-----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, HFY6GHM1sBtuSf0sv52JXkkrC0/vmdxBDxFfmt6QmZtCxxZRzKrPquet9Qh0U4LY PWxshrxgKrQOjunm+4zlRA== 0000950133-01-000008.txt : 20010122 0000950133-01-000008.hdr.sgml : 20010122 ACCESSION NUMBER: 0000950133-01-000008 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20001219 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010102 FILER: 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: 8-K SEC ACT: SEC FILE NUMBER: 000-26770 FILM NUMBER: 1500333 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 8-K 1 w43971e8-k.txt CURRENT REPORT 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): December 19, 2000 NOVAVAX, INC. ------------- (Exact name of registrant as specified in its charter) DELAWARE 0-26770 22-2816046 -------- ------- ---------- (State or other jurisdiction (Commission (I.R.S. Employer of incorporation or organization) File No.) Identification No.) 8320 GUILFORD ROAD, COLUMBIA, MD 21046 -------------------------------- ----- (Address of principal executive offices) (Zip code) (301) 854-3900 -------------- Registrant's telephone number, including area code NOT APPLICABLE -------------- (Former name or former address, if changed since last report) 2 NOVAVAX, INC. ITEMS TO BE INCLUDED IN THIS REPORT ITEM 5. OTHER EVENTS. On December 19, 2000 the Company announced that King Pharmaceuticals, Inc. has agreed to make a $25 million convertible note investment in the Company. A copy of the Press Release is attached hereto as Exhibit 99.1 and incorporated herein by this reference. ITEM 7. EXHIBITS. Exhibits. 99.1 Press Release dated December 20, 2000. 99.2 Note Purchase Agreement dated December 19, 2000 between Novavax, Inc. and King Pharmaceuticals, Inc. 99.3 Convertible Note dated December 19, 2000 between Novavax, Inc. and King Pharmaceuticals, Inc. 99.4 Investor Rights Agreement dated December 19, 2000 between Novavax, Inc. and King Pharmaceuticals, Inc. 3 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NOVAVAX, INC. Date: January 02, 2001 By: ------------------------------ Dennis W. Genge, Vice President And Chief Financial Officer/Treasurer EX-99.1 2 w43971ex99-1.txt PRESS RELEASE 1 EXHIBIT 99.1 FOR IMMEDIATE RELEASE COMPANY CONTACTS: John A. Spears President & CEO Jim Mirto Chief Operating Officer NOVAVAX, INC. 301-854-3900 INVESTORS/MEDIA: Olga Fleming/Lisa Bradlow SHANDWICK INTERNATIONAL 646-658-8000 NOVAVAX CLOSES $25 MILLLION CONVERTIBLE DEBENTURE FINANCING FROM KING PHARMACEUTICALS, INC. - NOVAVAX AND KING TO COLLABORATE ON HPV VACCINES - COLUMBIA, MD, DECEMBER 20, 2000 - NOVAVAX, INC. (AMEX: NOX), today announced that KING PHARMACEUTICALS, INC. (NYSE: KG) has agreed to make a $25 million convertible debenture investment in Novavax. The note is convertible into Novavax Common Stock at $10.00, an 18% premium to a 20 day trading average prior to closing. The note carries a 4% coupon payable semi-annually in cash and stock. As part of the transaction, Novavax received $20 million on December 19, 2000 and will receive an additional $5 million when Novavax files a New Drug Application for its topical transdermal estrogen replacement therapy, ESTRASORB(TM), expected to be filed in the first half of 2001. Novavax used a portion of the funds to complete its acquisition of Fielding Pharmaceutical Company, previously announced in October 2000 and will use the balance for general operating purposes. John A. Spears, President and Chief Executive Officer of Novavax, stated, "We are very pleased that King is making an investment in Novavax at this time. We have collaborated with King on several projects over the last several years and they have been an excellent corporate partner. This transaction confirms my belief that it has been and will continue to be, a mutually beneficial relationship. This is the first significant investment in Novavax by a major pharmaceutical company. The financing allowed us to close the Fielding acquisition, which provides Novavax a proven 60 member sales force with an established reputation within the obstetrical and gynecological community and a robust sales and distribution infrastructure." Novavax also announced that it has granted King an exclusive license to use its proprietary cell line to develop and potentially commercialize recombinant human papillomavirus (HPV) virus-like particle (VLP) vaccines. Novavax and King are currently working together on manufacturing HPV-16 VLP vaccines being evaluated by the National Cancer Institute in clinical trials. The vaccines are designed to prevent and/or treat HPV-16 infection and associated cervical cancer. The recombinant HPV-16 VLP vaccines were developed originally by Drs. Douglas Lowy and John Schiller of the Laboratory of Cellular Oncology at the NCI. The HPV-16 VLP vaccines were developed further and manufactured as experimental clinical vaccines by Dr. Robin Robinson of Novavax's Biomedical Service Division. In September 2000, Novavax received a contract from the NCI to manufacture the HPV-16 L1 VLP vaccine for a large scale clinical efficacy trial. The product will be manufactured at King's Parkedale facility in Michigan utilizing Novavax and Parkedale personnel. -MORE- 2 John M. Gregory, Chairman and Chief Executive Officer of King, stated, "We are excited to officially join forces with Novavax in the development of HPV vaccine which, if successful, could provide an important breakthrough in the prevention and/or treatment of HPV-induced cervical cancer. The Centers for Disease Control and Prevention recently reported that nearly 18% of American women and 8% of American men carry this strain of human papillomavirus which causes approximately half of all cases of cervical cancer." King, headquartered in Bristol, Tennessee, is a vertically integrated pharmaceutical company that manufactures, markets, and sells primarily branded prescription pharmaceutical products. King seeks to capitalize on niche opportunities in the pharmaceutical industry created by cost containment initiatives and consolidation among large global pharmaceutical companies. King's strategy is to acquire branded pharmaceutical products and to increase their sales by focused promotion and marketing and through product life cycle management. Novavax, Inc. is a biopharmaceutical drug delivery company engaged in the research and development of differentiated drug products primarily in the fields of women's health and infectious diseases. The Company is applying its proprietary lipid vesicle encapsulation technologies, including Novasome(R) lipid vesicles and micellar nanoparticles, to develop product candidates for the topical and oral delivery of generic and non-generic drugs, peptides, proteins and oligonucleotides. The Company's Novasome technology is also being developed as an adjuvant delivery system for enhanced vaccine efficacy. Novavax's Biomedical Services Division is engaged in contract research and development and Phase I/II vaccine manufacturing of human vaccines for government laboratories and other vaccine companies. Statements made in this press release that state the company's or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. The company's actual results could differ materially from those projected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the company's SEC report on Form 10K for the year ended December 31, 1999 incorporated herein by reference. Statements made herein should be read in conjunction with the company's Form 10K. Copies of these filings may be obtained by contacting the company at 8320 Guilford Road, Columbia, MD 21046 Tel 301-854-3900 or the SEC. EX-99.2 3 w43971ex99-2.txt FORM OF NOTE PURCHASE AGREEMENT 1 EXHIBIT 99.2 TABLE OF CONTENTS
