EXHIBIT 3
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
BY AND BETWEEN
NOVAVAX, INC.
AND
KING PHARMACEUTICALS, INC.
DATED AS OF JUNE 26, 2002
TABLE OF CONTENTS
Page
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SECTION 1. DEFINITIONS.................................................................. 2
SECTION 2. CONVERSION RIGHTS............................................................ 9
2.1 Optional Conversion.............................................................. 9
2.2 Mandatory Conversion............................................................. 10
2.3 Mechanics of Conversion.......................................................... 10
2.4 Undertakings by the Company...................................................... 12
2.5 Adjustments to Conversion Price.................................................. 13
2.6 Effect on Conversion Price of Certain Events..................................... 13
2.7. Subdivision or Combination of Common Stock....................................... 16
2.8. Reorganization, Reclassification, Consolidation, Merger or Sale.................. 17
2.9. Certain Events................................................................... 17
2.10. Notices.......................................................................... 18
2.11. No Avoidance..................................................................... 19
2.12. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇................................................................ 19
SECTION 3. MANDATORY REDEMPTION......................................................... 19
SECTION 4. [RESERVED.].................................................................. 20
SECTION 5. PURCHASE RIGHTS.............................................................. 20
SECTION 6. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL................................. 20
SECTION 7. BOARD OF DIRECTORS........................................................... 22
7.1 Effective Period of Rights....................................................... 22
7.2 Board Observer Rights............................................................ 22
7.3 Board Representation Rights...................................................... 22
SECTION 8. RESTRICTIVE COVENANTS........................................................ 23
SECTION 9. INFORMATION AND INSPECTION RIGHTS............................................ 25
9.1 Information Rights............................................................... 25
9.2 Inspection Rights................................................................ 26
9.3 Confidentiality.................................................................. 26
SECTION 10. MISCELLANEOUS................................................................ 27
10.1 Remedies......................................................................... 27
10.2 Entire Agreement; Consent to Amendments.......................................... 27
10.3 Successors and Assigns........................................................... 27
10.4 Severability..................................................................... 28
10.5 Counterparts..................................................................... 28
10.6 Descriptive Headings; Interpretation; No Strict Construction..................... 28
10.7 Governing Law.................................................................... 29
10.8 Notices.......................................................................... 29
10.9 Jurisdiction; Venue.............................................................. 30
10.10 Business Day..................................................................... 32
10.11 Delivery by Facsimile............................................................ 32
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AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (this "Agreement")
is made as of the 26th day of June, 2002 by and between NOVAVAX, INC., a
Delaware corporation (the "Company"), and KING PHARMACEUTICALS, INC., a
Tennessee corporation ("King").
WHEREAS, King and the Company entered into an Investor Rights Agreement
dated as of December 19, 2000, which was amended by the First Amendment to
Investor Rights Agreement dated September 7, 2001 (as so amended, the "Original
Agreement");
WHEREAS, pursuant to that certain Note Purchase Agreement dated as of
December 19, 2000 between the Company and King, the Company has sold to King,
and King has purchased from the Company, (a) a 4% Convertible Senior Note dated
December 19, 2000 in the aggregate principal amount of Twenty Million Dollars
($20,000,000), and (b) a 4% Convertible Senior Note dated September 7, 2001 in
the aggregate principal amount of Five Million Dollars ($5,000,000);
WHEREAS, pursuant to that certain September 2001 Note Purchase
Agreement dated as of September 7, 2001 between the Company and King, the
Company has sold to King, and King has purchased from the Company, a 4%
Convertible Senior Note in the aggregate principal amount of Five Million
Dollars ($5,000,000);
WHEREAS, pursuant to that certain June 2002 Note Purchase Agreement
dated as of June 26, 2002 (the "June 2002 Note Purchase Agreement") between King
and the Company, the Company has agreed, subject to the satisfaction of certain
conditions described therein, to sell to King, and King has agreed, subject to
the satisfaction of certain conditions described therein, to purchase from the
Company, a 4% Convertible Senior Note of the Company in the aggregate principal
amount of $10,000,000; and
WHEREAS, the Company and King have agreed to amend and restate the
Original Agreement as a condition to the closing of the June 2002 Note Purchase
Agreement.
NOW THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements herein contained, the
Original Agreement is hereby amended and restated as follows:
SECTION 1. DEFINITIONS.
The capitalized terms defined below have the following meanings when
used in this Agreement:
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a person whether through the ownership of
voting securities, contract or otherwise and, if such Person is a partnership or
limited liability company, any partner or member thereof.
"Agreement" has the meaning set forth in the Preamble.
"Board Observer" has the meaning set forth in Section 7.2(a).
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of Maryland are authorized or obligated by law
to close.
"Change of Control" means, with respect to any Person, such time as (a)
a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) of more than fifty percent (50%) of the total voting
power of the Voting Stock of such Person on a fully diluted basis; (b)
individuals who on December 19, 2000 constituted the board of directors of such
Person (together with any new directors whose election by the board of directors
of such Person or whose nomination by the board of directors of such Person for
election by the stockholders of such Person was approved by a vote of at least
two-thirds of the members of the board of directors of such Person then in
office who either were members of the board of directors of such Person on
December 19, 2000 or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the members of the
board of directors of such Person then in office; or (c) the stockholders of
such Person approve a complete liquidation or dissolution of such Person.
"Closing Price" means, with respect to each share of Common Stock, for
any day, the reported last sales price regular way per share or, in case no such
reported sale takes place on such day, the average of the reported closing bid
and asked prices regular way, in either case (a) on the principal (as determined
by the Board of Directors) national securities exchange on which the Common
Stock is listed or admitted to trading or (b) if not listed or admitted to
trading
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on any national securities exchange, on the Nasdaq National Market, or, if the
Common Stock is not listed or admitted to trading on any national securities
exchange or quoted on the Nasdaq National Market, the average of the closing bid
and asked prices in the over-the-counter market as furnished by any American
Stock Exchange member firm selected from time to time by the Company for that
purpose. If no such prices are available, the Closing Price per share of Common
Stock shall be the fair value of a share as determined in good faith by the
Board of Directors.
"Common Stock" means the Common Stock, $.01 par value per share, of the
Company, any stock into which such Common Stock shall have been changed, or any
stock resulting from any capital reorganization or reclassification of such
Common Stock, and all other stock of any class or classes (however designated)
of the Company the holders of which have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions of any
shares entitled to preference.
"Common Stock Deemed Outstanding" means, at any given time, the number
of shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to Sections 2.5(b),
whether or not the Options or Convertible Securities are actually exercisable at
such time, without duplication.
"Company" has the meaning set forth in the Preamble.
"Confidentiality Agreement" has the meaning set forth in Section
7.2(b).
"Conversion Price" for any Note means the Initial Conversion Price for
such Note, as adjusted pursuant to Section 2 hereof.
"Conversion Shares" means the shares of Common Stock to be received
upon the conversion of any Note.
"Convertible Securities" means any stock or securities directly or
indirectly convertible into or exchangeable for Common Stock.
"December 2000 Note Purchase Agreement" means the Note Purchase
Agreement, dated as of December 19, 2000, between the Company and King.
