Document:

<PAGE>
                                 EXHIBIT 10.2.1

                    SECOND AMENDMENT TO AMENDED AND RESTATED
                          LOAN AND SECURITY AGREEMENT

         This SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT (this "Amendment") is entered into as of November ___, 2004, among
DELTA APPAREL, INC., a Georgia corporation ("Borrower"), Lenders signatory
hereto, and CONGRESS FINANCIAL CORPORATION (SOUTHERN), as Agent ("Agent").

                                  WITNESSETH:

         WHEREAS, Borrower, Agent, Guarantors and the Lenders party thereto
from time to time are parties to that certain Amended and Restated Loan and
Security Agreement dated as of October 3, 2003, as amended by that certain
First Amendment to Amended and Restated Loan and Security Agreement dated as of
August 30, 2004 (as amended, restated, refinanced, supplemented or otherwise
modified from time to time, the "Loan Agreement"; capitalized terms used herein
and not otherwise defined shall have the meanings ascribed to such terms in the
Loan Agreement), pursuant to which Agent and Lenders have agreed to make
Advances, issue or arrange for the issuance of Letters of Credit and make other
extensions of credit to Borrower from time to time pursuant to the terms and
conditions thereof and the other Financing Agreements;

         WHEREAS, Borrower has requested that certain terms and conditions of
the Loan Agreement be amended; and

         WHEREAS, Agent, Lenders and, by their respective acknowledgment
hereof, Guarantors have agreed to the requested amendments on the terms and
conditions provided herein;

         NOW THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

         1.       Amendments to the Loan Agreement.

         (a)      Section 1 of the Loan Agreement, Definitions, is hereby
                  amended and modified by amending and restating the
                  definitions of "Borrowing Base", "Commitment", "Maximum
                  Credit" and "Mortgages", in their respective entirety as
                  follows:

         ""Borrowing Base" shall mean, at any time, the amount equal to:

         (a)      the sum of:

                  (i)      eighty-five (85%) percent of the Net Amount of the
                           Eligible Accounts, plus

                  (ii)     the lesser of:

                           (1)      the Inventory Loan Limit, or

                           (2)      fifty-five (55%) percent of the Value of
                                    Eligible Inventory consisting of finished
                                    goods, raw materials consisting of raw
                                    cotton and yarn for such finished goods,
                                    and finished yarn categorized as
                                    work-in-process; plus

                  (iii)    to the extent greater than zero, the lesser of:

                           (1)      (A)      the Fixed Asset Loan Limit, minus

                                    (B)      the Fixed Asset Loan Amortization
                                             Amount, or

                                       1
<PAGE>
                           (2)      (A)     eighty-five percent (85%) of the
                                            appraised Net Orderly Liquidation
                                            Value of Eligible Equipment (other
                                            than the Tennessee Equipment)
                                            determined from time to time by a
                                            qualified appraiser acceptable to
                                            Agent, minus

                                    (B)      the Fixed Asset Loan Amortization
                                             Amount, plus

                  (iii)    the result of:

                           (1)      the Tennessee Asset Loan Limit, minus

                           (2)      the Tennessee Asset Loan Amortization
                                    Amount, minus

         (b)      Reserves.

         "Commitment" shall mean, at any time, as to each Lender, the principal
amount set forth beside such Lender's name on Schedule 1.21 hereto or in the
Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 13.6 hereof, as the same
may be adjusted from time to time in accordance with the terms hereof;
sometimes being collectively referred to herein as "Commitments".

         "Maximum Credit" shall mean the amount of $42,750,000.

         "Mortgages" shall mean, individually and collectively, each of the
following, as each may be amended, modified, supplemented, extended or restated
from time to time: (a) that certain Amended and Restated Deed of Trust,
Assignment of Rents and Leases, Security Agreement and Fixture Filing, dated
October 3, 2003, by Borrower in favor of Agent with respect to the Real
Property and related assets of Borrower located in Catawba County, North
Carolina; (b) that certain Amended and Restated Deed of Trust, Assignment of
Rents and Leases, Security Agreement and Fixture Filing, dated October 3, 2003,
by Borrower in favor of Agent with respect to the Real Property and related
assets of Borrower located in Knox County, Tennessee; (c) that certain Amended
and Restated Mortgage, Assignment of Rents and Leases and Security Agreement,
dated October 3, 2003, by Borrower in favor of Agent with respect to the Real
Property and related assets of Borrower located in Edgefield County, South
Carolina; (d) that certain Mortgage, Assignment of Rents and Leases and
Security Agreement dated as of October 3, 2003, with respect to the Real
Property and related assets of Borrower located in Fayette County, Alabama; and
(e) that certain Deed of Trust, Assignment of Rents and Leases, Security
Agreement and Fixture Filing, dated November 1, 2004, by Borrower in favor of
Agent with respect to the Real Property and related assets of Borrower located
in Anderson County, Tennessee."

         (b)      Section 1 of the Loan Agreement, Definitions, is hereby
                  further amended and modified by adding the following to the
                  end of the first sentence of the definition of "Reserves":

                  "; or (g) $800,000 in respect of the Tennessee Equipment to
                  be acquired by Borrower, provided that such reserve shall be
                  reduced from time to time in the amount of eighty percent
                  (80%) of Borrower's invoice cost (net of shipping, freight,
                  installation, and other so-called "soft costs") of new
                  Tennessee Equipment that is purchased by Borrower upon
                  receipt by Agent of (i) a copy of the invoice relating to
                  such Tennessee Equipment, (ii) a description of such
                  Tennessee Equipment, including, without limitation, the
                  manufacturer and vendor of such Tennessee Equipment and, if
                  applicable, the make, model and serial number of such
                  Tennessee Equipment, and (iii) evidence, in form and
                  substance satisfactory to Agent, of the receipt and the
                  installation of such Tennessee Equipment"

         (c)      Section 1 of the Loan Agreement, Definitions, is hereby
                  further amended and modified by adding the following
                  definitions in the appropriate alphabetical order:

                                       2
<PAGE>

         ""Tennessee Asset Loan Amortization Amount" shall mean (a) until the
earlier of the Renewal Date (as it may be extended pursuant to Section 13.1 of
this Agreement) and October 1, 2009, an amount equal to (i) from and after
December 1, 2004, through December 30, 2004, $15,278, plus (ii) from and after
the first day of each month commencing January 1, 2005, and through the last
day of each such month, the product of: (1) $15,278 multiplied by (2) the
cumulative number of months that have elapsed since December 1, 2004 and (b)
after the earlier of the Renewal Date (as it may be extended pursuant to
Section 13.1 of this Agreement) and October 1, 2009, $2,750,000.

         "Tennessee Asset Loan Limit" shall mean $2,750,000.

         "Tennessee Equipment" shall mean Eligible Equipment to be purchased by
Borrower for installation and use at the facility located on Real Property
owned by Borrower in Anderson County, Tennessee, and on which Agent has a
Mortgage, including, without limitation, Eligible Equipment in the form of
racking and forklifts."

         (d)      Section 13.3 of the Loan Agreement, Notices, is hereby
                  amended and modified by adding the following Section 13.3 to
                  the end of such Section:

                  "13.3 Notices. All notices, requests and demands hereunder
         shall be in writing and deemed to have been given or made: if
         delivered in person, immediately upon delivery; if by telex, telegram
         or facsimile transmission, immediately upon sending and upon
         confirmation of receipt; if by nationally recognized overnight courier
         service with instructions to deliver the next Business Day, one (1)
         Business Day after sending; and if by certified mail, return receipt
         requested, five (5) days after mailing. All notices, requests and
         demands upon the parties are to be given to the following addresses
         (or to such other address as any party may designate by notice in
         accordance with this Section):

                  If to Borrower:       DELTA APPAREL, INC.
                                        2750 Premiere Parkway, Suite 100
                                        Duluth, GA 30097
                                        Attention: Herb Mueller
                                        Telephone No.: (678) 775-6900
                                        Telecopy No.: (678) 584-1880

                  If to Agent:          CONGRESS FINANCIAL CORPORATION
                                        (SOUTHERN)
                                        110 East Broward Blvd.
                                        Suite 2050
                                        Fort Lauderdale, Florida 33301
                                        Attention: Kerry Maxwell, Portfolio
                                                   Manager
                                        Telephone No.: (954) 467-2262
                                        Telecopy No.: (954) 467-5520"

         (e)      The Loan Agreement is hereby amended and modified by adding
                  the Schedule 1.21 attached hereto as Schedule 1.21 to the
                  Loan Agreement.

         2.       Commitments; Pro Rata Shares. Each of the Lenders
acknowledges and agrees that, as of the effectiveness of this Amendment, (a)
the Commitment of such Lender is as set forth below such Lender's signature on
the signature pages to this Amendment and (b) the Pro Rata Share of such Lender
is as set forth below such Lender's signature on the signature pages to this
Amendment.

