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



 

SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN
PROXY STATEMENT

SCHEDULE 14A INFORMATION
 
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934



 
Filed by the Registrant x
Filed by a Party other than the Registrant o

Check the appropriate box:

o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material under §240.14a-12

NOVAVAX, INC.

(Name of registrant as specified in its charter)

(Name of person(s) filing proxy statement, if other than the registrant)

Payment of Filing Fee (Check the appropriate box):

x No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which the transaction applies:

(2) Aggregate number of securities to which the transaction applies:

(3) Per unit price or other underlying value of the transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of the transaction:

(5) Total fee paid:

o Fee paid previously with preliminary materials.
o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:


 
 

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[GRAPHIC MISSING]

20 Firstfield Road
Gaithersburg, MD 20878
T 240-268-2000
F 240-268-2100
 
www.novavax.com
Nasdaq: NVAX
 
April 28, 2017

Dear Novavax Stockholder:

You are cordially invited to our Annual Meeting of Stockholders on Thursday, June 15, 2017, beginning at 8:30 a.m., local time, at Novavax’ offices located at 21 Firstfield Road, Gaithersburg, Maryland 20878. We are pleased to also provide a copy of our 2016 Annual Report to Stockholders with this proxy statement.

Your vote is important, and we hope you will be able to attend the Annual Meeting. You may vote over the Internet, by telephone, or, if you requested printed proxy materials, by mailing a proxy card or voting instruction form. Please review the instructions on each of your voting options described in this proxy statement. Also, please let us know if you plan to attend our Annual Meeting by marking the appropriate box on the proxy card, if you requested printed proxy materials, or, if you vote by telephone or over the Internet, by indicating your plans when prompted.

We look forward to seeing you there.

Very truly yours,
[GRAPHIC MISSING]
Stanley C. Erck
President and Chief Executive Officer


 
 

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[GRAPHIC MISSING]

NOVAVAX, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, JUNE 15, 2017

To the Stockholders of Novavax, Inc.:

NOTICE IS HEREBY GIVEN that the 2017 Annual Meeting of Stockholders (the “Annual Meeting”) of Novavax, Inc., a Delaware corporation (the “Company,” “Novavax,” “we,” or “us”), will be held on Thursday, June 15, 2017 at 8:30 a.m., local time, at the Company’s offices located at 21 Firstfield Road, Gaithersburg, Maryland 20878, to consider and act upon the following matters:

1. To elect two directors as Class I directors to serve on the board of directors of the Company (the “Board”), each for a three-year term expiring at the 2020 Annual Meeting of Stockholders;
2. To consider and vote whether to approve, on an advisory basis, the compensation paid to our principal executive officer, principal financial officer, and three other most highly compensated individuals serving as executive officers on December 31, 2016 (collectively, the “Named Executive Officers”);
3. To consider and vote, on an advisory basis, holding future executive compensation advisory votes every three years, every two years, or every year;
4. To amend and restate the Novavax, Inc. Amended and Restated 2015 Stock Incentive Plan (the “2015 Stock Plan”) to include a minimum vesting requirement applicable to all awards, define the plan administrator’s authority to accelerate the vesting of time- and performance-based awards on a change in control of the Company, expressly prohibit the payment of dividends and dividend equivalents on unvested awards, and increase the number of shares of the Company’s common stock, par value $0.01 (our “Common Stock”), available for issuance thereunder by 5,000,000 shares;
5. To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017; and
6. To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof.

The Board has fixed the close of business on April 19, 2017 (the “Record Date”) as the record date for determining stockholders of the Company entitled to notice of and to vote at the Annual Meeting and any adjournments or postponements thereof.

The following Proxy Statement is included with the Company’s Annual Report to Stockholders for the fiscal year ended December 31, 2016, which contains financial statements and other information of interest to stockholders.

By Order of the Board of Directors,
[GRAPHIC MISSING]
John A. Herrmann III
Senior Vice President, General Counsel and Corporate Secretary

Gaithersburg, Maryland
April 28, 2017

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE PROMPTLY VOTE OVER THE INTERNET OR BY TELEPHONE AS PER THE INSTRUCTIONS ON THE ENCLOSED PROXY OR COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ACCOMPANYING ENVELOPE. POSTAGE IS NOT NEEDED IF MAILED IN THE UNITED STATES.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE STOCKHOLDERS ANNUAL MEETING
TO BE HELD ON JUNE 15, 2017:
 
Notice of Annual Meeting, Proxy Statement, and Annual Report are available free of charge at
http://www.viewproxy.com/Novavax/2017.


 
 

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PROXY STATEMENT — TABLE OF CONTENTS

 
  Page
Proxy Statement     1  
Information Concerning the Annual Meeting     1  
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
        
Proposal No. 1 — Election of Directors     6  
Nominees for Election as Class I Directors     6  
Directors Continuing as Class II Directors     8  
Directors Continuing as Class III Directors     10  
Information Regarding the Board and Corporate Governance Matters     12  
Board Committees     13  
Nomination Procedures     15  
Certain Relationships and Related Transactions     17  
Compensation of Directors     19  
Section 16(A) Beneficial Ownership Reporting Compliance     20  
EXECUTIVE OFFICERS AND COMPENSATION
        
Executive Officers     21  
Compensation Discussion and Analysis     22  
Summary Compensation Table     31  
Grants of Plan-Based Awards Table     32  
Outstanding Equity Awards at 2016 Fiscal Year End     33  
Options Exercised and Stock Vested     34  
Equity Compensation Plan Information     34  
Overview of Employment and Change in Control Agreements     35  
Potential Payments Upon Termination     38  
Compensation Committee Report     40  
Audit Committee Report     41  
SECURITY OWNERSHIP INFORMATION
        
Security Ownership of Certain Beneficial Owners and Management     42  
OTHER PROXY PROPOSALS
        
Proposal No. 2 — Say-on-Pay, on an Advisory Basis     44  
Proposal No. 3 — Say-on-Frequency, on an Advisory Basis     45  
Proposal No. 4 — Amendment and Restatement of the 2015 Stock Plan     46  
Proposal No. 5 — Ratification of Appointment of Independent Registered Public Accounting Firm     57  
Fees and Services     57  
ADDITIONAL INFORMATION
        
Stockholder Proposals     59  
Other Matters     60  
APPENDIX A     A-1  

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Novavax, Inc.
20 Firstfield Road
Gaithersburg, Maryland 20878



 

PROXY STATEMENT
For the Annual Meeting of Stockholders
To Be Held on Thursday, June 15, 2017

INFORMATION CONCERNING THE ANNUAL MEETING

This Proxy Statement (“Proxy Statement”) is being furnished to stockholders in connection with the solicitation of proxies by the Board for use at the 2017 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Thursday, June 15, 2017 at 8:30 a.m. local time at the Company’s offices located at 21 Firstfield Road, Gaithersburg, Maryland 20878 and at any adjournments or postponements thereof. This Proxy Statement, the form of proxy, and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (the “Annual Report”) are being made available via the Internet and, upon request, will be mailed to our stockholders on or about May 4, 2017.

Why am I receiving these materials?

The Company has made these proxy materials available to you on the Internet or, upon your request, has delivered print versions of these proxy materials to you by mail, in order to provide you with information regarding the matters on which you may vote at the Annual Meeting. You are invited to attend the Annual Meeting and are requested to vote on the proposals described in this Proxy Statement.

Can I access the materials on the Internet instead of receiving paper copies?

Yes, stockholders may access the Proxy Statement and the Annual Report via the Internet and vote online at www.AALVote.com/NVAX. On or about May 4, 2017, a Notice of Internet Availability of Proxy Materials (the “Notice”) was mailed to stockholders of record as of the close of business on the Record Date. We are furnishing our proxy materials to our stockholders on the Internet in lieu of mailing a printed copy of our proxy materials. You will not receive a printed copy of our proxy materials unless you request one. If you would like to receive a printed or electronic copy of the proxy materials, free of charge, you should follow the instructions for requesting such materials in the Notice. The Notice instructs you as to how you may access and review on the Internet all of the important information contained in these proxy materials or request a printed copy of those materials. The Notice also instructs you as to how you may vote your proxy.

The Company encourages stockholders to take advantage of the availability of the proxy materials on the Internet to help reduce the environmental impact of printing and mailing annual meeting materials.

What is “householding” and how does it affect me?

The Company has adopted the process called “householding” for mailing annual meeting materials to stockholders who share the same address. Such stockholders will have received a notice from their bank, broker, or other holder of record, indicating that they will receive only one copy of this Proxy Statement and Annual Report.

If you own your shares through a bank, broker, or other holder of record and wish to either stop or begin householding, you may do so, or you may request a separate copy of this Proxy Statement and Annual Report, either by contacting your bank, broker, or other holder of record at the telephone number or address provided in the above referenced notice, or contacting Novavax by telephone at (240) 268-2000 or in writing to Novavax, Inc., 20 Firstfield Road, Gaithersburg, Maryland 20878, Attention: Corporate Secretary. If you request to begin or stop householding, you should provide your name, the name of your broker, bank, or other record holder, and your account information.

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What is the purpose of the Annual Meeting?

At the Annual Meeting, stockholders will vote on the following matters:

To elect two directors as Class I directors to serve on the Board, each for a three-year term expiring at the 2020 Annual Meeting of Stockholders;
To approve, on an advisory basis, the compensation paid to our Named Executive Officers;
To approve, on an advisory basis, holding future executive compensation advisory votes every three years, every two years, or every year;
To approve an amendment and restatement of the 2015 Stock Plan to include a minimum vesting requirement applicable to all awards, define the plan administrator’s authority to accelerate the vesting of time- and performance-based awards on a change in control of the Company, expressly prohibit the payment of dividends and dividend equivalents on unvested awards, and increase the number of shares of the Company’s Common Stock available for issuance thereunder by 5,000,000 shares;
To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017; and
To transact such other business that may properly come before the Annual Meeting or any adjournments or postponements thereof.

In addition, management will report on the Company’s performance during fiscal year 2016 and respond to questions from stockholders.

Who is entitled to vote?

The only class of stock of the Company entitled to vote at the Annual Meeting is its Common Stock. Only the record holders of shares of Common Stock at the close of business on the Record Date may vote at the Annual Meeting. On the Record Date, there were 282,613,919 shares of Common Stock outstanding and entitled to be voted. Each share entitles the holder to one vote on each of the matters to be voted upon at the Annual Meeting.

What is the quorum requirement for the Annual Meeting?

The presence in person or by proxy of the holders of a majority of the shares of Common Stock issued and outstanding on the Record Date and entitled to vote is required to constitute a quorum at the Annual Meeting. If a quorum is not present, the stockholders entitled to vote who are present in person or represented by proxy at the Annual Meeting have the power to adjourn the Annual Meeting until a quorum is present, without notice other than an announcement at the Annual Meeting, so long as such adjournment is less than 30 days and a new record date is not fixed. At any adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the Annual Meeting as originally scheduled. Abstentions and broker non-votes will count in determining whether a quorum is present at the Annual Meeting. A broker non-vote occurs when a broker or other nominee who holds shares represented by a proxy has not received voting instructions with respect to a particular item and does not have discretionary authority to vote such shares on the item.

How do I vote?

You may vote using any of the following methods:

Proxy card or voting instruction card.  You may vote by filling out the proxy card or voting instruction form (if received by mail) and returning it in the envelope provided.
By telephone or the Internet.   You may vote by calling 1-866-804-9616 or visiting the website www.AALVote.com/NVAX. The telephone and Internet voting procedures established by the Company for stockholders are designed to authenticate your identity, to allow you to give your voting instructions and to confirm that these instructions have been properly recorded. The availability of

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telephone and Internet voting for beneficial owners will depend on the voting processes of your broker, bank, or nominee. Therefore, we recommend that you follow the voting instructions in the materials you receive.
In person at the Annual Meeting.   All stockholders may vote in person at the Annual Meeting. You may also be represented by another person at the Annual Meeting by executing a proper proxy designating that person. If you are a beneficial owner of shares, you must obtain a legal proxy from your broker, bank, or nominee and present it to the inspector of election with your ballot when you vote at the meeting.

How can I attend the Annual Meeting?

To attend the Annual Meeting, you must demonstrate that you were a Novavax stockholder as of the close of business on April 19, 2017 or hold a valid proxy for the Annual Meeting from such a stockholder. If you received a Notice of Internet Availability of Proxy Materials, the Notice will serve as an admission ticket to attend the Annual Meeting. If you received a paper copy of the proxy materials in the mail, the proxy card includes an admission ticket to attend the Annual Meeting. You may alternatively present a brokerage statement showing proof of your ownership of Novavax common stock as of April 19, 2017. All stockholders must also present a valid form of government-issued picture identification in order to attend. If you do not provide photo identification or comply with the other procedures outlined above, you will not be admitted to the Annual Meeting. Please allow additional time for these procedures.

What is the difference between a stockholder of record and a beneficial owner of shares held in street name?

Stockholder of Record.   If your shares are registered directly in your name with the Company’s transfer agent, Computershare, Inc., you are considered the stockholder of record with respect to those shares, and the proxy materials were sent directly to you by the Company.

Beneficial Owner of Shares Held in Street Name.    If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the “beneficial owner” of shares held in “street name.” As a beneficial owner, you have the right to instruct your broker, bank, trustee, or nominee how to vote your shares.

How does discretionary voting authority apply?

All properly executed proxies will be voted in accordance with the instructions of the stockholder. If you are a stockholder of record and you sign and return a proxy card without giving specific instructions, then the persons named as proxy holders, Stanley C. Erck and Barclay A. Phillips, will vote your shares in the manner recommended by the Board on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the Annual Meeting, including any floor proposals.

Broker non-votes occur when a beneficial owner of shares held in street name does not give instructions to the broker or nominee holding the shares as to how to vote on matters deemed “non-routine.” Generally, if shares are held in street name, the beneficial owner of the shares is entitled to give voting instructions to the broker or nominee holding the shares. If the beneficial owner does not provide voting instructions, the broker or nominee can still vote the shares with respect to matters that are considered to be “routine,” but not with respect to “non-routine” matters. Under the rules and interpretations of the NASDAQ and the New York Stock Exchange, which generally govern this issue regardless of the exchange on which the company is listed, “non-routine” matters are matters that may substantially affect the rights or privileges of stockholders, such as mergers, stockholder proposals, equity compensation matters, and the election of directors, even if they are not contested.

Most brokers are permitted to vote your shares only with respect to the ratification of the appointment of Ernst & Young LLP as the Company’s independent auditor for the year ending December 31, 2017, even if they do not receive instructions from you in a timely manner, so long as they hold your shares in their name and have requested your instructions. Brokers do not have authority, discretionary or otherwise, to vote your shares for the election of directors, the approval, on an advisory basis, of the compensation paid to our Named

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Executive Officers, or the approval, on an advisory basis, of the frequency of stockholder approval of executive officers’ compensation, or approval of the amendment to the Company’s 2015 Stock Plan unless they receive proper instructions to do so from you in a timely manner.

In order to minimize the number of broker non-votes, the Company encourages you to vote or to provide voting instructions with respect to each proposal to the organization that holds your shares by carefully following the instructions provided in the proxy card or voting instruction form.

What are the Board’s recommendations?

 
Proposal   Board
Recommendation

No. 1 — 

Election of Directors

  For all nominees

No. 2 — 

The approval, on an advisory basis, of the compensation paid to our Named Executive Officers

  For

No. 3 — 

The approval, on an advisory basis of the frequency of stockholder approval of executive officers’ compensation

  For the three-year
option

No. 4 — 

Amendment and Restatement of the 2015 Stock Plan

  For

No. 5 — 

Ratification of Ernst & Young LLP as Independent Auditors for 2017

  For

What is the voting requirement to approve each of the proposals?

       
Proposal   Vote Required   Broker
Non-Votes
Allowed
  Abstentions   You May Vote

No. 1 — 

Election of Directors

  Plurality of Votes Cast   No   No Effect   FOR or
WITHHOLD

No. 2 — 

Say-on-Pay, on an advisory basis

  Majority of Votes Cast   No   No Effect   FOR,
AGAINST,
ABSTAIN

No. 3 — 

Say-on-Frequency, on an advisory basis

  Majority of Votes Cast   No   No Effect   3 YEARS, 2
YEARS, 1
YEAR,
ABSTAIN

No. 4 — 

Amendment and Restatement of the 2015 Stock Plan

  Majority of Votes Cast   No   No Effect   FOR,
AGAINST,
ABSTAIN

No. 5 — 

Ratification of Ernst & Young LLP as Independent Auditors for 2017

  Majority of Votes Cast   Yes   No Effect   FOR,
AGAINST,
ABSTAIN

Can I change my vote after I have voted?

Stockholders may revoke proxies at any time before they are exercised at the Annual Meeting by (a) signing and submitting a later-dated proxy to the Secretary of the Company; (b) delivering written notice of revocation to the Secretary of the Company; or (c) voting in person at the Annual Meeting. Attendance at the Annual Meeting will not itself be deemed to revoke a proxy unless the stockholder gives affirmative notice at the Annual Meeting that the stockholder intends to revoke the stockholder’s proxy and vote in person.

Where can I find the voting results of the Annual Meeting?

Preliminary voting results will be announced at the Annual Meeting. The Company will publish the final voting results in a Current Report on Form 8-K, which the Company is required to file with the Securities and Exchange Commission (“SEC”) within four business days following the Annual Meeting.

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Who bears the cost of solicitation of proxies?

The Company will bear the cost of soliciting proxies. In addition to solicitations by mail, the Company’s directors, officers, and regular employees may, without additional remuneration, solicit proxies in person, by telephone, or by electronic transmission and/or facsimile transmission. The Company may also utilize the assistance of third parties in connection with our proxy solicitation efforts, and will compensate such third parties for their efforts. The Company has retained Alliance Advisors, LLC., to assist in the solicitation of proxies and provide related advice and informational support, for a services fee and the reimbursement of expenses that are not expected to exceed $18,000 in the aggregate. The Company will also request brokerage houses, custodians, nominees and fiduciaries or other similar organizations to forward copies of the proxy materials to those persons for whom they hold shares and request instructions for voting the proxies. The Company will reimburse such brokerage houses, custodians, nominees and fiduciaries or other similar organizations for their reasonable expenses in connection with this distribution.

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PROPOSAL NO. 1
 
ELECTION OF CLASS I DIRECTORS

Pursuant to the Company’s charter, the Board may consist of no fewer than three directors, with the specific number to be authorized by the Board from time to time at its discretion. The Board is presently authorized to consist of eight members, and currently includes the following seven individuals: Gail K. Boudreaux, Richard H. Douglas, Ph.D., Stanley C. Erck, Gary C. Evans, Michael A. McManus, Jr., J.D., Rajiv I. Modi, Ph.D., and James F. Young, Ph.D. Mr. John O. Marsh, Jr., J.D. resigned from the Board effective June 12, 2014, and the Board bestowed upon Mr. Marsh the honorary title of Director Emeritus.

The members of the Company’s Board are divided into three classes, designated as Class I, Class II, and Class III, each serving staggered three-year terms. The term of the Class I directors expires at the Annual Meeting. The terms of the Class II and Class III directors will expire at the 2018 and 2019 Annual Meetings of Stockholders, respectively. A director of any class who is elected by the Board to fill a vacancy resulting from an increase in the number of directors holds office for the remaining term of the class to which he or she is elected. A director who is elected by the Board to fill a vacancy arising in any other manner holds office for the remaining term of his or her predecessor. Directors elected by the stockholders at an annual meeting to succeed those whose terms expire at such meeting are of the same class as the directors they succeed and are elected for a term to expire at the third annual meeting of stockholders after their election and until their successors are duly elected and qualified.

In the event of any increase or decrease in the authorized number of directors, the newly created or eliminated directorships must be apportioned by the Board among the three classes so as to ensure that no one class has more than one director more than any other class, unless otherwise determined by a resolution of the Board. However, existing directors cannot move across classes and, therefore, the number of directors in each class may become temporarily imbalanced.

Nominees for Election as Class I Directors

After recommendation by the Nominating and Corporate Governance Committee, the Board has designated Mr. Erck and Dr. Modi as nominees for election as Class I directors of the Company at the Annual Meeting. If elected, each such nominee will serve until the expiration of his or her term at the 2020 Annual Meeting of Stockholders and until his or her successor is elected and qualified. Mr. Erck and Dr. Modi have consented to being named in this Proxy Statement and to serve if elected. The Board has no reason to believe that Mr. Erck and Dr. Modi will be unable or unwilling to serve if elected. If any nominee becomes unavailable to serve as a director, the persons named in the proxy will vote the proxy for a substitute nominee or nominees as they, in their discretion, shall determine.