"Event of Default" means an Event of Default under any of the Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Excluded Issuance" means the issue or deemed issue of shares of
Common Stock (a) upon conversion of Notes; (b) as a payment of interest on the
Notes; (c) to officers, directors or employees of, or consultants to, or other
permitted grantees of, the Company and its Subsidiaries pursuant to the Existing
Plans or pursuant to any employee stock option plan subsequently adopted by the
Board of Directors and approved by the stockholders of the Company; provided,
that any Options granted pursuant to the Existing Plans or any such subsequently
adopted plans shall have an exercise price per share of Common Stock not less
than the fair market value of the Common Stock at the time of such grant; (d)
upon exercise of the Existing Warrants; (e) upon the exercise of warrants or
options granted to consultants of the Company; provided, that the total number
of shares of Common Stock issuable upon the exercise of all such options and
warrants shall not exceed one hundred thousand (100,000) (as adjusted to
reflect any stock split, stock dividend, reclassification, recapitalization or
otherwise); provided, further, that any such option or warrant shall have an
exercise price per share of Common Stock not less than the Market Price at the
time of such grant; (f) into the Company's 401(k) Plan in accordance with
the terms thereof to satisfy the Company's obligations to make matching
contributions thereunder to the extent that such issuances are made in the
ordinary course of business and consistent with past practice and (g) for
which adjustment of the then-applicable Conversion Price is made pursuant to
Section 2.
"Existing Plans" means (a) the Novavax, Inc. 1995 Stock Option Plan
adopted by the Board of Directors and approved by the stockholders of the
Company on September 13, 1995, as amended by that First Amendment to Novavax,
Inc. 1995 Stock Option Plan adopted by the Board of Directors on March 16, 1998,
and approved by the stockholders of the Company on May 14, 1998, that Second
Amendment to Novavax, Inc. 1995 Stock Option Plan adopted by the Board of
Directors on March 7, 2000, and approved by the stockholders of the Company on
May 9, 2000, that Third Amendment to Novavax, Inc. 1995 Stock Option Plan
adopted by the Board of Directors on June 28, 2001, and approved by the
stockholders of the Company on May 8, 2002, and that Fourth Amendment to
Novavax, Inc. 1995 Stock Option Plan adopted by the Board of Directors on
March 6, 2002, and approved by the stockholders of the Company on May 8, 2002;
and (b) the Director Stock Option Plan adopted by the Board of Directors and
approved by the stockholders of the Company on September 13, 1995.
"Existing Warrants" means warrants outstanding as of December 12, 2000
to purchase one million four hundred seventy-eight thousand eight hundred
twenty-six (1,478,826) shares of Common Stock, including the following: (a)
warrants to purchase fifty-four thousand nine hundred twenty-four (54,924)
shares of Common Stock issued in connection with the Stock
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Purchase Agreement dated October 30, 1996, by and between the Company and the
purchasers named therein; (b) warrants to purchase fifty thousand (50,000)
shares of Common Stock issued in consideration for services performed by The
Research Works, Inc.; (c) warrants to purchase four hundred fifty-four thousand
one hundred eighty-two (454,182) shares of Common Stock issued in connection
with the Stock and Warrant Purchase Agreement dated April 14, 1999, by and
between the Company and the purchasers named therein; and (d) warrants to
purchase nine hundred nineteen thousand seven hundred twenty (919,720) shares of
Common Stock issued in connection with the Stock and Warrant Purchase Agreement
dated January 28, 2000, by and between the Company and the purchasers named
therein.
"First December 2000 Note" means the Note issued by the Company
pursuant to Section 1.1 of the December 2000 Note Purchase Agreement, together
with all notes issued by the Company in substitution or exchange therefor
pursuant to this Agreement.
"GAAP" has the meaning set forth in Section 9.1(a).
"HSR Act" has the meaning set forth in Section 2.12.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (a) all indebtedness of such Person for
borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (d) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion of
such services, except trade payables, (e) all capitalized lease obligations of
such Person, (f) all Indebtedness of other Persons secured by a lien on any
asset of such Person, whether or not such Indebtedness is assumed by such
Person, (g) all Indebtedness of other persons guaranteed by such Person to the
extent such Indebtedness is guaranteed by such Person and (h) to the extent not
otherwise included in this definition, obligations under currency agreements and
interest rate agreements. Indebtedness shall not be construed to include any
principal or interest owed by the Company to King under the Notes; provided,
however, that in the event of a default, or upon the occurrence of an event
which with notice or lapse of time or both would constitute a default, under the
Notes, Indebtedness shall include the principal and interest owed by the Company
to King under the Notes.
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"Initial Conversion Price" means Ten Dollars ($10) for each of the
First December 2000 Note and the Second December 2000 Note. The "Initial
Conversion Price" means Thirteen Dollars and Eighty-Seven Cents ($13.87) for the
September 2001 Note. The "Initial Conversion Price" means Five Dollars and
Fifty-Six Cents ($5.56) for the June 2002 Note.
"June 2002 Note" means the 4% Convertible Senior Note issued by the
Company pursuant to the June 2002 Note Purchase Agreement, together with all
notes issued by the Company in substitution or exchange therefor pursuant to
this Agreement.
"June 2002 Note Purchase Agreement" has the meaning set forth in the
Recitals to this Agreement.
"King" has the meaning set forth in the Preamble.
"Lien" means any encumbrance, lien (statutory or other) or other
security interest.
"majority of the Notes" means, as of any date of determination, the
holders of a majority in principal amount of the Notes outstanding as of such
date.
"Mandatory Conversion Notice" has the meaning set forth in Section
2.2(a).
"Mandatory Conversion Period" has the meaning set forth in Section
2.2(a).
"Market Price" of any security means the average of the closing prices
of such security's sales on all securities exchanges on which such security may
at the time be listed, or, if there has been no sales on any such exchange on
any day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted on The
Nasdaq National Market, Inc. as of 4:00 P.M., New York time, or, if on any day
such security is not quoted on The Nasdaq National Market, Inc., the average of
the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case averaged
over a period of ten (10) days consisting of the day as of which "Market Price"
is being determined and the nine (9) consecutive trading days prior to such day.
If at any time such security is not listed on any securities exchange or quoted
on The Nasdaq National Market, Inc. or the over-the-counter market, the "Market
Price" shall be the fair value thereof determined by
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jointly by the Company and the holders of a majority of the Notes. If such
parties are unable to reach agreement within a reasonable period of time, such
fair value shall be determined by an independent appraiser experienced in
valuing securities jointly selected by the Company and the holders of a majority
of the Notes. The determination of such appraiser shall be final and binding
upon the parties, and the Company shall pay the fees and expenses of such
appraiser.
"Maryland Process Agent" has the meaning set forth in Section 10.9(c).
"Notes" mean the First December 2000 Note, the Second December 2000
Note, the September 2001 Note and the June 2002 Note, together with all notes
issued by the Company in substitution or exchange therefor pursuant to this
Agreement.
"Offer to Purchase" has the meaning set forth in Section 6(a).
"Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
"Organic Change" has the meaning set forth in Section 2.8.
"Original Agreement" has the meaning set forth in the Recitals to this
Agreement.
"Payment Date" has the meaning set forth in Section 6(b).
"Permitted Indebtedness" has the meaning set forth in Section 8(a)(i).
"Person" means an individual, a partnership, a corporation, a limited
liability company, a limited liability partnership, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization and a
governmental entity or any department, agency or political subdivision thereof.
"Purchase Rights" has the meaning set forth in Section 5.