Page ---- SECTION 1. PURCHASE AND SALE OF THE NOTES..............................................1 1.1 Sale and Issuance of the First Note...........................................1 1.2 Sale and Issuance of the Second Note..........................................2 1.3 Closings......................................................................2 SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................2 2.1 Organization, Good Standing and Qualification.................................3 2.2 Authorization.................................................................3 2.3 Valid Issuance of the Note Shares and Listing.................................3 2.4 Capitalization; Indebtedness..................................................4 2.5 SEC Reports and Certain Changes...............................................5 2.6 Financial Statements and Title to Assets......................................5 2.7 Contracts.....................................................................6 2.8 Compliance and Permits........................................................6 2.9 Compliance with Other Instruments.............................................7 2.10 Governmental Consents.........................................................7 2.11 Litigation....................................................................7 2.12 Taxes.........................................................................8 2.13 Intellectual Property.........................................................8 2.14 Brokerage.....................................................................8 2.15 Fielding Acquisition Agreement................................................8 SECTION 3. REPRESENTATIONS AND WARRANTIES OF KING......................................9 3.1 Organization, Good Standing and Qualification.................................9 3.2 Authorization.................................................................9 3.3 Governmental Consents.........................................................9 3.4 Accredited Investor...........................................................9 SECTION 4. FILINGS AND AUTHORIZATIONS.................................................10 SECTION 5. COMPANY COVENANTS..........................................................10 SECTION 6. CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.............................................11 SECTION 7. CONDITIONS OF KING'S OBLIGATIONS AT EACH CLOSING...........................11 SECTION 8. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT EACH CLOSING....................13 SECTION 9. TERMINATION................................................................14 9.1 Termination..................................................................14 9.2 Effect of Termination........................................................14 SECTION 10. MISCELLANEOUS..............................................................15 10.1 Survival.....................................................................15 10.2 Assignment; Successors and Assigns...........................................15 10.3 Governing Law................................................................15 10.4 Counterparts.................................................................15 10.5 Titles and Subtitles.........................................................16 10.6 Notices......................................................................16 10.7 Expenses.....................................................................18 10.8 Publicity....................................................................18 10.9 Amendments and Waivers.......................................................18 10.10 Severability.................................................................18 10.11 Entire Agreement.............................................................18 10.12 Jurisdiction; Venue..........................................................19 10.13 Specific Performance.........................................................20
2 Schedules Schedule 2.4(c)............................. Registration Rights Schedule 2.4(d)............................. Preemptive and Antidilution Rights Schedule 2.14............................... Brokerage Fees Schedule 5(a)(iii).......................... Efficacy Confirmation
3 Exhibits Exhibit A................................... Form of Note Exhibit B................................... Investor Rights Agreement Exhibit C................................... Registration Rights Agreement Exhibit D................................... Form of Legal Opinion
4 Index of Defined Terms
Section ------- 1995 Plan................................................................... 2.4(a) 1999 10-K................................................................... 2.5(a) Accredited Investor......................................................... 3.4 Agreement................................................................... PREAMBLE Closing..................................................................... 1.3(b) Closing Location............................................................ 1.3(a) Common Stock................................................................ RECITALS Company..................................................................... PREAMBLE Company Stock Option Plans.................................................. 2.4(a) Convertible Note............................................................ RECITALS Consultant Opinion Letters.................................................. 5(a)(ii) Director Plan............................................................... 2.4(a) Exchange.................................................................... 2.3 Exchange Act................................................................ 2.4(c) Existing Warrants........................................................... 2.4(a) FDA......................................................................... 5(a)(i) FDA Written Notice.......................................................... 5(a)(i) Fielding.................................................................... 1.3(a) Fielding Acquisition Agreement.............................................. 1.3(a) First Closing............................................................... 1.3(a) First Note.................................................................. 1.1 HPV License Agreement....................................................... RECITALS HSR Act..................................................................... 2.10 Investor Rights Agreement................................................... RECITALS King........................................................................ PREAMBLE Maryland Process Agent...................................................... 10.12(c) Material Adverse Effect..................................................... 2.1 Material Contracts.......................................................... 2.7 Nasdaq...................................................................... 2.3 Note Shares................................................................. 2.2 Notes....................................................................... 1.2 Parkedale................................................................... RECITALS Preferred Stock............................................................. 2.4(a) Quintiles................................................................... 5(a)(ii) Quintiles Efficacy Confirmation............................................. 5(a)(iii) Registration Rights Agreement............................................... RECITALS Related Agreements.......................................................... RECITALS SEC......................................................................... 2.5(a) SEC Filings................................................................. 2.5(a) Second Closing.............................................................. 1.3(b) Second Note................................................................. 1.2 Securities Act.............................................................. 2.4(c) Tennessee Process Agent..................................................... 10.12(b)
5 NOTE PURCHASE AGREEMENT THIS NOTE PURCHASE AGREEMENT (this "Agreement") is made as of the 19th day of December, 2000 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, 4% Convertible Senior Notes in the form of Exhibit A attached hereto (each a "Convertible Note") in the aggregate principal amount of Twenty-Five Million Dollars ($25,000,000), all subject to and in accordance with the terms and conditions of this Agreement; WHEREAS, shares of common stock, par value $0.01 per share, of the Company (the "Common Stock") shall be issuable upon the conversion of, and as interest payments on, the Convertible Notes; WHEREAS, as a condition to the consummation of the First Closing of this Agreement, King and the Company have agreed to enter into an Investor Rights Agreement in the form of Exhibit B attached hereto (the "Investor Rights Agreement"); WHEREAS, as a condition to the consummation of the First Closing of this Agreement, King and the Company have agreed to enter into a Registration Rights Agreement in the form of Exhibit C attached hereto (the "Registration Rights Agreement"); and WHEREAS, as a condition to King entering into this Agreement, the Company and Parkedale Pharmaceuticals, Inc., a subsidiary of King ("Parkedale") have entered into a License Agreement dated as of the date hereof (the "HPV License Agreement" and together with the Registration Rights Agreement and the Investor Rights Agreement, collectively, the "Related Agreements") pursuant to which the Company will supply certain proprietary manufacturing cell banks to Parkedale so that Parkedale can develop products to treat or prevent human papillomavirus and/or cervical cancer. 