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Information on the nominees follows:

   
Stanley C. Erck   Age: 68   Year First Elected Director: 2009
[GRAPHIC MISSING]   President and Chief Executive Officer of Novavax, Inc. since April 2011. Former Executive Chairman of Novavax, Inc. from February 2010 until April 2011, and a Director since June 2009. From 2000 to 2008, Mr. Erck served as President, Chief Executive Officer and Director of Iomai Corporation, a vaccine development company, which was acquired in 2008 by Intercell. Prior to that, Mr. Erck previously held leadership positions at Procept, a publicly traded immunology company, Integrated Genetics, now Sanofi Genzyme, and Baxter International.
Other Directorships:   Mr. Erck serves as a member of the boards of BioCryst Pharmaceuticals, Inc. (BCRX), MaxCyte, Inc., and MDBio Foundation.
Education:   Mr. Erck received a B.S. in economics from the University of Illinois and a M.B.A from the University of Chicago.
Skills/Qualifications:   We believe that Mr. Erck is well-suited to serve on our Board due to his leadership experience in the biotechnology industry, having held CEO positions for several companies, and his extensive experience of serving on other companies’ boards.
Rajiv I. Modi, Ph.D.   Age: 56   Year First Elected Director: 2009
[GRAPHIC MISSING]   Managing Director of Cadila Pharmaceuticals, Ltd. (“Cadila”), a company organized in India, since 1995. Dr. Modi was elected to Novavax, Inc.’s Board based upon his relationship with the Company’s largest stockholder at the time. As of April 19, 2017, Satellite Overseas (Holdings) Limited, a subsidiary of Cadila, holds approximately 0.9% of the Company’s outstanding Common Stock. Dr. Modi serves as a member of the boards of other Cadila group companies.
Other Directorships:   Mr. Modi serves as a member of the boards of Energy Hunter Resources, Inc., Targeted Microwave Solutions, and Cadila Pharmaceuticals, Ltd.
Education:   Dr. Modi received a bachelor’s degree of technology in chemical engineering from the Indian Institute of Technology, a master’s degree in biological engineering from University College, London, and a Ph.D. in biological science from the University of Michigan.
Skills/Qualifications:   We believe that Dr. Modi is well-suited to serve on our Board due to his extensive leadership experience, as well as technical expertise in the development and manufacturing of pharmaceutical products. He also brings broad experience in international joint ventures and pharmaceutical sales.

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Directors Continuing as Class II Directors

   
Richard H. Douglas, Ph.D.   Age: 64   Year First Elected Director: 2010
[GRAPHIC MISSING]   Former Senior Vice President, Corporate Development, Genzyme Corporation. From 1989 to 2011, Dr. Douglas led Genzyme Corporation’s Corporate Development team, and was involved in numerous acquisitions, licenses, financings, joint ventures, and strategic alliances. From 1982 until its merger with Genzyme Corporation in 1989 (now Sanofi Genzyme), Dr. Douglas served in science and corporate development capacities at Integrated Genetics. Dr. Douglas was a postdoctoral fellow in Leroy Hood’s laboratory at the California Institute of Technology.
Other Directorships:   Dr. Douglas serves as a member of the boards of University of Michigan Technology Transfer National Advisory Board and Aldeyra Therapeutics, Inc. (ALDX).
Education:   Dr. Douglas received a B.S. in chemistry from the University of Michigan and a Ph.D. in biochemistry from the University of California, Berkeley.
Skills/Qualifications:   We believe that Dr. Douglas is well-suited to serve on our Board due to his significant business experience and scientific background.

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Gary C. Evans   Age: 59   Year First Elected Director: 1998
[GRAPHIC MISSING]   Gary C. Evans presently serves as Chairman of the Board and Chief Executive Officer of Energy Hunter Resources, Inc., a Dallas based oil and gas exploration and production company. From May 2009 until May 2016, Mr. Evans served as Chairman of the Board and Chief Executive Officer of Magnum Hunter Resources Corporation (“Magnum Hunter”), a public energy company specializing in unconventional resource plays predominately in the Appalachian Basin. In December 2015, Magnum Hunter filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Mr. Evans was also founder and CEO of Eureka Hunter Holdings, LLC, a mid-stream gas gathering company transporting and managing up to 1 BCF of daily natural gas volumes from production in West Virginia and Ohio on approximately 200 miles of newly constructed pipeline during the similar seven-year period. Additionally, Mr. Evans previously founded and served as the Chairman and Chief Executive Officer of Magnum Hunter Resources Inc. (MHRI), a NYSE listed company, for twenty years before selling MHRI to Cimarex Energy for approximately $2.2 billion in June 2005. Later that year, Mr. Evans formed Wind Hunter Energy, LLC, a renewable energy company which was subsequently acquired in December 2006 by GreenHunter Energy, Inc., an emerging water resource company focusing on oil field water management and clean water technologies active in the Marcellus and Utica resource plays in Appalachia. As founder, Mr. Evans has served as Chairman and Chief Executive Officer of GreenHunter Energy, Inc. since December 2006 until May 2016 upon the sale of its assets to a private equity fund. Mr. Evans was recognized by Ernst and Young as the Southwest Area 2004 Entrepreneur of the Year for the Energy Sector and was subsequently inducted into the World Hall of Fame for Ernst & Young Entrepreneurs. Mr. Evans was also recognized as the Energy Industry Leader of the year in 2013 and chosen by Finance Monthly in 2013 as one of the most respected CEO’s. Mr. Evans was chosen as the Best CEO in the “Large Company” category by Texas Top Producers in 2013. He additionally won the Deal Maker of the Year Award in 2013 by Finance Monthly.
Other Directorships:   Mr. Evans serves as a member of the board of directors of Energy Hunter Resources, Inc. Mr. Evans serves as an Individual Trustee of TEL Offshore Trust, a publicly listed oil and gas trust, and on the Advisory Board of the Maguire Energy Institute at Southern Methodist University.
Skills/Qualifications:   We believe that Mr. Evans is well-suited to serve on our Board due to his entrepreneurial experience in the development of a number of companies as well as his extensive leadership experience and his aptitude for reading and understanding financial statements.

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Directors Continuing as Class III Directors

   
Gail K. Boudreaux   Age: 56   Year First Elected Director: 2015
[GRAPHIC MISSING]   Chief Executive Officer and Founder of GKB Global Health, LLC. Former Chief Executive Officer of UnitedHealthcare where she was responsible for the largest health benefits provider in the nation, serving 45 million individuals. Through November 2014, Ms. Boudreaux oversaw UnitedHealthcare’s Commercial, Medicare, Medicaid and Tricare Military Healthcare businesses with a workforce of more than 60,000 employees. Ms. Boudreaux has been honored six years in a row as one of Fortune’s 50 Most Powerful Women in American Business. She has been recognized by Modern Healthcare as one of the Most Powerful People in Healthcare and among the Top 25 Women in Healthcare, named to the Forbes 100 Most Powerful Women list, ranked by the Minneapolis/St. Paul Business Journal as a top 25 industry leader; and included on Today’s Chicago Woman’s list of 100 Women of Influence.
Other Directorships:   Ms. Boudreaux serves as a member of the boards of Xcel Energy, Inc. (XEL) and Zimmer Biomet Holdings, Inc. (ZBH). Ms. Boudreaux currently serves on Dartmouth College’s Board of Trustees and recently served as a member of the college’s Alumni Council.
Education:   Ms. Boudreaux earned a B.A. with honors from Dartmouth College and an M.B.A. in finance and health care administration from Columbia Business School.
Skills/Qualifications:   We believe that Ms. Boudreaux is well-suited to serve on our Board due to her successful growth and development of businesses and products, experience as a chief executive officer of a public company, her significant experience in governance, legal, and risk management, and reading and understanding financial statements.
Michael A. McManus, Jr., J.D.   Age: 74   Year First Elected Director: 1998
[GRAPHIC MISSING]   Former President and Chief Executive Officer of Misonix, Inc. from 1999 to 2016. Mr. McManus served as President, Chief Executive Officer and Director of New York Bancorp Inc. from 1991 through March 1998. He also served as President and Chief Executive Officer of Home Federal Savings Bank, the principal subsidiary of New York Bancorp Inc., from February 1995 through March 1998. From 1990 through November 1991, Mr. McManus was President and Chief Executive Officer of Jamcor Pharmaceuticals Inc. Mr. McManus served as an Assistant to the President of the United States from 1982 to 1985 and held positions with Pfizer Inc. and Revlon Group. Mr. McManus served in the U.S. Army Infantry from 1968 through 1970. Mr. McManus is a recipient of the Ellis Island Medal of Honor.
Other Directorships:   Mr. McManus serves as a member of the board of directors of The Eastern Company (EML).
Education:   Mr. McManus received a B.A. in economics from the University of Notre Dame and a J.D. from the Georgetown University Law Center.
Skills/Qualifications:   We believe that Mr. McManus is well-suited to serve on our Board due to his successful growth and development of businesses and products, experience as a chief executive officer of a public company, his significant experience in governance, legal, and risk management, and reading and understanding financial statements.

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James F. Young, Ph.D.   Age: 64   Year First Elected Director: 2010
[GRAPHIC MISSING]   Chairman of the Board and Chief Executive Officer of Targeted Microwave Solutions, Inc. since 2016. Former President, Research and Development, at MedImmune, Inc. Dr. Young has been Chairman of the Board of Novavax, Inc. since April 2011 and a Director since April 2010. Dr. Young held the position of President, Research and Development, at MedImmune, Inc. from 2000 until 2008 and previously served as Executive Vice President, Research and Development from 1999 to 2000, Senior Vice President from 1995 to 1999, and as Senior Vice President, Research and Development from 1989 to 1995.
Other Directorships:   Dr. Young serves as a member of the boards of Targeted Microwave Solutions, Inc. (TGTMF), CannaRoyalty Corp. (CNNRF), and 3-V Biosciences, Inc., a privately-held biopharmaceutical company developing novel antiviral therapeutics.
Education:   Dr. Young received B.S. degrees in general science and biology from Villanova University, as well as a Ph.D. in microbiology and immunology from Baylor College of Medicine.
Skills/Qualifications:   We believe that Dr. Young is well-suited to serve on our Board due to his over 30 years of experience in the fields of molecular genetics, microbiology, immunology, and pharmaceutical development. In addition, Dr. Young brings extensive scientific background and experiences, particularly in the areas of vaccine research and development.

FOR PROPOSAL NO. 1, THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR
THE ELECTION OF THE NOMINEES.

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INFORMATION REGARDING THE BOARD AND CORPORATE GOVERNANCE MATTERS

On March 16, 2017, the Board determined, upon a recommendation by the Nominating and Corporate Governance Committee, that, with the exception of Dr. Modi and Mr. Erck, all of the members of the Board are “independent” directors, as that term is defined in the NASDAQ listing standards. Mr. Erck is currently the President and Chief Executive Officer of the Company. Dr. Modi is not an “independent” director due to his interest in Cadila and the joint venture it has with the Company, as described in the section titled “Certain Relationships and Related Transactions.”

During 2016, the Board met nine times and acted by written consent in lieu of a meeting four times. In addition, the non-employee directors met nine times in executive session during the same period. Each of the directors attended at least 75% of the aggregate of the total number of meetings of the Board they were eligible to attend and the total number of meetings held by all committees on which they served.

Recognizing that director attendance at the Company’s annual meetings of stockholders provides stockholders with an opportunity to communicate with members of the Board, Novavax strongly encourages (but does not require) members of the Board to attend such meetings. Dr. Douglas, Mr. Erck, Mr. Evans, Mr. McManus, Dr. Modi, and Dr. Young attended the 2016 Annual Meeting of Stockholders.

Leadership Structure and Risk Oversight

The Board has elected to separate the roles of Chief Executive Officer and Chairman of the Board. On April 19, 2011, Mr. Erck was elected to the role of President and Chief Executive Officer and Dr. Young was elected as Chairman of the Board. Mr. Erck had served as Executive Chairman from February 2010 until April 19, 2011. Before being elected as Chairman of the Board, Dr. Young had served as a member of the Board from April 2010 until April 19, 2011.

The Chief Executive Officer and Chairman work closely together to execute the strategic plan of the Company. The Chairman mentors and advises the senior scientific team, provides an extensive network of contacts, and reports regularly to the Board. The Company believes that the combination of Mr. Erck as the President and Chief Executive Officer and Dr. Young as the Chairman of the Board is an effective leadership structure for the Company. The additional avenues of communication between the Board and management associated with having Dr. Young serve as Chairman provides the basis for the proper functioning of the Board and its oversight of management.

Management of the Company is primarily responsible for managing the risks Novavax faces in the ordinary course of operating the business. The Board actively oversees potential risks and risk management activities by receiving operational and strategic presentations from management, which include discussions of key risks to the business. In addition, the Board has delegated risk oversight to each of its key committees within their areas of responsibility. For example, the Audit Committee assists the Board in its risk oversight function by reviewing and discussing with management the system of disclosure controls and internal controls over financial reporting and discusses the key risks facing the Company and the processes or actions being taken to mitigate those risks. The Nominating and Corporate Governance Committee assists the Board in its risk oversight function by periodically reviewing and discussing with management important compliance and quality issues. The Compensation Committee assists the Board in its risk oversight function by overseeing strategies with respect to incentive compensation programs and key employee retention issues. The Board committees are chaired by independent directors and, at each Board meeting, each of the committee chairs delivers a report to the full Board on the activities and decisions made by the committees at recent meetings. There is also a significant amount of cross-over with respect to the membership of the various committees, allowing information to flow freely outside of a full board meeting.

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Board Committees

The Board currently has three standing committees: an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. In addition to the descriptions below, please refer to the “Compensation Committee Report” and “the Audit Committee Report” included in this Proxy Statement. The members of the committees are shown below.

     
Director   Audit Committee   Compensation
Committee
  Nominating
and Corporate
Governance
Committee
Gail K. Boudreaux           Member       Member  
Richard H. Douglas, Ph.D.     Member       Member        
Stanley C. Erck                  
Gary C. Evans     Member             Chair  
Michael A. McManus, Jr., J.D.     Chair       Member       Member  
Rajiv I. Modi, Ph.D.                  
James F. Young, Ph.D.           Chair       Member  

Audit Committee

Each Audit Committee member is a “non-employee director,” as defined by Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), “outside director,” as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and an “independent director,” as defined by the listing standards of the NASDAQ. The Board has determined that each of Mr. McManus and Mr. Evans qualifies as an “audit committee financial expert” as that term is defined by the rules and regulations of the SEC, and is financially sophisticated as required by the listing standards of the NASDAQ. During 2016, the Audit Committee met seven times and did not act by written consent in lieu of a meeting.

The Audit Committee acts pursuant to a written charter as adopted by the Board. A current copy of the charter is available on the Company’s website at www.novavax.com. The Audit Committee reviews and evaluates the charter annually to ensure its adequacy and accuracy, and is charged with performing an annual self-evaluation with the goal of continuing improvement.

The Audit Committee is directly responsible for the appointment, compensation, retention, and oversight of the work of any independent registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attestation services for the Company. To this end, the Audit Committee meets with the Company’s independent registered public accounting firm to discuss the scope and results of its examination and reviews the financial statements and reports contained in the Company’s periodic and other filings. The Audit Committee also reviews the adequacy and efficacy of the Company’s accounting, auditing and financial control systems, as well as the Company’s disclosure controls and procedures; monitors the adequacy of the Company’s accounting and financial reporting processes and practices; and considers any issues raised by its members, the Company’s independent registered public accounting firm and the Company’s employees. To assist in carrying out its duties, the Audit Committee is authorized to investigate any matter brought to its attention, retain the services of independent advisors (including legal counsel, auditors, and other experts), and receive and respond to concerns and complaints relating to accounting, internal accounting controls, and auditing matters. The Audit Committee regularly meets with both the Company’s management and its independent auditor collectively and, at times, independently and without the other present, and meets in executive session without management or the independent auditor present.

Compensation Committee

Each Compensation Committee member is a “non-employee director,” as defined by Rule 16b-3 of the Exchange Act, “outside director,” as defined in Section 162(m) of the Code (“Section 162(m)”), and an “independent director,” as defined by the listing standards of the NASDAQ, including the heightened standards that apply to compensation committee members. The Compensation Committee is tasked with meeting at least four times during the year, and more frequently, if necessary. During 2016, the Compensation Committee met nine times and acted by written consent in lieu of a meeting twice.

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The Compensation Committee acts pursuant to a written charter, a current copy of the charter is available on the Company’s website at www.novavax.com. The Compensation Committee reviews and evaluates the charter annually to ensure its adequacy and accuracy.

The Compensation Committee reviews and recommends salaries and other compensatory benefits for the employees, executive officers, and directors of Novavax. The Compensation Committee also recommends actions to administer the Company’s equity incentive plans and recommends stock option grants and other awards for employees, executive officers, and directors of Novavax.

As set forth in its charter, the Compensation Committee’s authority and responsibilities include but are not limited to:

reviewing and recommending to the Board the goals and objectives relevant to the Company’s Chief Executive Officer and other executive officers, annually evaluating the performance of the Chief Executive Officer and other executive officers, and recommending to the independent members of the Board the compensation levels and annual awards for the Chief Executive Officer and other executive officers;
overseeing the Company’s overall compensation philosophy, policies, and programs;
making recommendations to the Board about the compensation of the directors;
approving and administering the Company’s equity-based plans and awards and management incentive plans; and
approving and reviewing employment agreements, severance arrangements, retirement arrangements, change in control provisions, and any supplemental benefits or perquisites for senior management.

The Compensation Committee has the authority to engage independent compensation consultants or advisors, as it may deem appropriate in its sole discretion, and to approve related fees and retention terms of such consultants or advisors.

The Compensation Committee routinely holds meetings, some of which management attends, as well as executive sessions without management, where compensation is discussed. The chair of the Compensation Committee is responsible for leadership of the Compensation Committee and sets meeting agendas.

The Compensation Committee may request that any executive officer or employee of the Company, outside counsel, or consultant attend Compensation Committee meetings or confer with any members of, or consultants to, the Compensation Committee. The Compensation Committee is supported in its efforts by the Company’s Legal and Human Resources teams, to which the Compensation Committee delegates authority for certain administrative functions. The Chief Executive Officer gives performance assessments and compensation recommendations for each executive officer of the Company (other than himself). The Chairman gives performance assessments and compensation recommendations for the Chief Executive Officer. The Compensation Committee considers the Chief Executive Officer’s and the Chairman’s recommendations and the information provided by the Human Resources team in its deliberations regarding executive compensation and sets the compensation of the executive officers based on such deliberations and recommends that the Board ratify such compensation. The Chief Executive Officer and the Vice President, Human Resources generally attend Compensation Committee meetings but are not present for executive sessions or any discussion of their own compensation.

Nominating and Corporate Governance Committee

Each Nominating and Corporate Governance Committee member is an “independent director,” as defined by the listing standards of the NASDAQ. During 2016, the Nominating and Corporate Governance Committee met four times and did not act by written consent in lieu of a meeting.

The Nominating and Corporate Governance Committee acts pursuant to a written charter, a current copy of the charter is available on the Company’s website at www.novavax.com. The Nominating and Corporate Governance Committee reviews and evaluates the charter annually to ensure its adequacy and accuracy.

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As provided in the charter, the primary function of the Nominating and Corporate Governance Committee is to assist the Board in fulfilling its responsibilities by: reviewing and making recommendations to the Board regarding the Board’s size, structure, and composition; establishing criteria for Board membership; identifying and evaluating candidates qualified to become members of the Board, including candidates proposed by stockholders; selecting, or recommending for selection, director nominees to be presented for approval at the annual meeting of stockholders and to fill vacancies on the Board; overseeing the Company’s corporate governance guidelines; evaluating Company policies relating to the recruitment of Board members; developing and recommending to the Board corporate governance policies and practices applicable to the Company; monitoring compliance with the Company’s Code of Business Conduct and Ethics and handling such other matters as the Board or committee deems appropriate. The Nominating and Corporate Governance Committee’s goal is to contribute to the effective representation of the Company’s stockholders and to play a leadership role in shaping the Company’s corporate governance.

As noted above, it is the Nominating and Corporate Governance Committee’s responsibility to review and evaluate director candidates, including candidates submitted by stockholders. In performing its evaluation and review, the Nominating and Corporate Governance Committee does not differentiate between candidates based on the proposing constituency, but rather applies the same criteria to each candidate.

Nomination Procedures

Stockholders who wish to nominate qualified candidates to serve as directors of the Company may do so in accordance with the procedures set forth in the Company’s Amended and Restated By-laws (“By-laws”), which procedures did not change during the last fiscal year. As set forth in the By-laws, a stockholder must notify the Company in writing, by notice delivered to the attention of the Secretary of the Company at the address of the Company’s principal executive offices, of a proposed nominee. In order to ensure meaningful consideration of such candidates, notice must be received not less than 60 days nor more than 90 days prior to the anniversary date of this year’s Annual Meeting; provided, however, that in the event that the date of the current year’s annual meeting of stockholders is more than 30 days before or after the anniversary date of the prior year’s annual meeting of stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or public disclosure of the date of such meeting was made, whichever occurs first.

The notice must set forth as to each proposed nominee:

name, age, business and residence address;
his or her principal occupation or employment;
the class and number of shares of capital stock and other securities of the Company, if any, which are beneficially owned by such nominee and whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding has been made, the effect or intent of which is to increase or decrease the voting power or economic interest of, such person with respect to the Company’s securities; and
any other information concerning the nominee that must be disclosed as to nominees in proxy solicitations, or is otherwise required, in each case pursuant to applicable law.