"Purchaser Securities" means (a) the Notes, (b) any Common Stock issued
or issuable upon conversion of the Notes referred to in clause (a) above, and
(c) any securities issued directly or indirectly with respect to any of the
foregoing securities by way of a stock split, stock dividend, or other division
of securities, or in connection with a combination of securities,
recapitalization, merger, consolidation, or other reorganization. As to any
particular securities constituting Purchaser Securities, such securities shall
cease to be Purchaser Securities when such securities have been (a) registered
under the Securities Act and disposed of in accordance with the registration
statement covering
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such securities, (b) distributed to the public through a broker, dealer or
market maker pursuant to Rule 144 under the Securities Act (or any similar
provision then in force), or (c) repurchased or otherwise acquired by the
Company (or its assignee). Any reference herein to a "majority of the Purchaser
Securities" for purposes of comparison or calculation shall refer, with respect
to any particular Purchaser Securities, to the number shares of Common Stock (or
equivalent common equity securities of the Company) then represented by such
Purchaser Securities on an as-if-converted basis.
"Qualified Holder" means any holder of Purchaser Securities which,
together with such holder's Affiliates, holds Purchaser Securities with an
original purchase price of at least $5 million.
"Redemption Date" has the meaning set forth in Section 3(a).
"Related Documents" means collectively, this Agreement, the Notes, the
December 2000 Note Purchase Agreement, the September 2001 Note Purchase
Agreement, the June 2002 Note Purchase Agreement and the Second Amended and
Restated Registration Rights Agreement, all as may be amended, restated,
supplemented or otherwise modified from time to time.
"Second Amended and Restated Registration Rights Agreement" means the
Second Amended and Restated Registration Rights Agreement, dated as of the date
hereof between King and the Company.
"Second December 2000 Note" means the Note issued by the Company
pursuant to Section 1.2 of the December 2000 Note Purchase Agreement, together
with all notes issued by the Company in substitution or exchange therefor
pursuant to this Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"September 2001 Note" means the 4% Convertible Senior Note issued by
the Company pursuant to the September 2001 Note Purchase Agreement, together
with all notes issued by the Company in substitution or exchange therefor
pursuant to this Agreement.
"September 2001 Note Purchase Agreement" means that certain September
2001 Note Purchase Agreement dated as of September 7, 2001, between King and the
Company.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (a) if a corporation, a majority of the total voting power of the Voting
Stock of such
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corporation is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof, or (b) if a limited liability company, partnership, association or
other business entity, a majority of the partnership or other similar ownership
interests thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control the managing general partner of such
limited liability company, partnership, association or other business entity.
For purposes of Section 2, if the context does not otherwise indicate in respect
of which Person the "Subsidiary" is used, the term "Subsidiary" shall refer to
any Subsidiary of the Company.
"Tennessee Process Agent" has the meaning set forth in Section 10.9(b).
"Voting Stock" means, with respect to any Person, capital stock of any
class or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person. Without
limiting the foregoing, Voting Stock of the Company includes the Common Stock.
SECTION 2. CONVERSION RIGHTS.
2.1 OPTIONAL CONVERSION.
(a) Subject to and in compliance with the provisions of
this Section 2, at the option of the holder thereof, any Note may be converted
in whole or in part into fully paid and nonassessable shares (calculated as to
each conversion to the nearest one one-hundredth of a share) of Common Stock at
the Conversion Price, determined as hereinafter provided, in effect at the close
of business on the day of conversion, but not for less than three hundred fifty
thousand (350,000) shares at a time (or such lesser number of shares which may
then constitute the maximum number purchasable; such number being subject to
adjustment as provided for herein). Such conversion right with respect to any
Note shall commence on the issue date of such Note and expire on the later of
(i) the close of business on the maturity date of such Note or (ii) the date the
full principal amount of such Note has been paid in full.
(b) Any Note converted pursuant to Section 2.1(a) shall
be converted into a number of full shares of Common Stock computed by dividing
the principal amount of such Note or portion thereof surrendered
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for conversion by the Conversion Price in effect at the close of business on the
day of conversion. The Conversion Price shall be adjusted in certain instances
as provided in this Section 2.
2.2 MANDATORY CONVERSION.
(a) If at any time during the period commencing on
January 1, 2002, and ending on December 31, 2004 (the "Mandatory Conversion
Period"), the Closing Price shall exceed 180% of the Conversion Price for any
Note then in effect for at least thirty (30) trading days in any period of
forty-five (45) consecutive trading days, then the Company may, by providing
written notice to the holder of such Note (a "Mandatory Conversion Notice")
within twenty (20) Business Days after the end of such forty-five (45) day
period, require that such holder convert such Note, in whole or in part, into
fully paid and nonassessable shares (calculated as to each conversion to the
nearest one one-hundredth of a share) of Common Stock at the Conversion Price of
such Note, determined as hereinafter provided, in effect at the close of
business on the day of conversion. Each Mandatory Conversion Notice shall (i)
specify in reasonable detail the computations of the Closing Price and the
Conversion Price on the basis of which the Company is electing to exercise its
right to require conversion of the Note pursuant to this Section 2.2, and (ii)
the principal amount of the Note that the Company is requiring the holder to
convert pursuant to this Section 2.2. Notwithstanding anything to the contrary
contained herein, the Company shall not be entitled to require any holder of a
Note to convert such Note, in whole or in part, into Common Stock pursuant to
this Section 2.2 unless a Shelf Registration Statement (as defined in the Second
Amended and Restated Registration Rights Agreement) covering resales of the
Common Stock issuable upon conversion of such Note is effective and available
for use for at least sixty (60) days after the Conversion Shares are issued to
such holder upon such conversion.
(b) Any Note converted pursuant to Section 2.2(a) shall
be converted into a number of full shares of Common Stock computed by dividing
the principal amount of such Note or portion thereof surrendered for conversion
by the Conversion Price in effect at the close of business on the day of
conversion. The Conversion Price shall be adjusted in certain instances as
provided in this Section 2.
2.3 MECHANICS OF CONVERSION.
(a) In order to convert a Note into Common Stock pursuant
to Section 2.1 or Section 2.2, the holder of such Note to be converted shall
surrender such Note, duly endorsed or assigned to the Company or in blank, at
the Company's principal executive offices located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (or such other office or agency of the Company as
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the Company may designate by notice in writing to each holder of Notes),
accompanied by a completed "Conversion Notice" in the form attached to such
Note, at such office that the holder elects to convert such Note or, if less
than the entire principal amount thereof is to be converted, the portion thereof
to be converted.
(b) A Note shall be deemed to have been converted
immediately prior to the close of business on the day of surrender of such Note
for conversion in accordance with the foregoing provisions, and at such time the
rights of the holder of such Note, as a holder thereof, shall cease to the
extent of the portion of such Note converted, and the Person or Persons entitled
to receive the Conversion Shares shall be treated for all purposes as the record
holder or holders thereof at such time. As promptly as practicable on or after
the date of any conversion in full or in part of any Note, but in no event later
than five (5) Business Days thereafter, the Company shall issue and deliver to
the holder of such Note, or as such holder may direct, a certificate or
certificates for the number of full Conversion Shares, together with (i) payment
in lieu of any fraction of a share, as provided in Section 2.3(d), and (ii)
interest on the principal amount of such Note, or the portion thereof converted,
accrued and unpaid to and including the date of such conversion, without any
adjustment in respect of any dividend or other distribution payable on the
Conversion Shares.
(c) Upon any partial conversion of a Note, the Company
shall forthwith issue and deliver to or upon the order of the holder thereof, at
the expense of the Company, a new Note or Notes in aggregate principal amount
equal to the unpaid and unconverted portion of the principal amount of such
partially converted Note. Such new Note or Notes shall be registered in the name
of such holder and dated as of the date of the converted Note.
