 8.7 Expenses.......................................................................................18 8.8 Publicity......................................................................................18 8.9 Amendments and Waivers.........................................................................18 8.10 Severability...................................................................................19 8.11 Entire Agreement...............................................................................19 8.12 Jurisdiction; Venue............................................................................19 8.13 Specific Performance...........................................................................21 8.14. No Right of Setoff.............................................................................21

Schedules Schedule 2.4(b)...................................... Registration Rights Schedule 2.4(c)...................................... Preemptive and Antidilution Rights Schedule 2.4(d)...................................... Indebtedness Schedule 2.14........................................ Brokerage

Index of Defined Terms
Section ------- 1995 Plan.................................................................................... 2.4(a) 2001 10-K.................................................................................... 2.5(a) Agreement.................................................................................... PREAMBLE Amended and Restated Investor Rights Agreement............................................... RECITALS Amendment to AVC(TM) Asset Purchase Agreement................................................ RECITALS AVC Asset Purchase Agreement................................................................. RECITALS Closing...................................................................................... 1.2(a) Closing Date................................................................................. 1.2(a) Common Stock................................................................................. RECITALS Company...................................................................................... PREAMBLE Company Stock Option Plans................................................................... 2.4(a) Convertible Note............................................................................. RECITALS December 2000 Note Purchase Agreement........................................................ RECITALS Director Plan................................................................................ 2.4(a) Exchange..................................................................................... 2.3 Exchange Act................................................................................. 2.4(b) Existing Warrants............................................................................ 2.4(a) First December 2000 Note..................................................................... RECITALS HSR Act...................................................................................... 2.10 King......................................................................................... PREAMBLE Maryland Process Agent....................................................................... 8.12(c) Material Adverse Effect...................................................................... 2.1 Material Contracts........................................................................... 2.7 Nasdaq....................................................................................... 2.3 Note Shares.................................................................................. 2.2 Preferred Stock.............................................................................. 2.4(a) Related Agreements........................................................................... RECITALS SEC.......................................................................................... 2.5(a) SEC Filings.................................................................................. 2.5(a) Second Amended and Restated Registration Rights Agreement.................................... RECITALS Second December 2000 Note.................................................................... RECITALS Securities Act............................................................................... 2.4(b) September 2001 Note.......................................................................... RECITALS September 2001 Note Purchase Agreement....................................................... RECITALS Tennessee Process Agent...................................................................... 8.12(b) Third Amendment to the Copromotion Agreement ................................................ RECITALS
JUNE 2002 NOTE PURCHASE AGREEMENT THIS JUNE 2002 NOTE PURCHASE AGREEMENT (this "Agreement") is made as of the 26th day of June, 2002 by and between NOVAVAX, INC., a Delaware corporation (the "Company"), and KING PHARMACEUTICALS, INC., a Tennessee corporation ("King"). WHEREAS, King wishes to purchase from the Company, and the Company wishes to sell to King, a 4% Convertible Senior Note in the aggregate principal amount of Ten Million Dollars ($10,000,000) (the "Convertible Note"), all subject to and in accordance with the terms and conditions of this Agreement; WHEREAS, shares of common stock, par value $.01 per share, of the Company (the "Common Stock") shall be issuable upon the conversion of, and as interest payments on, the Convertible Note; WHEREAS, in connection with that certain Note Purchase Agreement dated as of December 19, 2000 between King and the Company (the "December 2000 Note Purchase Agreement"), the Company issued to King a 4% Convertible Senior Note in the aggregate principal amount of $20,000,000 (the "First December 2000 Note"); WHEREAS, in connection with the December 2000 Note Purchase Agreement, the Company issued to King a 4% Convertible Senior Note in the aggregate principal amount of $5,000,000 (the "Second December 2000 Note"); WHEREAS, in