The notice must also set forth with respect to the stockholder giving the notice and each Stockholder Associated Person:

the name and address, as they appear on the Company’s books, of such stockholder;
a description of all direct and indirect compensation and other material monetary arrangements, agreements or understandings during the past three years, and any other material relationship, if any, between or concerning such stockholder and each Stockholder Associated Person, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, on the other hand;
the class and number of shares of capital stock and other securities of the Company that are owned by such person; and

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any derivative positions held of record or beneficially by such person and whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding has been made, the effect or intent of which is to increase or decrease the voting power or economic interest of, such person, with respect to the Company’s securities.

For purposes of this Proxy Statement, a “Stockholder Associated Person” of any stockholder means (i) any “affiliate” or “associate” (as those terms are defined in Rule 12b-2 under the Exchange Act) of the stockholder who owns beneficially or of record any capital stock or other securities of the Company or, through one or more derivative positions, has an economic interest (whether positive or negative) in the price of securities of the Company and (ii) any person acting in concert with such stockholder or any affiliate or associate of such stockholder with respect to the capital stock or other securities of the Company.

In addition, any nominee proposed by a stockholder shall complete a questionnaire, in a form provided by the Company, and such completed questionnaire shall be submitted promptly, and in any event within ten days, after the Company provides the form of such questionnaire. The Company may require any proposed nominee to furnish such other information as may reasonably be required to determine the eligibility of the nominee to serve as a director. Nominations received through this process will be forwarded to the Nominating and Corporate Governance Committee for review.

The Nominating and Corporate Governance Committee strives to maintain a board of directors with a diverse set of skills and qualifications, to ensure that the board of directors is adequately serving the needs of the Company’s stockholders. Before evaluating director candidates, the Nominating and Corporate Governance Committee reviews the skills and qualifications of the directors currently serving on the Board and identifies any areas of weakness or skills of particular importance. On the basis of that review, the Nominating and Corporate Governance Committee will evaluate director candidates with those identified skills. While the Nominating and Corporate Governance Committee does not have a formal policy on Board diversity, the committee takes into account a broad range of diversity considerations when assessing director candidates, including individual backgrounds and skill sets, professional experiences, and other factors that contribute to the Board having an appropriate range of expertise, talents, experiences, and viewpoints, and considers those diversity considerations, in view of the needs of the Board as a whole, when making decisions on director nominations. The Nominating and Corporate Governance Committee considers the following skills and experiences necessary to the Board: industry knowledge, clinical development expertise, commercialization expertise, manufacturing expertise, financial expertise and capital raising experience, and scientific or medical education and experience, particularly in vaccine-related fields.

While there are no set minimum requirements, a candidate should:

be intelligent, thoughtful, and analytical;
possess superior business-related knowledge, skills, and experience;
reflect the highest integrity, ethics, and character;
have excelled in both academic and professional settings;
demonstrate achievement in his or her chosen field;
be free of actual or potential conflicts of interest;
have the ability to devote sufficient time to the business and affairs of the Company; and
demonstrate the capacity and desire to represent the best interests of the Company’s stockholders as a whole.

In addition to the above criteria (which may be modified from time to time), the Nominating and Corporate Governance Committee may consider such other factors as it deems in the best interests of the Company and its stockholders and that may enhance the effectiveness and responsiveness of the Board and its committees. Finally, the Nominating and Corporate Governance Committee must consider a candidate’s

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independence to make certain that the Board includes at least a majority of “independent” directors to satisfy all applicable independence requirements, as well as a candidate’s financial sophistication and special competencies.

The Nominating and Corporate Governance Committee identifies potential candidates through referrals and recommendations, including by incumbent directors, management, and stockholders, as well as through business and other organizational networks. To date, the Nominating and Corporate Governance Committee has not retained or paid any third party to identify or evaluate, or assist in identifying or evaluating, potential director nominees, although it reserves the right to engage executive search firms and other third parties to assist in finding suitable candidates.

Current members of the Board with the requisite skills and experience are considered for re-nomination, balancing the value of the member’s continuity of service with that of obtaining a new perspective, and considering each individual’s contributions, performance and level of participation, the current composition of the Board, and the Company’s needs. The Nominating and Corporate Governance Committee also must consider the age and length of service of incumbent directors. In March 2005, the Nominating and Corporate Governance Committee recommended to the Board, and the Board adopted, a rule not to re-nominate a director for re-election if such director has served ten years as a director or has reached 75 years of age, unless circumstances exist which cause the Nominating and Corporate Governance Committee to believe that despite such factors, such a nomination was in the best interest of the Company. If any existing members do not wish to continue in service or if it is decided not to re-nominate a director, new candidates are identified in accordance with those skills, experience, and characteristics deemed necessary for new nominees, and are evaluated based on the qualifications set forth above. In every case, the Nominating and Corporate Governance Committee meets (in person or telephonically) to discuss each candidate, and may require personal interviews before final approval. Once a slate of nominees is selected, the Nominating and Corporate Governance Committee presents it to the full Board.

Corporate Governance Guidelines

The Board adopted corporate governance guidelines which are available on the Company’s website at www.novavax.com.

Code of Business Conduct and Ethics

The Board has adopted a Code of Business Conduct and Ethics (“Code of Ethics”) that applies to each of Novavax’ employees, officers, and directors, including, but not limited to, the Company’s Chief Executive Officer and Chief Financial Officer. The Code of Ethics is reviewed at least annually by the Nominating and Corporate Governance Committee. A current copy of the Code Ethics, as amended, is available on the Company’s website at www.novavax.com. The Company intends to disclose on its website any future amendments to and waivers of the Code of Ethics that apply to its Chief Executive Officer, Principal Financial Officer and Principal Accounting Officer, and persons performing similar functions.

Stockholder Communications with the Board of Directors

The Board welcomes communications from stockholders and has adopted a procedure for receiving and addressing such communications. Stockholders may send written communications to the entire Board or individual directors, addressing them to Novavax, Inc., 20 Firstfield Road, Gaithersburg, Maryland 20878, Attention: Corporate Secretary. Communications by email should be addressed to ir@novavax.com and marked “Attention: Corporate Secretary” in the “Subject” field. All such communications will be forwarded to the full Board or to any individual director or directors to whom the communication is directed unless the communication is clearly of a marketing nature or is unduly hostile, threatening, illegal, or similarly inappropriate, in which case the Company has the authority to discard the communication or take appropriate legal action.

Certain Relationships and Related Transactions

The Company’s Code of Ethics provides that the Audit Committee is responsible for approving all transactions or business relationships involving Novavax and any director or executive officer, including any transactions between Novavax and either the director or officer personally, members of their immediate

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families or entities in which they have an interest. In evaluating related party transactions, the Audit Committee members apply the same standards of good faith and fiduciary duty they apply to their general responsibilities as a committee of the Board and as individual directors. The Audit Committee will approve a related party transaction when, in its good faith judgment, the transaction is in the best interest of the Company.

Dr. Modi, a director of Novavax, is also the managing director of Cadila Pharmaceuticals Ltd. (“Cadila”). Novavax and Cadila have formed a joint venture called CPL Biologicals Private Limited (“CPLB”), of which Novavax owns 20% and Cadila owns the remaining 80%. Novavax and Cadila have also entered into a master services agreement, the terms of which provide that if, by March 2016, the amount of services provided by Cadila under the agreement was less than $7.5 million, the Company would have paid Cadila the portion of the shortfall amount that is less than or equal to $2.0 million and 50% of the portion of the shortfall amount that exceeds $2.0 million. The Company fulfilled its financial obligation under the agreement in the fourth quarter of 2015; and the agreement expired on March 31, 2016. On October 27, 2016, the Company and CPLB entered into a new master services agreement. Unlike the prior agreement, this new master services agreement does not include minimum services obligations. In 2016, the Company had purchased $0.4 million in services from CPLB pursuant to these agreements. In addition, as of April 19, 2017, a subsidiary of Cadila owns 2.5 million shares of Novavax’ outstanding Common Stock. See also the information regarding the master services agreements in Note 15 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on February 27, 2017.

There are no family relationships among any of the directors or executive officers (or any nominee therefor) of Novavax. No director, executive officer, nominee, or any associate of any of the foregoing has any interest, direct or indirect, in any proposal to be considered and acted upon at the Annual Meeting (other than the election of directors).

Compensation Committee Interlocks and Insider Participation

During 2016, Ms. Boudreaux, Dr. Douglas, Mr. McManus, and Dr. Young served as members of the Compensation Committee. None of the members of the Compensation Committee was at any time during 2016 an employee or executive officer of Novavax.

No executive officer of the Company currently serves, or during 2016 served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of the Company’s Board or Compensation Committee.

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Compensation of Directors

Compensation for non-employee directors is comprised of two components: (i) cash compensation and (ii) equity awards.

Cash Compensation

Our non-employee director cash compensation arrangement for 2016 was as follows:

 
Fee(s)   Amount
Annual Director Retainer   $40,000 – Non-Employee Director
Annual Chairperson Retainer   $35,000 – Board
     $18,000 – Audit Committee
     $12,500 – Compensation Committee
     $9,500 – Nominating and Corporate Governance Committee
Committee Member Retainer   $10,000 – Audit Committee
     $7,000 – Compensation Committee
     $5,000 – Nominating and Corporate Governance Committee
Board and Committee Meetings   Directors do not receive compensation for attending meetings. Directors are reimbursed for reasonable costs and expenses incurred in connection with attending any Board or committee meetings or any other Company related business activities.

Non-Employee Director Deferred Fee Policy

In 2015, the Company implemented a Director Deferred Fee Policy (the “Policy”) for its non-employee directors. The Policy permits an eligible director to defer receipt of all or part of the director’s cash retainer. To defer fees payable during any calendar year, a director must make an election by the end of the preceding calendar year. A director can elect to have 100% of deferred amounts credited to a “cash account” or a “Company Common Stock account,” or, alternatively, a director may elect to have deferred amounts credited 50% to each account. Cash accounts are credited with interest quarterly at the IRS Applicable Federal Rate for short-term debt instruments for the last month of such calendar quarter. Company Common Stock accounts are credited as if amounts were invested in notional stock units based upon the market price of Company Common Stock and are credited with additional notional units if dividends are paid on Company Common Stock. Payment of deferred amounts is to be made in cash upon the occurrence of certain events, including the director’s separation from service, death of the director, or a change in control of the Company. The director may also elect to receive payment of the deferred amounts in a specified year that is not more than ten years from the year in which the director’s fees were earned. A director may elect to receive payment in either a lump sum or in up to ten annual installments.

Two directors elected to defer fees earned in the fiscal year ending December 31, 2016. The following table shows how those directors currently have their deferred fees credited.

 
Name   Annual Retainer
Gail K. Boudreaux   Cash account – 0%
     Company Common Stock account – 100%
Richard H. Douglas, Ph.D.   Cash account – 0%
     Company Common Stock account – 100%

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Equity Awards

On March 15, 2016, the Board, acting pursuant to a unanimous written consent, granted options to purchase 40,000 shares of Company Common Stock to each of Ms. Boudreaux, Messrs. Evans and McManus, and Dr. Douglas. Dr. Young was granted an option to purchase 100,000 shares of Company Common Stock. All of the aforementioned options have an exercise price of $4.99 per share and vested in full six months after the date of grant.

Summary Director Compensation Table

The Company does not pay employee directors additional compensation for service on the Board. The following table sets forth information concerning the compensation paid by the Company to each individual who served as a non-employee director at any time during fiscal year 2016:

     
Name   Fees Earned
or Paid in
Cash(1)
($)
  Option
Awards(2)
($)
  Total
($)
Gail K. Boudreaux     52,000       132,700       184,700  
Richard H. Douglas, Ph.D.     57,000       132,700       189,700  
Gary C. Evans     59,500       132,700       192,200  
Michael A. McManus, Jr., J.D.     70,000       132,700       202,700  
Rajiv I. Modi, Ph.D.(3)                  
James Young, Ph.D.     92,500       331,750       424,250  

(1) Represents fees earned in 2016.
(2) The grant date fair value was calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718. Assumptions used in the calculation of this amount are included in Note 11 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on February 27, 2017. As of December 31, 2016, the aggregate number of stock options held by each non-employee director is as follows: Ms. Boudreaux, 80,000, Dr. Douglas, 210,000; Mr. Evans, 295,000; Mr. McManus, 130,000; Dr. Modi, none; and Dr. Young, 665,000.
(3) Due to his relationship with Cadila and CPLB, and the commercial transactions between the Company and those companies, Dr. Modi did not receive compensation for his services as a director.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company’s executive officers, directors, and holders of more than 10% of the Company’s Common Stock to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Based solely on a review of the (i) copies of such reports (and any amendments thereto) furnished to the Company during or with respect to 2016 or (ii) written representations that no reports were required, the Company believes that during 2016 its executive officers, directors, and holders of more than 10% of the Company’s Common Stock complied with all Section 16(a) filing requirements.

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EXECUTIVE OFFICERS

Our executive officers hold office until the first meeting of the Board following the annual meeting of stockholders and until their successors are duly chosen and qualified, or until they resign or are removed from office in accordance with our By-laws. The following information outlines our executive officers and their ages and positions as of April 19, 2017, followed by biographical information of each such executive officer:

   
Name   Age   Title
Stanley C. Erck   68   President and Chief Executive Officer and Director
Barclay A. Phillips   54   Senior Vice President, Chief Financial Officer and Treasurer
Gregory M. Glenn, M.D.   63   President, Research and Development
John A. Herrmann III   51   Senior Vice President, General Counsel and Corporate Secretary
John J. Trizzino   57   Senior Vice President, Commercial Operations

Stanley C. Erck has served as President and Chief Executive Officer since April 2011 and a Director since June 2009, and previously served as Executive Chairman from February 2010 to April 2011. From 2000 to 2008, Mr. Erck served as President and Chief Executive Officer of Iomai Corporation, a developer of vaccines and immune system therapies, which was acquired in 2008 by Intercell AG. He also previously held leadership positions at Procept, a publicly traded immunology company, Integrated Genetics, now Sanofi Genzyme, and Baxter International. Mr. Erck also serves on the board of directors of BioCryst Pharmaceuticals, MaxCyte, Inc., and MDBio Foundation. Mr. Erck received a B.S. in economics from the University of Illinois and a M.B.A. from the University of Chicago.

Barclay A. Phillips has served as Senior Vice President, Chief Financial Officer and Treasurer since June 2013. Prior to joining the Company, Mr. Phillips served as Senior Vice President and Chief Financial Officer of Micromet, Inc., which was acquired by Amgen in 2012. Previously, he was Managing Director of Vector Fund Management and a Biotechnology Analyst and Director of Venture Investments at Invesco Funds Group, Inc. Mr. Phillips received a B.A. in economics from the University of Colorado at Boulder.

Gregory M. Glenn, M.D. has served as President, Research and Development since March 2016, and previously served as Senior Vice President, Research and Development since January 2014, as Senior Vice President, Chief Medical Officer from January 2011 to January 2014, and Senior Vice President and Chief Scientific Officer from June 2010 to January 2011. Prior to joining the Company, Dr. Glenn was the Chief Scientific Officer and founder of Iomai Corporation, which was acquired in 2008 by Intercell AG, an associate in international health at Johns Hopkins University’s School of Public Health and a clinical and basic research scientist at Walter Reed Army Institute of Research. Dr. Glenn received a B.A. in biology and chemistry from Whitman College and a M.D. from Oral Roberts University School of Medicine. He also completed the Medical Research Fellowship at the Walter Reed Army Institute of Research.

John A. Herrmann III has served as Senior Vice President, General Counsel and Corporate Secretary since June 2014. He previously served as the Company’s Vice President, General Counsel and Corporate Secretary from March 2012 to June 2014, and its Executive Director, Legal Affairs and Corporate Secretary from April 2010 to March 2012. Prior to joining the Company, Mr. Herrmann was General Counsel at Ore Pharmaceuticals and Deputy General Counsel at Gene Logic before it became Ore Pharmaceuticals. Mr. Herrmann worked as Senior Counsel for Celera Genomics following his position as Senior Corporate Counsel at Baxter Healthcare in its Renal Division. Mr. Herrmann received a B.A. in political science and history from Brown University and a J.D. from the University of Illinois.

John J. Trizzino has served as Senior Vice President, Commercial Operations since March 2014. He previously served as the Company’s Senior Vice President, Business Development from August 2010 to September 2011, and its Senior Vice President, International and Government Alliances from July 2009 to July 2010. Prior to joining the Company, Mr. Trizzino was the CEO of Immunovaccine from September 2011 to September 2013, VP, Vaccine Franchise at Medimmune, LLC, Senior Vice President, Business Development at ID Biomedical, and Vice President, Business Development in the Medical Group of Henry Schein, Inc. following his position as Vice President, General Manager of its GIV division. Mr. Trizzino also serves on the board of directors of The Maryland Tech Council. Mr. Trizzino received a B.S. from Long Island University, CW Post and a M.B.A. from New York University.

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COMPENSATION DISCUSSION AND ANALYSIS

Overview

The Compensation Discussion and Analysis (the “CD&A”) discusses the compensation of our five “named executive officers” for 2016 (each an “NEO”): (i) Stanley C. Erck, President and Chief Executive Officer; (ii) Barclay A. Phillips, Senior Vice President, Chief Financial Officer and Treasurer; (iii) Dr. Gregory M. Glenn, President, Research and Development; (iv) John A. Herrmann III, Senior Vice President, General Counsel and Corporate Secretary; and (v) John J. Trizzino, Senior Vice President, Commercial Operations.

The CD&A reviews the Company’s executive compensation philosophy, the objectives and operation of the compensation program, how compensation was set for 2016, and the various elements of compensation paid to the executive officers including the NEOs for services during 2016.

Executive Compensation Philosophy

Our compensation program is designed to attract, retain, and reward a high-performance workforce in an extremely competitive recruitment and retention market to achieve the Company’s mission, vision, and goals. This philosophy is reflected in the components of the Company’s compensation program, which include:

a competitive compensation package upon hire;
a performance management process that defines objectives, tracks employee performance, and ties into the annual rewards process;
an annual performance increase practice that rewards each individual employee’s performance against his or her objectives and his or her contribution over the prior year;
an annual incentive cash bonus program designed to reward both Company performance and functional area performance;
an equity incentive plan that provides initial grants upon hire, annual subsequent grants, and additional grants for promotions, strong performance, and retention of high potential personnel; and
a market-competitive, comprehensive benefits program.

The Compensation Committee believes that these components provide the tools we need to deliver performance-based compensation that retains and rewards high-performing employees and aligns with general industry practices. We conducted our most recent advisory vote on executive compensation at our 2014 Annual Meeting of Stockholders. Our Board and our Compensation Committee value the opinions of our stockholders, so we paid close attention to the outcome of this vote even though it is non-binding. More than 95% of the votes cast on the advisory vote on executive compensation were in favor of our named executive officer compensation as disclosed in our 2014 proxy statement. We view this support as an affirmation of our pay practices; and, consequently, we have maintained a consistent approach to executive compensation since that time.

Objectives of the Executive Compensation Program

The Compensation Committee believes that the compensation for our executive officers, including our NEOs, should be designed to attract, motivate, and retain highly qualified executive officers responsible for the success of Novavax and should be determined within a framework that rewards performance and aligns the interests of the executive officers with the interests of the Company’s stockholders. Within this overall philosophy, the Compensation Committee’s objectives are to:

attract and retain highly qualified employees;
reward executives for meeting the strategic goals and objectives of the Company, and reward strong individual performance; and
align executives’ interests with those of our stockholders.

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Attract and Retain Highly Qualified Executives

Our compensation program is designed to attract, motivate, and retain, from a limited pool of resources, individuals who are highly experienced with proven records of success, and to provide total compensation that is competitive with the Company’s peers within the biotechnology and pharmaceutical industries.

Reward Executives for Meeting Strategic Goals and Objectives of the Company

The Compensation Committee believes that a significant portion of an executive officer’s total compensation should reflect overall Company performance. The compensation program rewards the Company’s executive officers for achieving specified corporate performance goals, as well as goals that fall within their individual functional areas. Incentives are based on meeting criteria in each of these categories and reflect the executive officer’s overall contribution to the Company.

Align Executives’ Interests with Those of Our Stockholders

The Compensation Committee believes that Novavax’ long-term success depends upon aligning executives’ and stockholders’ interests. To support this objective, Novavax provides executive officers with equity accumulation opportunities by awarding stock options. Generally, time-vesting stock option grants vest over four years, although certain options granted in 2010 vest annually over a three-year period. Beginning with stock option awards made in 2016, such time-vesting stock option grants vest as to 25% of the award on the first anniversary of the grant date and the remaining 75% vests monthly thereafter over the next three-year period. Such vesting supports long-term retention of executive officers because executive officers cannot exercise the options until they have vested. Fifty percent of the stock options granted to each NEO in November 2016 are eligible to vest only on the achievement of performance milestones based on stock price.

Oversight and Operation of the Executive Compensation Program

The Compensation Committee is appointed by the Board to assist the Board with its responsibilities related to the compensation of the Company’s directors, officers, and employees and the development and administration of the Company’s compensation plans. For details on the Compensation Committee’s oversight of the executive compensation program, see the section titled “Information Regarding the Board and Corporate Governance Matters — Compensation Committee” beginning on page 12 of this Proxy Statement.