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: SECTION 1. PURCHASE AND SALE OF THE NOTES. 1.1 SALE AND ISSUANCE OF THE FIRST 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, at the First Closing (as defined below) a Convertible Note in the principal amount of Twenty Million Dollars ($20,000,000) (the "First Note"). 6 1.2 SALE AND ISSUANCE OF THE SECOND 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, at the Second Closing (as defined below) a Convertible Note in the principal amount of Five Million Dollars ($5,000,000) (the "Second Note" and together with the First Note, the "Notes"). 1.3 CLOSINGS. (a) The closing for the purchase and sale of the First Note (the "First Closing"), shall take place at the offices of Hogan & Hartson L.L.P., 8300 Greensboro Drive, McLean, Virginia 22102 (the "Closing Location"), subject to the satisfaction or waiver of the applicable conditions set forth in Sections 6, 7 and 8 hereof, simultaneously with the closing of the Company's acquisition of The Fielding Pharmaceutical Company ("Fielding") pursuant to the terms and conditions of that certain Agreement and Plan of Merger dated as of October 4, 2000, by and among the Company, Fielding and the other parties thereto (the "Fielding Acquisition Agreement"), or at such other time and place as the Company and King mutually agree upon in writing. (b) The closing for the purchase and sale of the Second Note (the "Second Closing", with each of the First Closing and Second Closing being referred to herein individually as a "Closing") shall take place at the Closing Location as promptly as practicable after the satisfaction or waiver of the applicable conditions set forth in Sections 6, 7 and 8 hereof, or at such other time and place as the Company and King mutually agree upon in writing. Assuming satisfaction of all the conditions precedent to the Company's obligation to consummate the Second Closing set forth in Sections 6 and 8, the parties acknowledge and agree that notwithstanding any provision to the contrary contained in this Agreement or any Related Agreement, the Second Closing shall take place on a date specified by King in a written notice to the Company; provided that such date shall not be earlier than the twentieth (20th) day following the date of the Company's receipt of such written notice from King. (c) At the First Closing, among other things, the Company shall deliver to King the fully executed First Note. In consideration of such delivery, King shall deliver to the Company the amount of the principal of the First Note in immediately available funds by wire transfer of funds to the Company's designated bank account. (d) At the Second Closing, among other things, the Company shall deliver to King the fully executed Second Note. In consideration of such delivery, King shall deliver to the Company the amount of the principal of the Second Note in immediately available funds by wire transfer of funds to the Company's designated bank account. SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to King that: 2 7 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, 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 1999 10-K (as defined below) and except for Fielding Acquisition Corp., 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 Notes and the Related Agreements, (b) to issue the Notes and the shares of Common Stock issuable upon the conversion of, and as interest payments on, the Notes (the "Note Shares"), in the manner and for the purpose contemplated by this Agreement, the Notes 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 Notes and the Note Shares (when issued) has been taken or will be taken prior to the First Closing or the Second Closing, as the case may be. This Agreement and the HPV License Agreement constitute, and each Note and other Related Agreement 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 Notes and the 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 Notes or the Note Shares under the rules and regulations of the Exchange, including, without limitation, Sections 712 and 3 8 713 of the Listing Standards, Policies and Requirements of the American Stock Exchange. 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 December 12, 2000: (i) nineteen million five hundred ninety thousand seven hundred ninety-three (19,590,793) shares of Common Stock were issued and outstanding; (ii) three million five hundred fifty-five thousand one hundred eighty-five (3,555,185) 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 (the "1995 Plan"); (iii) four hundred twenty thousand (420,000) 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) four hundred seventy-nine thousand four hundred eighty-three (479,483) shares of Common Stock were held by the Company in the Company's treasury; (v) no shares of Preferred Stock were issued or outstanding; and (vi) warrants to purchase one million four hundred seventy-eight thousand eight hundred twenty-six (1,478,826) shares of Common Stock were issued and outstanding (the "Existing Warrants"). (b) The maximum number of shares of Common Stock issuable at the Closing of the Fielding Acquisition Agreement is Three Million Three Hundred Sixty Three Thousand Six Hundred Thirty Six (3,363,636) shares of Common Stock. (c) 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, the Existing Warrants and the Fielding Acquisition Agreement, or as expressly permitted by this Agreement, (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 Company or any Company subsidiary, (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 as set forth on Schedule 2.4(c), 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 4 9 other securities or any of its capital stock or other securities that may be subsequently issued. (d) Except as provided for in this Agreement and the Related Agreements, and except as set forth on Schedule 2.4(d), 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. The execution, delivery and performance of this Agreement and the Related Agreements and the issuance of the Notes and the Note Shares will not trigger any of the preemptive or antidilutive rights under any of the agreements set forth on Schedule 2.4(d) hereto. Other than the Company subsidiaries, the Company does not directly or indirectly beneficially own any securities or other beneficial ownership interests in any other person. A list of all of the Company subsidiaries, other than Fielding Acquisition Corp., is set forth in an exhibit to the 1999 10-K. (e) Except for the Notes to be issued hereunder, the Company has no Indebtedness (as defined in the Investor Rights Agreement). 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, 1999 (the "1999 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 December 31, 1999, 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, 1999, 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 1999 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 1999 10-K and the unaudited interim financial statements contained in the quarterly reports on Form 10-Q for the first three quarters in the year ending 5 10 December 31, 2000 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, subject, in the case of unaudited interim financial statements, to usual year-end adjustments. 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 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 1999 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 1999 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 each of the Company and 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 Notes or any of 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 6 11 conducted by it, the lack of which would be reasonably expected to have a Material Adverse Effect. 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 Notes, (b) registration of the Note Shares under the Securities Act pursuant to the Registration Rights Agreement, (c) listing of the Note Shares on the Exchange, (d) any filings required under federal and state securities laws in connection with the issuance of the Notes or the Note Shares, and (e) any consents, approvals, orders or authorizations of, or registrations, qualifications, designations, declarations or filings with, any federal, state or local governmental authority as provided for in the HPV License Agreement, 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 Notes 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 Notes or any of 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 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. 7 12 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, 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, the Related Agreements, the acquisition of Fielding 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. 