         3.       No Other Amendments or Waivers. Except in connection with the
amendments set forth above, the execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of Agent
or Lenders under the Loan Agreement or any of the other Financing Agreements,
nor constitute a waiver of any provision of the Loan Agreement or any of the
other Financing Agreements. Except for the amendments set forth above, the text
of the Loan Agreement and all other Financing Agreements shall remain unchanged
and in full force and effect and Borrower hereby ratifies and confirms its
obligations thereunder. This

                                       3
<PAGE>
Amendment shall not constitute a modification of the Loan Agreement or any of
the other Financing Agreements or a course of dealing with Agent or Lenders at
variance with the Loan Agreement or the other Financing Agreements such as to
require further notice by Agent or Lenders to require strict compliance with
the terms of the Loan Agreement and the other Financing Agreements in the
future, except as expressly set forth herein. Borrower acknowledges and
expressly agrees that Agent and Lenders reserve the right to, and do in fact,
require strict compliance with all terms and provisions of the Loan Agreement
and the other Financing Agreements, as amended herein. Borrower has no
knowledge of any challenge to Agent's or any Lender's claims arising under the
Financing Agreements, or to the effectiveness of the Financing Agreements.

         4.       Conditions Precedent to Effectiveness. This Amendment shall
become effective when, and only when, Agent shall have received:

         (a)      counterparts of this Amendment duly executed and delivered by
                  Borrower, Agent and the Lenders;

         (b)      with respect to each Mortgage, an opinion from local counsel
                  with respect to this Amendment or a title certification or
                  title opinion stating that no security interest, mortgage,
                  pledge, lien, charge or other encumbrance of any nature shall
                  have been recorded since the filing of such Mortgage;

         (c)      payment, for the benefit of the Lenders according to their
                  Pro Rata Shares of the Commitment, of a non-refundable fee in
                  the amount of $13,750, due and payable on the date hereof;
                  and

         (d)      such other information, documents, instruments or approvals
                  as Agent or Agent's counsel may reasonably require.

         5.       Representations and Warranties of Borrower. In consideration
of the execution and delivery of this Amendment by Agent and Lenders, Borrower
hereby represents and warrants in favor of Agent and Lenders as follows:

         (a)      the execution, delivery and performance of this Amendment and
                  the transactions contemplated hereunder are (i) all within
                  Borrower's corporate powers, (ii) have been duly authorized,
                  (iii) are not in contravention of law or the terms of
                  Borrower's certificate of incorporation, by-laws, or other
                  organizational documentation, or any indenture, agreement or
                  undertaking to which Borrower is a party or by which Borrower
                  or its property are bound and (iv) do not result in or
                  require the creation or imposition of any Lien upon or with
                  respect to any of the properties of Borrower or any of its
                  Subsidiaries;

         (b)      this Amendment has been duly authorized, validly executed and
                  delivered by one or more authorized signatories of Borrower
                  and constitutes the legal, valid and binding obligation of
                  Borrower, enforceable against Borrower in accordance with its
                  terms;

         (c)      the execution, delivery and performance of this Amendment
                  does not and will not require the consent or approval of any
                  regulatory authority or governmental authority or agency
                  having jurisdiction over Borrower that has not already been
                  obtained;

         (d)      no Default or Event of Default exists under the Loan
                  Agreement or the other Financing Agreements;

         (e)      as of the date hereof and after giving effect to this
                  Amendment, all representations and warranties of Borrower and
                  Guarantors set forth in the Loan Agreement and the other
                  Financing Agreements are true, correct and complete in all
                  material respects; and

                                       4
<PAGE>
         (f)      all Financing Agreements to which Borrower is a party,
                  including, without limitation, the Loan Agreement, constitute
                  valid and legally binding obligations of Borrower and are
                  enforceable against Borrower in accordance with the terms
                  thereof.

         6.       Counterparts. This Amendment may be executed in multiple
counterparts, each of which shall be deemed to be an original and all of which,
taken together, shall constitute one and the same agreement. In proving this
Amendment in any judicial proceedings, it shall not be necessary to produce or
account for more than one such counterpart signed by the party against whom
such enforcement is sought. Any signatures delivered by a party by facsimile
transmission or by e-mail transmission of an adobe file format document (also
known as a PDF file) shall be deemed an original signature hereto.

         7.       Reference to and Effect on the Financing Agreements. Upon the
effectiveness of this Amendment, on and after the date hereof, each reference
in the Loan Agreement to "this Agreement," "hereunder," "hereof" or words of
like import referring to the Loan Agreement, and each reference in the other
Financing Agreements to "the Loan Agreement" "thereunder," "thereof" or words
of like import referring to the Loan Agreement, shall mean and be a reference
to the Loan Agreement as amended hereby.

         8.       Affirmation of Guaranty. By executing this Amendment, each
Guarantor hereby acknowledges, consents and agrees that all of its obligations
and liability under the Guarantee to which it is a party and the other
Financing Documents to which it is a party remain in full force and effect, and
that the execution and delivery of this Amendment and any and all documents
executed in connection herewith shall not alter, amend, reduce or modify its
obligations and liability under such Guarantee or any of the other Financing
Agreements to which it is a party.

         9.       Costs, Expenses and Taxes. Borrower agrees to pay on demand
all costs and expenses in connection with the preparation, execution, and
delivery of this Amendment and the other instruments and documents to be
delivered hereunder, including, without limitation, the fees and out-of-pocket
expenses of counsel for Agent with respect thereto and with respect to advising
Agent as to its rights and responsibilities hereunder and thereunder. In
addition, Borrower agrees to pay any and all stamp and other taxes payable or
determined to be payable in connection with the execution and delivery of this
Amendment and the other instruments and documents to be delivered hereunder,
and agree to save Agent and Lenders harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission
to pay such taxes. Borrower hereby acknowledges and agrees that Agent may,
without prior notice to Borrower, charge such costs and fees to Borrower's loan
account pursuant to the Loan Agreement, which amounts shall constitute Loans
under the Loan Agreement.

         10.      Section Titles. The section titles contained in this
Amendment are included for the sake of convenience only, shall be without
substantive meaning or content of any kind whatsoever, and are not a part of
the agreement between the parties.

         11.      Entire Agreement. This Amendment and the other Financing
Agreements constitute the entire agreement and understanding between the
parties hereto with respect to the transactions contemplated hereby and
supersede all prior negotiations, understandings and agreements between such
parties with respect to such transactions.

         12.      GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT
OF THIS AMENDMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF GEORGIA.

         13.      Financing Agreement. This Amendment shall be deemed to be a
Financing Agreement for all purposes.

                 [Remainder of page intentionally left blank.]

                                       5
<PAGE>
         IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Amendment as of the day and year first written above.

BORROWER:                       DELTA APPAREL, INC., a Georgia corporation

                                By:
                                   --------------------------------------------
                                Title:
                                      -----------------------------------------

AGENT AND
LENDERS:                        CONGRESS FINANCIAL CORPORATION (SOUTHERN), as
                                Agent and a Lender

                                By:
                                   --------------------------------------------
                                Title:
                                      -----------------------------------------

                                COMMITMENT:  $25,756,875
                                PRO RATA SHARE: 60.25%

                                ING CAPITAL LLC, as a Lender

                                By:
                                   --------------------------------------------
                                Title:
                                      -----------------------------------------
                                COMMITMENT: $8,550,000
                                PRO RATA SHARE: 20.0%

                                SIEMENS FINANCIAL SERVICES, INC., as a Lender

                                By:
                                   --------------------------------------------
                                Title:
                                      -----------------------------------------
                                COMMITMENT: $8,443,125

                                PRO RATA SHARE: 19.75%

ACKNOWLEDGED AND
AGREED:
GUARANTORS:                     M.J. SOFFE CO., a North Carolina corporation

                                By:
                                   --------------------------------------------
                                Title:
                                      -----------------------------------------

                                SAIM, LLC, a North Carolina limited liability
                                company

                                By:
                                   --------------------------------------------
                                Title:
                                      -----------------------------------------

                                       6
<PAGE>
                                 Schedule 1.21
                                  Commitments

<TABLE>
<CAPTION>
               LENDER                                             COMMITMENT

<S>                                                               <C>
Congress Financial Corporation (Southern)                        $25,756,875
ING Capital LLC                                                   $8,550,000
Siemens Financial Services, Inc.                                  $8,443,125

All Lenders                                                      $42,750,000
</TABLE>

                                       7EX-10.1 FORM OF STOCK AND WARRANT

 

EXHIBIT 10.1

STOCK AND WARRANT PURCHASE AGREEMENT

Inhibitex, Inc.