(d) No fractional shares of Common Stock shall be issued
upon conversion of any Note or Notes. If more than one Note shall be surrendered
for conversion at one time (or substantially at the same time) by the same
holder, the number of full shares which shall be issuable upon conversion
thereof shall be computed on the basis of the aggregate principal amount of the
Notes so surrendered. In place of any fractional share of Common Stock which
would otherwise be issuable upon conversion of any Note or Notes, the Company
shall calculate and pay a cash adjustment in respect to such fraction
(calculated to the nearest one one-hundredth of a share) in an amount equal to
the same fraction of the current Market Price per share of Common Stock at the
close of business on the day of conversion.
(e) Notwithstanding any other provision hereof, if a
conversion of Notes is to be made under this Section 2 in connection with a
transaction affecting the Company, the conversion of such Notes may, at the
election of the
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holder thereof, be conditioned upon the consummation of such transaction, in
which case such conversion shall not be deemed to be effective until
consummation of such transaction or immediately prior thereto (at the election
of such holder).
2.4 UNDERTAKINGS BY THE COMPANY.
(a) The issuance of certificates for shares of Common
Stock upon conversion of Notes shall be made without charge to the holders of
such Notes for any issuance tax in respect thereof or other cost incurred by the
Company in connection with such conversion and the related issuance of
Conversion Shares.
(b) The Company shall not close its books against the
transfer of Notes or of Common Stock issued or issuable upon conversion of Notes
in any manner which interferes with the timely conversion of Notes. The Company
shall assist and cooperate with any holder of Notes required to make any
governmental filings or obtain any governmental approval prior to or in
connection with any conversion of Notes hereunder (including, without
limitation, making any filings required to be made by the Company).
(c) The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of issuance upon the conversion of the Notes, such number of shares
of Common Stock which are issuable upon the conversion of all outstanding Notes.
All shares of Common Stock which are so issuable shall, when issued, be duly and
validly issued, fully paid and nonassessable and free from all taxes, Liens and
charges. The Company shall take all such actions as may be necessary to assure
that all such shares of Common Stock may be so issued without violation of any
applicable law or governmental regulation (other than laws or regulations
governing a regulated Person's investment authority) or any requirements of any
domestic securities exchange upon which shares of Common Stock may be listed
(except for official notice of issuance, which shall be immediately delivered by
the Company upon each such issuance). The Company shall not take any action
which would cause the number of authorized but unissued shares of Common Stock
to be less than the number of such shares required to be reserved hereunder for
issuance upon conversion of all of the Notes from time to time outstanding.
(d) If the shares of Common Stock issuable by reason of
conversion of Notes are convertible into or exchangeable for any other stock or
securities of the Company, the Company shall, at the converting holder's option,
upon surrender of the Notes to be converted by such holder as provided herein
together with any notice, statement or payment required to effect such
conversion or exchange of Common Stock, deliver to such holder or as
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otherwise specified by such holder a certificate or certificates representing
the stock or securities into which the shares of Common Stock issuable by reason
of such conversion are so convertible or exchangeable, registered in such name
or names and in such denomination or denominations as such holder has specified.
2.5 ADJUSTMENTS TO CONVERSION PRICE.
(a) In order to prevent dilution of the conversion rights
granted under this Section 2, the Conversion Price shall be subject to
adjustment from time to time pursuant to this Section 2.5.
(b) If and whenever the Company issues or sells, or
in accordance with Section 2.6 is deemed to have issued or sold, any shares
of Common Stock for a consideration per share (as calculated pursuant to
Section 2.6) less than the Conversion Price in effect immediately prior to the
time of such issue or sale or deemed issue and sale, then immediately upon such
issue or sale or deemed issue or sale the Conversion Price shall be reduced to
an amount equal to: (A) the sum of (1) the product derived by multiplying (x)
the Conversion Price in effect immediately prior to such issue or sale by (y)
the number of shares of Common Stock Deemed Outstanding immediately prior to
such issue or sale, plus (2) the consideration (as calculated pursuant to
Section 2.6(e)), if any, received or deemed to have been received by the Company
upon such issue or sale or deemed issue or sale, divided by (B) the number of
shares of Common Stock Deemed Outstanding immediately after such issue or sale.
(c) Notwithstanding the foregoing, there shall be no
adjustment in the Conversion Price as a result of any issue or sale or deemed
issue or sale of Common Stock in an Excluded Issuance.
2.6 EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS.
For purposes of determining the adjusted Conversion Price
under Section 2.5, the following provisions shall be applicable:
(a) Issuance of Rights or Options. If the Company in any
manner grants or sells any Options and the price per share for which Common
Stock is issuable upon the exercise of such Options, or upon conversion or
exchange of any Convertible Securities issuable upon exercise of such Options,
is less than the Conversion Price in effect immediately prior to the time of the
granting or sale of such Options, then the "price per share for which Common
Stock is issuable" shall be determined by dividing (A) the total amount, if any,
received or receivable by the Company as consideration for the granting or sale
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of such Options, plus the minimum aggregate amount of additional consideration
payable to the Company upon exercise of all such Options, plus in the case of
such Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable to the Company upon the
issuance or sale of such Convertible Securities and the conversion or exchange
thereof, by (B) the total maximum number of shares of Common Stock issuable upon
the exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options. For the
purposes of this Section 2.6(a), the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon conversion or exchange
of the total maximum amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to be outstanding and to have been
issued and sold by the Company at the time of the granting or sale of such
Options for such price per share. No further adjustment of the Conversion Price
shall be made when Convertible Securities are actually issued upon the exercise
of such Options or when Common Stock is actually issued upon the exercise of
such Options or the conversion or exchange of such Convertible Securities.
(b) Issuance of Convertible Securities. If the Company in
any manner issues or sells any Convertible Securities and the price per share
for which Common Stock is issuable upon conversion or exchange of such
Convertible Securities is less than the Conversion Price in effect immediately
prior to the time of such issue or sale, then the "price per share for which
Common Stock is issuable" shall be determined by dividing (A) the total amount
received or receivable by the Company as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (B) the total maximum number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities. For the purposes
of this Section 2.6(b), the maximum number of shares of Common Stock issuable
upon conversion or exchange of such Convertible Securities shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the
issuance or sale of such Convertible Securities for such price per share. No
further adjustment of the Conversion Price shall be made when Common Stock is
actually issued upon the conversion or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustments of the Conversion Price had been
or are to be made pursuant to the provisions of Section 2.5, no further
adjustment of the Conversion Price shall be made by reason of such issue or
sale.
(c) Change in Option Price or Conversion Rate. If (i) the
purchase price provided for in any Options, the additional consideration, if
any,
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payable upon the conversion or exchange of any Convertible Securities or the
rate at which any Convertible Securities are convertible into or exchangeable
for Common Stock changes at any time, the Conversion Price in effect at the time
of such change shall be immediately adjusted to the Conversion Price which would
have been in effect at such time had such changed purchase price, additional
consideration or conversion rate, as the case may be, occurred at the time such
Options or Convertible Securities were initially granted, issued or sold. For
purposes of this Section 2.6, if the terms of any Option or Convertible Security
which was outstanding as of December 19, 2000 or at any time thereafter are
changed in the manner described in the immediately preceding sentence, then such
Option or Convertible Security and the Common Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued as
of the date of such change; provided that no such change shall at any time cause
the Conversion Price hereunder to be increased.
(d) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the termination of
any right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Conversion Price then in effect hereunder shall
be adjusted immediately to the Conversion Price which would have been in effect
had such Option or Convertible Security, to the extent outstanding immediately
prior to such expiration or termination, never been issued; provided that the
expiration or termination of any Option or Convertible Security which was
outstanding as of December 19, 2000 or at any time thereafter shall not cause
the Conversion Price hereunder to be adjusted unless, and only to the extent
that, a change in the terms of such Option or Convertible Security causes such
Option or Convertible Security to be deemed to have been issued after December
19, 2000.