The Chief Executive Officer (the “CEO”) evaluates and provides to the Compensation Committee performance assessments and compensation recommendations for each executive officer other than himself. The Chairman of the Board evaluates the CEO’s performance and makes compensation recommendations for the CEO to the Compensation Committee. The Compensation Committee considers the CEO’s and the Chairman’s recommendations and information provided by the Human Resources team in its deliberations regarding executive compensation and recommends to the Board the compensation of the executive officers based on such deliberations. The Board determines all executive compensation based on the recommendation of the Compensation Committee. In 2016, the CEO and the Vice President, Human Resources generally attended Compensation Committee meetings, but were not present for executive sessions or any discussion of their own compensation.

Process for Setting Executive Compensation

Compensation packages for each executive officer are analyzed and discussed separately at the first Compensation Committee meeting each year. Prior to that meeting, an independent compensation consultant performs a comprehensive competitive analysis on the compensation package for each executive officer. In 2016, the independent compensation consultant retained by the Compensation Committee for this purpose was LCG Group Compensation and HR Consulting (“LCG”). The results of this analysis were presented to the Compensation Committee, and the Compensation Committee and the Board were able to request additional information from LCG or the Human Resources team at any time.

Survey Data

When setting the compensation for the executive officers for 2016, the Compensation Committee reviewed analysis based on compensation survey data specific to the life sciences industry using the Radford Global Life Sciences Survey (the “Survey”). The Survey provides total compensation and practices data for

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700+ life sciences companies and more than 450,000 individuals. Global market data is available for 51 countries and positions at the executive, management, professional, sales, and support levels, as well as overall compensation practices. Target industries include biotechnology, pharmaceutical, diagnostic and clinical research organizations. The Compensation Committee understands that many organizations use a defined peer group, and will continue to consider that approach in the future. However, based on guidance from LCG, the Compensation Committee elected to rely on survey data for the competitive analysis in 2016, believing it to reflect a broader, more in-depth view of the market.

The Survey is used to determine whether each executive officer’s salary and bonus opportunity are competitive. LCG benchmarks each executive officer’s current compensation against the 50th percentile of the Survey. The Compensation Committee believes this is a common reference point among biotechnology companies similar in size to Novavax and that the Company remains competitive by targeting the 50th percentile of the Survey data.

Internal Equity

The Compensation Committee considers internal equity when determining compensation to ensure that the Company is fair in its compensation practices across roles similar in scope and level of responsibility.

Independent Compensation Analysis

In the fourth quarter of 2015, the Compensation Committee engaged LCG to review and analyze its executive compensation programs and to conduct a competitive market analysis for each member of the senior leadership team for 2016 compensation. LCG first performed such services for the Company in 2010 and has provided similar services in subsequent years. In addition, LCG reviewed the competitiveness of long-term incentives. LCG was authorized by the Compensation Committee to work with certain executive officers of the Company, as well as other employees in the Company’s Human Resources, Legal, and Finance departments in connection with LCG’s work for the Compensation Committee. LCG conducted a review of the total compensation of the Company’s executive officers and prepared a report for review by management and subsequently by the Compensation Committee that was used in determining appropriate levels of compensation for the Company’s executive officers for 2016.

As required by rules adopted by the SEC under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Compensation Committee engaged LCG after assessing LCG’s independence, including taking into consideration the fact that LCG does not provide any services to the Company other than those requested by the Compensation Committee and the absence of any significant business or personal relationships between LCG and members of the Compensation Committee and any executive officer of the Company. Based upon this assessment, it was determined that the engagement of LCG did not raise any conflicts of interest or similar concerns.

In September 2016, the Compensation Committee engaged Radford, an Aon Hewitt Company — a business unit of Aon plc, a national executive compensation consulting firm, to provide ongoing independent compensation consulting support. Radford is fully independent, and the engagement of Radford does not raise any conflicts of interest or similar concerns.

What the Compensation Program is Designed to Reward

Company Performance

The executive compensation program is designed to reward both individual performance and Company performance. A significant portion of an executive officer’s total compensation package is based on the Company’s performance and the achievement of corporate goals. Because of the key roles the executive officers play in the success of the Company, a significant portion of the achievement of corporate goals is reflective of the executive officers’ individual performance. During 2016, the Board and the Company’s senior executives jointly developed a set of objectives for 2016 which were based on the Company’s strategic plan (the “2016 Objectives”). These objectives are described below under “2016 Performance and Outcomes.”

Individual Performance

For 2016, the CEO reviewed and evaluated the performance of the executive officers other than himself, and also recommended their performance goals and objectives for 2017. This review was conducted in the

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first quarter of 2017. For 2016, the Chairman of the Board reviewed and evaluated the performance of the CEO. The performance goals and objectives for the CEO were the same as the annual corporate objectives based on the strategic plan.

With the exception of the CEO, whose incentive compensation is based entirely on achievement of the 2016 Objectives and the discretion of the Board, each NEO had additional individual goals to support the 2016 Objectives or to further the Company’s strategic plan. More specifically:

Each NEO achieved his individual objectives.

2016 Performance and Outcomes

The Compensation Committee reviewed the Company’s performance related to its 2016 Objectives in a series of meetings held between November 2016 and March 2017. The following table summarizes its conclusions regarding these objectives:

       
2016 Objective   Weight   Achievement   Percent   Explanation
Execute on RSV vaccine development plans   65%   Partially met
objective
  30%   Unsuccessful ResolveTM trial results; however, significant progress achieved on ongoing Phase 3 maternal clinical trial, government affairs initiatives, and manufacturing plans; successfully established ongoing interest from multiple prospective business development partners
Execute on influenza vaccine development plans   15%   Partially met
objective
  10%   Transition from VLP to nanoparticle candidate finalized with promising results
Execute on development plans for vaccines for emerging diseases   5%   Met
objective
  5%   Promising preclinical results for Zika vaccine candidate
Support advancement of vaccine candidates at CPLB   5%   Exceeded
objective
  10%   Indian licensure of two seasonal influenza vaccines; successful rabies clinical trial and preclinical results
Complete financing to end 2016 with 18 months of cash   10%   Partially met
objective
  5%   Raised $325M through convertible note offering; took significant operational steps to reduce expenses and preserve cash
Total   100%        60%     

The overall performance in relation to corporate goals could have supported payment to our NEOs and other senior executives of some portion of their bonuses for 2016 performance. However, after the September 2016 Company report that topline data from the Resolve Phase 3 trial did not meet pre-specified efficacy objectives, in an effort to maintain alignment of interests between our executive officers and our stockholders, and to preserve cash, the CEO and the Compensation Committee made several recommendations regarding executive compensation that were implemented by the Board:

(1) No employee would be entitled to receive 2016 incentive cash bonus payout; the NEOs and other senior executives would not be entitled to receive 2017 retention bonus payments made available to all other employees.
(2) The NEOs and other senior executives would not receive annual salary increases for 2017.
(3) The 2017 stock option awards for the NEOs and other senior executives would be granted in November 2016, with fifty percent of the options as traditional, time-based vesting options over a four year period (25% on the first anniversary of the grant date and the remaining 75% monthly thereafter over a three-year period), and the remaining fifty percent vesting according to both traditional time-based vesting and performance milestones based on predetermined stock price targets.

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The Compensation Committee and the Board continue to have the utmost confidence in the abilities of the NEOs and senior executives. These actions were designed to create alignment of interests between our executive officers and our stockholders and to help contain costs.

Elements of Compensation

The Compensation Committee believes that the most effective compensation program is one that provides a competitive base salary, rewards the achievement of established annual and long-term goals and objectives, and provides an incentive for retention. For this reason, the compensation program is comprised of three primary elements: (i) base salary, (ii) an incentive cash bonus program, and (iii) equity awards. The Compensation Committee believes that these three elements are the most effective combination to motivate and retain executive officers.

The Compensation Committee has not adopted any formal guidelines for allocating total compensation between equity compensation and cash compensation, but generally seeks to provide an overall executive compensation package designed to attract, motivate, and retain highly qualified executive officers, to reward them for performance over time, and to align the interests of the executive officers with the interests our stockholders. Although equity compensation is an important component of the compensation program, particularly with respect to creating long-term stockholder value, in 2016, with guidance from LCG based on analysis of the Survey data, the Compensation Committee focused on ensuring that executive officers’ base salaries and bonus opportunities were in line with the median average salaries and annual incentives for comparable positions within the Survey.

Base Salary

The Compensation Committee’s philosophy is to maintain base salaries at a competitive level sufficient to recruit and retain individuals possessing the skills and capabilities necessary to achieve the Company’s goals over the long term.

The Company provides an annual salary to each executive officer designed to reflect that person’s level of responsibility, expertise, skills, knowledge, and experience. The Compensation Committee compares Novavax salaries to those at other comparable companies within the biotechnology and pharmaceutical industries and adjusts, as appropriate, to assist the Company in retaining this expertise, skill, and knowledge at Novavax. Merit increases are typically awarded effective April 1st of each year, reflecting performance for the previous year. The increases were determined by an annual performance review in light of the individual’s 2015 performance goals and achievement of Company objectives, as well as by reference to the Survey. Salary increases were provided April 1, 2016. The base salaries for the NEOs were:

   
Executive   Base
Salary
($)
  Percentage
Increase
in Base
Salary from
December 31, 2015 (%)
Stanley C. Erck     624,000       4.0 (1) 
Barclay A. Phillips     366,000       3.1 (2) 
Gregory M. Glenn, M.D.     450,000       8.4 (3) 
John A. Herrmann III     340,000       6.3 (2) 
John J. Trizzino     366,000       7.6 (2) 

(1) Mr. Erck’s leadership during 2015, the overall progress of the Company, and a review of the Survey data were factors used by the Compensation Committee in its decision to increase his base salary on April 1, 2016.
(2) Each of Messrs. Phillips’, Herrmann’s, and Trizzino’s individual performances during 2015 and a review of the Survey data were factors used by the Compensation Committee in its decision to increase their base salaries on April 1, 2016.
(3) In February 2016, the Board of Directors approved Dr. Glenn’s promotion to President, Research & Development; his new role, along with his individual performance and a review of the Survey data, were factors used by the Compensation Committee in its decision to increase his base salary on April 1, 2016.

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As noted earlier, the NEOs and other senior executives did not receive annual base salary increases for 2017.

Incentive Cash Bonus Program

The incentive cash bonus program is designed to motivate and reward executive officers for the achievement of specific corporate objectives. The purpose of the incentive cash bonus program is to align company, departmental, and individual goals throughout the Company and to provide an incentive that further ties compensation to individual contribution and teamwork. At the time that the Board (or the Compensation Committee as its delegate) approves the corporate objectives for a particular calendar year, the Board also weights each objective, as shown for example in the table of the 2016 Objectives above. In reviewing corporate objectives at the end of each calendar year, the Board generally assigns a percentage to each objective that reflects its determination as to whether the Company achieved that objective, failed to meet that objective, partially met that objective, or exceeded that objective. In some instances, the Board uses its discretion to make such determinations, and in doing so looks at other performance factors, mitigating circumstances, and other material successes or missed opportunities. By applying the achievement percentage to the initial weighting percentage, each objective’s weight contribution and the overall cumulative percentage of corporate performance for the calendar year is determined.

A target bonus is set at a percentage of the executive officer’s base salary, with such percentages being based on market data, although the ultimate amount of any bonus payout is at the discretion of the Board. The Compensation Committee believes that the higher the individual’s position within Novavax, the more closely his or her bonus award should be tied to the Company’s success. Thus, the CEO’s target bonus is based entirely on the achievement of the annual corporate objectives and the discretion of the Board. For the other NEOs, 80% of the bonus is based on corporate achievement and 20% of the bonus is based on the functional area performance of each NEO. Based on a competitive survey data analysis, LCG recommended that for 2016, Senior Vice President bonus targets be increased from 35% to 40% and that Dr. Glenn’s bonus target, as President of Research and Development, be increased to 50%. These recommendations were implemented and the 2016 NEO bonus targets were as follows:

 
Executive   Percentage of
Base Salary
(%)
Stanley C. Erck     60 % 
Barclay A. Phillips     40 % 
Gregory M. Glenn, M.D.     50 % 
John A. Herrmann III     40 % 
John J. Trizzino     40 % 

The conclusions regarding the Company’s performance related to its 2016 objectives are shown above, under the heading “2016 Performance and Outcomes.” As noted above, the Board, upon recommendation of the CEO and Compensation Committee, determined that no employee would be entitled to receive 2016 incentive cash bonus payout and further that the NEOs and other senior executives would not be entitled to receive 2017 retention bonus payouts made available to all other employees.

Equity Awards

Equity awards are a fundamental incentive element in the executive compensation program because they emphasize long-term performance, as measured by creation of stockholder value, and foster a commonality of interest between stockholders and key executives. In addition, they are crucial to a competitive compensation program for executive officers because they act as a powerful retention tool. The Compensation Committee views the Company as still facing significant risk, but with a potential for a high upside. In the case of stock options, the executive officers are motivated by the potential appreciation in the stock price above the exercise price. To encourage continued employment, stock option grants to executive officers typically include options that require the executive to remain an employee of the Company for four years before the options are fully vested, although certain options granted in 2010 have a three-year vesting period. Beginning with stock option awards made in 2016, such stock option grants vest as to 25% of the award on the first anniversary of the grant date and the remaining 75% vests monthly thereafter over the next three-year period. In addition, the

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Compensation Committee may award options that vest as the executive officer achieves certain milestones. The Compensation Committee believes it is important to tie the long-term benefit potentially realizable by the executive to a long-term commitment with Novavax.

Annual stock option grants are awarded to executive officers at the discretion of the Board upon a recommendation by the Compensation Committee, typically during the first quarter of each calendar year, with the grant of such equity typically occurring at the first quarter in-person meeting of the Board in March. In making its recommendations, the Compensation Committee considers Company performance, Survey data, and the individual’s scope of responsibility and continuing performance. With guidance from LCG upon its analysis of Survey data, stock options were awarded to the NEOs in March 2016, and these options vest over a four year period (25% on the first anniversary of the grant date and the remaining 75% monthly thereafter over a three-year period). Annual stock options grants that would have normally been awarded to executive officers in March 2017 were instead granted in November 2016 as a retention measure.

Performance-Based Awards

Annual stock option grants that would normally have been awarded to each NEO and the senior executives in March 2017 were instead granted in November 2016 as a retention measure, which was developed in consultation with Radford. Radford conducted a market analysis and recommended stock option targets based on the 50th percentile of the market, which were adopted for all NEOs and senior executives. In November 2016, the Compensation Committee granted fifty percent of the options to its NEOs and senior executives as traditional, time-based vesting options over a four year period (25% on the first anniversary of the grant date and the remaining 75% monthly thereafter over a three-year period). The remaining fifty percent of the November 2016 option grants vest according to both traditional time-based vesting and performance milestones based on predetermined stock price targets. The introduction of performance-based vesting for senior leadership’s November 2016 stock option grant is part of the ongoing strategy to ensure alignment of the interests of senior leadership with those of our stockholders.

The following table contains information about the grant, vesting, and forfeiture of NEO performance-based awards:

 
  Number of Shares
Non-vested at December 31, 2013      
Granted      
Vested      
Forfeited      
Non-vested at December 31, 2014      
Granted      
Vested      
Forfeited      
Non-vested at December 31, 2015      
Granted     1,100,000  
Vested      
Forfeited      
Non-vested at December 31, 2016     1,100,000  

The executive officers also have the ability to participate in the Company’s ESPP.

Clawback Policy

On April 26, 2017, the Board adopted a policy providing that, if the Company is required to prepare an accounting restatement due to material non-compliance with financial reporting requirements under applicable securities laws, with respect to any cash bonus or other cash compensation paid or awarded, or equity-based bonus or other equity-based incentive compensation that was exercised, vested or settled, within six months preceding such restatement, and that was granted or earned or became vested based wholly or in part upon the

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attainment of any financial reporting measure, if the recipient of such cash or equity-based bonus or other cash or equity-based incentive compensation engaged in fraud, intentional misconduct, or gross negligence that caused or partially caused the need for the restatement, the Board generally may seek reimbursement of any amount paid under an award in excess of what would have been paid had such material noncompliance not occurred.

Perquisites and Other Personal Benefits

We do not have any executive perquisite programs. From time to time, on a limited or exception basis, we may provide other benefits that we believe are related to a business purpose or are customary among our peer public companies that may otherwise be considered perquisites. All of the NEOs are eligible to participate in the Company’s benefit plans offered to all employees, including health, dental and vision insurance, a prescription drug plan, flexible spending accounts, short and long term disability, life insurance and a 401(k) plan.

Employment Agreements and Severance Benefits

As of December 31, 2016, the Company had employment agreements in place with all of the NEOs. The employment agreements provide for certain payments if the NEO is terminated by the Company without cause or leaves for good reason. The terms of these agreements are described in greater detail in the section titled “Overview of Employment and Change in Control Agreements.” All of the NEOs are “at will” employees.

The Company has established a Change in Control Severance Benefit Plan, which provides for severance payments to participating employees if the participant’s employment is terminated in connection with a change in control. This plan is described in greater detail in the section titled “Overview of Employment and Change in Control Agreements.” The Compensation Committee believes it is important to provide such employees with an incentive to remain with the Company amid the uncertainty that often accompanies efforts to consummate a corporate sale or similar transaction that may enhance stockholder value. All of the NEOs participate in the Change in Control Severance Benefit Plan.

Tax and Accounting Implications

Section 162(m) limits to $1 million the amount a company may deduct for compensation paid to its chief executive officer and any of its other three named executive officers (excluding the chief financial officer). This limitation, however, does not apply to compensation meeting the requirements for qualifying performance-based compensation within the meaning of Section 162(m). The Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) in designing our executive compensation program. The Compensation Committee, however, believes that a compensation program that attracts and retains highly qualified executives and rewards them for their achievements is necessary for our success and, therefore, is in the best interests of the Company and our stockholders. Accordingly, the Compensation Committee believes that in establishing the cash and equity incentive compensation program for the Company’s executive officers, the potential deductibility of the compensation payable under that program should only be one of a number of relevant factors taken into consideration. Consequently, the Compensation Committee may pay or provide compensation in excess of $1 million that is not exempt from the deduction limitations under Section 162(m).

Anti-Hedging Policy

Our insider trading policy prohibits all directors and officers from pledging or engaging in hedging or similar transactions in our Common Stock, such as prepaid variable forwards, equity swaps, collars, puts, calls, and short sales.

Compensation Risk Assessment

We do not believe that our compensation policies and practices create risks that are reasonably likely to have a material adverse effect on our business and operations.

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Stockholder Outreach

Active stockholder outreach and interaction is paramount to Novavax’ investor relations strategy. Consistent with that, Novavax attended seven investor conferences in 2016, the majority of which included presentations and opportunities to meet with institutional investors in individual one-on-one settings. Novavax further conducted nine non-deal roadshows covering large swaths of the U.S. and Europe. On-site meetings with both sell-side and buy-side contacts included tours of Novavax’ facilities and provided additional opportunities for investor interaction and feedback. Each year, Novavax holds an annual stockholder day and an Investor and Analyst Day, the latter of which was conducted as a webcast in 2016. In total, Novavax conducted over 200 individual calls or meetings with buy-side investors and had over 50 interactions with sell-side analysts in 2016. We believe these interactions are central to communicating Novavax’ investment opportunity, corporate strategy, milestones and goals, and to obtaining feedback directly from the investment community.

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SUMMARY COMPENSATION TABLE

The following table sets forth information concerning the compensation of our NEOs for the fiscal years ended December 31, 2016, 2015, and 2014.

             
Name and Principal Position   Year   Salary(1)
($)
  Bonus(2)
($)
  Option
Awards(3)
($)
  Non-Equity
Incentive Plan
Compensation(4)
($)
  All Other
Compensation(5)
($)
  Total
($)
Stanley C. Erck
President and CEO
    2016       618,000             3,252,440             7,379       3,877,819  
    2015       575,000             3,924,000       345,000       7,800       4,851,800  
    2014       487,750             2,280,780       304,844       7,650       3,081,024  
Barclay A. Phillips
SVP, Chief Financial Officer and Treasurer
    2016       363,250             790,315             7,500       1,161,065  
    2015       351,250             872,000       122,938       6,487       1,352,675  
    2014       330,000             380,130       139,755       5,507       855,392  
Gregory M. Glenn, M.D.
President, Research and Development
    2016       441,250             1,193,920             7,500       1,642,670  
    2015       410,000             1,308,000       143,500       10,514       1,872,014  
    2014       389,783             443,485       165,073       9,920       1,008,261  
John A. Herrmann III
SVP, General Counsel and Corporate Secretary
    2016       335,000             790,315             7,500       1,132,815  
    2015       315,000             872,000       110,250       6,811       1,304,061  
    2014       280,458             477,190       119,956       7,321       884,925  
John J. Trizzino
SVP, Commercial Operations
    2016       359,500             790,315             7,387       1,157,202  
    2015       335,000             872,000       117,250       8,067       1,332,317  
    2014       247,846             738,810       110,609       4,000       1,101,265  

(1) Includes amounts earned, but deferred at the election of the NEO, such as salary deferrals under the Company’s 401(k) plan.
(2) Performance-based bonuses are generally paid under the Company’s incentive cash bonus program and reported as Non-Equity Incentive Plan Compensation.
(3) The grant date fair value was calculated in accordance with FASB ASC Topic 718 excluding the effect of estimated forfeitures. Assumptions used in the calculation of this amount are included in Note 11 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on February 27, 2017.
(4) Represents performance-based bonuses awarded in 2016, 2015, and 2014 under the Company’s incentive cash bonus program. In the fourth quarter of 2016, the Board, upon recommendation of the Compensation Committee, determined that the senior executives would not receive a bonus payout for 2016 performance. For a description of the incentive cash bonus program, see page 27 in the CD&A.
(5) All Other Compensation consisted of (i) employer matching contributions to the Company’s 401(k) plan for Messrs. Erck, Phillips, Herrmann, and Trizzino and Dr. Glenn and (ii) for 2015, certain travel reimbursements paid to Dr. Glenn.