1165 Sanctuary Parkway, Suite 400

Alpharetta, GA 30004

Ladies & Gentlemen:

     The
undersigned,                  
         (the “Investor”), hereby
confirms its agreement with you as follows:

1. This Stock and Warrant Purchase Agreement is made as of November 4, 2004
between Inhibitex, Inc., a Delaware corporation (the “Company”), and the
Investor.

2. The Company has authorized the sale and issuance of up to 6,777,363 shares
(the “Shares”) of common stock of the Company, $0.001 par value per share (the
“Common Stock”), and warrants to purchase up to 2,033,209 shares (the “Warrant
Shares”) of Common Stock at an exercise price per share of $8.81 (the
“Warrants”) to certain investors in a private placement (the “Offering”).

3. The Company and the Investor agree that the Investor will purchase from the
Company and the Company will issue and sell to the Investor
                  Shares
and a Warrant to purchase
             Warrant Shares, for a purchase price of
$            per Share, or an aggregate purchase price of
$               ,
pursuant to the Terms and Conditions for Purchase of Shares attached hereto as
Annex I and incorporated herein by reference as if fully set forth herein (the
“Terms and Conditions”). This Stock and Warrant Purchase Agreement, together
with the Terms of Conditions which are incorporated herein by reference as if
fully set forth herein, may hereinafter be referred to as the “Agreement”.
Unless otherwise requested by the Investor, the Warrant and certificates
representing the Shares purchased by the Investor will be registered in the
Investor’s name and address as set forth below. The Warrant shall have the
rights, preferences, privileges and restrictions as set forth in the form of a
Warrant attached hereto as Exhibit B.

4. The Investor represents that, except as set forth below, (a) it has had no
position, office or other material relationship within the past three months
with the Company or persons known to it to be affiliates of the Company, (b)
neither it, nor any group of which it is a member or to which it is related,
beneficially owns (including the right to acquire or vote) any securities of
the Company and (c) it has no direct or indirect affiliation or association
with any NASD member as of the date hereof. Exceptions:

	 	 
	
	 
	 
	
	.

(If no exceptions, write “none.” If left blank, response will be deemed to be “none.”)

     Please confirm that the foregoing correctly sets forth the agreement
between us by signing in the space provided below for that purpose. By
executing this Agreement, the Investor acknowledges that the Company may use
the information in paragraph 4 above and the name and address information below
in preparation of the Registration Statement (as defined in Annex 1).

	 	 	 
	AGREED AND ACCEPTED:
	 	 
	Inhibitex, Inc.

	 	Investor: 

	 
	 	 
	

By:
	 	By:

	Title:

	 	Print Name:
	 

	 	Title:
	 
	 	 
	

	 	Address: 

	

	 	

	

	 	Tax ID No.: 

	

	 	Contact name: 

	

	 	Telephone: 

	

	 	Name in which shares should be
registered (if different):

	

	 	

 

 

ANNEX I

TERMS AND CONDITIONS FOR PURCHASE OF SHARES AND WARRANTS

     1. Authorization and Sale of the Shares and Warrants. Subject to these
Terms and Conditions, the Company has authorized the sale of up to 6,777,363
Shares and Warrants to purchase up to 2,033,209 Warrant Shares. The Company
reserves the right to increase or decrease this number.

     2. Agreement to Sell and Purchase the Shares and Warrants; Subscription
Date.

          2.1 At the Closing (as defined in Section 3), the Company will sell to the
Investor, and the Investor will purchase from the Company, upon the terms and
conditions hereinafter set forth, the number of Shares and a Warrant to
purchase the number of Warrant Shares each as set forth in Section 3 of the
Stock and Warrant Purchase Agreement to which these Terms and Conditions are
attached at the purchase price set forth thereon.

          2.2 The Company may enter into the same form of Stock and Warrant Purchase
Agreement, including these Terms and Conditions, with certain other investors
(the “Other Investors”) and expects to complete sales of Shares and Warrants to
them. The Investor and the Other Investors are hereinafter sometimes
collectively referred to as the “Investors,” and the Stock and Warrant Purchase
Agreement to which these Terms and Conditions are attached and the Stock and
Warrant Purchase Agreements (including attached Terms and Conditions) executed
by the Other Investors are hereinafter sometimes collectively referred to as
the “Agreements.” The Company may accept executed Agreements from Investors
for the purchase of Shares and Warrants commencing upon the date on which the
Company provides the Investors with the proposed purchase price per Share plus
Warrant exercise price and concluding upon the date (the “Subscription Date”)
on which the Company has notified Lazard Frères & Co. LLC, in its capacity as
placement agent for this transaction, in writing that it is no longer accepting
additional Agreements from Investors for the purchase of Shares and Warrants.
The Company may not enter into any Agreements after the Subscription Date.

          2.3 The obligations of each Investor under any Agreement are several and
not joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Agreement. Nothing contained herein, and no action taken by
any Investor hereto, shall be deemed to constitute the Investors as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Investors are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated
hereby, provided that such obligations or the transactions contemplated hereby
may be modified, amended or waived in accordance with Section 9 below. Each
Investor shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement
(provided, that such rights may be modified, amended or waived in accordance
with Section 9 below) and the Warrant, and it shall not be necessary for any
Other Investor to be joined as an additional party in any proceeding for such
purpose.

     3. Delivery of the Shares and Warrants at Closing. It is expected that
the completion of the purchase and sale of the Shares and Warrants (the
“Closing”) shall occur on or about November 9, 2004 (the “Closing Date”), at
the offices of the Company’s counsel. At the Closing, the Company shall
deliver to the Investor a Warrant representing the number of Warrant Shares and
one or more stock certificates representing the number of Shares, in each case
as is set forth in Section 3 of the Stock and Warrant Purchase Agreement, each
such certificate to be registered in the name of the Investor or, if so
indicated on the signature page of the Stock and Warrant Purchase Agreement, in
the name of a nominee designated by the Investor.

     The Company’s obligation to issue the Shares and the Warrant to the
Investor shall be subject to the following conditions, any one or more of which
may be waived by the Company: (a) receipt by the Company of a certified or
official bank check or wire transfer of funds in the full amount of the
purchase price for the Shares and the Warrant being purchased hereunder as set
forth in Section 3 of the Stock and Warrant Purchase Agreement; (b) completion
of the purchases and sales under the Agreements with the Other Investors; and
(c) the accuracy of the representations and warranties made by the Investors
and the fulfillment of those undertakings of the Investors to be fulfilled
prior to the Closing.

     The Investor’s obligation to purchase the Shares and the Warrant shall be
subject to the following conditions, any one or more of which may be waived by
the Investor: (a) the representations and warranties of the Company set forth
herein shall be true and correct as of the Closing Date (except for
representations and warranties that speak as of a specific date, which
representations and warranties shall be true and correct as of such date) in
all material respects and the fulfillment in all material respects of those

-1-

 

undertaking of the Company in this Agreement to be fulfilled on or prior
to the Closing Date and (b) the Investor shall have received such documents as
such Investor shall reasonably have requested, including, a standard opinion of
the Company’s counsel including as to the matters set forth in Section 4.2 and
as to exemption from the registration requirements of the Securities Act of
1933, as amended (the “Securities Act”), of the sale of the Shares and
Warrants.

     4. Representations, Warranties and Covenants of the Company. The Company
hereby represents and warrants to, and covenants with, the Investor, as
follows:

          4.1 Organization. The Company is duly organized and validly existing in
good standing under the laws of the State of Delaware. The Company has full
power and authority to own or lease its properties and to conduct its business
as presently conducted and as described in the final prospectus contained in
Post-Effective Amendment No. 3 to its Registration Statement on Form S-1, filed
with the Securities and Exchange Commission on June 3, 2004 and in the
documents filed by the Company under the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder (the “Exchange
Act”), since the end of its most recently completed fiscal year through the
date hereof, including, without limitation, its most recent report on Form 10-Q
(the “Disclosure Documents”) and is registered or qualified to do business and
in good standing in each jurisdiction in which the nature of the business
conducted by it or the location of the properties owned or leased by it
requires such qualification and where the failure to be so qualified would have
a material adverse effect upon the condition (financial or otherwise),
earnings, business or business prospects, properties or operations of the
Company (a “Material Adverse Effect”), and no proceeding has been instituted in
any such jurisdiction, revoking, limiting or curtailing, or seeking to revoke,
limit or curtail, such power and authority or qualification. The Company has
no subsidiaries (as defined in Rule 405 of the Securities Act).