(e) Calculation of Consideration Received. If any Common
Stock, Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be deemed to
be the aggregate amount of cash received by the Company therefor (net of
discounts, commissions and related expenses). If any Common Stock, Option or
Convertible Security is issued or sold for a consideration other than cash, the
amount of the consideration other than cash received by the Company shall be the
fair value of such consideration, except where such consideration consists of
securities, in which case the amount of such consideration received by the
Company shall be the Market Price thereof as of the date of receipt. If any
Common Stock, Option or Convertible Security is issued to the owners of the
non-surviving entity in connection with any merger in which the Company is the
surviving corporation, the amount of consideration therefor shall be deemed to
be the fair value of such portion of the net assets and business of
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the non-surviving entity which is attributable to such Common Stock, Option or
Convertible Security, as the case may be. The fair value of any consideration
other than cash and securities shall be determined jointly by the Company and
the holders of a majority of the Notes. If such parties are unable to reach
agreement within a reasonable period of time, the fair value of such
consideration shall be determined by an independent appraiser experienced in
valuing such type of consideration jointly selected by the Company and the
holders of a majority of the Notes. The determination of such appraiser shall be
final and binding upon the parties, and the fees and expenses of such appraiser
shall be borne by the Company.
(f) Integrated Transactions. In case any Option is issued
in connection with the issue or sale of other securities of the Company,
together constituting one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued for a consideration of $.01.
(g) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company or any Subsidiary, and the disposition of any shares
so owned or held shall be considered an issue or sale of Common Stock.
(h) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling such holders (i) to receive
a dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (ii) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or upon the making of such
other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
2.7. SUBDIVISION OR COMBINATION OF COMMON STOCK.
If the Company at any time subdivides (by any stock split,
stock dividend, reclassification, recapitalization or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced, and if the Company at any time combines (by
reverse stock split, reclassification or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
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2.8. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE.
Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's assets
or other transaction, in each case which is effected in such a manner that the
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock, is referred to herein as an "Organic Change". Prior
to the consummation of any Organic Change, the Company shall make appropriate
provisions (in form and substance reasonably satisfactory to the holders of a
majority of the Notes) to insure that each of the holders of Notes shall
thereafter have the right to acquire and receive, in lieu of or in addition to
(as the case may be) the shares of Common Stock immediately theretofore
acquirable and receivable upon the conversion of such holder's Notes, such
shares of stock, securities or assets as such holder would have received in
connection with such Organic Change if such holder had converted its Notes
immediately prior to such Organic Change. In each such case, the Company shall
also make appropriate provisions (in form and substance reasonably satisfactory
to the holders of a majority of the Notes) to insure that the provisions of this
Section 2 and Section 4 and Section 5 shall thereafter be applicable to the
Notes (including, in the case of any such consolidation, merger or sale in which
the successor entity or purchasing entity is other than the Company, an
immediate adjustment of the Conversion Price to the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, and a
corresponding immediate adjustment in the number of shares of Common Stock
acquirable and receivable upon conversion of any of the Notes, if the value so
reflected is less than the Conversion Price in effect immediately prior to such
consolidation, merger or sale). The Company shall not effect any such
consolidation, merger or sale, unless prior to the consummation thereof, the
successor entity (if other than the Company) resulting from consolidation or
merger or the entity purchasing such assets assumes by written instrument (in
form and substance reasonably satisfactory to the holders of a majority of the
Notes), the obligation to deliver to each such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to acquire.
2.9. CERTAIN EVENTS.
If any event occurs of the type contemplated by the provisions
of this Section 2 but not expressly provided for by such provisions (including,
without limitation, the granting of stock appreciation rights, phantom stock
rights or other rights with equity features), then the Board of Directors shall
make an appropriate adjustment in the Conversion Price so as to protect the
rights of the holders of the Notes; provided that no such adjustment shall
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increase the Conversion Price as otherwise determined pursuant to this Section 2
or decrease the number of shares of Common Stock issuable upon conversion of any
Note.
2.10. NOTICES.
(a) Whenever the Conversion Price is adjusted as provided
in this Section 2, the Company shall promptly (and, in any event, not later than
fifteen (15) days following the occurrence of the event requiring such
adjustment) compute the adjusted Conversion Price in accordance with this
Section 2 and shall prepare a report setting forth such adjustment and showing
in detail the method of calculation and the facts upon which such adjustment is
based. Such report shall include a statement of (i) the consideration received
or to be received by the Company for any additional shares of Common Stock
issued or sold or deemed to have been issued, (ii) the number of shares of
Common Stock outstanding or deemed to be outstanding, and (iii) the Conversion
Price in effect immediately prior to such issue or sale and as adjusted on
account therefor. Upon the request of any holder of the Notes, the Company shall
cause certified public accountants of recognized national standing (which may be
the regular auditors of the Company) selected by the Company to verify such
computation and report, if not previously verified at the request of any holder.
The Company shall promptly (and, in any event, not later than thirty (30) days
following such verification request) furnish a copy of such verification to the
holder of any Note, and shall, upon the written request at any reasonable time
of the holder of any Note, furnish to such holder a like report setting forth
the Conversion Price at the time in effect and showing how such Conversion Price
was calculated. The Company shall keep copies of all such reports and such
verifications at its principal office, and shall cause such reports and
verifications to be available for inspection at such office during normal
business hours by the holder of any Note or any prospective purchaser of any
Note designated by the holder of such Note.
(b) The Company shall give written notice to all holders
of Notes at least twenty (20) days prior to the date on which the Company closes
its books or fixes a record date (i) with respect to any dividend or
distribution upon Common Stock, (ii) with respect to any pro rata subscription
offer to holders of Common Stock or (iii) for determining rights to vote with
respect to any Organic Change.
(c) The Company shall also give written notice to the
holders of Notes at least twenty (20) days prior to the date on which any
Organic Change shall take place.
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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. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇.
Issuance of the Common Stock upon conversion of, or as
interest payments on, the Notes hereunder may be subject to expiration or
termination of all applicable waiting periods under the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), if applicable.
Each of King and the Company shall cooperate in making filings under the HSR
Act, if any, and shall use its reasonable best efforts to take, or cause to be
taken, all actions necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement, including using its reasonable best efforts to resolve such
objections, if any, as the Antitrust Division of the Department of Justice or
the Federal Trade Commission or state antitrust enforcement or other
governmental entities may assert under antitrust laws with respect to the
transactions contemplated hereby. All filing fees payable in connection with any
such filings under the HSR Act shall be split equally between the Company and
King.
SECTION 3. MANDATORY REDEMPTION
(a) The Notes shall be redeemable, at the Company's
option, in whole (and not in part), at any time after January 1, 2005, and prior
to maturity of the Notes, upon not less than thirty (30) nor more than sixty
(60) days' prior notice to all holders of the Notes, at the following redemption
prices (expressed in percentages of principal amount), plus accrued and unpaid
interest to the date fixed for redemption (the "Redemption Date"), subject to
the right of Note holders of record on the relevant Interest Payment Date (as
defined in the Notes) that is prior to the Redemption Date to receive interest
due on such Interest Payment Date:
Year Redemption Price
---- ----------------
2005 102%
2006 101%
2007 100%
(b) With respect to any redemption of Notes, at least
thirty (30) days but not more than sixty (60) days before a Redemption Date, the
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Company shall mail a notice of redemption by first-class mail to each holder
whose Notes are to be redeemed. The notice shall identify the notes to be
redeemed and shall state the Redemption Date and the redemption price.