connection with that certain September 2001 Note Purchase Agreement dated as of September 7, 2001 between King and the Company (the "September 2001 Note Purchase Agreement"), the Company issued to King a 4% Convertible Senior Note in the aggregate principal amount of $5,000,000 (the "September 2001 Note"); WHEREAS, in connection with the December 2000 Note Purchase Agreement, the Company and King entered into that certain Investor Rights Agreement dated as of December 19, 2000, which was amended in connection with the September 2001 Note Purchase Agreement by that certain First Amendment to Investor Rights Agreement dated September 7, 2001; WHEREAS, as a condition to the consummation of the Closing of this Agreement, King and the Company have agreed to enter into an Amended and Restated Investor Rights Agreement (the "Amended and Restated Investor Rights Agreement"); WHEREAS, in connection with the September 2001 Note Purchase Agreement, the Company and King entered into that certain Amended and Restated Registration Rights Agreement dated as of September 7, 2001; WHEREAS, as a condition to the consummation of the Closing of this Agreement, King and the Company have agreed to enter into a Second Amended and Restated Registration Rights Agreement (the "Second Amended and Restated Registration Rights Agreement"); WHEREAS, King and the Company are parties to that certain Agreement for Purchase and Sale of Assets Relating to AVC Product Line dated as of January 8, 2001 (the "AVC Asset Purchase Agreement"); WHEREAS, as a condition to the consummation of the Closing of this Agreement, King and the Company have agreed to enter into a First Amendment to AVC Asset Purchase Agreement (the "Amendment to AVC Asset Purchase Agreement"); WHEREAS, King and the Company are parties to that certain Copromotion Agreement dated as of January 8, 2001, as amended by that certain First Amendment to the Copromotion Agreement dated as of June 29, 2001, as further amended by that certain Second Amendment to the Copromotion Agreement dated as of June 29, 2001; and WHEREAS, as a condition to the consummation of the Closing of this Agreement, King and the Company have agreed to enter into a Third Amendment to the Copromotion Agreement (the "Third Amendment to the Copromotion Agreement" and together with the Amended and Restated Investor Rights Agreement, the Second Amended and Restated Registration Rights Agreement and the Amendment to AVC Asset Purchase Agreement, as the same may be amended, restated, supplemented or otherwise modified from time to time, the "Related Agreements"). NOW THEREFORE, in consideration of the foregoing premises and the representations, warranties, covenants and agreements herein contained, the parties hereto, intending to be legally bound, agree as follows: 2 SECTION 1. PURCHASE AND SALE OF THE CONVERTIBLE NOTE; USE OF PROCEEDS. 1.1 SALE AND ISSUANCE OF THE CONVERTIBLE NOTE. Subject to the terms and conditions of this Agreement, the Company agrees to sell and issue to King, and King agrees to purchase from the Company, the Convertible Note. 1.2 CLOSING. (a) The closing for the purchase and sale of the Convertible Note pursuant to this Agreement (the "Closing"), shall, subject to the satisfaction or waiver of the applicable conditions set forth in Sections 5, 6 and 7 hereof, take place at the offices of Hogan & Hartson L.L.P., 8300 Greensboro Drive, McLean, Virginia 22102, on the date of this Agreement, or on such other date, and at such other place, as the parties mutually agree in writing (the date on which the Closing shall occur, the "Closing Date"). (b) At the Closing, among other things, the Company shall deliver to King the fully executed Convertible Note. In consideration of such delivery, King shall deliver to the Company the amount of the principal of the Convertible Note in immediately available funds by wire transfer of funds to the Company's designated bank account. 1.3 USE OF PROCEEDS. All of the proceeds received from King pursuant to Section 1.2(b) hereof shall be used by the Company solely for general working capital purposes, capital expenditures and in the operation of the Company's business. SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to King that: 2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on the business, 3 operations, properties, assets, prospects or condition (financial or otherwise) of the Company and its subsidiaries taken as a whole (a "Material Adverse Effect"). Except as disclosed in the 2001 10-K (as defined below), the Company has no subsidiaries. 2.2 AUTHORIZATION. The Company has all requisite corporate power and authority (a) to execute, deliver and perform its obligations under this Agreement, the Convertible Note and the Related Agreements, (b) to issue the Convertible Note and the shares of Common Stock issuable upon the conversion of, and as interest payments on, the Convertible Note (the "Note Shares"), in the manner and for the purpose contemplated by this Agreement, the Convertible Note and the Related Agreements, and (c) to execute, deliver and perform its obligations under all other agreements and instruments executed and delivered by it pursuant to or in connection with this Agreement and the Related Agreements. All corporate action on the part of the Company, its officers, directors and stockholders for the authorization, execution and delivery of this Agreement and the Related Agreements and the performance of all obligations of the Company hereunder and thereunder and the authorization, issuance (or reservation for issuance) and delivery of the Convertible Note and the Note Shares (when issued) has been taken or will be taken prior to the Closing. This Agreement constitutes and the Convertible Note and the Related Agreements when executed by the Company will constitute, valid and legally binding obligations of the Company, enforceable in accordance with their respective terms, except (x) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors' rights generally and (y) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. 