          4.2 Due Authorization and Valid Issuance. The Company has all requisite
power and authority to execute, deliver and perform its obligations under the
Agreements and the Warrants, and the Agreements and the Warrants have been duly
authorized and validly executed and delivered by the Company and constitute
legal, valid and binding agreements of the Company enforceable against the
Company in accordance with their terms, except as rights to indemnity and
contribution may be limited by state or federal securities laws or the public
policy underlying such laws, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ and contracting parties’ rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
The Shares being purchased by the Investor hereunder and the Warrant Shares
issuable pursuant to the Warrant will, upon issuance and payment therefor
pursuant to the terms hereof and thereof, be duly authorized, validly issued,
fully-paid and nonassessable. The Warrant being purchased by the Investor
hereunder will, upon issuance and payment therefor and pursuant to the terms
hereof and thereof, be duly authorized and validly issued.

          4.3 Non-Contravention. The execution and delivery of the Agreements and
the Warrants, the issuance and sale of the Shares and the Warrants under the
Agreements and the Warrant Shares under the Warrant, the fulfillment of the
terms of the Agreements and the Warrants and the consummation of the
transactions contemplated thereby will not (A) conflict with or constitute a
violation of, or default (with the passage of time or otherwise) under, (i) any
bond, debenture, note or other evidence of indebtedness, lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument to which the Company is a party or by which it or its
properties are bound, (ii) the charter, by-laws or other organizational
documents of the Company, or (iii) any law, administrative regulation,
ordinance or order of any court or governmental agency, arbitration panel or
authority applicable to the Company or its properties, except in the case of
clauses (i) and (iii) for any such conflicts, violations or defaults that are
not reasonably likely to have a Material Adverse Effect or (B) result in the
creation or imposition of any lien, encumbrance, claim, security interest or
restriction whatsoever upon any of the properties or assets of the Company or
an acceleration of indebtedness pursuant to any obligation, agreement or
condition contained in any bond, debenture, note or any other evidence of
indebtedness or any indenture, mortgage, deed of trust or any other agreement
or instrument to which the Company is a party or by which it is bound or to
which any of the material property or assets of the Company is subject, except
for such liens, encumbrances, claims, security interests or restrictions upon
any of the properties or assets of the Company or accelerations of indebtedness
that are not reasonably likely to have a Material Adverse Effect. No consent,
approval, authorization or other order of, or registration, qualification or
filing with, any regulatory body, administrative agency, or other governmental
body or any other person is required for the execution and delivery of the
Agreements and the Warrants, and the valid issuance and sale of the Shares and
Warrants to be sold pursuant to the Agreements, and the valid issuance of the
Warrant Shares under the Warrant, other than such as have been made or
obtained, and except for any post-closing securities filings or notifications
required to be made under federal or state securities laws.

          4.4 Capitalization. The capitalization of the Company as of June 30, 2004
is as set forth in the most recent applicable Disclosure Documents, increased
as set forth in the next sentence. The Company has not issued any capital
stock since

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that date other than pursuant to (i) employee benefit plans disclosed in
the Disclosure Documents, or (ii) outstanding warrants, options or other
securities disclosed in the Disclosure Documents and (iii) shares of Common
Stock issued in connection with the exercise of the overallotment option in the
Company’s initial public offering. The Shares and the Warrants to be sold
pursuant to the Agreements, and the Warrant Shares to be issued pursuant to the
Warrants, have been duly authorized, and when they are issued and paid for in
accordance with the terms of the Agreements and the Warrants, as the case may
be, the Shares and Warrant Shares will be duly and validly issued, fully paid
and nonassessable. The outstanding shares of capital stock of the Company have
been duly and validly issued and are fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, and were not
issued in violation of any preemptive rights or similar rights to subscribe for
or purchase securities. Except as set forth in or contemplated by the
Disclosure Documents, and other than options issued to officers, directors and
employees of the Company under its employee benefit plans, there are no
outstanding rights (including, without limitation, preemptive rights), warrants
or options to acquire, or instruments convertible into or exchangeable for, any
unissued shares of capital stock or other equity interest in the Company, or
any contract, commitment, agreement, understanding or arrangement of any kind
to which the Company is a party or of which the Company has knowledge and
relating to the issuance or sale of any capital stock of the Company, any such
convertible or exchangeable securities or any such rights, warrants or options.
Without limiting the foregoing, no preemptive right, co-sale right, right of
first refusal or other similar right exists with respect to the Shares, the
Warrants or the Warrant Shares or the issuance and sale thereof. No further
approval or authorization of any stockholder, the Board of Directors of the
Company or others is required for the issuance and sale of the Shares, the
Warrants and the Warrants Shares. Except as disclosed in the Disclosure
Documents, there are no stockholders agreements, voting agreements or other
similar agreements with respect to the Common Stock to which the Company is a
party or, to the knowledge of the Company, between or among any of the
Company’s stockholders. The issuance and sale of the Shares will not result in
a right of any current holder of Company securities to adjust the exercise,
conversion, exchange or reset price under such securities. Subject to the
filing of the notification with the Nasdaq National Market, the issuance and
sale of the Shares and Warrant Shares under this Agreement does not contravene
the rules and regulations of the Nasdaq National Market, and, in furtherance of
the foregoing sentence, no approval of the stockholders of the Company
thereunder is required for the Company to issue and deliver to the Investor the
maximum number of Shares and Warrant Shares contemplated by this Agreement.

          4.5 Legal Proceedings; Disagreements with Advisors. There is no material
legal or governmental investigations, actions, suits or proceeding pending or,
to the knowledge of the Company, threatened to which the Company is or may be a
party or of which the business or property of the Company is subject that is
not disclosed in the Disclosure Documents. There are no material disagreements
presently existing, or reasonably anticipated by the Company to arise, between
the accountants formerly or presently employed by the Company.

          4.6 No Violations. The Company is not (i) in violation of its charter,
bylaws, or other organizational document; (ii) in violation of any federal,
state or local law, administrative regulation, ordinance or order of any court
or governmental agency, arbitration panel or authority applicable to the
Company, which violation, individually or in the aggregate, would be reasonably
likely to have a Material Adverse Effect; or (iii) in default (and there exists
no condition which, with the passage of time or otherwise, would constitute a
default) in the performance of any bond, debenture, note or any other evidence
of indebtedness in any indenture, mortgage, deed of trust or any other
agreement or instrument to which the Company is a party or by which the Company
is bound or by which the properties of the Company are bound, which would be
reasonably likely to have a Material Adverse Effect.

          4.7 Governmental Permits, Etc. With the exception of the matters which
are dealt with separately in Sections 4.1, 4.12, 4.13, and 4.14, the Company
has all necessary franchises, licenses, certificates and other authorizations
from any foreign, federal, state or local government or governmental agency,
department, or body that are currently necessary for the operation of the
business of the Company as currently conducted and as described in the
Disclosure Documents except where the failure to currently possess would not
have a Material Adverse Effect.

          4.8 Intellectual Property. Except as specifically disclosed in the
Disclosure Documents (i) the Company owns or possesses sufficient rights to
use all patents, patent rights, trademarks, copyrights, licenses, inventions,
trade secrets, trade names and know-how (including trade secrets and other
unpatented and/or unpatentable property or confidential information, systems,
processes or procedures) (collectively, “Intellectual Property”) described or
referred to in the Disclosure Documents as owned or possessed by it or that are
necessary for the conduct of its business as now conducted as described in the
Disclosure Documents except where the failure to currently own or possess would
not have a Material Adverse Effect, (ii) the Company is not infringing, and has
not received any notice of, and has no knowledge of, any asserted infringement
by the Company of any rights of a third party with respect to any Intellectual
Property that, individually or in the aggregate, would have a Material Adverse
Effect and (iii) the Company has not received any notice of, and has no
knowledge of, infringement by a third party with respect to any Intellectual
Property rights of the Company that, individually or in the aggregate, would
have a Material Adverse Effect. Further,

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except as described in the Disclosure Documents or exhibits thereto, or as
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect, no third party, including any academic or governmental
organization, possesses rights to the Intellectual Property which, if
exercised, could enable such third party to develop products competitive with
the business of the Company as currently being conducted.

          4.9 Financial Statements; Obligations to Related Parties. (a) The
financial statements of the Company and the related notes contained in the
Disclosure Documents present fairly, in accordance with generally accepted
accounting principles, the financial position of the Company as of the dates
indicated, and the results of its operations and cash flows for the periods
therein specified consistent with the books and records of the Company except
that the unaudited interim financial statements were or are subject to normal
and recurring year-end adjustments which are not expected to be material in
amount. Such financial statements (including the related notes) have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods therein specified, except as may be
disclosed in the notes to such financial statements, or in the case of
unaudited statements, as may be permitted by the Securities and Exchange
Commission (the “SEC”) on Form 10-Q under the Exchange Act and except as
disclosed in the Disclosure Documents. The other financial information
contained in the Disclosure Documents has been prepared on a basis consistent
with the financial statements of the Company. As of their respective dates,
the financial statements of the Company included in the Disclosure Documents
complied as to form in all material respects with applicable accounting
requirements and published rules and regulations of the SEC with respect
thereto.

