Convertible Note (2001)Full Document 

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                                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  SUCH SECURITIES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, OR
 THE HOLDER HEREOF PROVIDES  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. 2                                                          September 7, 2001
$5,000,000

         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 Five Million Dollars ($5,000,000), 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 December 31, 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,
as amended (the "Investor


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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 twelve 30-day months and applied to the actual number of days
elapsed and shall accrue at a fixed rate equal to four percent (4%) per annum.
All payments with respect to this Note shall be credited first to the payment of
accrued but unpaid interest and then to the repayment of principal. The rate of
interest payable hereunder shall in no event exceed the maximum rate permitted
by applicable law.

         Payments of principal on this Note shall be made in lawful money of the
United States in immediately available funds at the address of Payee set forth
below.

         Except as provided in the following sentence, payments of interest on
this Note shall be made in lawful money of the United States in immediately
available funds at the address of Payee set forth below. If the Average Closing
Price calculated with respect to an Interest Payment Date is equal to or greater
than the Conversion Price then in effect and no Event of Default shall have
occurred and be continuing as of such Interest Payment Date, the Company, at its
option, shall have the right to pay up to the full amount of the Stock Interest
Portion of the interest due on such Interest Payment Date by issuing to Payee
the number of fully paid and nonassessable shares of Common Stock which is
determined by dividing such Stock Interest Portion by the Average Closing Price
calculated with respect to such Interest Payment Date and by delivering a
certificate or certificates for shares of such Common Stock in such denomination
or denominations as Payee may request at the address specified by Payee. For
purposes of the foregoing provision:

         "Average Closing Price" means, with respect to any Interest Payment
Date, the average Closing Price per share, rounded up to four (4) decimal
points, of the Common Stock during the twenty (20) consecutive trading days
ending with and including the third trading day immediately preceding such
Interest Payment Date.

         "Closing Price" means, with respect to each share of Common Stock, for
any day, the reported last sales price regular way per share or, in case no such
reported sale takes place on such day, the average of the reported closing bid
and asked prices regular way, in either case (a) on the 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



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Market, the average of the closing bid and asked prices in the over-the-counter

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