2.15 FIELDING ACQUISITION AGREEMENT. The Company and its subsidiaries have not waived any of their rights under, or any of the conditions to the obligation of the Company to consummate any transaction contemplated by, the Fielding Acquisition Agreement. Neither the Company nor any other party to the Fielding Acquisition Agreement is in material breach of, or has defaulted under, any of the terms of the Fielding Acquisition Agreement. The Fielding Acquisition Agreement constitutes a legal, valid and binding obligation of the Company, Fielding and the other parties thereto enforceable in accordance with its 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. The Company is not and, to Company's knowledge, no other party to the Fielding Acquisition Agreement is, subject to any 8 13 judgment, award, order, writ, injunction, arbitration decision or decree which prohibits the performance of the Fielding Acquisition Agreement or the consummation of any transaction contemplated under the Fielding Acquisition Agreement. There is no action (a) pending or, to the Company's knowledge, threatened against or affecting the Company or (b) to the Company's knowledge, pending or threatened against or affecting any other party to the Fielding Acquisition Agreement in any federal, state or local court, or before any governmental authority or arbitrator that would adversely affect the ability of the Company or any other party to the Fielding Acquisition Agreement to consummate, or that would prohibit, the transactions contemplated under the Fielding Acquisition Agreement. 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 each Closing, and this Agreement and the Related Agreements constitute valid and legally binding obligations of King enforceable in accordance with their respective terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting the enforcement of creditors' rights generally, or (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 the Related Agreements, 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 Notes, or the issuance of Note Shares in payment of interest on the Notes, 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 Notes and the underlying Note Shares for its own 9 14 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 Notes (and the underlying Note Shares) and is capable of bearing the economic risks of such investment. 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. COMPANY COVENANTS. The Company hereby covenants and agrees as follows: (a) The Company shall use its best efforts to obtain and deliver to King as promptly as practicable each of the following, each in a form reasonably acceptable to King: (i) written notice from the U.S. Food and Drug Administration (the "FDA") stating that the FDA has accepted the Company's New Drug Application for Estrasorb(TM) (the "FDA Written Notice"); (ii) an opinion letter from Quintiles Transnational Corp. ("Quintiles") stating that the Company's New Drug Application for Estrasorb(TM) exceeds the minimum filing standards required by the FDA, and, if not covered by such opinion letter from Quintiles, an additional opinion letter from a nationally recognized consulting firm reasonably acceptable to King stating that the CMC section of the Company's New Drug Application for Estrasorb(TM) exceeds the minimum filing standards required by the FDA (opinion letters described in this clause (ii), the "Consultant Opinion Letters"); and (iii) written confirmation from Quintiles regarding the efficacy results for the E98-2 study, all as is more fully described in Schedule 5(a)(iii) attached hereto (the "Quintiles Efficacy Confirmation"). (b) Fielding Acquisition Agreement. The Company shall not terminate, amend, modify or change the Fielding Acquisition Agreement or take any action, or refrain from taking any action, that would constitute a material breach of, constitute a default (or event which with the giving of notice, or lapse of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of the Fielding Acquisition Agreement. Within two (2) Business Days after the First Closing, the Secretary of the Company shall deliver to King a certificate dated as of the First Closing, certifying that attached thereto is a true and complete copy of all documents and agreements 10 15 executed in connection with the consummation of the Fielding Acquisition Agreement. (c) Use of Proceeds. Up to Six Million Dollars ($6,000,000) of the proceeds from the First Note shall be used by the Company to complete the acquisition of Fielding and the remainder of the proceeds from the First Note shall be used by the Company for the promotion of Estrasorb(TM), for general working capital purposes and in the operation of the Company's business. The proceeds from the Second Note shall be used to fulfill the Company's obligations in connections with the promotion of Estrasorb(TM), for general working capital purposes and in the operation of the Company's business. SECTION 6. 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 each of the First Closing and the Second 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 shall have been obtained; and (b) no stop order or other order enjoining the sale of the First Note at the First Closing or the Second Note at the Second 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 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 enacted by any governmental authority shall be in effect that would restrain or otherwise prevent the consummation of the transactions contemplated by this Agreement. SECTION 7. CONDITIONS OF KING'S OBLIGATIONS AT EACH CLOSING. The obligations of King to consummate each Closing under this Agreement are subject to the fulfillment on or before each Closing of the following conditions, the waiver of which shall not be effective without the 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 each Closing 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 each Closing. 11 16 (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 each 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) Related Agreements. At the First Closing, the Company shall have entered into the Related Agreements, and such Related Agreements shall be in full force and effect. (f) Certificate. At each 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 (iii) the incumbency of officers of the Company executing this Agreement and the other instruments or certificates delivered at each Closing. (g) Opinion of Counsel. At each Closing, the Company shall have furnished to King an opinion of White & McDermott. P.C. in the form attached hereto as Exhibit D. (h) Delivery of the Notes. At the First Closing, the Company shall have delivered the fully executed First Note and at the Second Closing, the Company shall have delivered the fully executed Second Note. (i) Listing. The Note Shares shall have been approved for listing on the Exchange. (j) Fielding Acquisition Agreement. The closing of the Company's acquisition of Fielding shall have occurred or occur simultaneously with the First Closing, in accordance with the terms and conditions of the Fielding Acquisition Agreement and the representations and warranties of the Company set forth in Section 2.15 hereof shall be true and correct in all respects at and as of the First Closing, as though each such representation and warranty were made at and as of such time (except for representations and warranties that speak of a specific date or time other than the First Closing, which need only be true and correct as of such date or time). An authorized executive officer of the Company shall have delivered to King a certificate dated as of the First Closing, certifying (i) that the matters set forth in the preceding sentence are true and correct and (ii) that attached thereto is a true and complete copy of the Certificate of Merger accepted by and filed with the Secretary of State of the State of Delaware in connection with the consummation of the Company's acquisition of Fielding pursuant to the Fielding Acquisition Agreement. 12 17 (k) Broker Releases. At the First Closing, the Company shall have delivered to King (i) evidence reasonably satisfactory to King that all amounts due to the Persons identified in Schedule 2.14 will be paid in full at the First Closing and (ii) releases (conditioned only upon receipt of agreed upon consideration set forth on Schedule 2.14) from such Persons with respect to any claims relating thereto, each in a form reasonably acceptable to King. (l) FDA Written Notice. Prior to the Second Closing, the Company shall have delivered the FDA Written Notice to King. (m) Consultant Opinion Letters. Prior to the Second Closing, the Company shall have delivered the Consultant Opinion Letters to King. (n) Quintiles Efficacy Confirmation. Prior to the Second Closing, the Company shall have delivered the Quintiles Efficacy Confirmation to King. (o) Packaging Requirements. Prior to the Second Closing, the Company shall have delivered to King (i) a certificate from an authorized executive officer certifying that Fielding's noncompliance disclosed in Schedule 2.19 to the Fielding Acquisition Agreement shall have been remedied and that Fielding and the Company are in compliance with 21 CFR 310.518 and (ii) any correspondence the Company or Fielding has had with the FDA regarding 21 CFR 310.518 since the date of the Fielding Acquisition Agreement. (p) 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 each Closing. SECTION 8. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT EACH CLOSING. The obligations of the Company to consummate each Closing under this Agreement are subject to the fulfillment on or before each Closing of the following conditions, the waiver of which shall not be effective without the consent of the Company thereto: (a) Representations and Warranties. The representations and warranties of King contained in Section 3 shall be true in all material respects on and as of each 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 each Closing, and all corporate or other proceedings in connection with the transactions contemplated at each such 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 13 18 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 First Closing, King shall have delivered to the Company the amount of the principal of the First Note in immediately available funds by wire transfer of funds to the Company's designated bank account, and at the Second Closing King shall have delivered to the Company the amount of the principal of the Second Note in immediately available funds by wire transfer of funds to the Company's designated bank account. (e) Related Agreements. At the First Closing, King (or Parkedale in the case of the HPV License Agreement) shall have entered into each of the Related Agreements and such Related Agreements shall be in full force and effect. (f) 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 each Closing. SECTION 9. TERMINATION. 9.1 TERMINATION. This Agreement may be terminated at any time prior to the closing: (a) by mutual written agreement of the Company and King; or (b) by either King or the Company if the First Closing shall not have been consummated on or before January 2, 2001 (provided that the right to terminate this Agreement under this Section 9.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of or resulted in the failure of the First Closing to occur on or before such date); or (c) by either King or the Company if a court of competent jurisdiction or governmental, regulatory, or administrative agency or commission shall have issued a nonappealable final order, decree or ruling or taken any other action having the effect of permanently reshaping, enjoining or otherwise prohibiting the transactions contemplated by this Agreement; or (d) by King if the Second Closing shall not have been consummated on or before March 1, 2002. 9.2 EFFECT OF TERMINATION. In the event of the termination of this Agreement pursuant to Section 9.1, this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto (or any stockholder director, officer, partner, employee, agent, consultant or representative 14 19 of such party) except as set forth in this Section 9.2; provided, that nothing contained in this Agreement shall relieve any party from liability of any breach of this Agreement; provided, further, that this Section 9.2 and Section 10 shall survive such termination and the parties hereto shall have any and all remedies to enforce such obligations provided at law or in equity or otherwise (including, without limitation, specific performance); provided, further, that termination of this Agreement pursuant to Section 9.1 after the First Closing shall render inapplicable only those provisions of this Agreement obligating the parties to consummate the Second Closing. SECTION 10. MISCELLANEOUS. 10.1 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 Notes, the transfer by King of any Note or Note Shares or portion thereof or interest therein and the payment or conversion of any Note, and may be relied upon by any transferee of any 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 Notes shall survive the execution and delivery of this Agreement and the Notes, and may be relied upon by the Company and its successors and assigns. 10.2 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. 10.3 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. 10.4 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 15 20 10.5 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. 10.6 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: White & McDermott, P.C. 65 William Street, Suite 250 Wellesley, Massachusetts 02481 Attn: David A. White Telecopy: (781) 237-8120 To King: King Pharmaceuticals, Inc. 501 Fifth Street Bristol, Tennessee 37620 Attn: Executive Vice President and General Counsel Telecopy: (423) 989-6282 16 21 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. 10.7 EXPENSES. Irrespective of whether the Closings are 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. 10.8 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, the Notes or the Related Agreements without first seeking the approval of the other party, which shall not be unreasonably withheld or delayed. 10.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the 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 10.9 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. 10.10 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. 17 22 10.11 ENTIRE AGREEMENT. This Agreement and the documents referred to herein constitute the entire agreement among the parties and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except as specifically set forth herein or therein. 10.12 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 10.6 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. Each of the parties 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. 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, the party effecting such service shall also deliver a copy thereof to the other parties in accordance with the notice provision set forth in Section 10.6. Each such party 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 each such party 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 submit to the exclusive jurisdiction and venue of the federal courts located in and state courts of the State of Maryland and hereby waive any and all objections based on jurisdiction or venue that such party may have under applicable law or the, Federal Rules of Civil Procedure. Each of the foregoing parties 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 18 23 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 party effecting such service shall also deliver a copy thereof to the other parties in accordance with the notice provision set forth in Section 10.6. Each such party 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 each such party shall at all times have an agent for service for the foregoing purposes in the State of Maryland. 10.13 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. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.] 19 24 IN WITNESS WHEREOF, the parties have executed this Note Purchase Agreement as of the date first above written. NOVAVAX, INC. By: ---------------------------------------- Name: ------------------------------- Title: ------------------------------------- KING PHARMACEUTICALS, INC. By: ---------------------------------------- Name: ------------------------------- Title: ------------------------------------- 25 EXHIBIT A FORM OF 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. ___ ___________ ___, 200_ $------------- NOVAVAX, INC., a Delaware corporation (the "Company"), for value received, hereby promises to pay to the order of KING PHARMACEUTICALS, INC., a Tennessee corporation, or its registered assigns ("Payee"), the principal amount of _____________________________ Dollars ($_______________), 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 _________________, 200_, 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 Investor Rights Agreement dated as of December 19, 2000 (the "Investor Rights Agreement") by and between the Company and King Pharmaceuticals, Inc. Interest payable on this Note shall be computed on the basis of a 360-day year of 26 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 Initial Conversion Price 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 American Stock Exchange as reported in The Wall Street Journal (or other similar newspaper) for American Stock Exchange Composite Transactions or, if the Common Stock is not listed or admitted to trading on such exchange, 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 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. "Initial Conversion Price" means $________ 1/. - ----------------------- 1/ For the First Note, this price will be Ten Dollars ($10). The Initial Conversion Price of -2- 27 "Stock Interest Portion" shall mean one-half of the interest due and payable on this Note at any Interest Payment Date. This Note is one of the Company's 4% Convertible Senior Notes authorized for issuance in the aggregate original principal amount of $25,000,000 pursuant to the Note Purchase Agreement. The registered holder of this Note is entitled to the benefits of the 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 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 4 of the Investor Rights Agreement, a mandatory redemption of this Note pursuant to Section 3 of the Investor Rights Agreement, or a repurchase of the Notes pursuant to Section 6 of the 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 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. 