          (b) Except as set forth in any Disclosure Documents, there are no
obligations of the Company to officers, directors, stockholders or employees of
the Company other than (i) for payment of salary for services rendered and for
bonus payments; (ii) reimbursements for reasonable expenses incurred on behalf
of the Company; (iii) for other standard employee benefits made generally
available to all employees (including stock option agreements outstanding under
any stock option plan approved by the Board of Directors of the Company); and
(iv) obligations listed in the Company’s financial statements.

          4.10 No Material Adverse Change. Except as disclosed in the Disclosure
Documents, since June 30, 2004, there has not been (i) any material adverse
change in the financial condition or earnings of the Company, (ii) any material
adverse event affecting the Company, (iii) any obligation, direct or
contingent, that is material to the Company, incurred by the Company, except
obligations incurred in the ordinary course of business, (iv) any dividend or
distribution of any kind declared, paid or made on the capital stock of the
Company, or (v) any loss or damage (whether or not insured) to the physical
property of the Company which has been sustained which has a Material Adverse
Effect.

          4.11 Disclosure. The representations and warranties of the Company
contained in this Section 4 as of the date hereof and as of the Closing Date,
do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except with respect to the material terms and conditions of the
transaction contemplated by the Agreements and the Warrants, the anticipated
use of the proceeds therefrom, which shall be publicly disclosed by the Company
pursuant to Section 16 hereof, the Company confirms that neither it nor any
person acting on its behalf has provided the Investors with any information
that the Company believes constitutes material, non-public information. The
Company understands and confirms that the Investors will rely on the foregoing
representations in effecting transactions in the securities of the Company.

          4.12 NASDAQ Compliance. The Company’s Common Stock is registered pursuant
to Section 12(g) of the Exchange Act and is listed on The Nasdaq Stock Market,
Inc. National Market (the “Nasdaq National Market”), and the Company has taken
no action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or de-listing the
Common Stock from the Nasdaq National Market, nor has the Company received any
notification that the SEC or the National Association of Securities Dealers,
Inc. (“NASD”) is contemplating terminating such registration or listing.

          4.13 Reporting Status. The Company has filed in a timely manner all
documents that the Company was required to file under the Exchange Act during
the 12 months preceding the date of this Agreement. The following documents
complied in all material respects with the SEC’s requirements as of their
respective filing dates, and the information contained therein as of the date
thereof did not contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which they were made not
misleading:

(a) Quarterly Report on Form 10-Q for the quarter ended June 30,
2004; Forms 8-K filed on July 7, 2004 and August 4, 2004; and all
registration statements and prospectuses (and any amendments thereto)
filed pursuant to the Securities Act during the one-year period
preceding the date of this Agreement (including the prospectus
contained in Post-Effective Amendment No. 3 to Registration Statement
No. 333-113243 on Form S-1;

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(b) all other documents, if any, filed by the Company with the SEC
during the one-year period preceding the date of this Agreement
pursuant to the reporting requirements of the Exchange Act.

          4.14 Listing. The Company shall use reasonable commercial efforts to
comply with all requirements of the NASD and SEC with respect to the issuance
of the Shares, the Warrant and the Warrant Shares, and the listing of the
Shares and Warrant Shares on the Nasdaq National Market.

          4.15 No Manipulation of Stock. The Company has not taken and will not, in
violation of applicable law, take, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Shares or
the Warrant Shares.

          4.16 Company not an “Investment Company”. The Company has been advised of
the rules and requirements under the Investment Company Act of 1940, as amended
(the “Investment Company Act”). The Company is not, and immediately after
receipt of payment for the Shares and Warrants and the Warrant Shares will not
be, an “investment company” or an entity “controlled” by an “investment
company” within the meaning of the Investment Company Act and shall conduct its
business in a manner so that it will not become subject to the Investment
Company Act.

          4.17 Foreign Corrupt Practices. Neither the Company, nor to the knowledge
of the Company, any agent or other person acting on behalf of the Company, has
(i) directly or indirectly, used any corrupt funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of
1977, as amended.

          4.18 Accountants. To the Company’s knowledge, Ernst & Young LLP, who the
Company expects will consent to the inclusion (or incorporation by reference,
as the case may be) of its report dated February 16, 2004 with respect to the
financial statements to be included in the Registration Statement (as defined
below) and the prospectus which forms a part thereof, are and, during the
periods covered by their reports, were independent accountants as required by
the Securities Act.

          4.19 Contracts. The contracts described in the Disclosure Documents that
are material to the Company are in full force and effect on the date hereof,
and neither the Company nor, to the Company’s knowledge, any other party to
such contracts is in breach of or default, or received a notice of termination
under any of such contracts which would have a Material Adverse Effect. The
Company has filed with the SEC all contracts and agreements required to be
filed by the Exchange Act.

          4.20 Taxes. The Company has filed (or has obtained an extension of time
within which to file) all necessary federal, state and foreign income and
franchise tax returns and has paid all taxes shown as due on such tax returns,
except where the failure to so file or the failure to so pay would not have a
Material Adverse Effect. The Company is not aware of any tax deficiency that
has been or might be asserted or threatened against it that would have a
Material Adverse Effect.

          4.21 Private Offering. Assuming the correctness of the representations
and warranties of the Investors set forth in Section 5 hereof and assuming that
Lazard Frères & Co. LLC has not offered or sold any of the Shares and the
Warrants by any form of general solicitation or advertising, the offer and sale
of Shares and the Warrants hereunder is and, upon exercise of the Warrants,
assuming the accuracy of the representations included in Exhibit A to the
Warrant, the issuance of the Warrant Shares will be exempt from registration
under the Securities Act. The Company has not distributed and will not
distribute prior to the Closing Date any offering material in connection with
this Offering and sale of the Shares and the Warrants other than the documents
of which this Agreement is a part or the Disclosure Documents. The Company has
not in the past nor will it hereafter take any action independent of the
placement agent to sell, offer for sale or solicit offers to buy any securities
of the Company which would bring the offer, issuance or sale of the Shares and
the Warrants as contemplated by this Agreement, or the issuance of the Warrant
Shares pursuant to the Warrant, within the provisions of Section 5 of the
Securities Act, unless such offer, issuance or sale was or shall be within the
exemptions of Section 4 of the Securities Act. Neither the Company nor any
person acting on behalf of the Company (other than Lazard Frères & Co. LLC) has
offered or sold any of the Shares by any form of general solicitation or
general advertising. The Company has offered the Shares for sale only to the
Investors and certain other “accredited investors” within the meaning of Rule
501 under the Securities Act.

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          4.22 Disclosure Controls and Procedures. The Company is in material
compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are
applicable to it as of the Closing Date. The Company maintains a system of
internal control over financial reporting (as such term is defined in the
Exchange Act) sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company’s certifying officers are responsible for establishing and maintaining
disclosure controls and procedures (as defined in the Exchange Act) for the
Company and they have (a) designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under their
supervision, to ensure that material information relating to the Company is
made known to the certifying officers by others within those entities,
particularly during the periods in which the Company’s filings under the
Exchange Act have been prepared; (b) evaluated the effectiveness of the
Company’s disclosure controls and procedures and presented in the Company’s
filings under the Exchange Act their conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the periods covered by
such filings under the Exchange Act based on such evaluation; and (c) since
the last evaluation date referred to in (b) above, there have been no material
changes in the Company’s internal control over financial reporting (as such
term is defined in the Exchange Act) or, to the Company’s knowledge, in other
factors that could significantly affect the Company’s internal control over
financial reporting.

          4.23 Transactions With Affiliates. There are no business relationships or
related-party transactions involving the Company or any other person required
to be described in the Disclosure Documents that have not been described as
required.

          4.24 No Registration Rights. Upon the filing of the Registration
Statement (as defined below), no person will have the right, which right has
not been waived, to require the Company to register any securities for sale
under the Securities Act by reason of the filing of the Registration Statement
with the SEC or the issuance and sale of the Shares, Warrants or Warrant
Shares.

          4.25 Company Acknowledgement of Investor Representation. The Company
acknowledges and agrees that Investor does not make or has not made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Sections 5 and 16(a) of this
Agreement, or in the Investor Questionnaire.