2.3 VALID ISSUANCE OF THE NOTE SHARES AND LISTING. The Note Shares will be duly and validly issued, fully paid and nonassessable and not subject to preemptive or similar rights, and such Note Shares will be issued in compliance with all applicable federal and state securities laws, when issued, sold and delivered in accordance with the terms of the Convertible Note and the Amended and Restated Investor Rights Agreement for the consideration expressed therein. The Note Shares will be listed on the principal U.S. national securities exchange on which the Common Stock is listed or, if the Common Stock is listed on the Nasdaq National Market ("Nasdaq"), then the Note Shares will be listed on Nasdaq (such place of listing of the Note Shares, the "Exchange"), subject only to official notice of issuance. No approval of the stockholders of the Company is required to issue the 4 Convertible Note or the Note Shares. 2.4 CAPITALIZATION; INDEBTEDNESS. (a) The authorized capital stock of the Company consists of fifty million (50,000,000) shares of Common Stock and two million (2,000,000) shares of preferred stock, $.01 par value per share (the "Preferred Stock"). As of June 24, 2002: (i) twenty-four million six hundred sixty thousand nine hundred fifty-seven (24,660,957) shares of Common Stock were issued and outstanding; (ii) four million three hundred twenty-one thousand nine hundred sixteen (4,321,916) shares of Common Stock were reserved for issuance upon the exercise of outstanding stock options or other rights to purchase or receive the Common Stock granted under the Company's 1995 Stock Option Plan, as amended (the "1995 Plan"); (iii) two hundred sixty thousand (260,000) shares of Common Stock were reserved for issuance upon the exercise of outstanding stock options or other rights to receive the Common Stock granted under the Company's Director Stock Option Plan (the "Director Plan" and together with the 1995 Plan, the "Company Stock Option Plans"); (iv) two million (2,000,000) shares of Common Stock were reserved for issuance upon the conversion of the First December 2000 Note; (v) five hundred thousand (500,000) shares of Common Stock were reserved for issuance upon the conversion of the Second December 2000 Note; (vi) three hundred sixty thousand four hundred ninety (360,490) shares of Common Stock were reserved for issuance upon the conversion of the September 2001 Note; (vii) one million seven hundred ninety-eight thousand five hundred sixty-one (1,798,561) shares of Common Stock were reserved for issuance upon conversion of the Convertible Note; (viii) five hundred fifty-nine thousand five hundred thirty-two (559,532) shares of Common Stock were held by the Company in the Company's treasury; (ix) no shares of Preferred Stock were issued or outstanding; and (x) warrants to purchase two hundred seventy thousand five hundred sixty-two (270,562) shares of Common Stock were issued and outstanding (the "Existing Warrants"). (b) All outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive or similar rights. Except as set forth in this Section 2.4 and except for changes resulting from the issuance of shares of Common Stock pursuant to the Company Stock Option Plans and the Existing Warrants, or as expressly permitted by this Agreement or the Related Agreements, (i) there are not issued, reserved for issuance or outstanding (A) any shares of capital stock or other voting securities of the Company, (B) any securities of the Company or any Company subsidiary convertible into or exchangeable or exercisable for shares of capital stock or voting securities of or ownership interests in the 5 Company or any Company subsidiary, or (C) any warrants, calls, options or other rights to acquire from the Company or any Company subsidiary, or any obligation of the Company or any Company subsidiary to issue, any capital stock, voting securities or other ownership interests in, or securities convertible into or exchangeable or exercisable for capital stock or voting securities of or other ownership interests in, the Company or any Company subsidiary, (ii) there are no outstanding obligations of the Company or any Company subsidiary to repurchase, redeem or otherwise acquire any such securities or to issue, deliver or sell, or cause to be issued, delivered or sold, any such securities, and (iii) except as contemplated in this Agreement or the Related Agreements or as set forth on Schedule 2.4(b), the Company is not presently under any obligation, has not agreed or committed, and has not granted rights, to register under the Securities Act of 1933, as amended (the "Securities Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise file any registration statement under the Securities Act or the Exchange Act covering, any of its currently outstanding capital stock or other securities or any of its capital stock or other securities that may be subsequently issued. (c) Except as provided for in this Agreement or the Related Agreements and except as set forth on Schedule 2.4(c), neither the Company nor any Company subsidiary is a party to any agreement granting any preemptive or antidilutive rights with respect to any securities of the Company or any Company subsidiary that are outstanding as of the date hereof, or with respect to any securities of the Company or any Company subsidiary that may be subsequently issued upon the conversion or exercise of any instrument outstanding as of the date hereof. Except as set forth on Schedule 2.4(c) hereto, the execution, delivery and performance of this Agreement and the Related Agreements and the issuance of the Convertible Note and the Note Shares will not trigger any of the preemptive or antidilutive rights under any of the agreements set forth on such Schedule 2.4(c). Other than the Fielding Pharmaceutical Company, the Company does not directly or indirectly beneficially own any securities or other beneficial ownership interests in any other person. (d) Except for the Convertible Note to be issued hereunder, the First December 2000 Note, the Second December 2000 Note and the September 2001 Note and except as set forth on Schedule 2.4(d) hereto, the Company has no Indebtedness (as defined in the Amended and Restated Investor Rights Agreement). 