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GRANTS OF PLAN-BASED AWARDS TABLE

The following table sets forth information with respect to option awards and other plan-based awards granted to our NEOs during the fiscal year ended December 31, 2016:

                   
                   
Name   Estimated Future Payouts Under
Non-Equity Incentive Plan Awards(1)
  Grant
Date
  Estimated Future Payouts under
Equity Incentive Plan Awards(2)
  All Other
Option Awards: Number of Securities Underlying Options(3)
(#)
  Exercise or Base Price of Option Awards(4)
($/Sh)
  Grant Date Fair Value of Stock and Option Awards(4)
($)
  Threshold
($)
  Target
($)
  Maximum
($)
  Threshold
(#)
  Target
(#)
  Maximum
(#)
Stanley C. Erck   $ 278,100     $ 370,800     $ 463,500       3/15/2016                                  900,000       4.99       2,249,460  
                                  11/14/2016                                  550,000       1.35       557,480  
                                  11/14/2016       183,333       366,666       550,000                1.35       445,500  
Barclay A. Phillips   $ 108,975     $ 145,300     $ 181,625       3/15/2016                                  225,000       4.99       562,365  
                                  11/14/2016                                  125,000       1.35       126,700  
                                  11/14/2016       41,666       83,333       125,000                1.35       101,250  
Gregory M. Glenn, M.D.   $ 165,469     $ 220,625     $ 275,781       3/15/2016                                  350,000       4.99       874,790  
                                  11/14/2016                                  175,000       1.35       177,380  
                                  11/14/2016       58,333       116,666       175,000                1.35       141,750  
John A. Herrmann III   $ 100,500     $ 134,000     $ 167,500       3/15/2016                                  225,000       4.99       562,365  
                                  11/14/2016                                  125,000       1.35       126,700  
                                  11/14/2016       41,666       83,333       125,000                1.35       101,250  
John J. Trizzino   $ 107,850     $ 143,800     $ 179,750       3/15/2016                                  225,000       4.99       562,365  
                                  11/14/2016                                  125,000       1.35       126,750  
                                  11/14/2016       41,666       83,333       125,000                1.35       101,250  

(1) A cash bonus could not be paid under the incentive cash bonus program unless at least 75% of the 2016 Objectives were achieved. The bonus was capped at 125% achievement of the 2016 Objectives. The target amount of any bonus was, subject to Board discretion, prorated between the minimum 75% achievement of 2016 Objectives and the maximum 125% achievement. The target amount was based on the individual’s earned base salary for 2016 and represented 60% of Mr. Erck’s base salary, 50% of Dr. Glenn’s base salary, and 40% of the base salary of each of Mr. Phillips, Mr. Herrmann, and Mr. Trizzino.
(2) Represents the threshold, target, and maximum number of shares that may be issued pursuant to performance-based stock option grants made to each of the NEOs under the Company’s 2015 Stock Plan. These grants are eligible to vest according to the satisfaction of both a time-based vesting requirement, pursuant to which twenty-five percent of the shares subject to this option vest one year following the date of grant, and the remaining seventy-five percent will vest in equal monthly installments over the following three years subject to continued employment through the vesting date; and performance milestones based on predetermined stock price targets.
(3) Options granted have an exercise price equal to the fair market value of the Company’s Common Stock on the date of grant which, under the Company’s 2015 Stock Plan, is equal to the closing price of the Company’s Common Stock as reported on NASDAQ on the date of grant.
(4) The grant date fair value was calculated in accordance with FASB ASC Topic 718 excluding the effect of estimated forfeitures. Assumptions used in the calculation of this amount are included in Note 11 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on February 27, 2017.

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OUTSTANDING EQUITY AWARDS AT 2016 FISCAL YEAR END

The following table sets forth certain information with respect to the value of all outstanding equity awards to the NEOs as of December 31, 2016:

         
    Option Awards(1)
Name   Grant Date   Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
  Number of
Securities
Underlying
Underexercised
Options
(#)
Unexercisable
  Option
Exercise
Price
($)
  Option
Expiration
Date
Stanley C. Erck     6/24/2009       20,000             2.44       6/24/2019 (2) 
       2/15/2010       150,000             2.40       2/15/2020 (3) 
       6/22/2011       850,000             1.99       6/22/2021  
       3/1/2012       500,000             1.28       3/1/2022  
       3/2/2013       675,000       225,000       1.83       3/2/2023  
       3/6/2014       450,000       450,000       6.05       3/6/2024  
       3/5/2015       225,000       675,000       8.94       3/5/2025  
       3/15/2016             900,000       4.99       3/15/2026 (4) 
       11/14/2016             550,000       1.35       11/14/2026 (4) 
       11/14/2016             550,000       1.35       11/14/2026 (5) 
Barclay A. Phillips     6/24/2013       225,000       75,000       2.03       6/24/2023  
       3/6/2014       75,000       75,000       6.05       3/6/2024  
       3/5/2015       50,000       150,000       8.94       3/5/2025  
       3/15/2016             225,000       4.99       3/15/2026 (4) 
       11/14/2016             125,000       1.35       11/14/2026 (4) 
       11/14/2016             125,000       1.35       11/14/2026 (5) 
Gregory M. Glenn, M.D.     7/1/2010       335,000             2.11       7/1/2020 (6) 
       3/10/2011       64,000             2.50       3/10/2021  
       3/1/2012       150,000             1.28       3/1/2022  
       3/2/2013       50,614       37,500       1.83       3/2/2023  
       3/6/2014       87,500       87,500       6.05       3/6/2024  
       3/5/2015       75,000       225,000       8.94       3/5/2025  
       3/15/2016             350,000       4.99       3/15/2026 (4) 
       11/14/2016             175,000       1.35       11/14/2026 (4) 
       11/14/2016             175,000       1.35       11/14/2026 (5) 
John A. Herrmann III     4/15/2010       75,000             2.66       4/15/2020  
       3/10/2011       20,000             2.50       3/10/2021  
       3/1/2012       150,000             1.28       3/1/2022  
       3/2/2013       112,500       37,500       1.83       3/2/2023  
       3/6/2014       75,000       75,000       6.05       3/6/2024  
       6/12/2014       25,000       25,000       4.55       6/12/2024  
       3/5/2015       50,000       150,000       8.94       3/5/2025  
       3/15/2016             225,000       4.99       3/15/2026 (4) 
       11/14/2016             125,000       1.35       11/14/2026 (4) 
       11/14/2016             125,000       1.35       11/14/2026 (5) 
John J. Trizzino     3/10/2014       150,000       150,000       5.86       3/10/2024  
       3/5/2015       50,000       150,000       8.94       3/5/2025  
       3/15/2016             225,000       4.99       3/15/2026 (4) 
       11/14/2016             125,000       1.35       11/14/2026 (4) 
       11/14/2016             125,000       1.35       11/14/2026 (5) 

(1) All options were awarded under the 2005 Stock Plan or 2015 Stock Plan and, except as noted, vest in four equal increments on the first four anniversaries of the date of grant.
(2) These options vested six months following the date of grant.

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(3) These options vested one year following the date of grant.
(4) Twenty-five percent of the shares subject to this option vest one year following the date of grant, and the remaining seventy-five percent will vest in equal monthly installments over the following three years subject to continued employment through the vesting date.
(5) The amounts represent performance- and time-based options, and assume achievement of performance at threshold levels. These options are eligible to vest according to the satisfaction of both a time-based vesting requirement, pursuant to which twenty-five percent of the shares subject to this option vest one year following the date of grant, and the remaining seventy-five percent will vest in equal monthly installments over the following three years subject to continued employment through the vesting date; and performance milestones based on predetermined stock price targets.
(6) These options vested in three equal increments on the first three anniversaries of the date of grant.

OPTIONS EXERCISED AND STOCK VESTED

The following table sets forth certain information concerning the exercise of stock options held by the NEOs during the fiscal year ended December 31, 2016:

   
  Option Awards
Name   Number of
Shares
Acquired on
Exercise (#)
  Value
Realized on
Exercise(1)
($)
Stanley C. Erck     400,000       1,563,124  
Barclay A. Phillips            
Gregory M. Glenn, M.D.            
John A. Herrmann III            
John J. Trizzino            

(1) This amount represents the difference between the market price of a share of our Common Stock at the time of exercise and the exercise price.

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information about the Company’s Common Stock authorized for issuance under our equity compensation plans as of December 31, 2016. See also the information regarding stock options in Note 11 to the Company’s consolidated financial statements for the year ended December 31, 2016, included in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2017.

     
Plan Category   Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options,
Warrants, and
Rights
(a)
  Weighted-
Average
Exercise Price
of Outstanding
Options,
Warrants, and
Rights
(b)
  Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plans (Excluding
Securities in
Column (a))
(c)
Equity compensation plans approved by security holders(1)     39,232,732     $ 4.30       7,487,335 (2) 
Equity compensation plans not approved by security holders                  
Total     39,232,732     $ 4.30       7,487,335  

(1) Consists of the 2015 Stock Plan, Amended and Restated 2005 Stock Incentive Plan (the “2005 Stock Plan”), and 2013 Employee Stock Purchase Plan. The 2005 Stock Plan terminated pursuant to its terms on February 23, 2015 and no further awards will be made pursuant to that plan.
(2) Does not include the shares proposed to be made available under the Amended 2015 Stock Plan (as defined in Proposal No. 4).

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OVERVIEW OF EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS

Employment Agreements

On December 31, 2016, the Company had employment agreements in place with each of our NEOs. Each employment agreement provides for a base salary subject to review each year, an incentive bonus, and equity awards. Salary information and the target amount of the incentive bonus are described in greater detail on pages 22 through 30 in the CD&A. The amount of any incentive bonus and the form of payment (cash, shares of restricted stock, or some combination of the two) are at the discretion of the Board.

The employment agreements also provide that additional equity may be awarded to the NEO based upon his or her performance and subject to the Board’s approval, for the reimbursement of reasonable expenses incurred by him or her in connection with the performance of his or her duties, and for the NEO to participate in the Company’s Severance Plan (discussed below). Each NEO must devote his or her full business time to the performance of services to the Company.

The employment agreements require each NEO to maintain the confidentiality of the Company’s proprietary information and provide that all work product discovered or developed by the NEO in the course of the NEO’s employment belongs to the Company. In addition, in the employment agreements, the NEOs have agreed not to compete with the Company, directly or indirectly, within the United States or interfere with or solicit the Company’s contractual relationships, in each case during the term of his or her employment and for the duration of the severance period described for the NEO following the termination of his or her employment.

If an NEO is terminated without “cause” or leaves the Company for “good reason” (as such terms are defined in each employment agreement), the NEO may receive a lump sum separation payment. The amount of these payments is more specifically described in the section “Potential Payments Upon Termination” beginning on page 38. To be entitled to such a payment, the NEO must execute and deliver to the Company a waiver and separation agreement, releasing the Company from any claims.

Amended and Restated Change in Control Severance Benefit Plan

In August 2005, the Board adopted a Change in Control Severance Benefit Plan, which has since been amended in July 2006, December 2008, and June 2011 (the “Severance Plan”). The purpose of the Severance Plan is to provide severance pay and benefits to a select group of employees whose employment with the Company may be terminated following a change in control event, to provide such employees with an incentive to remain with the Company and help the Company consummate a strategic corporate sale or transaction that maximizes stockholder value. Participants in the Severance Plan are recommended by the CEO and approved by the Board. Selected participants with existing severance agreements will be deemed to elect coverage under the Severance Plan and are not eligible for any severance benefits under other agreements unless expressly provided otherwise by the Board. Each of the NEOs participates in the Severance Plan.

The Severance Plan provides for the payment of benefits upon certain triggering events. A triggering event occurs if a participant’s employment is terminated due to an “Involuntary Termination without Cause” for a reason other than death or disability or as a result of a “Constructive Termination” either (i) within a certain period (not to exceed 24 months) after the effective date of a “Change in Control” or (ii) before the Change in Control but after the first day on which the Board and/or senior management of the Company has entered into formal negotiations with a potential acquirer that results in the consummation of the Change in Control. The specific periods of time following the effective date of a Change in Control during which payment of benefits under the Severance Plan may be triggered by termination are as follows:

 
Executive   Protected
Period
Stanley C. Erck     24 months  
Barclay A. Phillips     12 months  
Gregory M. Glenn, M.D.     12 months  
John A. Herrmann III     12 months  
John J. Trizzino     12 months  

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If a triggering event occurs, the participant is entitled to a lump sum severance payment, a bonus equal to 100% of the target annual performance bonus for the year in which the termination date occurred multiplied by the length in years of the participant’s severance benefit period and continuation of medical, dental, and vision benefits for the same number of months as the severance period, with the exception of Mr. Erck, whose benefits continue for 18 months.

   
Executive   Severance
Payment
  Continuation of
Benefits Period
Stanley C. Erck     24 months salary       18 months  
Barclay A. Phillips     12 months salary       12 months  
Gregory M. Glenn, M.D.     12 months salary       12 months  
John A. Herrmann III     12 months salary       12 months  
John J. Trizzino     12 months salary       12 months  

Under the Severance Plan, all current unvested awards become vested and exercisable in full only upon a termination of employment following a Change in Control (a double trigger acceleration). The Severance Plan provides that all vested and exercisable options may be exercised within one year from the participant’s termination date, provided, however, that no exercise may occur later than the expiration date of the option as set forth in the applicable option agreement. As used herein, the below terms shall have the following meanings:

 
Term   Definition
Involuntary Termination without Cause   The termination of an eligible employee’s employment which is initiated by the Company for a reason other than Cause.
Cause  

•  

Conviction of, a guilty plea with respect to, or a plea of nolo contendere to a charge that the eligible employee has committed a felony under the laws of the United States or of any state or a crime involving moral turpitude, including, but not limited to, fraud, theft, embezzlement, or any crime that results in or is intended to result in personal enrichment at the expense of the Company;

    

•  

Material breach of any agreement entered into between the eligible employee and the Company that impairs the Company’s interest therein;

    

•  

Willful misconduct, significant failure to perform the eligible employee’s duties, or gross neglect by the eligible employee of the eligible employee’s duties; or

    

•  

Engagement in any activity that constitutes a material conflict of interest with the Company.

Constructive Termination   A termination initiated by an eligible employee because any of the following events or conditions has occurred:
    

•  

a change in the eligible employee’s position or responsibilities (including reporting responsibilities) which represents an adverse change from the eligible employee’s position or responsibilities as in effect immediately preceding the effective date of a Change in Control or at any time thereafter; the assignment to the eligible employee of any duties or responsibilities which are inconsistent with the eligible employee’s position or responsibilities as in effect immediately preceding the effective date of a Change in Control or at any time thereafter; except in connection with the termination of the eligible employee’s employment for Cause or the termination of an eligible employee’s employment because of an eligible employee’s disability or death, or except resulting from a voluntary termination by the employee other than as a result of a Constructive Termination;

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Term   Definition
    

•  

a material reduction in the eligible employee’s pay or any material failure to pay the eligible employee any compensation or benefits to which the eligible employee is entitled within five (5) days of the date due;

    

•  

the Company’s requiring the eligible employee to relocate his principal worksite to any place outside a fifty (50) mile radius of the eligible employee’s current worksite, except for reasonably required travel on the business of the Company or its affiliates which is not materially greater than such travel requirements prior to the Change in Control;

    

•  

the failure by the Company to continue in effect (without reduction in benefit level and/or reward opportunities) any material compensation or employee benefit plan in which the eligible employee was participating immediately preceding the effective date of a Change in Control or at any time thereafter, unless such plan is replaced with a plan that provides substantially equivalent compensation or benefits to the eligible employee;

    

•  

any material breach by the Company of any provision of the Severance Plan; or

    

•  

the failure of the Company to obtain an agreement, from any successors and assigns to assume and agree to perform the obligations created under the Severance Plan as a result of a Change in Control.

Change in Control  

•  

A sale, lease, license, or other disposition of all or substantially all of the assets of the Company;

    

•  

A consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger, or reorganization, own less than fifty percent (50%) of the outstanding voting power of the surviving entity and its parent following the consolidation, merger, or reorganization;

    

•  

Any transaction or series of related transactions involving a person or entity, or a group of affiliated persons or entities (but excluding any employee benefit plan or related trust sponsored or maintained by the Company or an affiliate) in which such persons or entities that were not stockholders of the Company immediately prior to their acquisition of the Company securities as part of such transaction become the owners, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation, or similar transaction and other than as part of a private financing transaction by the Company; or

    

•  

A change in the Incumbent Board, which occurs if the existing members of the Board on the date the Severance Plan was initially adopted by the Board (the “Incumbent Board”) cease to constitute at least a majority of the members of the Board, provided, however, that any new Board member shall be considered a member of the Incumbent Board for this purpose if the appointment or election (or nomination for such election) of the new Board member is approved or recommended by a majority vote of the members of the Incumbent Board who are then still in office.

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Regular Termination Benefits

In addition to the benefits described above, the NEOs are also entitled to certain payments and benefits upon termination of employment that are provided on a non-discriminatory basis to salaried employees generally upon termination of employment. These include accrued salary and accrued, but unused vacation pay, and availability for distribution of plan balances under the Company’s 401(k) plan.

POTENTIAL PAYMENTS UPON TERMINATION

Termination Other Than for Cause

On December 31, 2016, the Company had employment agreements with Dr. Glenn and Messrs. Erck, Phillips, Herrmann, and Trizzino, which provided for a lump sum cash severance payment if the executive is terminated without “cause” or leaves for “good reason.” All vested and exercisable stock options held by Dr. Glenn and Messrs. Phillips, Herrmann, and Trizzino must be exercised within three months following the termination date. Mr. Erck is entitled to the accelerated vesting of 50% of the unvested portion of each stock option or restricted stock grant made by the Company and may exercise all outstanding vested stock options held at termination (including any accelerated options or grants) during the twelve (12) month period following the date of termination. If such termination had occurred on December 31, 2016, the Company would have made the following payments:

 
Executive   Severance Payment
($)
Stanley C. Erck     936,000  
Barclay A. Phillips     366,000  
Gregory M. Glenn, M.D.     450,000  
John A. Herrmann III     340,000  
John J. Trizzino     366,000  

Termination for Cause

In the event an NEO is terminated for cause, the Company has no further obligation to the executive other than the obligation to pay any unpaid base salary and unused vacation accrued through the termination date.

Cause means (i) the executive’s willful failure or refusal to perform in all material respects the services required to be performed by him; (ii) the executive’s willful failure or refusal to carry out any proper and material direction by the President and Chief Executive Officer or Board (or, with respect to Mr. Erck’s agreement, the Board, and with respect to Mr. Herrmann’s agreement, the CMO, the CEO or the Board) with respect to the services to be rendered by him or the manner of rendering such services; (iii) the executive’s willful misconduct or gross negligence in the performance of his duties (or, with respect to Mr. Herrmann’s and Mr. Trizzino’s agreements, the executive’s misconduct in the performance of his duties); (iv) the executive’s commission of an act of fraud, embezzlement, or theft or felony involving moral turpitude; (v) the executive’s use of confidential information, other than for the benefit of the Company in the course of rendering services to the Company; or (vi) a breach of the executive’s non-competition obligations.

Termination as a Result of Death or Disability

In the event an NEO is terminated as a result of death or disability, the Company has no further obligation to the executive other than the obligation to pay any unpaid base salary and unused vacation accrued through the termination date. If the executive dies while in the employ of the Company (or within three months after the date on which the executive ceases to be an employee), vested and exercisable options may be exercised by the executive’s estate for one year following the executive’s death. If the executive becomes disabled while in the employ of the Company, vested and exercisable options may be exercised by the executive for a period of one year after the executive ceases to be an employee due to a disability.