     5. Representations, Warranties and Covenants of the Investor.

          5.1 The Investor represents and warrants to, and covenants with, the
Company that: (i) the Investor is an “accredited investor” as defined in
Regulation D under the Securities Act and the Investor is also knowledgeable,
sophisticated and experienced in making, and is qualified to make decisions
with respect to investments in shares presenting an investment decision like
that involved in the purchase of the Shares and the Warrant, including
investments in securities issued by the Company and investments in comparable
companies, and has requested, received, reviewed and considered all information
it deemed relevant in making an informed decision to purchase the Shares and
the Warrant; (ii) the Investor is acquiring the Warrant to purchase the number
of Warrant Shares and the number of Shares, each as set forth in Section 3 of
the Stock and Warrant Purchase Agreement in the ordinary course of its business
and for its own account for investment only and with no present intention of
distributing any of such Shares, Warrants or Warrant Shares or any arrangement
or understanding with any other persons regarding the distribution of such
Shares, Warrant or Warrant Shares; (iii) the Investor will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of
the Shares, Warrant or Warrant Shares except in compliance with the Securities
Act, applicable state securities laws and the respective rules and regulations
promulgated thereunder; (iv) the Investor has answered all questions on the
Investor Questionnaire for use in preparation of the Registration Statement and
the answers thereto are true, correct and complete as of the date hereof and
will be true, correct and complete as of the Closing Date; (v) the Investor
will notify the Company immediately of any change in any of such information
until such time as the Investor has sold all of its Shares and Warrant Shares
or until the Company is no longer required to keep the Registration Statement
effective; and (vi) the Investor has, in connection with its decision to
purchase the number of Shares and the Warrant to purchase the number of Warrant
Shares, each as set forth in Section 3 of the Stock and Warrant Purchase
Agreement relied only upon the Disclosure Documents and the representations and
warranties of the Company contained herein. The Investor understands that its
acquisition of the Shares and the Warrant has not been registered under the
Securities Act or registered or qualified under any state securities law in
reliance on specific exemptions therefrom, which exemptions may depend upon,
among other things, the bona fide nature of the Investor’s investment intent as
expressed herein. Subject to compliance with the Securities Act, applicable
securities laws and the respective rules and regulations promulgated
thereunder, nothing contained herein shall be deemed a representation or
warranty by such Investor to hold the Shares, Warrant or Warrant Shares for any
period of time. The

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Investor has completed or caused to be completed and delivered to the
Company the Investor Questionnaire, which questionnaire is true, correct and
complete in all material respects.

          5.2 The Investor acknowledges, represents and agrees that no action has
been or will be taken in any jurisdiction outside the United States by the
Company that would permit an offering of the Shares, Warrant or Warrant Shares
or possession or distribution of offering materials in connection with the
issue of the Shares, Warrant or Warrant Shares in any jurisdiction outside the
United States where legal action by the Company for that purpose is required.
Each Investor outside the United States will comply with all applicable laws
and regulations in each foreign jurisdiction in which it purchases, offers,
sells or delivers Shares, the Warrant or Warrant Shares or has in its
possession or distributes any offering material, in all cases at its own
expense.

          5.3 The Investor hereby covenants with the Company not to make any sale of
the Shares, Warrant or Warrant Shares without complying with the provisions of
this Agreement and without causing the prospectus delivery requirement under
the Securities Act to be satisfied (whether by delivery of the Prospectus or
pursuant to and in compliance with an exemption from such requirement), and the
Investor acknowledges that the certificates evidencing the Shares and Warrant
Shares will be imprinted with a legend that prohibits their transfer except in
accordance therewith. The Investor acknowledges that there may occasionally be
times when the Company determines that it must suspend the use of the
Prospectus forming a part of the Registration Statement, as set forth in
Section 7.2(c).

          5.4 The Investor further represents and warrants to, and covenants with,
the Company that (i) the Investor has full right, power, authority and capacity
to enter into this Agreement and to consummate the transactions contemplated
hereby and has taken all necessary action to authorize the execution, delivery
and performance of this Agreement, and (ii) this Agreement constitutes a valid
and binding obligation of the Investor enforceable against the Investor in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ and contracting parties’ rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and except as the indemnification agreements of the Investors herein may be
legally unenforceable.

          5.5 Between the time the Investor learned about the Offering and the
public announcement of the Offering, the Investor has not engaged in any short
sales or similar transactions with respect to the Common Stock, nor has the
Investor, directly or indirectly, caused any person to engage in any short
sales or similar transactions with respect to the Common Stock. Without
limiting the foregoing, Investor will not use any of the Shares acquired
pursuant to this Agreement to cover any short position in the Common Stock of
the Company if doing so would be in violation of applicable securities laws.

          5.6 The Investor understands that nothing in the Disclosure Documents,
this Agreement or any other materials presented to the Investor in connection
with the purchase and sale of the Shares and the Warrant constitutes legal, tax
or investment advice. The Investor has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of Shares and the Warrant.

     6. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Investor herein shall survive the execution of this Agreement, the delivery
to the Investor of the Shares and the Warrant being purchased and the payment
therefor, provided that the representations and warranties contained herein
shall expire on the one-year anniversary of the Closing Date.

     7. Registration of the Shares; Compliance with the Securities Act.

          7.1 Registration Procedures and Other Matters. The Company shall:

               (a) subject to receipt of necessary information from the Investors after
prompt request from the Company to the Investors to provide such information,
prepare and file with the SEC, within 30 days after the Closing Date, a
registration statement on Form S-1 (the “S-1 Registration Statement”) to enable
the resale of the Shares and the Warrant Shares by the Investors from time to
time in compliance with the Securities Act;

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               (b) subject to receipt of necessary information from the Investors after
prompt request from the Company to the Investors to provide such information,
use its best efforts to cause the S-1 Registration Statement to become
effective within 105 days after the Closing Date such efforts to include,
without limiting the generality of the foregoing, preparing and filing with the
SEC in such period any financial statements that are required to be filed prior
to the effectiveness of such S-1 Registration Statement; and the Company shall
use its best efforts, subject to receipt of necessary information from the
Investors after prompt request from the Company to the Investors to provide
such information, to prepare and file with the SEC, within 30 days after the
Company first becomes eligible to file a registration statement on Form S-3 (or
an amendment to the Registration Statement on Form S-3) (the “S-3 Registration
Statement”) to enable the resale of the Shares and the Warrant Shares by the
Investors from time to time in compliance with the Securities Act; and to use
its best efforts to cause the S-3 Registration Statement to become effective as
soon as practicable thereafter, such efforts to include, without limiting the
generality of the foregoing, preparing and filing with the SEC as promptly as
practicable any financial statements that are required to be filed prior to the
effectiveness of such S-3 Registration Statement (the term “Registration
Statement” shall mean the S-1 or S-2 Registration Statement until the S-3
Registration Statement is declared effective by the SEC, after which time it
shall mean the S-3 Registration Statement).

               (c) use its best efforts to prepare and file with the SEC such amendments
and supplements to the Registration Statement in compliance with applicable
laws, and the prospectus used in connection therewith (the “Prospectus”) as may
be necessary to keep the Registration Statement current, effective and free
from any material misstatement or omission to state a material fact for a
period not exceeding, with respect to each Investor’s Shares purchased
hereunder and the Warrant Shares purchased under the Warrant, the earlier of
(i) the second anniversary of the Closing Date, (ii) the date on which the
Investor may sell all Shares and Warrant Shares then held by the Investor
without restriction by the volume limitations of Rule 144(e) of the Securities
Act, or (iii) such time as all Shares purchased by such Investor in this
offering and Warrant Shares issuable pursuant to the Warrant have been sold
pursuant to a registration statement;

               (d) furnish to the Investor with respect to the Shares and Warrant Shares
registered under the Registration Statement such number of copies of the
Registration Statement, Prospectuses and Preliminary Prospectuses in conformity
with the requirements of the Securities Act and such other documents as the
Investor may reasonably request, in order to facilitate the public sale or
other disposition of all or any of the Shares or Warrant Shares by the
Investor;

               (e) file documents required of the Company for blue sky clearance in
states specified in writing by the Investor and use its commercially reasonable
efforts to maintain such blue sky qualifications during the period the Company
is required to maintain the effectiveness of the Registration Statement
pursuant to Section 7.1(c); provided, however, that the Company shall not be
required to qualify to do business or consent to service of process in any
jurisdiction in which it is not now so qualified or has not so consented;

               (f) bear all expenses in connection with the procedures in paragraph (a)
through (e), (h) and the last paragraph of this Section 7.1 and the
registration of the Shares and Warrant Shares pursuant to the Registration
Statement (other than underwriting discounts or commissions, brokers’ fees and
similar selling expenses and any other fees or expenses incurred by the
Investor, including attorneys’ fees); and

               (g) advise the Investor, promptly after it shall receive notice or obtain
knowledge of the issuance of any stop order by the SEC delaying or suspending
the effectiveness of the Registration Statement or of the initiation or threat
of any proceeding for that purpose; and it will promptly use its commercially
reasonable efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be issued;
and

               (h) provide a “Plan of Distribution” section of the Registration Statement
to the Investor for such Investor’s review and comment which, at a minimum,
states that the selling stockholders may transfer the shares of common stock in
various circumstances, including circumstances in which the transferees,
pledgees or other successors in interest may be the selling beneficial owners
for purposes of the Prospectus.