(c) Once notice of redemption is mailed, Notes called for
redemption become due and payable on the Redemption Date and at the redemption
price; provided, however, that the holders of the Notes shall be permitted to
convert the Notes into Common Stock pursuant to Section 2 at any time prior to
the Redemption Date. Upon surrender of any Notes to the Company, such Notes
shall be paid at the redemption price, plus accrued interest, if any, to the
Redemption Date. Unless the Company defaults in making the redemption payment,
interest on Notes called for redemption shall cease to accrue on and after the
Redemption Date and the only remaining right of the holders of the Notes shall
be to receive payment of the Redemption Price plus accrued interest to the
Redemption Date upon surrender of the Notes to the Company.
SECTION 4. [RESERVED.]
SECTION 5. PURCHASE RIGHTS.
If at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
"Purchase Rights"), then each holder of Notes shall be entitled to acquire, upon
the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such holder could have acquired if such holder had held the number of
shares of Common Stock acquirable upon conversion of such holder's Notes
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.
SECTION 6. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL.
(a) The Company shall commence, within thirty (30) days
after the occurrence of a Change of Control of the Company, and shall
consummate, an offer to purchase from the holders thereof all Notes then
outstanding, at a purchase price equal to one hundred one percent (101%) of the
principal
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amount thereof, plus accrued interest to the Payment Date (the "Offer to
Purchase").
(b) The Company shall commence the Offer to Purchase by
mailing a notice to each holder of Notes stating: (i) the covenant pursuant to
which the offer is being made and that all Notes validly tendered will be
accepted for payment on a pro rata basis; (ii) the purchase price and the date
of purchase (which shall be a Business Day no earlier than thirty (30) days nor
later than sixty (60) days from the date such notice is mailed) (the "Payment
Date"); (iii) that any Note not tendered will continue to accrue interest
pursuant to its terms; (iv) that, unless the Company defaults in the payment of
the purchase price, any Note accepted for payment pursuant to the Offer to
Purchase shall cease to accrue interest on and after the Payment Date; (v) that
holders electing to have a Note purchased pursuant to the Offer to Purchase will
be required to surrender such Note, together with the form entitled "Option of
the Holder to Elect Purchase" attached to such Note completed, to the Company at
the address specified in the notice prior to the close of business on the
Business Day immediately preceding the Payment Date; (vi) that holders will be
entitled to withdraw their election if the Company receives, not later than the
close of business on the third Business Day immediately preceding the Payment
Date, a facsimile transmission or letter setting forth the name of such holder,
the principal amount of Notes delivered for purchase and a statement that such
holder is withdrawing such holder's election to have such Notes purchased; and
(vii) that holders whose Notes are being purchased only in part will be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered; provided that each Note purchased and each new Note issued shall be
in a principal amount of One Hundred Thousand Dollars ($100,000) or integral
multiples thereof.
(c) On the Payment Date, the Company shall accept for
payment the Notes or portions thereof tendered pursuant to an Offer to Purchase.
Promptly following the Payment Date, the Company shall mail to the holders of
Notes so accepted payment in an amount equal to the purchase price and mail to
such holders a new Note equal in principal amount to any unpurchased portion of
the Note surrendered; provided that, upon the request of any holder of at least
Five Million Dollars ($5,000,000) in principal amount of Notes accepted for
payment, the Company shall make such payment by wire transfer; and provided
further, that each Note purchased and each new Note issued shall be in a
principal amount of One Hundred Thousand Dollars ($100,000) or integral
multiples thereof. In the event that the Company is required to repurchase Notes
pursuant to an Offer to Purchase, the Company shall comply with all securities
laws and regulations applicable to such repurchase.
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SECTION 7. BOARD OF DIRECTORS.
7.1 EFFECTIVE PERIOD OF RIGHTS.
The provisions of Sections 7.2 and 7.3 shall remain in effect
for so long as King and King's Affiliates collectively shall be the holders of a
majority of the Purchaser Securities. The provisions of Sections 7.2 and 7.3
shall automatically terminate upon a Change of Control of King.
7.2 BOARD OBSERVER RIGHTS.
(a) King shall be entitled to designate one individual
reasonably acceptable to the Company (the "Board Observer") who shall not be a
member of the Board of Directors and who shall have the following rights and
such other rights as agreed to with the Company:
(i) the Company shall provide the Board Observer
with written notice and a copy of materials distributed to the Board of
Directors and committees thereof at least three (3) days in advance of all
meetings of the Board of Directors and committees thereof (or if a shorter
period of notice is provided to the Board of Directors or committee members,
then within such shorter period);
(ii) the Board Observer, or another individual
designated by the Board Observer, shall have the right to attend each such
meeting; and
(iii) if the Company proposes to take any action
by written consent in lieu of a meeting of the Board of Directors or any
committee thereof, the Company shall give the Board Observer written notice
thereof prior to the effective date of such consent, describing in reasonable
detail the nature and the substance of such action.
(b) King shall, and shall cause each Board Observer to,
keep confidential all proprietary and confidential information of the Company
disclosed to the Board Observer pursuant to Section 7.2(a), all in accordance
with and subject to the terms and conditions of the Confidentiality Agreement
dated September 1, 2000 between the Company and King (the "Confidentiality
Agreement").
7.3 BOARD REPRESENTATION RIGHTS.
If and for so long as an Event of Default shall have occurred
and be continuing, upon the written request of King, the Company shall take all
corporate action necessary to increase by one the total number of directors then
constituting the entire Board of Directors and to cause one individual
designated by King to be appointed to the Board of Directors by the directors
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then in office and to cause such designee of King to be nominated for election
and reelection at any annual or special meeting of the Company's stockholders.
Whenever such Event of Default shall have terminated or been waived, the right
of King to have such individual appointed and nominated for election and
reelection to the Board of Directors shall cease (but subject always to the same
provisions for King's exercise of its rights under this Section 7.3 in the case
of any subsequent Event of Default), and the term of service on the Board of
Directors of such individual designated by King shall forthwith terminate. King
shall continue to have the Board Observer rights set forth in Section 7.2 during
any period in which it exercises its rights under this Section 7.3.
SECTION 8. RESTRICTIVE COVENANTS.
(a) Without the prior written consent of the holders of a
majority of the Purchaser Securities (or, in the case of clause (iii), the
holders of a majority of the Notes), the Company shall not take (or permit any
Subsidiary to take) any of the following actions:
(i) except as set forth on Schedule 8(a)(i),
incur any Indebtedness, except to the extent that such Indebtedness, together
with all other Indebtedness of the Company and its Subsidiaries taken as a whole
(other than the Indebtedness described on Schedule 8(a)(i)), does not exceed One
Million Five Hundred Thousand Dollars ($1,500,000) ("Permitted Indebtedness");
(ii) create, incur, assume or suffer to exist any
Lien upon any of its right or interest in or to property of any kind whatsoever,
whether real, personal or mixed and whether tangible or intangible including,
without limitation, capital stock except for Liens securing Permitted
Indebtedness that do not at any time encumber any property other than the
property financed by such Permitted Indebtedness.