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Termination in Connection with a Change in Control

Each of the NEOs participates in the Severance Plan. The following table sets forth the payments the Company would have made if eligible NEOs had been terminated in connection with a Change in Control that occurred on December 31, 2016 in accordance with the Severance Plan:

   
Name   Benefit   Amount
($)
Stanley C. Erck     Severance Payment       1,248,000  
       Bonus(1)
      748,800  
       Equity Awards(2)
       
       Health Insurance Benefits(3)
      32,598  
       Total       2,029,398  
Barclay A. Phillips     Severance Payment       366,000  
       Bonus(1)
      146,400  
       Equity Awards(2)
       
       Health Insurance Benefits(3)
      21,732  
       Total       534,132  
Gregory M. Glenn, M.D.     Severance Payment       450,000  
       Bonus(1)
      225,000  
       Equity Awards(2)
       
       Health Insurance Benefits(3)
      21,732  
       Total       696,732  
John A. Herrmann III     Severance Payment       340,000  
       Bonus(1)
      136,000  
       Equity Awards(2)
       
       Health Insurance Benefits(3)
      15,682  
       Total       491,682  
John J. Trizzino     Severance Payment       366,000  
       Bonus(1)
      146,400  
       Equity Awards(2)
       
       Health Insurance Benefits(3)
      21,732  
       Total       534,132  

(1) Bonus equals 100% of the NEO’s target annual bonus award multiplied by the participant’s severance benefit period.
(2) Represents the value of all unvested equity awards at the closing price on December 31, 2016, minus any applicable exercise price.
(3) Reflects the premiums for health, dental, and vision coverage under the Company’s group health insurance program. Amounts are based on the premiums in effect at December 31, 2016.

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COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

COMPENSATION COMMITTEE
James F. Young, Chair
Gail K. Boudreaux
Richard H. Douglas, Ph.D.
Michael A. McManus, Jr., J.D.

This Compensation Committee Report shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934 except to the extent that Novavax specifically incorporates this information by reference, and shall not otherwise be deemed filed under the Securities Act of 1933 and the Securities Exchange Act of 1934 and shall not be deemed soliciting material.

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AUDIT COMMITTEE REPORT

The Audit Committee operates under a written charter adopted by the Board of Directors and monitors the Company’s financial reporting process on behalf of the Board of Directors. This report reviews the actions taken by the Audit Committee with regard to the Company’s financial reporting process during 2016 and particularly with regard to the Company’s audited consolidated statements of financial condition as of December 31, 2016, and the related statements of operations, comprehensive income, changes in shareowners’ equity, and cash flows for each of the years in the three-year period ended December 31, 2016.

The Audit Committee believes that it has taken the actions necessary or appropriate to fulfill its oversight responsibilities under the Audit Committee’s charter. In fulfilling its oversight responsibilities, the Audit Committee has reviewed and discussed the Company’s audited financial statements with management and with Ernst & Young LLP, the Company’s independent registered public accounting firm, the matters required to be discussed by the Public Company Accounting Oversight Board (PCAOB) AU Section 380, “Communication with Audit Committees” (as currently in effect), which includes, among other items, matters related to the conduct of the audit of the Company’s financial statements.

The Audit Committee meets with the independent registered public accounting firm, with and without management present, to discuss the results of its examinations, its evaluations of the Company’s internal controls, the overall quality of the Company’s financial reporting, and their judgments as to the Company’s accounting principles and such other matters as are required to be discussed with the Audit Committee in accordance with PCAOB standards. The Audit Committee has also received the written disclosures and the letter from Ernst & Young LLP required by the PCAOB independence and ethics rule, Rule 3526, “Communication with Audit Committees Concerning Independence,” relating to the firm’s independence from the Company and its related entities, discussed with Ernst & Young LLP its independence from the Company and considered the compatibility of the firm’s provision of non-audit services with maintaining its independence. Management and the Company’s internal and independent auditors also made presentations to the Audit Committee throughout the year on specific topics of interest, that include but are not limited to: (i) information technology systems, controls and security; (ii) critical accounting policies; (iii) the impact of new accounting guidance; (iv) compliance with internal controls required under Section 404 of the Sarbanes-Oxley Act; (v) compliance with Company’s Code of Conduct and Ethics; (vi) risk management initiatives and controls; (vii) significant legal matters; and (viii) insider and related party transactions. Additionally, the Audit Committee discussed with the Company’s internal and independent auditors the overall scope and plan for their respective audits.

Based on the review and discussions referred to above, the Audit Committee recommended to the Company’s Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 for filing with the Securities and Exchange Commission.

AUDIT COMMITTEE
Michael A. McManus, Jr., J.D., Chair
Richard H. Douglas, Ph.D.
Gary C. Evans

This Audit Committee Report shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934 except to the extent that Novavax specifically incorporates this information by reference, and shall not otherwise be deemed filed under the Securities Act of 1933 and the Securities Exchange Act of 1934 and shall not be deemed soliciting material.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of April 19, 2017, unless otherwise indicated, with respect to the beneficial ownership of our Common Stock by (i) each person (including any group) known to the Company to beneficially own more than 5% of the outstanding shares of our Common Stock, (ii) each director of the Company or nominee for director, (iii) each of the NEOs of the Company as identified in the “Summary Compensation Table,” and (iv) all directors and NEOs of the Company as a group.

   
Name of Beneficial Owner(1)   Shares of
Common Stock
Beneficially
Owned(2)
  Percentage of
Class
Outstanding(3)
FMR LLC(4)     21,194,137       7.5  
BlackRock, Inc.(5)     21,224,265       7.5  
The Vanguard Group, Inc.(6)     20,742,737       7.3  
State Street Corp.(7)     19,971,040       7.1  
Directors, Nominees, and Executive Officers
                 
Gail K. Boudreaux(8)     280,000      
Richard H. Douglas, Ph.D.(9)     560,000      
Gary C. Evans.(10)     516,979      
Michael A. McManus, Jr., J.D.(11)     362,590      
Rajiv I. Modi, Ph.D.(12)     2,500,000      
James F. Young, Ph.D.(13)     840,000      
Stanley C. Erck(14)     3,904,529       1.4  
Barclay A. Phillips(15)     519,424      
Gregory M. Glenn, M.D.(16)     1,032,166      
John A. Herrmann III(17)     722,384      
John J. Trizzino(18)     484,277      
All directors and executive officers as a group (11 persons)(19)     11,722,349       4.0  

* Less than 1%.
(1) Each beneficial owner named in the table above (except as otherwise indicated in the footnotes below) has an address in c/o Novavax, Inc., 20 Firstfield Road, Gaithersburg, Maryland 20878.
(2) Beneficial ownership is determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to shares of the Company’s Common Stock. Unless otherwise indicated, each beneficial owner named in the table has sole voting and investment power over the shares beneficially owned. With respect to each person or group, percentages are calculated based on the number of shares of Common Stock beneficially owned, including shares that may be acquired by such person or group within 60 days of April 19, 2017 upon the exercise of stock options, warrants, or other purchase rights, but not the exercise of options, warrants, or other purchase rights held by any other person.
(3) Percentages have been calculated based on 282,613,919 shares of the Company’s Common Stock outstanding as of April 19, 2017.
(4) As reported by FMR LLC on Schedule 13G/A as filed on February 14, 2017. FMR LLC is a parent holding company or control person in accordance with Rule 13d-1(b)(1)(ii)(G). Beneficial ownership (and other information in this footnote) is as of December 31, 2016. FMR LLC has the sole voting power with respect to 178,400 shares of Common Stock. Edward C. Johnson 3d (Chairman of FMR LLC), Abigail P. Johnson (Vice Chairman of FMR LLC) and FMR LLC, through its wholly-owned subsidiaries and registered investment advisers, FMR Co., Inc. and Strategic Advisors, Inc., are the beneficial owners of 21,194,137 shares of Common Stock. Neither FMR LLC nor Edward C. Johnson 3d nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by the investment companies (the “Funds”) registered under the Investment Company Act of 1940, which power resides with the Funds’ Boards of Trustees. FMR Co., Inc. carries out the voting of the shares under written guidelines established by the Funds’ Boards of Trustees. Select Biotechnology Portfolio has sole voting power and beneficial ownership over 16,470,821 shares of Common Stock. The principal office address of FMR LLC is 245 Summer Street, Boston, MA 02210.

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(5) As reported by BlackRock, Inc. (“BlackRock”) on Schedule 13G/A as filed on January 25, 2017. BlackRock is a parent holding company or control person in accordance with Rule 13d-1(b)(1)(ii)(G). Beneficial ownership (and other information in this footnote) is as of December 31, 2016. BlackRock beneficially owns 21,224,265 shares of Common Stock, for which it has sole voting power with respect to 20,668,254 shares of Common Stock and sole dispositive power with respect to 21,224,265 shares of Common Stock. The principle office address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055.
(6) As reported by The Vanguard Group (“Vanguard”), Vanguard Fiduciary Trust Company, and Vanguard Investments Australia, Ltd. on Schedule 13G/A as filed on February 10, 2017. Beneficial ownership (and other information in this footnote) is as of December 31, 2016. Vanguard beneficially owns 20,742,737 shares of Common Stock, for which it has sole voting power with respect to 536,463 shares of Common Stock and sole dispositive power with respect to 20,204,174 shares of Common Stock. The principal business address of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.
(7) As reported by State Street Corporation (“State Street”) on Schedule 13G as filed on February 8, 2017. Beneficial ownership (and other information in this footnote) is as of December 31, 2016. State Street beneficially owns 19,971,040 shares of Common Stock, for which it has sole voting power with respect to 0 shares of Common Stock and sole dispositive power with respect to 0 shares of Common Stock. The principal business address of State Street is State Street Financial Center, One Lincoln Street, Boston, MA 02111.
(8) Includes 80,000 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 19, 2017.
(9) Includes 210,000 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 19, 2017.
(10) Includes 195,000 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 19, 2017. Also includes 4,000 shares owned of record by Gary Evans Custodian for Dustin Evans UTMA/TX and 4,000 shares owned by record by Gary Evans Custodian for Casey Evans UTMA/TX.
(11) Includes 115,000 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 19, 2017.
(12) Consists of 2,500,000 shares owned by Satellite Overseas (Holdings) Limited, a wholly-owned subsidiary of Cadila Pharmaceuticals Ltd. Dr. Modi is a managing director of Cadila Pharmaceuticals Ltd.
(13) Includes 665,000 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 19, 2017.
(14) Includes 3,826,250 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 19, 2017.
(15) Includes 507,812 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 19, 2017.
(16) Includes 1,027,739 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 19, 2017.
(17) Includes 715,312 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 19, 2017.
(18) Includes 395,312 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 19, 2017.
(19) Includes 7,737,425 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of April 19, 2017.

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PROPOSAL NO. 2
 
ADVISORY VOTE ON EXECUTIVE COMPENSATION

We are asking stockholders to approve, on an advisory, non-binding basis, the compensation of our Named Executive Officers as disclosed in this Proxy Statement. The Company provides its stockholders with the opportunity to cast a triennial advisory vote to approve the compensation of its named executive officers and this Proposal No. 2, commonly referred to as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our executive compensation programs.

As described in detail in the Compensation Discussion and Analysis section and the related tables and narrative disclosure in this Proxy Statement, our executive compensation programs are designed to attract and retain highly qualified executives, reflect performance and reward high performance, reward named executive officers for meeting Novavax’ strategic goals and objectives, and align named executive officers’ goals with those of our stockholders. Please read the Compensation Discussion and Analysis section for additional details about our executive compensation objectives, philosophy, and programs, along with the compensation paid to our Named Executive Officers with respect to the fiscal year ended December 31, 2016 and the rationale for such compensation.

Accordingly, the Board is asking stockholders to cast a non-binding, advisory vote “FOR” the compensation paid to our Named Executive Officers in 2016, as disclosed pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, compensation tables, and related narrative discussion included in this Proxy Statement.

We recommend that you vote “FOR” the following resolution at the Annual Meeting:

RESOLVED, that the compensation of the Company’s Named Executive Officers as disclosed in the Company’s proxy statement for the 2017 Annual Meeting of Stockholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion, is hereby approved.

Although the say-on-pay vote we are asking you to cast is non-binding, the Board and the Compensation Committee, who are responsible for designing and administering our executive compensation programs, value the opinions of our stockholders on this Proposal No. 2 and will consider the outcome of the vote on this Proposal No. 2 when making future compensation decisions for our named executive officers.

The Company’s current policy, and the Board’s recommendation contained in Proposal No. 3, is to provide stockholders with an opportunity to approve the compensation of the named executive officers triennially at the annual meeting of stockholders. Accordingly, assuming no change to the Company’s current policy, it is expected that the next “say-on-pay” vote will occur at the 2020 Annual Meeting of Stockholders.

FOR PROPOSAL NO. 2, THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS IN 2016.

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PROPOSAL NO. 3
 
ADVISORY VOTE ON THE FREQUENCY OF
FUTURE EXECUTIVE COMPENSATION ADVISORY VOTES

As described in Proposal No. 2 above, we are asking our stockholders to approve, on an advisory, non-binding basis, the compensation of our named executive officers as disclosed in this Proxy Statement pursuant to rules promulgated by the SEC. In this Proposal No. 3, we are asking our stockholders to cast a non-binding, advisory vote regarding the frequency of future executive compensation advisory votes. Stockholders may vote in favor of holding an executive compensation advisory vote every three years, every two years, or every year, or may abstain from voting.

After careful consideration, the Board recommends that an executive compensation advisory vote be held once every three years. The Board believes that a triennial executive compensation advisory vote will allow our stockholders to hold our Board and Compensation Committee accountable for compensation decisions, while also considering executive compensation in relation to the long-term performance of the Company. A significant portion of the compensation paid to our NEOs is derived from equity compensation that rewards long-term performance, and we believe a triennial vote aligns more closely with our compensation program’s emphasis on rewarding long-term performance. Given the Company’s lengthy product development cycles, we believe a triennial vote avoiding excessive focus on short-term financial results or short-term stock price fluctuations will enable stockholders to provide the most constructive feedback on our compensation policies.

Further, a triennial vote will give our Board sufficient time to engage with stockholders to better understand their views about executive compensation and to respond more effectively to any stockholder concerns. Holding executive compensation advisory votes every year or every two years may not allow stockholders sufficient time to evaluate the effect of any changes we may make to executive compensation from time to time.

Finally, the Board believes that a triennial vote would not foreclose stockholder engagement on our compensation program during interim periods. Stockholders are able to vote on the re-election of Compensation Committee members to the Board, and are also encouraged to provide input on our compensation policies directly to the Board. Thus, we view the advisory vote on executive compensation as an additional, but not exclusive, opportunity for our stockholders to communicate their views on our compensation program.

The Board will take into consideration the outcome of this vote in making a determination about the frequency of future executive compensation advisory votes. However, because this vote is advisory and non-binding, the Board may decide that it is in the best interests of our stockholders and the Company to hold the advisory vote to approve executive compensation more or less frequently than the frequency approved by our stockholders. In the future, we will propose an advisory vote on the frequency of executive compensation advisory votes at least once every six years.

FOR PROPOSAL NO. 3, THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE
“FOR HOLDING FUTURE EXECUTIVE COMPENSATION ADVISORY VOTES ONCE
EVERY THREE YEARS.”

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PROPOSAL NO. 4
 
AMENDMENT OF 2015 STOCK PLAN

At the Annual Meeting, stockholders will be asked to approve the adoption of the Amended and Restated 2015 Stock Incentive Plan adopted by our Board on March 15, 2017 (the “Amended 2015 Stock Plan”). The 2015 Stock Plan was originally adopted by our Board on March 5, 2015 and approved by Novavax stockholders on June 18, 2015, with an amendment thereto approved by our stockholders on June 9, 2016. The number of shares originally authorized for issuance under the 2015 Stock Plan was 25,000,000 shares of Common Stock, which included 4,620,369 shares of Common Stock that were available for issuance under our 2005 Stock Plan immediately prior to its expiration on February 23, 2015. On June 9, 2016, Novavax stockholders voted to approve an amendment to increase the number of shares under the 2015 Stock Plan by an additional 6,000,000 shares. As discussed further below, stockholders are being asked to approve the Amended 2015 Stock Plan to enable us to increase the number of shares of our Common Stock available for issuance pursuant to awards under the plan by 5,000,000 shares. The Amended 2015 Stock Plan also amends the 2015 Stock Plan by including a minimum vesting requirement applicable to all awards, narrowly defining the plan administrator’s authority to accelerate the vesting of time- and performance-based awards on a change in control of the Company, and expressly prohibiting the payment of dividends and dividend equivalents on unvested awards. Further, the Board has adopted a clawback policy applicable to awards made under the Amended 2015 Stock Plan.

Equity grants are an essential element of the Company’s compensation program. Stockholder approval of the Amended 2015 Stock Plan would allow us to continue to attract and retain high quality and high performing directors, executives, and other employees with equity incentives. The Board approved the Amended 2015 Stock Plan and the additional shares of Common Stock authorized for issuance under it based upon its review and consideration of:

the Company’s historic rates of equity award issuances;
the dilutive impact to stockholders;
equity plan guidelines established by certain institutional investors and proxy advisory firms; and
advice provided by Radford, the Compensation Committee’s independent consultant.

The Board believes that it is in the best interest of the Company’s stockholders for the Company’s employees (including its officers), directors, and consultants to have an ownership interest in the Company and that granting equity awards to such persons motivates them to contribute to the Company’s success. Given the emphasis placed on equity awards in the Company’s compensation philosophy and due to an increase in the Company’s employee population in the first half of 2016 and, in general, a decline in the Company’s stock price, more shares of our Common Stock were granted as awards under the 2015 Stock Plan (prior to its amendment) in 2016 than previously anticipated. As a result, we do not believe that the remaining shares of Common Stock available for issuance under the 2015 Stock Plan are sufficient to continue implementing the Company’s stock incentive program over the next year taking into account our historic burn rate (discussed below) and certain other factors, including the Company’s anticipated need to attract new employees with appropriate levels of experience and talent. Accordingly, on April 26, 2017, our Board approved the Amended 2015 Stock Plan, subject to stockholder approval, to increase the number of shares of Common Stock reserved for issuance under the Amended 2015 Stock Plan by 5,000,000 shares and to increase the number of shares of Common Stock that may be issued under the Amended 2015 Stock Plan upon the exercise of incentive stock options by 5,000,000 shares. The Amended 2015 Stock Plan is being submitted to the Company’s stockholders for approval.

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The Board believes that the Amended 2015 Stock Plan continues to promote the interests of our stockholders and continues to be consistent with principles of good corporate governance including:

Independent Committee.  The Amended 2015 Stock Plan will continue to be administered by the Compensation Committee and its authorized delegates. The Compensation Committee is composed entirely of independent directors who meet the NASDAQ Global Select Market (“NASDAQ”) standards for independence and who meet the definitions of “outside directors” for purposes of Section 162(m) and “non-employee directors” under Rule 16b-3(b)(3) of the Exchange Act.
Stockholder Approval is Required for Additional Shares.  The Amended 2015 Stock Plan does not contain an annual “evergreen” provision. The Amended 2015 Stock Plan authorizes a fixed number of shares and, as a result, stockholder approval is required to issue any additional shares under awards under the plan. This gives our stockholders the opportunity to provide direct input on our equity compensation programs.
Limits on Awards.  The Amended 2015 Stock Plan limits the number of shares of Common Stock that may be awarded through stock options, stock appreciation rights (“SARs”), and other awards that may be granted to any person in any calendar year and contains a separate limit that applies to awards granted to our non-employee directors.
No Discounted Stock Options or SARs.  All stock options and SARs under the Amended 2015 Stock Plan must have an exercise price or base value that is not less than the fair market value of a share of Common Stock on the date of grant.
Performance Awards.  Under the Amended 2015 Stock Plan, the Compensation Committee may grant performance-based awards, including awards that are intended to satisfy the requirements of the exception for qualified performance-based compensation under Section 162(m).
No Repricing.  Other than in connection with a corporate transaction affecting the Company, the Amended 2015 Stock Plan prohibits any repricing of stock options or SARs without obtaining stockholder approval in accordance with NASDAQ requirements.
Awards Subject to Recoupment.  Awards under the Amended 2015 Stock Plan are subject to recoupment in accordance with any applicable Company clawback or recoupment policy that may be adopted by the Board or as otherwise required by law or applicable listing standards.
No Liberal Share Recycling.  Shares retained or withheld by or delivered to the Company to satisfy the purchase or exercise price of (or withholding taxes applicable to) an award and the total number of shares subject to a SAR any portion of which is settled in shares reduce the number of shares available for issuance under the Amended 2015 Stock Plan. In addition, the number of shares available for delivery under the Amended 2015 Stock Plan will not be increased by any shares that have been delivered under the Amended 2015 Stock Plan that are subsequently repurchased using proceeds directly attributable to stock option exercises.