     Notwithstanding anything to the contrary herein, the Registration
Statement shall cover only the Shares and the Warrant Shares. In no event at
any time before the Registration Statement becomes effective with respect to
the Shares and the Warrant Shares shall the Company publicly announce or file
any other registration statement, other than registrations on Form S-8, without
the prior written consent of a majority in interest of the Investors.

     The Company understands that the Investor disclaims being an underwriter,
but the Investor being deemed an underwriter by the SEC shall not relieve the
Company of any obligations it has hereunder; provided, however that if the
Company receives

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notification from the SEC that the Investor is deemed an underwriter, then
the period by which the Company is obligated to submit an acceleration request
to the SEC shall be extended to the earlier of (i) the 90th day after such SEC
notification, or (ii) 120 days after the initial filing of the Registration
Statement with the SEC.

     Within five business days of the effectiveness date of the Registration
Statement, the Company shall give notice to the Investor of such effectiveness
and use its commercially reasonable efforts to cause its counsel to issue an
appropriate opinion or opinions to the transfer agent substantially to the
effect that the shares are subject to an effective registration statement and
can be reissued free of restrictive legend upon notice of a sale by an Investor
and confirmation by such Investor that it has complied with the prospectus
delivery requirements in the form attached hereto as Exhibit A, provided that
the Company has not advised the transfer agent orally or in writing that the
opinion has been withdrawn.

          7.2 Transfer of Shares and Warrant Shares After Registration; Suspension.

               (a) The Investor agrees that it will not effect any disposition of the
Shares or the Warrant Shares or its right to purchase the Shares or the Warrant
Shares that would constitute a sale within the meaning of the Securities Act
except as contemplated in the Registration Statement referred to in Section 7.1
and as described below or as otherwise permitted by law, and that it will
promptly notify the Company of any changes in the information set forth in the
Registration Statement regarding the Investor or its plan of distribution. In
connection with any transfer of Shares or Warrant Shares other than pursuant to
an effective registration statement, to the Company or to an affiliate of the
Investor (who is an accredited investor and executes a customary representation
letter), the Company may require the transferor thereof to provide to the
Company an opinion of counsel which opinion shall be reasonably satisfactory to
the Company, to the effect that such transfer does not require registration of
such transferred Shares or Warrant Shares under the Securities Act.

               (b) Except in the event that paragraph (c) below applies, the Company
shall (i) if deemed necessary by the Company, prepare and file from time to
time with the SEC a post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or a supplement or amendment to any
document incorporated therein by reference or file any other required document
so that such Registration Statement will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and so that, as
thereafter delivered to purchasers of the Shares and Warrant Shares being sold
thereunder, such Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; (ii) provide the Investor copies of any
documents filed pursuant to Section 7.2(b)(i) as they reasonably request; and
(iii) inform each Investor that the Company has complied with its obligations
in Section 7.2(b)(i) (or that, if the Company has filed a post-effective
amendment to the Registration Statement which has not yet been declared
effective, the Company will notify the Investor to that effect, will use its
best efforts to secure the effectiveness of such post-effective amendment as
promptly as possible and will promptly notify the Investor pursuant to Section
7.2(b)(i) hereof when the amendment has become effective).

               (c) Subject to paragraph (d) below, in the event (i) of any request by the
SEC or any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to a
Registration Statement or related Prospectus or for additional information;
(ii) of the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purpose; (iii) of the
receipt by the Company of any notification with respect to the suspension of
the qualification or exemption from qualification of any of the Shares or the
Warrant Shares for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; or (iv) of any event or circumstance which,
upon the good faith judgment of the Company’s Board of Directors based on the
advice of its counsel, necessitates the making of any changes in the
Registration Statement or Prospectus, or any document incorporated or deemed to
be incorporated therein by reference, so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and that in the case of the
Prospectus, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; then the Company shall deliver a certificate in
writing to the Investor (the “Suspension Notice”) to the effect of the
foregoing and, upon receipt of such Suspension Notice, the Investor will
refrain from selling any Shares and Warrant Shares pursuant to the Registration
Statement (a “Suspension”) until the Investor’s receipt of copies of a
supplemented or amended Prospectus prepared and filed by the Company, or until
it is advised in writing by the Company that the current Prospectus may be
used, and has received copies of any additional or supplemental filings that
are incorporated or deemed incorporated by reference in any such Prospectus.
In the event of any Suspension, the Company will use its best efforts to cause
the use of the Prospectus so suspended to be resumed as soon as reasonably
practicable within 20 business days after the delivery of a Suspension Notice
to the Investor.

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               (d) Notwithstanding the foregoing paragraphs of this Section 7.2, the
Investor shall not be prohibited from selling Shares or Warrant Shares under
the Registration Statement as a result of Suspensions on more than two
occasions of not more than 30 days each in any twelve month period, unless, in
the good faith judgment of the Company’s Board of Directors based on the advice
of its counsel, the sale of Shares and Warrant Shares under the Registration
Statement in reliance on this paragraph 7.2(d) would be reasonably likely to
cause a violation of the Securities Act or the Exchange Act and result in
liability to the Company.

               (e) Provided that a Suspension is not then in effect, the Investor may
sell Shares and Warrant Shares under the Registration Statement, provided that
it arranges for delivery of a current Prospectus to the transferee of such
Shares or Warrant Shares. Upon receipt of a request therefor, the Company has
agreed to provide an adequate number of current Prospectuses to the Investor
and to supply copies to any other parties requiring such Prospectuses pursuant
to the Securities Act.

               (f) In the event of a sale of Shares or Warrant Shares by the Investor
pursuant to the Registration Statement, the Investor must also deliver to the
Company’s transfer agent, with a copy to the Company, a Certificate of
Subsequent Sale substantially in the form attached hereto as Exhibit A, so that
the Shares and Warrant Shares may be properly transferred.

          7.3 Indemnification. For the purpose of this Section 7.3:

          (i) the term “Selling Stockholder” means the Investor and any affiliate of

such Investor;

          (ii) the term “Registration Statement” shall include the Prospectus in the
form first filed with the SEC pursuant to Rule 424(b) of the Securities Act or
filed as part of the Registration Statement at the time of effectiveness if no
Rule 424(b) filing is required, exhibit, supplement or amendment included in or
relating to the Registration Statement referred to in Section 7.1; and

          (iii) the term “untrue statement” for purposes of Section 7.3(d) hereof
shall include any untrue statement or alleged untrue statement, or any omission
or alleged omission to state in the Registration Statement a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.

               (a) The Company agrees to indemnify and hold harmless each Selling
Stockholder from and against any losses, claims, damages or liabilities to
which such Selling Stockholder may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of, or are based upon (i) any
breach of the representations or warranties of the Company contained herein or
failure to comply with the covenants and agreements of the Company contained
herein, (ii) any untrue statement of a material fact contained in the
Registration Statement as amended at the time of effectiveness or any omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any failure by the Company to
fulfill any undertaking included in the Registration Statement as amended at
the time of effectiveness, and the Company will reimburse such Selling
Stockholder for any reasonable legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim, or preparing to defend any such action, proceeding or claim, provided,
however, that the Company shall not be liable in any such case to the extent
that such loss, claim, damage or liability arises out of, or is based upon, an
untrue statement made in such Registration Statement or any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Selling
Stockholder specifically for use in preparation of the Registration Statement,
or the failure of such Selling Stockholder to comply with its covenants and
agreements contained in Section 7.2 hereof respecting sale of the Shares or
Warrant Shares or any statement or omission in any Prospectus that is corrected
in any subsequent Prospectus that was delivered to the Selling Stockholder
prior to the pertinent sale or sales by the Selling Stockholder. The Company
shall reimburse each Selling Stockholder for the amounts provided for herein on
demand as such expenses are incurred as reasonably documented by the Selling
Stockholder.

               (b) The Investor agrees to indemnify and hold harmless the Company (and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act, each officer of the Company who signs the Registration
Statement and each director of the Company) from and against any losses,
claims, damages or liabilities to which the Company (or any such officer,
director or controlling person) may become subject (under the Securities Act or
otherwise), insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of, or are based upon, (i) any
failure to comply with the covenants and agreements contained in Section 7.2
hereof respecting sale of the Shares and Warrant

-10-

 

Shares, (ii) any untrue statement of a material fact contained in the
Registration Statement or any omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading if such
untrue statement or omission was made in reliance upon and in conformity with
written information furnished by or on behalf of the Investor specifically for
use in preparation of the Registration Statement, and the Investor will
reimburse the Company (or such officer, director or controlling person), as the
case may be, for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim, or (iii) any breach of the representations and warranties of the
Investor contained in Section 5 of this Agreement; provided that Investor’s
obligation to indemnify the Company shall be limited to the net amount received
by the Investor from the sale of the Shares and Warrant Shares.