(iii) acquire any business or any Person or
division thereof by merging or consolidating with, or by purchasing a
substantial portion of the assets of, such business, Person or division, or by
effecting any such acquisition in any other manner;
(iv) acquire any assets, including the
acquisition or license of any pharmaceutical or similar products, except for the
acquisition or license of any product pursuant to a transaction (or series of
transactions) whereby the aggregate consideration payable (including any
contingent or deferred payments) is less than Five Million Dollars ($5,000,000);
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(v) enter into the active management or
operation of any business that is not primarily related to, or in furtherance
of, being a biopharmaceutical company focused on the research, development and
commercialization of proprietary healthcare products;
(vi) elect to pay any additional consideration
under Section 1.3 of the Fielding Acquisition Agreement (as defined in the
December 2000 Note Purchase Agreement) in cash rather than in Common Stock;
(vii) liquidate, dissolve or wind up the Company;
(viii) file a voluntary petition in bankruptcy or
commence a voluntary legal procedure for reorganization, arrangement,
adjustment, relief or composition of indebtedness under bankruptcy or other
similar law now or hereafter in effect, consent to the entry of an order for
relief in an involuntary case under any such law or apply for or consent to the
appointment of a receiver, liquidator, assignee, custodian or trustee (or
similar official) of the Company or any Subsidiary;
(ix) adopt any amendment to the certificate of
incorporation or bylaws of the Company or take any other action that, in any
case, would reasonably be expected to affect adversely the rights of the holders
of the Purchaser Securities under the Notes, this Agreement or any other Related
Document;
(x) grant any put, registration or similar
rights to any Person that would reasonably be expected to affect adversely in
any material respect the rights of the holders of the Purchaser Securities under
the Notes, this Agreement or any other Related Document;
(xi) grant any power of attorney to any Person to
do or perform any of the foregoing; or
(xii) take any action, directly or indirectly, in
contemplation of any of the foregoing.
(b) Notwithstanding anything to the contrary set forth in
this Agreement, the Company agrees that it shall not take or fail to take any
action which would cause any holder of the Notes, together with such holder's
Affiliates, to be the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of more than eighteen percent (18%) of the Common Stock then
outstanding (assuming the conversion of all Notes then outstanding). If,
notwithstanding the foregoing covenant, any holder of the Notes, together with
such holder's Affiliates, becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) of more than eighteen percent (18%) of the Common
-24-
Stock then outstanding (assuming the conversion of all Notes then outstanding),
then such holder shall have the right, in addition to and without limitation of
any other rights or remedies available to such holder, to require the Company to
prepay enough of the outstanding principal under the Notes held by such holder
(as specified by such holder in writing, with such notice to specify the Note or
Notes to which the prepayment shall be applied), so that such holder, together
with such holder's Affiliates, is the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), of less than eighteen percent (18%) of the Common
Stock then outstanding (assuming the conversion of all Notes then outstanding).
Any principal amount required to be prepaid by the Company pursuant to this
Section 8(b) shall be made within five (5) business days after receipt of
written notice from the holder, and shall be made by wire transfer of
immediately available funds to an account specified by the holder.
(c) Without the prior written consent of the Company, no
holder of any Note shall offer any Common Stock in transactions to cover short
sales at any time (i) within thirty (30) days prior to conversion of such Note
or (ii) within thirty (30) days prior to the date of issuance of such Note.
SECTION 9. INFORMATION AND INSPECTION RIGHTS.
9.1 INFORMATION RIGHTS.
The Company shall deliver the following information to each
Qualified Holder:
(a) as soon as practicable, but in any event within
ninety (90) days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company and statement of
stockholders' equity as of the end of such year, and a statement of cash flows
for such year, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles,
consistently applied ("GAAP"), and audited and certified by independent public
accountants of nationally recognized standing selected by the Company;
(b) as soon as practicable, but in any event within
forty-five (45) days after the end of each quarter of each fiscal year of the
Company, unaudited financial statements (including income statements, balance
sheets, cash flow statements and summaries of bookings and backlog) and
management commentary as of the end of such fiscal quarter in accordance with
GAAP;
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(c) as soon as practicable any budget or business plan
provided to the Board of Directors and as soon as prepared, any other budgets or
revised budgets prepared by the Company;
(d) within ten (10) business days after transmission
thereof, copies of all financial statements, proxy statements, reports and any
other general written communications which the Company sends to its stockholders
and copies of all registration statements and all periodic and current reports
which it files with the Securities and Exchange Commission or with any
securities exchange on which any of its securities are then listed, and copies
of all press releases and other statements made available generally by the
Company to the public concerning material developments in the businesses of the
Company and its Subsidiaries; and
(e) with reasonable promptness, such other information
and financial data concerning the Company and its Subsidiaries as any Qualified
Holder entitled to receive information under this Section 9.1 may reasonably
request.
9.2 INSPECTION RIGHTS.
The Company shall permit any representatives designated by any
Qualified Holder, upon reasonable notice and during normal business hours and at
such other times as any such Qualified Holder may reasonably request, to (a)
visit and inspect any of the properties of the Company and its Subsidiaries, (b)
examine the corporate and financial records of the Company and its Subsidiaries
and, at the expense of such Qualified Holder, make copies thereof or extracts
therefrom, and (c) discuss the affairs, finances and accounts of the Company and
its Subsidiaries with the directors and executive officers thereof and the
Company's independent public accountants. The presentation of an executed copy
of this Agreement (or photocopy thereof) by any Qualified Holder or
representative thereof to the Company's independent accountants shall constitute
the Company's permission to its independent accountants to participate in
discussions with such Persons.
9.3 CONFIDENTIALITY.
All information received by any representatives designated by
any Qualified Holder shall be deemed received pursuant to the Confidentiality
Agreement or, if such Qualified Holder is not King or other Person subject to
the Confidentiality Agreement, pursuant to another confidentiality agreement
mutually acceptable to the Company and such Qualified Holder.
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SECTION 10. MISCELLANEOUS.
10.1 REMEDIES.
Each holder of Purchaser Securities shall have all the rights
and remedies set forth in this Agreement and the other Related Documents and all
the rights and remedies which such holders have under any law or at equity. Any
Person having any rights under any provision of this Agreement and the other
Related Documents shall be entitled to enforce such rights specifically (without
posting a bond or other security), to recover damages by reason of any breach of
any provision of this Agreement and the other Related Documents and to exercise
all other rights granted by law or at equity.
10.2 ENTIRE AGREEMENT; CONSENT TO AMENDMENTS.
This Agreement and the other Related Documents contain the
entire agreement between the parties with respect to the subject matter hereof,
and supersede all prior written agreements and negotiations and oral
understandings, if any, with respect to their subject matter, including the
Original Agreement. Except as otherwise expressly provided herein, the
provisions of this Agreement may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the holders of a
majority of the Purchaser Securities; provided, that if any such amendment,
modification or waiver would adversely affect any holder of Purchaser Securities
relative to the holders of Purchaser Securities voting in favor of such
amendment, modification, or waiver, such amendment, modification or waiver shall
also require the written consent of the holders of a majority of the Purchaser
Securities held by all holders so adversely affected; and provided further that
if such amendment, modification or waiver is to a provision in this Agreement
that requires a specific vote to take an action thereunder or to take an action
with respect to the matters described therein, such amendment, modification or
waiver shall not be effective unless such vote is obtained with respect to such
amendment, modification or waiver. No other course of dealing between the
Company and the holder of any Purchaser Securities or any delay in exercising
any rights hereunder or under the Notes or the Company's certificate of
incorporation shall operate as a waiver of any rights of any such holders. For
purposes of this Agreement, Purchaser Securities held by the Company or any of
its Subsidiaries shall not be deemed to be outstanding.
10.3 SUCCESSORS AND ASSIGNS.
Except as otherwise expressly provided herein, all covenants
and agreements contained in this Agreement by or on behalf of any of the parties
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hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto, whether so expressed or not. In addition, whether
or not any express assignment has been made and except as provided in this
Agreement, the provisions of this Agreement which are for the benefit of King as
a purchaser or holder of Purchaser Securities are also for the benefit of, and
enforceable by, any subsequent holder of such Purchaser Securities.