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 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 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 Investor Rights Agreement or under applicable law shall operate as a waiver of such right or remedy. - ------------- the Second Note will be equal to the Conversion Price of the First Note as of the date that the Second Note is issued. -3- 28 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 Note Purchase Agreement, the Investor Rights Agreement or the Registration Rights Agreement, or the borrowings hereunder or 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 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, the Note Purchase Agreement or the Related Agreements and such default shall continue for thirty (30) days after written notice thereof to the Company by the holder of this Note; ; provided, that a breach by the Company of the representation and warranty made by the Company in Section 7.15 of the HPV License Agreement (as defined in the Note Purchase Agreement) shall not constitute an Event of Default hereunder if such breach was not caused in whole or in part by any actions or inactions of the Company; (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 -4- 29 proceeding or file any petition seeking relief under Title 11 of 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, the Note Purchase Agreement or any Related Agreements 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) 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 (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); or (l) the Initial Shelf Registration Statement (as defined in the 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; 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 -5- 30 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 Investor Rights Agreement or available at law or equity. For purposes of the foregoing provisions: "Material Contract" shall mean (i) any supply or packaging agreement related to Estrasorb(TM); and (ii) any other 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). 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 -6- 31 with a copy (which shall not constitute notice) to: White & McDermott, P.C. 65 William Street Suite 250 Wellesley, Massachusetts 02481 Attn: David A. White Telecopy: (781) 237-8120 To King: King Pharmaceuticals, Inc. 501 Fifth Street Bristol, Tennessee 37620 Attn: Executive Vice President 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/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. -7- 32 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 each 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, 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. Each of the parties 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 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, the party effecting such service shall also deliver a copy thereof to the other parties in accordance with the notice provision set forth herein. Each such party 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 each such party 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 submit to the exclusive jurisdiction and venue of the federal courts located in and state courts of the State of Maryland and hereby waive any and all objections based on jurisdiction or venue that such party may have under applicable law or the Federal Rules of Civil Procedure. Each of the foregoing parties hereby irrevocably designates CT Corporation in the State of Maryland (the -8- 33 "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 Note and the transactions contemplated hereby. Service 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 party effecting such service shall also deliver a copy thereof to the other parties in accordance with the notice provision set forth herein. Each such party 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 each such party 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.] -9- 34 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: --------------------------------- Name: ------------------------ Title: ------------------------------ 35 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 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 36 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 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) 37 EXHIBIT B INVESTOR RIGHTS AGREEMENT 38 EXHIBIT C REGISTRATION RIGHTS AGREEMENT 39 EXHIBIT D FORM OF LEGAL OPINION 40 SCHEDULE 5(a)(iii) EFFICACY CONFIRMATION The efficacy results claimed by the Company for the E98-2 Study must be confirmed by Quintiles. Specifically, it must be confirmed that the efficacy analysis (reduction in the incidence of hot flushes), when replicated by Quintiles per the a priori protocol-specified methodology, demonstrates statistical significance for the 2.5 mg and 7.5 mg dose. The efficacy results for the 5 mg dose (expected to be non-significant) must also be replicated and confirmed. Quintiles must also provide a consultant opinion with respect to the appropriateness of the statistical methodology specified in the original protocol for E98-2 and that specified for the ongoing study (E99-1). Given FDA's preference for a Change Score analysis, the comparisons between each dose and placebo must be calculated as a change score at each efficacy assessment point specified in the protocol, using the a priori specified statistical methodology. EX-99.3 4 w43971ex99-3.txt CONVERTIBLE NOTE 1 EXHIBIT 99.3 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. 1 December 19, 2000 $20,000,000 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 Twenty Million Dollars ($20,000,000), 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, 2001, 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 Investor Rights Agreement dated as of December 19, 2000 (the "Investor Rights Agreement") by and between the Company and King Pharmaceuticals, Inc. 2 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 Initial Conversion Price 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 American Stock Exchange as reported in The Wall Street Journal (or other similar newspaper) for American Stock Exchange Composite Transactions or, if the Common Stock is not listed or admitted to trading on such exchange, 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 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. "Initial Conversion Price" means Ten Dollars ($10). -2- 3 "Stock Interest Portion" shall mean one-half of the interest due and payable on this Note at any Interest Payment Date. This Note is one of the Company's 4% Convertible Senior Notes authorized for issuance in the aggregate original principal amount of $25,000,000 pursuant to the Note Purchase Agreement. The registered holder of this Note is entitled to the benefits of the 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 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 4 of the Investor Rights Agreement, a mandatory redemption of this Note pursuant to Section 3 of the Investor Rights Agreement, or a repurchase of the Notes pursuant to Section 6 of the 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 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. 