6 2.5 SEC REPORTS AND CERTAIN CHANGES. (a) The Company has heretofore filed with the United States Securities and Exchange Commission (the "SEC") all forms, statements, reports and documents (together with all exhibits, amendments and supplements thereto, the "SEC Filings") required to be filed by the Company under each of the Securities Act and the Exchange Act and the SEC rules and regulations thereunder, including an Annual Report on Form 10-K for the year ended December 31, 2001 (the "2001 10-K"). As of their respective filing dates, none of the SEC Filings, at the time they were filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading. Since September 7, 2001, the Company has timely filed with the SEC all SEC Filings required to be filed since such date, and all such SEC Filings complied with all applicable requirements of the Securities Act and the Exchange Act, as applicable, and the rules and regulations thereunder. The Company has previously made available or delivered to King copies of the SEC Filings. (b) Since December 31, 2001, and except as set forth in SEC Filings or otherwise previously disclosed to King in writing, there has been no change in the business, assets, liabilities, financial condition or operating results of the Company from that reflected in the 2001 10-K, except changes in the ordinary course of business that have not, individually or in the aggregate, resulted in and are not reasonably expected to result in a Material Adverse Effect. 2.6 FINANCIAL STATEMENTS AND TITLE TO ASSETS. The audited consolidated financial statements of the Company included or incorporated by reference in the 2001 10-K and the unaudited interim financial statements contained in the quarterly report on Form 10-Q for the first quarter in the year ending December 31, 2002 have been prepared in accordance with the published rules and regulations of the SEC and with U.S. generally accepted accounting principles applied on a consistent basis throughout the periods indicated therein and with each other, except as may be indicated therein or in the notes thereto, and fairly present in all material respects the financial condition of the Company and its subsidiaries as of the respective dates thereof and the results of their operations and statements of cash flows for the respective periods then ended. Except as reflected in such financial statements, the Company and its subsidiaries have no material liabilities, absolute or contingent, other than ordinary course liabilities incurred since the date of the last such financial statements in connection with the conduct of the business of the Company and 7 its subsidiaries. Except as otherwise set forth in the SEC Filings, the Company and its subsidiaries have (a) good and marketable title to all material property and assets reflected as owned by the Company or its subsidiaries in the financial statements to the 2001 10-K (or as disclosed in the SEC Filings), and (b) valid and enforceable leasehold interests in all material property and assets reflected as leased by the Company or its subsidiaries in the financial statements to the 2001 10-K (or as disclosed in the SEC Filings). 2.7 CONTRACTS. With respect to each of the material contracts, commitments and agreements of the Company and its subsidiaries ("Material Contracts"), neither the Company nor any of its subsidiaries is, or has actual knowledge that any other party is, in default under or in respect of any Material Contract, the result of which default would have a Material Adverse Effect. 2.8 COMPLIANCE AND PERMITS. (a) Except as disclosed in the SEC Filings, each of the Company and its subsidiaries has complied with, and is not in default under or in violation of, (i) its Certificate of Incorporation, By-laws or other organizational document or (ii) any laws, ordinances and regulations or other governmental restrictions, orders, judgments or decrees applicable to the Company or any of its subsidiaries, except, in the case of clause (ii), for any such default or violation which would not have a Material Adverse Effect. Except as disclosed in the SEC Filings, neither the Company nor any of its subsidiaries has received notice of any possible or actual violation of any applicable law, ordinance, regulation, or order, the result of which violation would be reasonably expected to have a Material Adverse Effect. Neither the execution and delivery of this Agreement, the Convertible Note or the Related Agreements, nor the consummation of the transactions contemplated hereby or thereby will violate, conflict with or result in a breach or result in the acceleration or termination of, or the creation in any third party of the right to accelerate, terminate, modify or cancel, any material indenture, contract, lease, sublease, loan agreement, note or other material obligation or liability to which the Company or any of its subsidiaries is a party or is bound or to which any of its assets are subject. (b) Except as disclosed in SEC Filings, each of the Company and its subsidiaries has, and is not in default in any material respect under, all governmental franchises, permits, licenses, and any similar authority necessary for the conduct of its business as now being conducted by it, the lack of which would be reasonably expected to have a Material Adverse Effect. 8 2.9 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery and performance of this Agreement or any of the Related Agreements and the transactions contemplated hereby and thereby will not result in any violation of or constitute, with or without the passage of time and the giving of notice, a default under any provision of (a) the Certificate of Incorporation, By-laws or other organizational document of the Company or any of its subsidiaries or (b) any material provision of any material indenture, agreement or other instrument by which the Company or any of its subsidiaries or any of their properties or assets are bound, or result in the creation or imposition of any lien, or encumbrance upon any of the material properties or assets of the Company or any of its subsidiaries, except, in the case of clause (b), for any such default or violation which would not have in any such event a Material Adverse Effect. 