After consideration of these features of the 2015 Stock Plan, the Board has taken four additional measures that further promote the interests of our stockholders and are consistent with principles of good corporate governance:

Minimum Vesting Provisions.  The Amended 2015 Stock Plan now requires a minimum vesting period of at least one year for all awards granted under the plan, subject to a carve-out for awards not exceeding five percent of the total shares of our Common Stock reserved for issuance under the plan.
Accelerated Vesting on a Change in Control.  The Amended 2015 Stock Plan now provides that, upon the consummation of a corporate transaction (as described below) time-based awards will vest unless such awards are assumed or substituted by the acquiring or succeeding company. Further, the Amended 2015 Stock Plan requires that, on the consummation of a corporate transaction, the performance-based vesting of any award be determined based on the greater of (a) assumed achievement of the applicable performance goals at 100% of target with the result prorated based on

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the period of the Participant’s actual employment or service relationship with the Company prior to the corporate transaction during the applicable full performance period, or (b) actual achievement of the applicable performance goals through the date of the corporate transaction.
Clawback Policy.  On April 26, 2017, the Board adopted a policy providing that, if the Company is required to prepare an accounting restatement due to material non-compliance with financial reporting requirements under applicable securities laws, with respect to any cash bonus or other cash compensation paid or awarded, or equity-based bonus or other equity-based incentive compensation that was exercised, vested or settled, within six months preceding such restatement, and that was granted or earned or became vested based wholly or in part upon the attainment of any financial reporting measure, if the recipient of such cash or equity-based bonus or other cash or equity-based incentive compensation engaged in fraud, intentional misconduct, or gross negligence that caused or partially caused the need for the restatement, the Board generally may seek reimbursement of any amount paid under an award in excess of what would have been paid had such error not been made.
Payment of Dividends.  The Amended 2015 Stock Plan expressly prohibits the payment of dividends or dividend equivalents on unvested awards.

Existing Equity Plan Information

Since its adoption in 2015, we have granted equity awards exclusively under our 2015 Stock Plan. In fiscal 2016, the Company granted stock options covering a total of 19,343,937 shares and restricted stock awards covering a total of 45,000 shares. Our fiscal year 2016 burn rate was determined to be 7.2%.

As of March 16, 2017, our 2015 Stock Plan had 6,130,674 shares of Common Stock available for grant as equity awards. If the Amended 2015 Stock Plan is approved, the total number of shares of Common Stock that will be available for future awards under the Amended 2015 Stock Plan will be 11,130,674, which is the sum of 5,000,000 shares plus the number of shares currently available under the 2015 Stock Plan. If the stockholders do not approve the Amended 2015 Stock Plan, the Amended 2015 Stock Plan will not become effective and additional awards will only be granted from the shares currently available under the 2015 Stock Plan.

Potential Dilution

The following table provides information regarding the number of shares subject to each type of outstanding award under the 2015 Stock Plan and the 2005 Stock Plan, the number of shares of our Common Stock available for future awards under the 2015 Stock Plan, the number of additional shares that would be available for future awards under the Amended 2015 Stock Plan, if approved by stockholders, and the dilutive impact of each to our stockholders as of March 16, 2017.

   
  Number of
shares
  As a percentage
of stock
outstanding on
a fully diluted
basis
Outstanding stock options     38,228,380       12.0 % 
Outstanding restricted stock     18,750       0.0 % 
Total shares subject to outstanding awards under the 2015 Stock Plan and the 2005 Stock Plan     38,247,130       12.0 % 
Total shares available for future awards under the 2015 Stock Plan     6,130,674       1.9 % 
Proposed additional shares available for future awards under the Amended 2015 Stock Plan     5,000,000       1.5 % 
Total potential dilution     49,377,804       15.0 % 

As indicated by the numbers in the table above, as of March 16, 2017, the date our Board adopted the Amended 2015 Stock Plan, the potential dilution under our 2015 Stock Plan and 2005 Stock Plan was 13.7%. If the Amended 2015 Stock Plan is approved by our stockholders, our potential dilution will be 15.0%.

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Supplemental Equity Compensation Plan Information

The following table provides supplemental information on the Company’s equity compensation plans as of March 16, 2017 in addition to the required information presented under “Equity Compensation Plan Information” included elsewhere in this Proxy Statement. Under the plans included in the table below, the Company’s Common Stock may be issued upon the exercise of options.

         
Plan Category   Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options,
Warrants, and
Rights
(a)
  Weighted-
Average
Exercise Price
of Outstanding
Options,
Warrants, and
Rights
(b)
  Weighted-
Average
Remaining Term
of Outstanding
Options,
Warrants, and
Rights
(c)
  Number of
Restricted
Stock
Awards
Outstanding
(d)
  Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plans (Excluding
Securities in
Column (a))
(e)
Equity compensation plans approved by security holders(1)     38,228,380     $ 4.24       7.8       18,750       7,316,543 (2) 
Equity compensation plans not approved by security holders(3)                              
Total     38,228,380     $ 4.24       7.8       18,750       7,316,543  

(1) Consists of the 2015 Stock Plan, the 2005 Stock Plan, and the ESPP. The 2005 Stock Plan terminated pursuant to its terms on February 23, 2015 and no further awards will be made pursuant to that plan.
(2) Reflects shares of our Common Stock available under the 2015 Stock Plan and under the ESPP.
(3) Excludes the Amended 2015 Stock Plan, which is subject to stockholder approval in accordance with this Proposal No. 4.

Reasons for Seeking Stockholder Approval

Our Board believes that the ability to grant equity compensation to all employees has been, and will continue to be, essential to the Company’s ability to attract and retain the highest quality and highest performing employees and directors. Our Board also believes that equity compensation motivates our employees, including our executive officers, and our directors to contribute to the achievement of our corporate objectives and encourages the alignment of their interests with the interests of our stockholders. After a review of its routine historical practice and an estimation of the Company’s future growth, the Company believes that the availability of 5,000,000 additional shares of Common Stock under the Amended 2015 Stock Plan would provide a sufficient number of shares to enable the Company to continue to make awards at historical average annual rates for the next year. The Compensation Committee determined that reserving shares sufficient for approximately one year of new awards at historical grant rates is in line with the practice of our peer public companies.

In addition, approval of the Amended 2015 Stock Plan by our stockholders would preserve our ability to grant stock options, stock appreciation rights, and performance-based stock awards that may qualify as “qualified performance-based compensation” within the meaning of Section 162(m) for five years. Section 162(m) disallows a deduction to any publicly held corporation and its affiliates for certain compensation paid to “covered employees” in a taxable year to the extent that compensation to a covered employee exceeds $1 million. However, compensation that satisfies the requirements of an exception for “qualified performance-based compensation” is not subject to this deduction limitation. For compensation awarded under a plan to fit within this exception under Section 162(m), among other things, the following terms must be disclosed to and approved by the stockholders before the compensation is paid: (i) a description of the employees eligible to receive such awards; (ii) a per-person limit on the number of shares subject to stock options, stock appreciation rights and performance-based stock awards that may be granted to any employee under the plan in any year; and (iii) a description of the business criteria underlying the performance goals on the basis of which performance-based awards may be granted (or become vested or exercisable). Although stockholder approval is one of the requirements of the exception to the deductibility

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limits under Section 162(m), even with stockholder approval, the Board and Compensation Committee cannot guarantee that awards under the Amended 2015 Stock Plan will be deductible as qualified performance-based compensation under Section 162(m). In addition, the Compensation Committee has and will continue to have authority to pay or provide compensation (including under the Amended 2015 Stock Plan) that is not deductible under Section 162(m) in order to maintain a competitive compensation program and provide compensation that will attract and retain highly qualified executives.

Summary of the Amended 2015 Stock Plan

The following summary describes the material terms of the Amended 2015 Stock Plan. This summary of the Amended 2015 Stock Plan is not a complete description of all provisions of the Amended 2015 Stock Plan and is qualified in its entirety by reference to the Amended 2015 Stock Plan, which is filed as Appendix A to this Proxy Statement.

Purpose; Term.  The purpose of the Amended 2015 Stock Plan is to secure for the Company and its stockholders the benefits arising from capital stock ownership by employees, officers, and directors of, as well as consultants and advisors to, the Company, its parents and its subsidiaries. Unless sooner terminated in accordance with its terms, the Amended 2015 Stock Plan will terminate upon the close of business on March 14, 2026.

Administration.  The Amended 2015 Stock Plan is administered by the Compensation Committee and its authorized delegates. Subject to the terms of the Amended 2015 Stock Plan, the Compensation Committee has the authority to determine the individuals to whom, and the time or times at which, awards are made, the number of shares of Common Stock subject to each award, and the terms of all awards and all award agreements; to construe the plan and the award agreements under the plan; to prescribe the forms, rules and procedures relating to the plan; to determine the form of settlement of awards (whether in cash, shares of Common Stock, or other property); and to make all other determinations and take all other actions that are, in the Compensation Committee’s judgment, necessary or desirable for the administration of the Amended 2015 Stock Plan. Notwithstanding the foregoing, except in connection with a change in control of the Company or the death or disability of a participant after the time an award has been granted, the Compensation Committee may not accelerate the time or times at which an award vests or becomes exercisable. The Compensation Committee’s construction and interpretation of the terms and provisions of the Amended 2015 Stock Plan and any award agreement are final and conclusive.

Shares Reserved.  Subject to adjustment as described below, the number of shares of Common Stock that are reserved for issuance under the Amended 2015 Stock Plan is 36,000,000 shares (which includes 25,000,000 and 6,000,000 shares that were approved by stockholders at the Annual Meeting of Stockholders in 2015 and 2016, respectively). Shares of Common Stock underlying any award made under the Amended 2015 Stock Plan to the extent the award expires, terminates or is forfeited, in whole or in part, without the issuance of shares become available for issuance again under the Amended 2015 Stock Plan. Shares of Common Stock that are retained or withheld by or delivered to the Company to satisfy any purchase or exercise price or tax withholding obligation, and the total number of shares of Common Stock subject to a SAR, any portion of which is settled in shares of Common Stock, are treated as issued under the Amended 2015 Stock Plan. The shares available for issuance under the Amended 2015 Stock Plan are not increased by any shares that have been delivered under the Amended 2015 Stock Plan that are subsequently repurchased using the proceeds directly attributable to stock option exercises.

Maximum Number of Shares Available under ISOs.  The maximum aggregate number of shares that may be issued under the Amended 2015 Stock Plan upon the exercise of ISOs is 36,000,000.

Individual Limits.  The maximum number of shares of Common Stock subject to stock options and the maximum number of shares of Common Stock subject to SARs that may be granted to any person in any calendar year is, in each case, 2,000,000 shares. The maximum number of shares subject to other awards that may be granted to any person in any calendar year is 1,000,000 shares.

Non-Employee Director Limits.  A participant in the Amended 2015 Stock Plan who is a non-employee member of our Board may not receive shares of Common Stock underlying awards under the Amended 2015

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Stock Plan in any calendar year in excess of 750,000 shares. This limit does not apply to any award or shares of Common Stock granted pursuant to a director’s election to receive shares of Common Stock in lieu of cash fees.

Eligible Participants.  The Compensation Committee may select recipients of awards from among key employees, officers, or directors of, or consultants or advisors to the Company and its parents and subsidiaries who are expected to contribute to the Company’s future growth and success. Eligibility for stock options intended to be “incentive stock options” within the meaning of Section 422 of the Code is limited to employees of the Company or its parents and subsidiaries, in accordance with Section 422 of the Code. As of March 16, 2017, 351 employees, six consultants, and five directors are eligible to participate in the Amended 2015 Stock Plan.

Awards.  The Amended 2015 Stock Plan provides for grants of stock options, restricted stock, unrestricted stock, SARs, stock units, restricted stock units, and performance awards. Dividend equivalents may also be provided in connection with awards under the Amended 2015 Stock Plan.

Restricted and Unrestricted Stock.  A restricted stock award is an award of stock subject to forfeiture restrictions, while an unrestricted stock award is not subject to restrictions.
Stock Options and SARs.  The Amended 2015 Stock Plan provides for the grant of incentive stock options, non-statutory stock options and SARs. Stock options entitle the holder to acquire shares of Common Stock upon payment of the exercise price. A SAR is a right entitling the holder upon exercise to receive an amount (payable in cash or in shares of Common Stock of equivalent value) equal to the excess of the fair market value of the shares of Common Stock subject to the SAR over the base value from which appreciation under the SAR is to be measured. The exercise price of a stock option, and the base value against which a SAR is to be measured, may not be less than the fair market value (or, in the case of an incentive stock option granted to a ten percent stockholder, 110% of the fair market value) of a share of Common Stock on the date of grant. The Compensation Committee will determine when stock options or SARs become exercisable and the terms on which such awards remain exercisable. Stock options and SARs will generally have a maximum term of ten years (or, in the case of an incentive stock option granted to a ten percent stockholder, five years); however, in general, if (i) a participant holds an outstanding but unexercised stock option or SAR on the date that is ten years from the date of grant (or, in the case of a stock option or SAR with a maximum term of less than ten years, the last day of such maximum term) and has not exercised such stock option or SAR as of the regular closing time of the exchange on which shares of our Common Stock are traded on the last day of the applicable term of the stock option or SAR, (ii) on such date shares of our Common Stock is publicly traded, and (iii) at such time the fair market value of a share of our Common Stock is greater than the exercise price or base value applicable to such stock option or SAR, such stock option or SAR to the extent then vested and exercisable will be automatically exercised on the last day of the applicable term and the number of shares of Common Stock otherwise to be delivered upon exercise of the stock option or SAR will be reduced by, in the case of a stock option, a number of shares having a fair market value equal to the aggregate exercise price of the stock option being exercised and, in the case of a stock option or SAR, a number of shares having a fair market value equal to the amount necessary to satisfy any applicable tax withholding obligation (but not in excess of the minimum tax withholding required by law).
Stock Units.  A stock unit award is denominated in shares of Common Stock and entitles the recipient to receive stock or cash measured by the value of the shares in the future. The delivery of Common Stock or cash under a stock unit may be subject to the satisfaction of performance or other vesting conditions.
Performance Awards.  A performance award is an award of a stock option, SAR, restricted stock, or restricted stock unit the vesting, settlement or exercisability of which is subject to specified performance criteria.

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Vesting.  The Compensation Committee will determine the time or times at which awards will vest or become exercisable. However, no award may vest prior to the first anniversary of the grant date, subject to the Compensation Committee’s discretion to accelerate the vesting of such an award upon except in connection with a change in control of the Company, the death or disability of a participant.

Termination of Employment or Service.  The Compensation Committee determines the effect of the termination of employment or service on an award. Unless otherwise provided by the Compensation Committee, upon a termination of employment or service, all unvested stock options and SARs will terminate, all other unvested awards will be forfeited, and vested stock options and SARs then held by the participant will remain exercisable for a period of three months, or twelve months in the case of death or disability, following such termination of employment or, in each case, until the applicable expiration date, if earlier. All stock options and SARs held by a participant, whether vested or unvested, immediately prior to the participant’s termination of employment or service will terminate if such termination is for cause.

Performance Criteria.  The Amended 2015 Stock Plan provides that grants of performance awards may be made based upon and subject to achieving performance objectives over a specified performance period. Performance criteria for awards that are intended to qualify for the performance-based compensation exception under Section 162(m) are limited to an objectively determinable measure or measures of performance relating to any or any combination of the following (measured either absolutely or by reference to an index or indices and determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof): sales; revenue; assets; expenses; earnings before or after deduction for all or any portion of interest, taxes, depreciation, amortization or equity expense, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital, capital employed or assets; one or more operating ratios; operating income or profit, including on an after-tax basis; net income; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; stock price; stockholder return; sales of particular products or services; customer acquisition or retention; acquisitions and divestitures (in whole or in part); joint ventures, strategic alliances, licenses or collaborations; spin-offs, split-ups and the like; reorganizations; recapitalizations, restructurings, financings (issuance of debt or equity) or refinancings; manufacturing or process development; or achievement of clinical trial or research objectives, regulatory or other filings or approvals or other product development milestones. A performance criterion and any targets with respect thereto determined by the Compensation Committee need not be based upon an increase, a positive or improved result or avoidance of loss.

To the extent consistent with the requirements for satisfying the performance-based compensation exception under Section 162(m), the Compensation Committee may provide in the case of any award intended to qualify for such exception that one or more of the performance objectives applicable to the award will be adjusted in an objectively determinable manner to reflect events (for example, the impact of charges for restructurings, discontinued operations, mergers, acquisitions, extraordinary items, and other unusual or non-recurring items, and the cumulative effects of tax or accounting changes, each as defined by U.S. generally accepted accounting principles) occurring during the performance period that affect the applicable performance objectives.

Non-transferability of Awards.  In general, awards under the Amended 2015 Stock Plan may not be transferred except by will or the laws of descent and distribution, unless, in the case of awards other than incentive stock options, expressly permitted in the agreement evidencing the award. Awards other than incentive stock options may be transferred pursuant to a domestic relations order (within the meaning of Rule 16a-12 of the Exchange Act).

Recovery of Compensation.  The Compensation Committee may cancel, rescind, withhold or otherwise limit or restrict any award at any time under the Amended 2015 Stock Plan if the participant is not in compliance with the provisions of the Amended 2015 Stock Plan or the award or if the participant breaches any agreement with the Company with respect to non-competition, non-solicitation or confidentiality. The Compensation Committee also may recover any award or payments or gain with respect to any award under the Amended 2015 Stock Plan in accordance with any applicable Company clawback or recoupment policy, as such policy may be in effect from time to time, or as otherwise required by applicable law or applicable stock exchange listing standards. On April 26, 2017, the Board adopted a policy providing that, if the Company is

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required to prepare an accounting restatement due to material non-compliance with financial reporting requirements under applicable securities laws, with respect to any cash bonus or other cash compensation paid or awarded, or equity-based bonus or other equity-based incentive compensation that was exercised, vested or settled, within six months preceding such restatement, and that was granted or earned or became vested based wholly or in part upon the attainment of any financial reporting measure, if the recipient of such cash or equity-based bonus or other cash or equity-based incentive compensation engaged in fraud, intentional misconduct, or gross negligence that caused or partially caused the need for the restatement, the Board generally may seek reimbursement of any amount paid under an award in excess of what would have been paid had such error not been made.

Adjustment Provisions.  If the outstanding shares of Common Stock are exchanged for a different number or kind of shares or other securities of the Company or increased or decreased as a result of any recapitalization, reclassification, stock dividend, stock split or reverse stock split, or additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares of Common Stock or other securities, an appropriate and proportionate adjustment will be made to (a) the maximum number and kind of shares reserved for issuance under the Amended 2015 Stock Plan, (b) the maximum number of shares that can be issued upon exercise of incentive stock options under the Amended 2015 Stock Plan, (c) the limitations on the number of shares of Common Stock that may be delivered through awards granted to any person in any calendar year and the limitations on awards granted to our non-employee directors, (d) the number and kind of shares or other securities subject to any then outstanding awards under the Amended 2015 Stock Plan, and (e) the exercise or purchase prices (or base values) relating to awards and any other provision of awards affected by such change, without (in the case of stock options or SARs) changing the aggregate exercise price (or base values) for such awards.

Change in Control.  In the event of a corporate transaction (as defined in the Amended 2015 Stock Plan) in which awards are not assumed or substituted by the acquiring or succeeding corporation (or an affiliate thereof), the Compensation Committee will provide for the accelerated vesting or delivery of shares under awards and may provide for (a) the cash-out of outstanding awards or (b) the termination of awards that are not exercised prior to the consummation of the transaction. In the event of a corporate transaction in which awards are assumed or substituted by the acquiring or succeeding corporation (or an affiliate thereof), the Compensation Committee will provide that such awards will continue in existence with appropriate adjustments or modifications. The performance-based vesting of any award is determined based on the greater of (a) assumed achievement of the applicable performance goals at 100% of target with the result prorated based on the period of the Participant’s actual employment or service relationship with the Company prior to the corporate transaction during the applicable full performance period, or (b) actual achievement of the applicable performance goals through the date of the corporate transaction. Except as the Compensation Committee may otherwise provide in any case, all awards will terminate automatically or, in the case of restricted stock, will be forfeited automatically upon the consummation of a covered transaction other than awards that are assumed by the acquiring or succeeding corporation. In general, a corporate transaction under the Amended 2015 Stock Plan means a consolidation, merger, combination or reorganization of the Company, the sale, lease or other disposition of all or substantially all of the assets of the Company, a transaction or series of related transactions involving a person or entity, or a group of affiliated persons or entities in which such persons or entities become the owners, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction, or a dissolution or liquidation of the Company.

Prohibition on Repricing.  Except in connection with certain corporate transactions involving the Company, the Company may not, without obtaining stockholder approval, amend the terms of outstanding stock options or SARs to reduce the exercise price or base value of such awards, cancel outstanding stock options or SARs in exchange for stock options or SARs with an exercise price or base value that is less than the exercise price or base value applicable to the original award, or cancel outstanding stock options or SARs that have an exercise price or base value greater than the fair market value of a share of Common Stock on the date of such cancellation in exchange for cash or other consideration.

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Plan Amendments and Termination.  The Board may at any time, and from time to time, modify or amend the Amended 2015 Stock Plan in any respect, except that any such modification or amendment will be subject to stockholder approval to the extent required by applicable tax or securities laws or stock exchange listing requirements, and no such modification or amendment may adversely affect the rights under an award previously granted to a participant without such participant’s consent. The Compensation Committee may amend outstanding award agreements only with the consent of the affected participant, except that the Administrator, without the consent of the affected participant, may amend or modify the terms and provisions of the Amended 2015 Stock Plan and of any outstanding incentive stock options granted under the Amended 2015 Stock Plan to the extent necessary to qualify any or all such stock options as incentive stock options or to the extent necessary to ensure the qualification of the Amended 2015 Stock Plan under Rule 16b-3 (if then applicable) or compliance with, or exemption from, Section 409A of the Code.

The Board may at any time suspend or terminate the Amended 2015 Stock Plan except that any such suspension or termination may not adversely affect the rights under an award previously granted to a participant while the Amended 2015 Stock Plan is in effect without the consent of the affected participant.