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 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 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 Investor Rights Agreement or under applicable law shall operate as a waiver of such right or remedy. In the case of the happening of any of the following events (herein called "Events of Default"): -3- 4 (a) any representation or warranty made by the Company in or in connection with this Note, the Note Purchase Agreement, the Investor Rights Agreement or the Registration Rights Agreement, or the borrowings hereunder or 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 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, the Note Purchase Agreement or the Related Agreements and such default shall continue for thirty (30) days after written notice thereof to the Company by the holder of this Note; provided, that a breach by the Company of the representation and warranty made by the Company in Section 7.15 of the HPV License Agreement (as defined in the Note Purchase Agreement) shall not constitute an Event of Default hereunder if such breach was not caused in whole or in part by any actions or inactions of the Company; (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 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 -4- 5 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, the Note Purchase Agreement or any Related Agreements 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) 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 (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); or (l) the Initial Shelf Registration Statement (as defined in the 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; 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 -5- 6 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 Investor Rights Agreement or available at law or equity. For purposes of the foregoing provisions: "Material Contract" shall mean (i) any supply or packaging agreement related to Estrasorb(TM); and (ii) any other 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). 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: White & McDermott, P.C. 65 William Street Suite 250 Wellesley, Massachusetts 02481 Attn: David A. White Telecopy: (781) 237-8120 -6- 7 To King: King Pharmaceuticals, Inc. 501 Fifth Street Bristol, Tennessee 37620 Attn: Executive Vice President 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/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. -7- 8 Each of the Company and Payee each 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, 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. Each of the parties 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 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, the party effecting such service shall also deliver a copy thereof to the other parties in accordance with the notice provision set forth herein. Each such party 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 each such party 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 submit to the exclusive jurisdiction and venue of the federal courts located in and state courts of the State of Maryland and hereby waive any and all objections based on jurisdiction or venue that such party may have under applicable law or the Federal Rules of Civil Procedure. Each of the foregoing parties 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 Note and the transactions contemplated hereby. Service 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 party effecting such service shall also deliver a copy thereof to the other parties in accordance with the notice provision set forth herein. Each such party 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 each such -8- 9 party 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.] -9- 10 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: --------------------------------- Name: ------------------------ Title: ------------------------------ 11 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 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 12 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 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-99.4 5 w43971ex99-4.txt FORM OF INVESTOR RIGHTS AGREEMENT 1 EXHIBIT 99.4 INVESTOR RIGHTS AGREEMENT THIS INVESTOR RIGHTS AGREEMENT (this "Agreement") is made as of the 19th day of December, 2000 by and between NOVAVAX, INC., a Delaware corporation (the "Company"), and KING PHARMACEUTICALS, INC., a Tennessee corporation ("King"). WHEREAS, the Company and King have entered into a Note Purchase Agreement, dated as of December 19, 2000, pursuant to which King has agreed to purchase from the Company, and the Company has agreed to sell to King, 4% Convertible Senior Notes of the Company in the aggregate principal amount of Twenty-Five Million Dollars ($25,000,000); WHEREAS, as of the date hereof, King has purchased from the Company, and the Company has sold to King, a 4% Convertible Senior Note of the Company in the aggregate principal amount of Twenty Million Dollars ($20,000,000); and WHEREAS, in order to induce King to enter into the Note Purchase Agreement, the Company has agreed that this Agreement shall govern the rights of King as holder of the 4% Convertible Senior Notes and the Common Stock of the Company issuable upon the conversion thereof, and as interest payments thereon, and certain other matters as set forth herein. 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: 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. 2 "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 the Closing Date constitute 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 the Closing Date 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 Date" shall mean December 19, 2000. "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" means the price used to compute the number of shares of Common Stock to be received upon the conversion of any Note. -2- 3 "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. "Event of Default" has the meaning set forth in the form of Note. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "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, and 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; 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. -3- 4 "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 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 Note" means the Note issued by the Company pursuant to Section 1.1 of the 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. "Initial Conversion Price" for each First Note means Ten Dollars ($10), which is the Conversion Price as of the Closing Date. "Initial Conversion Price" -4- 5 for each Second Note means the Conversion Price of the First Notes as of the date such Second Note is issued by the Company. "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 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). -5- 6 "Note Purchase Agreement" means the Note Purchase Agreement, dated as of December 19, 2000, between the Company and King. "Notes" means the 4% Convertible Senior Notes authorized for issuance and sale by the Company pursuant to the Note Purchase Agreement, 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. "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, 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 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 -6- 7 original purchase price under the Note Purchase Agreement of at least $5 million. "Redemption Date" has the meaning set forth in Section 3(a). "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the Closing Date, between King and the Company. "Second Note" means the Note issued by the Company pursuant to Section 1.2 of the 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. "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 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. -7- 8 SECTION 2. CONVERSION RIGHTS. 2.1 OPTIONAL CONVERSION. (a) Subject to and upon 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. 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 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 (as defined in the form of Note) shall exceed 180% of the Conversion Price 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 any 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, 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 Registration Rights Agreement) covering resales of the Common Stock issuable -8- 9 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 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 2.4(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 -9- 10 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 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 -10- 11 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 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. -11- 12 (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 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 -12- 13 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 other provisions of this 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, 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 the Closing Date 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 the Closing Date 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 the Closing Date. -13- 14 (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 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. -14- 15 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. 