10.4 SEVERABILITY.
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
10.5 COUNTERPARTS.
This Agreement may be executed simultaneously in two or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together shall constitute one and the
same Agreement.
10.6 DESCRIPTIVE HEADINGS; INTERPRETATION; NO STRICT CONSTRUCTION.
The descriptive headings of this Agreement are inserted for
convenience only and do not constitute a substantive part of this Agreement.
Whenever required by the context, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
forms of nouns, pronouns, and verbs shall include the plural and vice versa.
Reference to any agreement, document or instrument means such agreement,
document or instrument as amended or otherwise modified from time to time in
accordance with the terms thereof, and if applicable hereof. The use of the
words "include" or "including" in this Agreement shall be by way of example
rather than by limitation. The use of the words "or", "either" or "any" shall
not be exclusive. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties hereto, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
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10.7 GOVERNING LAW.
This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without giving effect to any
choice of law or conflict of law rules or provisions (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.
10.8 NOTICES.
All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when (i) delivered personally to
the recipient, (ii) telecopied to the recipient (with hard copy sent to the
recipient by reputable overnight courier service (charges prepaid) that same
day) if telecopied before 5:00 p.m. New York time on a Business Day, and
otherwise on the next Business Day, or (iii) one (1) Business Day after being
sent to the recipient by reputable overnight courier service (charges prepaid).
Such notices, demands and other communications shall be sent to the following
Persons at the following addresses:
To the Company:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
Novavax, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Vice President and General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
To King:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Executive Vice President of Legal Affairs
and General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy (which shall not constitute notice) to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
Notice to any other holder of Purchaser Securities shall be addressed to such
holder at the address set forth for such holder in the Company's records or at
such other address and/or to the attention of such other Person as such holder
may designate by written notice to the Company.
10.9 JURISDICTION; VENUE.
(a) Each of the Company and King hereby waives personal
service of any process upon it in connection with any suit, action or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby, and hereby covenants and agrees that all such service of process may be
made in the manner set forth in Section 10.8 with the same effect as though
served on it personally.
(b) The Company hereby covenants and agrees that any
suit, action or proceeding initiated by the Company against King, its
affiliates, subsidiaries, successors and/or assigns arising out of or relating
to this Agreement or the transactions contemplated hereby shall be brought
exclusively in the federal courts located in and/or state courts of the State of
Tennessee. In the event of any such suit, action or proceeding initiated by the
Company, each of the Company and King hereby submits to the exclusive
jurisdiction and venue of the federal courts located in and state courts of the
State of Tennessee and hereby waives any and all objections based on
jurisdiction or venue that such party may have under applicable law or the
Federal Rules of Civil Procedure. The Company hereby irrevocably designates CT
Corporation in the State of Tennessee (the "Tennessee Process Agent") as its
designee, appointee and agent to receive, for and on its behalf, service of
process in the State of Tennessee in any such suit, action or proceedings with
respect to this Agreement and the transactions contemplated hereby. Service on
the Tennessee Process Agent shall be deemed complete upon delivery thereof to
the Tennessee Process Agent, provided that, in the case of any such service upon
the Tennessee Process Agent, King shall also deliver a copy thereof to the
Company in accordance with the notice provision set forth in Section 10.8. The
Company shall take all such action as may be necessary to
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continue the appointment of the Tennessee Process Agent in full force and effect
or to appoint another agent, who shall thereafter be referred to herein as the
"Tennessee Process Agent", so that the Company shall at all times have an agent
for service for the foregoing purposes in the State of Tennessee.
(c) King hereby covenants and agrees that any suit,
action or proceeding initiated by King against the Company, its affiliates,
subsidiaries, successors and/or assigns arising out of or relating to this
Agreement or the transactions contemplated hereby shall be brought exclusively
in the federal courts located in and/or state courts of the State of Maryland.
In the event of any such suit, action or proceeding initiated by King, each of
the Company and King hereby submits to the exclusive jurisdiction and venue of
the federal courts located in and state courts of the State of Maryland and
hereby waives any and all objections based on jurisdiction or venue that such
party may have under applicable law or the Federal Rules of Civil Procedure.
King hereby irrevocably designates CT Corporation in the State of Maryland (the
"Maryland Process Agent"), as its designee, appointee and agent to receive, for
and on its behalf, service of process in the State of Maryland in any such suit,
action or proceedings with respect to this Agreement and the transactions
contemplated hereby. Service on the Maryland Process Agent shall be deemed
complete upon delivery thereof to the Maryland Process Agent, provided that in
the case of any such service upon the Maryland Process Agent, the Company shall
also deliver a copy thereof to King in accordance with the notice provision set
forth in Section 10.8. King shall take all such action as may be necessary to
continue the appointment of the Maryland Process Agent in full force and effect
or to appoint another agent, who shall thereafter be referred to herein as the
"Maryland Process Agent", so that King shall at all times have an agent for
service for the foregoing purposes in the State of Maryland.
(d) The Company acknowledges that the Executive Vice
President of Legal Affairs and General Counsel of King is the registered agent
for King in the State of Tennessee. Consequently, for purposes of any Related
Documents which require King to appoint CT Corporation as King's registered
agent in the State of Tennessee, for so long as the General Counsel of King
shall be the registered agent for King in the State of Tennessee, King shall
have no obligation to appoint CT Corporation or any other third party as its
agent to receive service of process in the State of Tennessee. Instead, all
service of process in the State of Tennessee shall be served on King at the
address set forth in Section 10.8 of this Agreement.
(e) King acknowledges that the General Counsel of the
Company is the registered agent for the Company in the State of Maryland.
Consequently, for purposes of any Related Documents which require the Company to
appoint CT Corporation as the Company's registered agent in the
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State of Maryland, for so long as the General Counsel of the Company shall be
the registered agent for the Company in the State of Maryland, the Company shall
have no obligation to appoint CT Corporation or any other third party as its
agent to receive service of process in the State of Maryland. Instead, all
service of process in the State of Maryland shall be served on the Company at
the address set forth in Section 10.8 of this Agreement.
10.10 BUSINESS DAY.
If any time period for giving notice or taking action
hereunder expires on a day which is a Saturday, Sunday, or any other day in
which the banks located in the State of Maryland are authorized or obligated by
law to close, then the time period shall automatically be extended to the
Business Day immediately following such Saturday, Sunday or any other day in
which the banks located in the State of Maryland are authorized or obligated by
law to close.
10.11 DELIVERY BY FACSIMILE.
This Agreement, the agreements referred to herein, and each
other agreement or instrument entered into in connection herewith or therewith
or contemplated hereby or thereby, and any amendments hereto or thereto, to the
extent signed and delivered by means of a facsimile machine, shall be treated in
all manner and respects as an original agreement or instrument and shall be
considered to have the same binding legal effect as if it were the original
signed version thereof delivered in person. At the request of any party hereto
or to any such agreement or instrument, each other party hereto or thereto shall
re-execute original forms thereof and deliver them to all other parties. No
party hereto or to any such agreement or instrument shall raise the use of a
facsimile machine to deliver a signature or the fact that any signature or
agreement or instrument was transmitted or communicated through the use of a
facsimile machine as a defense to the formation or enforceability of a contract,
and each such party forever waives any such defense.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Investor Rights Agreement as of the date first above written.
COMPANY:
NOVAVAX, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Title: President & CEO
-----------------------------------
KING:
KING PHARMACEUTICALS, INC.
By: /s/ ▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇▇
------------------------------------
Title: Executive Vice President and
-----------------------------------
General Counsel
-----------------------------------