2.10 GOVERNMENTAL CONSENTS. Except for (a) any notification required to be filed or supplied pursuant to the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, and the rules promulgated thereunder (the "HSR Act") in connection with the conversion of the Convertible Note, (b) registration of the Note Shares under the Securities Act pursuant to the Second Amended and Restated Registration Rights Agreement, (c) listing of the Note Shares on the Exchange, and (d) any filings required under federal and state securities laws in connection with the issuance of the Convertible Note or the Note Shares, no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the part of the Company in connection with the Company's valid execution, delivery and performance of this Agreement, the Convertible Note or any of the Related Agreements. The filings under federal and state securities laws, if any, will be effected by the Company at its cost within the applicable stipulated statutory period. 2.11 LITIGATION. There is no action, suit, proceeding or investigation pending or, to the knowledge of the Company, currently threatened against the Company or any of its subsidiaries which questions the validity of this Agreement, the Convertible Note or the Related Agreements, or the right of the Company to enter into such agreements and instruments or to consummate the transactions contemplated hereby or thereby. Except as disclosed in SEC Filings, there is no action, suit, proceeding or investigation pending or, to the knowledge of the Company, currently threatened against the Company, which 9 singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have or would reasonably be expected to have a Material Adverse Effect. 2.12 TAXES. Each of the Company and its subsidiaries has filed all federal, state, foreign and other tax returns which are required to be filed and has heretofore paid all taxes which have become due and payable, except where the failure to file or pay would not be reasonably expected to have a Material Adverse Effect. 2.13 INTELLECTUAL PROPERTY. Except as disclosed in the SEC Filings, to the knowledge of the Company, each of the Company and its subsidiaries owns, or possesses adequate rights to use, all of the patents, patent rights, trade secrets, know-how, proprietary techniques, including processes and substances, trademarks, service marks, trade names and copyrights described or referred to in the SEC Filings or owned or used by it or which is necessary for the conduct of its business as presently conducted, except where the failure to own or possess such patents, patent rights, trade secrets, know-how, proprietary techniques, including processes and substances, trademarks, service marks, trade names and copyrights would not have a Material Adverse Effect. Except as disclosed in the SEC Filings, neither the Company nor any of its subsidiaries has received any notice of infringement of or conflict with asserted rights of others with respect to any patents, patent rights, trade secrets, know-how, proprietary techniques, including processes and substances, trademarks, service marks, trade names and copyrights which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would be reasonably expected to have a Material Adverse Effect. 2.14 BROKERAGE. Except as set forth on Schedule 2.14 hereto, there are no claims, agreements, or commitments for brokerage commissions or finder's fees or similar compensation in connection with the transactions contemplated by this Agreement or otherwise, based on any arrangement made by or on behalf of the Company or any of its subsidiaries, and the Company agrees to indemnify and hold King harmless against any damages incurred as a result of any such claim, agreement, or commitment. 10 SECTION 3. REPRESENTATIONS AND WARRANTIES OF KING. King hereby represents and warrants that: 3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. King is a corporation duly organized, validly existing and in good standing under the laws of the State of Tennessee and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted. 3.2 AUTHORIZATION. All corporate action on the part of King, its officers and directors necessary for the authorization, execution and delivery of this Agreement and each of the Related Agreements and the performance of all obligations of King hereunder and thereunder has been taken or will be taken prior to the Closing, and this Agreement constitutes, and each of the Related Agreements when executed by King will constitute, valid and legally binding obligations of King enforceable in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting the enforcement of creditors' rights generally, and (b) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. 3.3 GOVERNMENTAL CONSENTS. Other than matters contemplated by this Agreement and any filings required to be made or supplied pursuant to Section 13 or 16 of the Exchange Act or the HSR Act, in connection with the issuance or conversion of the Convertible Note, or the issuance of Note Shares in payment of interest on the Convertible Note, no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the part of King in connection with King's valid execution, delivery and performance of this Agreement and the Related Agreements. 3.4 ACCREDITED INVESTOR. King is an "accredited investor" as such term is defined in Rule 501(a) of the Securities Act and is purchasing the Convertible Note and the underlying Note Shares for its own account for investment purpose. King has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the 11 Convertible Note (and the underlying Note Shares) and is capable of bearing the economic risks of such investment. 