Federal Income Tax Consequences

The following is a summary of some of the material federal income tax consequences associated with the grant and exercise of awards under the Amended 2015 Stock Plan under current federal tax laws and certain other tax considerations associated with awards under the Amended 2015 Stock Plan. The summary does not address tax rates or non-U.S., state, or local tax consequences, nor does it address employment-tax or other federal tax consequences except as noted.

Restricted Stock.  A participant who is awarded or purchases shares subject to a substantial risk of forfeiture generally does not have income until the risk of forfeiture lapses. When the risk of forfeiture lapses, the participant has ordinary income equal to the excess of the fair market value of the shares at that time over the purchase price, if any, and a corresponding deduction is generally available to the Company. However, a participant may make an election under Section 83(b) of the Code to be taxed on restricted stock when it is acquired rather than later, when the substantial risk of forfeiture lapses. An 83(b) election must be made not later than thirty (30) days after the transfer of the shares to the participant and must satisfy certain other requirements. A participant who makes an effective 83(b) election will realize ordinary income equal to the fair market value of the shares as of the time of acquisition less any price paid for the shares. A corresponding deduction will generally be available to the Company. Fair market value for this purpose is determined without regard to the forfeiture restrictions. If a participant makes an effective 83(b) election, no additional income results by reason of the lapsing of the restrictions.

For purposes of determining capital gain or loss on a sale of shares awarded under the Amended 2015 Stock Plan, the holding period in the shares begins when the participant realizes taxable income with respect to the transfer. The participant’s tax basis in the shares equals the amount paid for the shares plus any income realized with respect to the transfer. However, if a participant makes an effective 83(b) election and later forfeits the shares, the tax loss realized as a result of the forfeiture is limited to the excess of what the participant paid for the shares (if anything) over the amount realized (if any) in connection with the forfeiture.

Incentive Stock Options.  In general, a participant realizes no taxable income upon the grant or exercise of an incentive stock option. However, the exercise of an incentive stock option may result in an alternative minimum tax liability to the participant. With some exceptions, a disposition of shares purchased under an incentive stock option within two years from the date of grant or within one year after exercise produces ordinary income to the participant (and generally a deduction to the Company) equal to the value of the shares at the time of exercise less the exercise price. Any additional gain recognized on the disposition is treated as a capital gain, for which the Company is not entitled to a deduction. If the participant does not dispose of the shares until after the expiration of these one- and two-year holding periods, any gain or loss recognized upon a subsequent sale is treated as a long-term capital gain or loss, for which the Company is not entitled to a deduction.

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Non-statutory Stock Options.  In general, a participant has no taxable income upon the grant of a non-statutory stock option but realizes income in connection with exercise of the option in an amount equal to the excess (at time of exercise) of the fair market value of the shares acquired upon exercise over the exercise price. A corresponding deduction is generally available to the Company. Upon a subsequent sale or exchange of the shares, any recognized gain or loss is treated as a capital gain or loss for which the Company is not entitled to a deduction. An incentive stock option that is exercised more than three months after termination of employment (other than termination by reason of death) is generally treated as a non-statutory stock option. Incentive stock options are also treated as non-statutory stock options to the extent they first become exercisable by an individual in any calendar year for shares having a fair market value (determined as of the date of grant) in excess of $100,000.

SARs.  The grant of a SAR does not itself result in taxable income, nor does taxable income result merely because a SAR becomes exercisable. In general, a participant who exercises a SAR for shares of stock or receives payment in cancellation of a SAR will have ordinary income equal to the amount of any cash and the fair market value of any stock received. A corresponding deduction is generally available to the Company.

Restricted Stock Units.  The grant of a restricted stock unit does not itself result in taxable income. Instead, the participant is taxed upon delivery of the underlying shares (and a corresponding deduction is generally available to the Company). If the shares delivered are restricted for tax purposes, the participant will be subject to the rules described above for restricted stock.

Section 162(m).  As described above under “Reasons for Seeking Stockholder Approval,” Section 162(m) generally disallows a deduction to a publicly held corporation and its affiliates for certain compensation paid to a “covered employee” in a taxable year in excess of $1 million, unless the compensation satisfies the requirements of the “performance-based compensation” exception under Section 162(m). Stock options, SARs and certain performance awards under the Amended 2015 Stock Plan are generally intended to satisfy the requirements of this exception. However, as discussed above, the Compensation Committee will have discretionary authority to grant awards under the Amended 2015 Stock Plan that do not satisfy the requirements of this exception.

Certain Change in Control Payments.  Under Section 280G of the Code, the vesting or accelerated exercisability of stock options or the vesting and payment of other awards in connection with a change in control of a corporation may be required to be valued and taken into account in determining whether participants have received compensatory payments contingent on the change in control in excess of certain limits. If these limits are exceeded, a substantial portion of amounts payable to the participant, including income recognized by reason of the grant, vesting or exercise of awards, may be subject to an additional 20% federal tax and may be non-deductible to the Company.

New Plan Benefits

Awards under the Amended 2015 Stock Plan are subject to the discretion of the Compensation Committee and, therefore, are not determinable at this time. The Compensation Committee has full discretion to determine the shares subject to awards to be granted to participants under the Amended 2015 Stock Plan, subject to the limits described above under Summary of the Amended 2015 Stock Plan — Individual Limits and — Non-employee Director Limits.

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The table below reflects all awards that have been granted under the 2015 Stock Plan. On March 16, 2017, the closing price of a share of our Common Stock as reflected on the NASDAQ was $1.38.

 
Name and Position   Number of
Units
Stanley C. Erck
President and CEO
    2,000,000  
Barclay A. Phillips
SVP, Chief Financial Officer and Treasurer
    475,000  
Gregory M. Glenn, M.D.
President, Research and Development
    700,000  
John A. Herrmann III
SVP, General Counsel and Corporate Secretary
    475,000  
John J. Trizzino
SVP, Commercial Operations
    475,000  
Executive Officer Group     4,125,000  
Non-Executive Director Group     260,000  
Non-Executive Officer Employee Group     15,003,937  

Required Vote

Approval of the Amended 2015 Stock Plan requires the affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy and voting on the matter. Abstentions and broker non-votes will not be counted as shares voting on this matter and accordingly will have no effect on the approval of this Proposal No. 4.

FOR PROPOSAL NO. 4, THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR”
THE ADOPTION OF THE AMENDED 2015 STOCK PLAN, INCLUDING AN AMENDMENT
TO INCREASE THE NUMBER OF SHARES BY 5,000,000 UNDER THE
AMENDED 2015 STOCK PLAN.

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PROPOSAL NO. 5
 
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE
COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR THE FISCAL YEAR ENDING DECEMBER 31, 2017

The Audit Committee, comprised solely of independent directors, has appointed the firm Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017. The Board recommends that the stockholders of the Company ratify this appointment. Although ratification is not required by the Company’s By-laws or otherwise, the Company believes that it is advisable to give stockholders an opportunity to ratify this selection.

The affirmative vote of the majority of the shares present in person or represented by proxy at the 2017 Annual Meeting and voting on this proposal shall constitute ratification of the appointment of Ernst & Young LLP. If the appointment of Ernst & Young LLP as the Company’s independent auditor is ratified, the Audit Committee may, in its discretion, change the appointment at any time during the year should it determine such a change would be in the best interest of the Company and its stockholders. If the stockholders, however, do not ratify the appointment, the Audit Committee will reconsider whether to retain Ernst & Young LLP, but may proceed with the retention of Ernst & Young LLP if it deems it to be in the best interest of the Company and its stockholders.

Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and will have an opportunity to address the Annual Meeting if they desire to do so. They will also be available to respond to appropriate questions from stockholders.

Fees and Services

The following table shows the fees billed by Ernst & Young LLP for professional services rendered as the Company’s independent registered public accounting firm during the 2016 and 2015 fiscal years.

   
  Ernst & Young LLP
Fee Category   2016
($)
  2015
($)
Audit Fees     760,758 (1)      547,610 (1) 
Audit-Related Fees            
Tax Fees     44,600       72,320  
All Other Fees            
Total Fees     805,358       619,930  

(1) Includes $122,000 and $55,165 for services related to the Company’s public offerings of Convertible Senior Notes and Common Stock in 2016 and 2015, respectively.

Audit Fees.  Consists of fees for professional services rendered in connection with the audit of the Company’s annual consolidated financial statements for 2016 and 2015 and the reviews of the consolidated financial statements included in the Company’s quarterly reports on Forms 10-Q. These amounts included fees billed for annual financial statement and internal control audits, quarterly reviews, consultations on accounting matters, and registration statement filings and consents.

Audit-Related Fees.  Consists of fees for assurance and related services that were reasonably related to the performance of the independent registered public accounting firm’s audit or review of the Company’s financial statements.

Tax Fees.  Consists of fees for professional services rendered for tax compliance, tax advice, and tax planning for the Company. These amounts represent those billed for tax return preparation for the Company and its subsidiary. All material tax fees were pre-approved by the Audit Committee.

All Other Fees.  Consists of fees for products and services provided other than those otherwise described above.

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Audit Committee Pre-Approval Policies and Procedures

As contemplated by applicable law and as provided by the Audit Committee’s charter, the Audit Committee is responsible for the appointment, compensation, retention, and oversight of the work of the Company’s independent registered public accounting firm. In connection with such responsibilities, the Audit Committee is required, and it is the Audit Committee’s policy, to pre-approve the audit and permissible non-audit services (both the type and amount) performed by the Company’s independent registered public accounting firm in order to ensure that the provision of such services does not impair the firm’s independence, in appearance or fact.

Under the policy, unless a type of service to be provided by the independent registered public accounting firm has received general pre-approval, it will require separate pre-approval by the Audit Committee. If fees for a proposed service of a type that has been pre-approved exceed the pre-approved amount, the Audit Committee and the independent registered public accounting firm must confer and the Audit Committee must grant its approval before further work may be performed. For audit services (including the annual financial statement audit, quarterly statement reviews, and other procedures required to be performed by the independent registered public accounting firm to be able to form an opinion on the Company’s consolidated financial statements), the independent registered public accounting firm must provide to the Audit Committee in advance an engagement letter, outlining the scope of audit services proposed to be performed with respect to the audit for that fiscal year and associated fees. If, in advance of its meeting, the Audit Committee agrees to the engagement letter, the engagement will be formally accepted by the Audit Committee at its next regularly scheduled meeting.

All permissible non-audit services not specifically approved in advance must be separately pre-approved by the Audit Committee, as noted above, with the exception of certain services of limited financial expense for which the Audit Committee has authorized the Chairman and the Chief Financial Officer to hire at their discretion. Generally, requests or applications to provide services must be in writing and include a description of the proposed services, the anticipated costs and fees, and the business reasons for engaging the independent registered public accounting firm to perform the services. The request must also include a statement as to whether the request or application is consistent with the SEC rules on registered public accounting firm independence.

To ensure prompt handling of unexpected matters, the Audit Committee has delegated authority to pre-approve audit and permissible non-audit services between regularly scheduled meetings of the committee to its chair and, in certain limited instances, to its Chief Financial Officer, who are each responsible for reporting any pre-approval decisions to the Audit Committee at its next scheduled meeting. Except as noted above, the Audit Committee has not and will not delegate to management of the Company the Audit Committee’s responsibilities to pre-approve services performed by the independent registered public accounting firm. The Audit Committee pre-approved all audit services provided to the Company by each independent registered public accounting firm engaged during the fiscal years ended December 31, 2016 and 2015.

FOR PROPOSAL NO. 5, THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE
FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS
THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR THE FISCAL YEAR ENDING DECEMBER 31, 2017

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ADDITIONAL INFORMATION

Stockholder Proposals

Stockholder proposals for inclusion in the Company’s proxy statement:  Stockholders who wish to present proposals for inclusion in the Company’s proxy materials for the Company’s 2018 Annual Meeting of Stockholders should follow the procedures prescribed in Rule 14a-8 under the Exchange Act and the Company’s By-laws. Those procedures require that the Company receive a stockholder proposal in writing at the Company’s principal executive offices no later than January 4, 2018. If the date of next year’s annual meeting of stockholders is changed by more than 30 days from the anniversary date of this year’s Annual Meeting (June 15, 2017), then the deadline is the close of business on the 10th day following the date on which such notice of the date of the meeting was mailed or public disclosure of the date of such meeting was made, whichever occurs first.

Other stockholder proposals:  Under the Company’s By-laws, stockholders who wish to include a proposal in the Company’s 2018 Annual Meeting of Stockholders (but do not wish to include such proposal in the Company’s proxy materials) must give the Company timely written notice. To be timely, the Company’s By-laws provide that such notice must be received by the Company at its principal executive offices not less than 60 days nor more than 90 days prior to the anniversary date of this year’s Annual Meeting (June 15, 2017); provided, however, in the event that the date of the meeting is more than 30 days before or after the anniversary date of the prior year’s annual meeting of stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the date on which such notice of the date of the meeting was mailed or public disclosure of the date of such meeting was made, whichever occurs first.

In addition to being timely, any such notice must include the following information regarding each matter the stockholder proposes to bring before the Annual Meeting:

a brief description of the business desired to be brought before the Annual Meeting and the reasons for conducting such business at the Annual Meeting;
the name and address, as they appear on the Company’s books, of the stockholder proposing such business;
the number of shares of capital stock and other securities of the Company which are beneficially owned by the stockholder and each Stockholder Associated Person;
any derivative positions held of record or beneficially by the stockholder and any Stockholder Associated Person and whether and the extent to which any hedging or other transactions or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement, or understanding has been made, the effect or intent of which is to increase or decrease the voting power or economic interest of, such stockholder or any Stockholder Associated Person with respect to the Company’s securities; and
any material interest of the stockholder or any Stockholder Associated Person in such proposal.

For purposes of this Proxy Statement, a “Stockholder Associated Person” of any stockholder means (i) any “affiliate” or “associate” (as those terms are defined in Rule 12b-2 under the Exchange Act) of the stockholder who owns beneficially or of record any capital stock or other securities of the Company or, through one or more derivative positions, has an economic interest (whether positive or negative) in the price of securities of the Company and (ii) any person acting in concert with such stockholder or any affiliate or associate of such stockholder with respect to the capital stock or other securities of the Company.

Please note that if the stockholder proposes to nominate a director for election to the Company’s Board, the procedures described under the caption “Nomination Procedures” herein relating to director nominations must be followed.

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Other Matters

The Board knows of no other matters which will be presented for consideration at the Annual Meeting. If any other business should come before the Annual Meeting, however, it is the intention of the persons named in the enclosed proxy to vote, or otherwise act, in accordance with their best judgment on such matters.

* * *

THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE ANNUAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE, OR VOTE OVER THE INTERNET OR TELEPHONE AS DESCRIBED THEREIN. YOUR PROMPT RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE ANNUAL MEETING, AND YOUR COOPERATION IS APPRECIATED. STOCKHOLDERS WHO ATTEND THE ANNUAL MEETING MAY VOTE THEIR STOCK PERSONALLY EVEN IF THEY HAVE SENT IN THEIR PROXIES.

By the Order of the Board of Directors
[GRAPHIC MISSING]
John A. Herrmann III
Senior Vice President, General Counsel and
Corporate Secretary

April 28, 2017

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APPENDIX A

[GRAPHIC MISSING]

NOVAVAX, INC.
2015 STOCK INCENTIVE PLAN
AMENDED AND RESTATED APRIL 26, 2017
 
Adopted by the Board of Directors as of April 26, 2017

1. Purpose.

The purpose of the Plan is to secure for the Company and its stockholders the benefits arising from capital stock ownership by employees, officers and directors of, and consultants or advisors to, the Company. Capitalized terms and operational rules related to such terms not otherwise defined in the Plan are defined on Exhibit A, which is incorporated herein by reference.

2. Type of Stock Awards and Administration.

(a) Types of Stock Awards.  The Plan provides for the grant of Options (including Incentive Stock Options and Non-Statutory Options), Restricted Stock, Unrestricted Stock, Stock Appreciation Rights (or SARs), Stock Units, Restricted Stock Units (or RSUs) and Performance Awards.

(b) Administration.

(i) The Plan will be administered by the Administrator, whose construction and interpretation of the terms and provisions of the Plan and any Award Agreement shall be final and conclusive. The Administrator may in its sole discretion grant Stock Awards with respect to shares of Common Stock and direct the Company to issue shares of Common Stock upon the grant, vesting or exercise of such Stock Awards as provided in the Plan.

(ii) Subject to the express provisions of the Plan, the Administrator shall have authority:

(1) To determine the individuals to whom, and the time or times at which, Stock Awards are made, the number of shares subject to each Stock Award and the terms of all Stock Awards and Award Agreements, which need not be identical;

(2) To construe the Plan and Award Agreements;

(3) To prescribe forms, rules and procedures relating to the Plan;

(4) To determine the form of settlement of Stock Awards (whether in cash, shares of Common Stock or other property); and

(5) To make all other determinations and take all other actions that are, in the judgment of the Administrator, necessary or desirable for the administration of the Plan.

(iii) The Administrator may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award Agreement (or any inconsistency between the Plan and any Award Agreement) in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. No director or individual acting pursuant to authority delegated by the Administrator shall be liable for any action or determination under the Plan made in good faith.

3. Participant Eligibility.

(a) General.  The Administrator may select Participants from among key employees, officers or directors of, or consultants or advisors to, the Company who are expected to contribute to the Company’s future growth and success; provided, however, that the class of persons to whom Incentive Stock Options may be granted shall be limited to employees of the Company, and provided further, that persons to whom Non-Statutory Options or SARs may be granted shall be limited to persons employed by or providing services to the Company and its “qualifying subsidiaries.” For these purposes, a “qualifying subsidiary” means a subsidiary in which the Company owns a “controlling interest” as described in Treasury Regulations §1.409A-1(b)(5)(iii)(E)(1).

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(b) Grant of Stock Awards to Directors and Officers.  In the discretion of the Administrator, the selection of a director or officer (as defined for purposes of Rule 16b-3) as a Participant, and the terms of any Stock Award granted to such Participant, including the grant date, the purchase or exercise price, the number of shares underlying the Stock Award and other terms and conditions, shall be determined either (i) by the Board, of which all members shall be “outside directors” and “non employee directors” (each as hereinafter defined) or (ii) by the Compensation Committee, consisting of two or more directors having full authority to act in the matter, each of whom shall be an “outside director” and a “non-employee director” (with any action of the Compensation Committee subject to approval or ratification by the Board, if required). For the purposes of the Plan, a director shall be deemed to be a “non-employee director” only if such director qualifies as a “non-employee director” within the meaning of Rule 16b-3 and shall be deemed to be an “outside director” only if such director qualifies as an “outside director” within the meaning of Section 162(m).

4. Stock Subject to Plan.

(a) Number of Shares.  Subject to adjustment as provided in Section 10 below, the maximum number of shares of Common Stock that may be delivered in satisfaction of Stock Awards under the Plan shall be 36,000,000 shares. Subject to adjustment as provided in Section 10 below, the maximum aggregate number of shares that may be issued upon the exercise of Incentive Stock Options shall in no event exceed 36,000,000 shares.

(b) Reversion of Shares to the Share Reserve.  Shares of Common Stock underlying any Stock Award to the extent the Stock Award, for any reason, expires, terminates or is forfeited, in whole or in part, without the issuance of shares, shall revert to and again become available for issuance under the Plan. Shares of Common Stock that are retained or withheld by or delivered to the Company to satisfy any purchase or exercise price or tax withholding obligation, and the total number of shares of Common Stock subject to a SAR any portion of which is settled in shares of Common Stock will be treated as issued under the Plan. The shares of Common Stock available for issuance pursuant to Section 4(a) will not be increased by any shares that have been delivered under the Plan that are subsequently repurchased using the proceeds directly attributable to stock option exercises.

(c) Individual Limits.  The following additional limits will apply to Stock Awards of the specified type granted to any person in any calendar year:

(i) Options: 2,000,000 shares of Common Stock.

(ii) SARs: 2,000,000 shares of Common Stock.

(iii) Stock Awards other than Options or SARs: 1,000,000 shares of Common Stock.

In applying the foregoing limits, (A) all Stock Awards of the specified type granted to the same person in the same calendar year will be aggregated and made subject to one limit; (B) the limits applicable to Options and SARs refer to the number of shares of Common Stock subject to those Stock Awards; and (C) the share limit under clause (iii) refers to the maximum number of shares of Common Stock that may be delivered, or the value of which could be paid in cash or other property, under a Stock Award or Stock Awards of the type specified in clause (iii) assuming a maximum payout. The foregoing provisions will be construed in a manner consistent with Section 162(m), including, without limitation, where applicable, the rules under Section 162(m) pertaining to permissible deferrals of exempt awards.

(d) Non-employee Director Limits.  Notwithstanding any other provision of the Plan to the contrary, including subsection (c) above, a Participant who is a non-employee director, in any calendar year, may not receive shares of Common Stock underlying Stock Awards in excess of 750,000 shares. The foregoing limit shall not apply to any Stock Award or shares of Common Stock granted pursuant to a director’s election to receive shares of Common Stock in lieu of cash fees.