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 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 -15- 16 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 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. -16- 17 (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. 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 shall 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 -17- 18 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 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 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. PARTIAL PREPAYMENT OF THE NOTES. In the event that the FDA Written Notice (as defined in the Note Purchase Agreement) shall not have been obtained by the Company prior to June 1, 2002, the holders of the Notes may, by written notice to the Company, accelerate the maturity of up to Five Million Dollars ($5,000,000) of the outstanding principal amount under the Notes whereupon such accelerated amount of principal, together with all accrued and unpaid interest thereon, 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 or in the Notes to the contrary notwithstanding. -18- 19 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 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 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 -19- 20 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. 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); -20- 21 (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 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 office of such individual designated by King service on the Board of Directors 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) incur any Indebtedness, except to the extent that such Indebtedness, together with all other Indebtedness of the Company and its -21- 22 Subsidiaries taken as a whole, 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); (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 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 the Registration Rights Agreement; -22- 23 (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 the Registration Rights Agreement; (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) 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; (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 -23- 24 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. SECTION 10. MISCELLANEOUS. 10.1 REMEDIES. Each holder of Purchaser Securities shall have all the rights and remedies set forth in this Agreement and all the rights and remedies which such holders have under any law or at equity. Any Person having any rights -24- 25 under any provision of this Agreement 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 to exercise all other rights granted by law or at equity. 10.2 CONSENT TO AMENDMENTS. 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 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 -25- 26 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. 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 -26- 27 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: White & McDermott, P.C. 65 William Street, Suite 250 Wellesley, Massachusetts 02481 Attn: David A. White Telecopy: (781) 237-8120 To King: 501 Fifth Street Bristol, Tennessee 37620 Attn: Executive Vice President 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 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. -27- 28 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 submit to the exclusive jurisdiction and venue of the federal courts located in and state courts of the State of Tennessee and hereby waive any and all objections based on jurisdiction or venue that such party may have under applicable law or the Federal Rules of Civil Procedure. Each of the parties 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, the party effecting such service shall also deliver a copy thereof to the other parties in accordance with the notice provision set forth in Section 10.8. Each such party 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 each such party 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 submit to the exclusive jurisdiction and venue of the federal courts located in and state courts of the State of Maryland and hereby waive any and all objections based on jurisdiction or venue that such party may have under -28- 29 applicable law or the Federal Rules of Civil Procedure. Each of the foregoing parties 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 party effecting such service shall also deliver a copy thereof to the other parties in accordance with the notice provision set forth in Section 10.8. Each such party 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 each such party shall at all times have an agent for service for the foregoing purposes in the State of Maryland. 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] -29- 30 IN WITNESS WHEREOF, the parties have executed this Investor Rights Agreement as of the date first above written. COMPANY: NOVAVAX, INC. By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- KING: KING PHARMACEUTICALS, INC. By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- 31 TABLE OF CONTENTS
Page ---- SECTION 1. DEFINITIONS....................................................................1 SECTION 2. CONVERSION RIGHTS..............................................................8 2.1 Optional Conversion............................................................8 2.2 Mandatory Conversion...........................................................8 2.3 Mechanics of Conversion........................................................9 2.4 Undertakings by the Company....................................................10 2.5 Adjustments to Conversion Price................................................11 2.6 Effect on Conversion Price of Certain Events...................................12 2.7. Subdivision or Combination of Common Stock.....................................15 2.8. Reorganization, Reclassification, Consolidation, Merger or Sale................15 2.9. Certain Events.................................................................16 2.10. Notices........................................................................16 2.11. No Avoidance...................................................................17 2.12. Hart-Scott-Rodino..............................................................17 SECTION 3. MANDATORY REDEMPTION...........................................................17 SECTION 4. PARTIAL PREPAYMENT OF THE NOTES................................................18 SECTION 5. PURCHASE RIGHTS................................................................19 SECTION 6. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL...................................19 SECTION 7. BOARD OF DIRECTORS.............................................................20 7.1 Effective Period of Rights.....................................................20 7.2 Board Observer Rights..........................................................20 7.3 Board Representation Rights....................................................21 SECTION 8. RESTRICTIVE COVENANTS..........................................................21 SECTION 9. INFORMATION AND INSPECTION RIGHTS..............................................23 9.1 Information Rights.............................................................23 9.2 Inspection Rights..............................................................24 9.3 Confidentiality................................................................24 SECTION 10. MISCELLANEOUS..................................................................24 10.1 Remedies.......................................................................24 10.2 Consent to Amendments..........................................................25 10.3 Successors and Assigns.........................................................25 10.4 Severability...................................................................25 10.5 Counterparts...................................................................26 10.6 Descriptive Headings; Interpretation; No Strict Construction...................26 10.7 Governing Law..................................................................26 10.8 Notices........................................................................26 10.9 Jurisdiction; Venue............................................................28 10.10 Business Day...................................................................29
32 10.11 Delivery by Facsimile..........................................................29
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