3.5 BROKERAGE. There are no claims, agreements, or commitments for brokerage commissions or finder's fees or similar compensation in connection with the transactions contemplated by this Agreement or otherwise, based on any arrangement made by or on behalf of King or any of its subsidiaries or affiliates, and King agrees to indemnify and hold the Company harmless against any damages incurred as a result of any such claim, agreement, or commitment. SECTION 4. FILINGS AND AUTHORIZATIONS. The Company and King, as promptly as practicable, (a) will make, or cause to be made, all such other filings and submissions under laws, rules and regulations applicable to them as may be required for them to consummate the transactions contemplated hereby in accordance with the terms of this Agreement and the Related Agreements and (b) will use reasonable efforts to obtain, or cause to be obtained, all authorizations, approvals, consents and waivers from all governmental authorities necessary to be obtained by them in order for them to consummate such transactions. SECTION 5. CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. The obligation of each party to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the date of the Closing of the following conditions: (a) all governmental and other consents and approvals, if any, necessary to permit the consummation of the transactions contemplated by this Agreement and the Related Agreement shall have been obtained; and (b) no stop order or other order enjoining the sale of the Convertible Note at the Closing shall have been issued and no proceedings for such purpose shall be pending or, to the knowledge of the Company, threatened by the SEC or any commissioner of corporations or similar officer of any state having jurisdiction over the transactions contemplated by this Agreement or any of the Related Agreements and no preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission nor any statute, rule, regulation or executive order promulgated or 12 enacted by any governmental authority shall be in effect that would restrain or otherwise prevent the consummation of the transactions contemplated by this Agreement or any of the Related Agreements. SECTION 6. CONDITIONS OF KING'S OBLIGATIONS AT THE CLOSING. The obligations of King to consummate the Closing under this Agreement are subject to the fulfillment on or before the Closing Date of the following conditions, the waiver of which shall not be effective without the written consent of King thereto: (a) Representations and Warranties. The representations and warranties of the Company contained in Section 2 shall be true in all material respects on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the date of such Closing (except for representations and warranties that speak as of a specific time, which need only be true and correct in all material respects as of such date or time). (b) Performance. The Company shall have performed and complied in all material respects with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing. (c) Compliance Certificate. An authorized executive officer of the Company shall have delivered to King a certificate certifying that the conditions specified in Section 6(a) and Section 6(b) have been fulfilled. (d) Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to King, and King shall have received all such counterpart original and certified or other copies of such documents as King may reasonably request. (e) Certificate. At the Closing, the Company shall have furnished to King a certificate, signed by an authorized executive officer of the Company, certifying: (i) the due organization and good standing of the Company; (ii) the corporate resolutions of the Company authorizing the transactions contemplated by this Agreement and the Related Agreements; and (iii) the incumbency of officers of the Company executing this Agreement and the other instruments or certificates delivered at the Closing. 13 (f) Opinion of Counsel. At the Closing, the Company shall have furnished to King an opinion of White & McNamara, P.C. in a form reasonably acceptable to King. (g) Delivery of the Convertible Note. At the Closing, the Company shall have delivered the fully executed Convertible Note. (h) Listing. The Note Shares shall have been approved for listing on the Exchange. (i) Second Amended and Restated Registration Rights Agreement. At the Closing, the Company shall have entered into the Second Amended and Restated Registration Rights Agreement and such Second Amended and Restated Registration Rights Agreement shall be in full force and effect. (j) Amended and Restated Investor Rights Agreement. At the Closing, the Company shall have entered into the Amended and Restated Investor Rights Agreement and such Amended and Restated Investor Rights Agreement shall be in full force and effect. (k) Amendment to AVC Asset Purchase Agreement. At the Closing, the Company shall have entered into the Amendment to AVC Asset Purchase Agreement and such Amendment to AVC Asset Purchase Agreement shall be in full force and effect. (l) Third Amendment to the Copromotion Agreement. At the Closing, the Company shall have entered into the Third Amendment to the Copromotion Agreement and such Third Amendment to the Copromotion Agreement shall be in full force and effect. (m) Other Documentation. The Company shall have furnished to King such other instruments and documents, in form and substance reasonably acceptable to King, as may be necessary to effect the Closing. SECTION 7. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT THE CLOSING. The obligations of the Company to consummate the Closing under this Agreement are subject to the fulfillment on or before the Closing of the following conditions, the waiver of which shall not be effective without the written consent of the Company thereto: (a) Representations and Warranties. The representations and 14 warranties of King contained in Section 3 shall be true in all material respects on and as of the Closing with the same effect as though such representations and warranties had been made on and as of such Closing (except for representations and warranties that speak as of a specific time, which need only be true and correct in all material respects as of such date or time). (b) Performance. King shall have performed and complied in all material respects with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing, and all corporate or other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and in substance to the Company. (c) Compliance Certificate. An officer of King shall have delivered to the Company a certificate certifying that the conditions specified in Section 7(a) and Section 7(b) have been fulfilled. (d) Payment of Purchase Price. At the Closing, King shall have delivered to the Company the amount of the principal of the Convertible Note in immediately available funds by wire transfer of funds to the Company's designated bank account. (e) Second Amended and Restated Registration Rights Agreement. At the Closing, King shall have entered into the Second Amended and Restated Registration Rights Agreement and such Second Amended and Restated Registration Rights Agreement shall be in full force and effect. (f) Amended and Restated Investor Rights Agreement. At the Closing, King shall have entered into the Amended and Restated Investor Rights Agreement and such Amended and Restated Investor Rights Agreement shall be in full force and effect. (g) Amendment to AVC Asset Purchase Agreement. At the Closing, King shall have entered into the Amendment to AVC Asset Purchase Agreement and such Amendment to AVC Asset Purchase Agreement shall be in full force and effect. (h) Third Amendment to the Copromotion Agreement. At the Closing, King shall have entered into the Third Amendment to the Copromotion Agreement and such Third Amendment to the Copromotion Agreement shall be in full force and effect. 15 (i) Other Documentation. King shall have furnished to the Company such other instruments and documents, in form and substance reasonably acceptable to the Company, as may be necessary to effect the Closing. SECTION 8. MISCELLANEOUS. 8.1 SURVIVAL. All representations, warranties and covenants contained herein or made in writing by or on behalf of the Company in connection herewith shall survive the execution and delivery of this Agreement and the Convertible Note, the transfer by King of the Convertible Note or Note Shares or portion thereof or interest therein and the payment or conversion of the Convertible Note, and may be relied upon by any transferee of the Convertible Note or Note Shares, regardless of any investigation made at any time by or on behalf of King or any transferee. All representations, warranties and covenants contained herein made by King or any holder of the Convertible Note shall survive the execution and delivery of this Agreement and the Convertible Note, and may be relied upon by the Company and its successors and assigns. 8.2 ASSIGNMENT; SUCCESSORS AND ASSIGNS. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by the parties hereto without the prior written consent of the other party. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 8.3 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. 8.4 COUNTERPARTS. This Agreement may be executed in two or more 16 counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 8.5 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 8.6 NOTICES. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when (a) delivered personally to the recipient, (b) telecopied to the recipient (with hard copy sent to the recipient by reputable overnight courier service (charges prepaid) that same day) if telecopied before 5:00 p.m. Eastern time on a business day, and otherwise on the next business day, or (c) one business day after being sent to the recipient by reputable overnight courier service (charges prepaid). Such notices, demands and other communications shall be sent to the following persons at the following addresses: To the Company: Novavax, Inc. 8320 Guilford Road Columbia, Maryland 21046 Attn: Chief Executive Officer Telecopy: (301) 854-3902 with a copy (which shall not constitute notice) to: Novavax, Inc. 8320 Guilford Road Columbia, Maryland 21046 Attn: Ann P. McGeehan, Esq. Vice President and General Counsel Telecopy: (301) 854-3902 17 To King: King Pharmaceuticals, Inc. 501 Fifth Street Bristol, Tennessee 37620 Attn: Executive Vice President of Legal Affairs and General Counsel Telecopy: (423) 989-6282 with a copy (which shall not constitute notice) to: Hogan & Hartson L.L.P. 8300 Greensboro Drive McLean, Virginia 22102 Attn: Richard T. Horan, Jr. Thomas E. Repke Telecopy: (703) 610-6200 or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. 8.7 EXPENSES. Irrespective of whether the Closing is effected, each party shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of this Agreement. Notwithstanding the foregoing, the Company shall pay any and all stamp, transfer and other similar taxes payable or determined to be payable in connection with the execution and delivery of this Agreement or any securities purchased from the Company hereunder, and shall save and hold King harmless from and against any and all liabilities with respect to or resulting from any delay in paying, or omission to pay, such taxes. 8.8 PUBLICITY. Except for information which is required to be disclosed by applicable law, neither party hereto shall issue any press releases or public statements with regard to this Agreement or the Convertible Note without first seeking the approval of the other party, which shall not be unreasonably withheld or delayed. 8.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the 18 observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and King. Any amendment or waiver effected in accordance with this Section 8.9 shall be binding upon each holder of any securities purchased under this Agreement at the time outstanding, each future holder of all such securities, and the Company. 8.10 SEVERABILITY. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 8.11 ENTIRE AGREEMENT. This Agreement and the Related Agreements constitute the entire agreement between the parties with respect to the subject matter hereof, and supersede all prior written agreements and negotiations and oral understandings, if any, with respect to such subject matter, and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants with respect to the subject matter hereof, except as specifically set forth herein or therein. 8.12 JURISDICTION; VENUE. (a) Each of the Company and King hereby waives personal service of any process upon it in connection with any suit, action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, and hereby covenants and agrees that all such service of process may be made in the manner set forth in Section 8.6 with the same effect as though served on it personally. 19 (b) The Company hereby covenants and agrees that any suit, action or proceeding initiated by the Company against King, its affiliates, subsidiaries, successors and/or assigns arising out of or relating to this Agreement or the transactions contemplated hereby shall be brought exclusively in the federal courts located in and/or state courts of the State of Tennessee. In the event of any such suit, action or proceeding initiated by the Company, each of the Company and King hereby submits to the exclusive jurisdiction and venue of the federal courts located in and state courts of the State of Tennessee and hereby waives any and all objections based on jurisdiction or venue that such party may have under applicable law or the Federal Rules of Civil Procedure. The Company hereby irrevocably designates CT Corporation in the State of Tennessee (the "Tennessee Process Agent") as its designee, appointee and agent to receive, for and on its behalf, service of process in the State of Tennessee in any such suit, action or proceedings with respect to this Agreement and the transactions contemplated hereby. Service on the Tennessee Process Agent shall be deemed complete upon delivery thereof to the Tennessee Process Agent, provided that, in the case of any such service upon the Tennessee Process Agent, King shall also deliver a copy thereof to the Company in accordance with the notice provision set forth in Section 8.6. The Company shall take all such action as may be necessary to continue the appointment of the Tennessee Process Agent in full force and effect or to appoint another agent, who shall thereafter be referred to herein as the "Tennessee Process Agent", so that the Company shall at all times have an agent for service for the foregoing purposes in the State of Tennessee. (c) King hereby covenants and agrees that any suit, action or proceeding initiated by King against the Company, its affiliates, subsidiaries, successors and/or assigns arising out of or relating to this Agreement or the transactions contemplated hereby shall be brought exclusively in the federal courts located in and/or state courts of the State of Maryland. In the event of any such suit, action or proceeding initiated by King, each of the Company and King hereby submits to the exclusive jurisdiction and venue of the federal courts located in and state courts of the State of Maryland and hereby waives any and all objections based on jurisdiction or venue that such party may have under applicable law or the, Federal Rules of Civil Procedure. King hereby irrevocably designates CT Corporation in the State of Maryland (the "Maryland Process Agent"), as its designee, appointee and agent to receive, for and on its behalf, service of process in the State of Maryland in any such suit, action or proceedings with respect to this Agreement and the transactions contemplated hereby. Service on the Maryland Process Agent shall be deemed complete upon delivery thereof to the Maryland Process Agent, provided that in the case of any such service upon the Maryland Process Agent, the Company shall also deliver a copy thereof to King in accordance with the notice provision set forth in 20 Section 8.6. King shall take all such action as may be necessary to continue the appointment of the Maryland Process Agent in full force and effect or to appoint another agent, who shall thereafter be referred to herein as the "Maryland Process Agent", so that King shall at all times have an agent for service for the foregoing purposes in the State of Maryland. 8.13 SPECIFIC PERFORMANCE. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled, in addition to any other remedy provided by this Agreement or in law or at equity, to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof. 8.14 NO RIGHT OF SETOFF. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, THE COMPANY HEREBY EXPRESSLY WAIVES, AND SHALL BE PROHIBITED FROM ENFORCING OR SEEKING TO ENFORCE, ANY RIGHT OR REMEDY (INCLUDING, WITHOUT LIMITATION, ANY COMMON LAW RIGHT OR REMEDY) TO SET OFF, COUNTERCLAIM, DEDUCT OR OTHERWISE REDUCE ANY AMOUNT WHICH THE COMPANY MAY BE ENTITLED TO RECEIVE FROM KING OR ITS AFFILIATES AGAINST ANY AMOUNTS PAYABLE UNDER THE CONVERTIBLE NOTE OR THE OTHER NOTES (AS THAT TERM IS DEFINED IN THE CONVERTIBLE NOTE). [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.] 21 IN WITNESS WHEREOF, the parties have executed this June 2002 Note Purchase Agreement as of the date first above written. NOVAVAX, INC. By: /s/ John Spears ----------------------------- Name: John Spears ----------------------------- Title: President & CEO ----------------------------- KING PHARMACEUTICALS, INC. By: /s/ John A. A. Bellamy ----------------------------- Name: John A. A. Bellamy ----------------------------- Title: Executive Vice President and ----------------------------- General Counsel ----------------------------- ~~-----END PRIVACY-ENHANCED MESSAGE-----~~


¹	Previously filed with the Securities and Exchange Commission as an exhibit to the Schedule 13D filed by King Pharmaceuticals, Inc. on December 29, 2000 and incorporated herein by reference.

²	Previously filed with the Securities and Exchange Commission as an exhibit to Amendment No. 1 to the Schedule 13D filed by King Pharmaceuticals, Inc. on September 19, 2001 and incorporated herein by reference.