               (c) Promptly after receipt by any indemnified person of a notice of a
claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 7.3, such
indemnified person shall notify the indemnifying person in writing of such
claim or of the commencement of such action, but the omission to so notify the
indemnifying person will not relieve it from any liability which it may have to
any indemnified person under this Section 7.3 (except to the extent that such
omission materially and adversely affects the indemnifying person’s ability to
defend such action) or from any liability otherwise than under this Section
7.3. Subject to the provisions hereinafter stated, in case any such action
shall be brought against an indemnified person, the indemnifying person shall
be entitled to participate therein, and, to the extent that it shall elect by
written notice delivered to the indemnified person promptly after receiving the
aforesaid notice from such indemnified person, shall be entitled to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified
person. After notice from the indemnifying person to such indemnified person
of its election to assume the defense thereof, such indemnifying person shall
not be liable to such indemnified person for any legal expenses subsequently
incurred by such indemnified person in connection with the defense thereof,
provided, however, that if there exists or shall exist a conflict of interest
that would make it inappropriate, in the opinion of counsel to the indemnified
person, for the same counsel to represent both the indemnified person and such
indemnifying person or any affiliate or associate thereof, the indemnified
person shall be entitled to retain its own counsel at the expense of such
indemnifying person; provided, however, that no indemnifying person shall be
responsible for the fees and expenses of more than one separate counsel
(together with appropriate local counsel) for all indemnified parties. In no
event shall any indemnifying person be liable in respect of any amounts paid in
settlement of any action unless the indemnifying person shall have approved the
terms of such settlement; provided that such consent shall not be unreasonably
withheld. No indemnifying person shall, without the prior written consent of
the indemnified person, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified person is or could have been a
party and indemnification could have been sought hereunder by such indemnified
person, unless such settlement includes an unconditional release of such
indemnified person from all liability on claims that are the subject matter of
such proceeding.

               (d) If the indemnification provided for in this Section 7.3 is unavailable
to or insufficient to hold harmless an indemnified person under subsection (a)
or (b) above in respect of any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) referred to therein, then each
indemnifying person shall contribute to the amount paid or payable by such
indemnified person as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and the Investor, as well as
any other Selling Stockholders under such registration statement on the other
in connection with the statements or omissions or other matters which resulted
in such losses, claims, damages or liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations. The relative fault
shall be determined by reference to, among other things, in the case of an
untrue statement, whether the untrue statement relates to information supplied
by the Company on the one hand or an Investor or other Selling Stockholder on
the other and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement. The Company and
the Investor agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Investor and other Selling Stockholders were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified person as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to
above in this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified person in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), the Investor shall not be required to
contribute any amount in excess of the amount by which the net amount received
by the Investor from the sale of the Shares and Warrant Shares to which such
loss relates exceeds the amount of any damages which such Investor has
otherwise been required to pay by reason of such untrue statement. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Investor’s obligations in
this subsection to contribute shall be in proportion to its sale of Shares and
Warrant Shares to which such loss relates and shall not be joint with any other
Selling Shareholders.

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               (e) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 7.3, and are fully informed regarding said
provisions. They further acknowledge that the provisions of this Section 7.3
fairly allocate the risks in light of the ability of the parties to investigate
the Company and its business in order to assure that adequate disclosure is
made in the Registration Statement as required by the Securities Act and the
Exchange Act. The parties are advised that federal or state public policy as
interpreted by the courts in certain jurisdictions may be contrary to certain
of the provisions of this Section 7.3, and the parties hereto hereby expressly
waive and relinquish any right or ability to assert such public policy as a
defense to a claim under this Section 7.3 and further agree not to attempt to
assert any such defense.

          7.4 Termination of Conditions and Obligations. The conditions precedent
imposed by Section 5 or this Section 7 upon the transferability of the Shares
and Warrant Shares shall cease and terminate as to any particular number of the
Shares or Warrant Shares when such shares shall have been effectively
registered under the Securities Act and sold or otherwise disposed of in
accordance with the intended method of disposition set forth in the
Registration Statement covering such shares or at such time as an opinion of
counsel reasonably satisfactory to the Company shall have been rendered to the
effect that such conditions are not necessary in order to comply with the
Securities Act.

          7.5 Information Available. So long as the Registration Statement is
effective covering the resale of Shares and Warrant Shares owned by the
Investor, the Company will furnish to the Investor:

               (a) as soon as practicable after it is available, one copy of (i) its
Annual Report to Stockholders (which Annual Report shall contain financial
statements audited in accordance with generally accepted accounting principles
by a national firm of certified public accountants), (ii) its Annual Report on
Form 10-K and (iii) its Quarterly Reports on Form 10-Q (the foregoing, in each
case, excluding exhibits);

               (b) upon the reasonable request of the Investor, all exhibits excluded by
the parenthetical to subparagraph (a) of this Section 7.5 as filed with the SEC
and all other information that is made available to shareholders; and

               (c) upon the reasonable request of the Investor, an adequate number of
copies of the Prospectuses to supply to any other party requiring such
Prospectuses; and upon the reasonable request of the Investor, the President or
the Chief Financial Officer of the Company (or an appropriate designee thereof)
will meet with the Investor or a representative thereof at the Company’s
headquarters to discuss all information relevant for disclosure in the
Registration Statement covering the Shares and Warrant Shares and will
otherwise cooperate with any Investor conducting an investigation for the
purpose of reducing or eliminating such Investor’s exposure to liability under
the Securities Act, including the reasonable production of information at the
Company’s headquarters; provided, that the Company shall not be required to
disclose any confidential information to or meet at its headquarters with any
Investor until and unless the Investor shall have entered into a
confidentiality agreement in form and substance reasonably satisfactory to the
Company with the Company with respect thereto.

          7.6 Legend; Restrictions on Transfer. (a) The certificate or certificates
for the Shares, Warrants and Warrant Shares (and any securities issued in
respect of or exchange for the Shares or Warrant Shares) shall be subject to a
legend or legends restricting transfer under the Securities Act and referring
to restrictions on transfer herein, such legend to be substantially as follows:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE
“SECURITIES”) HAVE BEEN ISSUED AND SOLD IN RELIANCE UPON
EXEMPTIONS FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933 (THE “1933 ACT”), SECTION 10-5-9(13) OF THE OFFICIAL
CODE OF GEORGIA ANNOTATED (THE “GEORGIA CODE”), AND
APPROPRIATE EXEMPTIONS FROM REGISTRATION UNDER THE
SECURITIES LAWS OF OTHER APPLICABLE JURISDICTIONS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR TRANSFERRED
OTHER THAN PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
OR AN EXEMPTION THEREFROM UNDER THE 1933 ACT, THE GEORGIA
CODE AND THE APPLICABLE SECURITIES LAWS OF ANY OTHER
JURISDICTION. THE ISSUER SHALL BE ENTITLED TO REQUIRE AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT WITH
RESPECT TO COMPLIANCE OF THE PROPOSED SALE OR TRANSFER WITH
THE REGISTRATION REQUIREMENTS OF THE 1933 ACT OR EXEMPTION
THEREFROM.

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               (b) Such certificates shall not contain any legend (i) following any sale
of such Shares and Warrant Shares pursuant to an effective
Registration Statement or Rule 144, or (ii) if such Shares and Warrant Shares are eligible
for sale under Rule 144(k). Following such time as a legend is no longer
required for certain Shares or Warrant Shares, the Company will, no later than
five (5) trading days following the delivery by a Investor to the Company or
the Company’s transfer agent of a legended certificate representing such
securities, deliver or cause to be delivered to such Investor a certificate
representing such securities that is free from all restrictive and other
legends.

          7.7 Liquidated Damages. The Company and Investor agree that Investor will
suffer damages if the Company fails to fulfill its obligations pursuant to
Section 7.1 and 7.2 hereof and that it would not be possible to ascertain the
extent of such damages with precision. Accordingly, the Company hereby agrees
to pay liquidated damages (“Liquidated Damages”) to Investor under the
following circumstances: (a) if the Registration Statement is not filed by the
Company on or prior to 30 days after the Closing Date (such an event, a “Filing
Default”); (b) if the Registration Statement is not declared effective by the
SEC on or prior to 105 days after the Closing Date (such an event, an
“Effectiveness Default”); (c) if the Registration Statement (after its
effectiveness date) ceases to be effective and available to Investor prior to
June 30, 2005 for more than 60 days in the aggregate; or (d) if the
Registration Statement ceases to be effective and available to Investor after
June 30, 2005 for any continuous period that exceeds 30 days or for one or more
periods that exceed in the aggregate 60 days in any 12-month period (such an
event, a “Suspension Default” and together with a Filing Default and an
Effectiveness Default, a “Registration Default”). In the event of a
Registration Default, the Company shall as Liquidated Damages pay to Investor,
for each 30-day period of a Registration Default, an amount in cash equal to 1%
of the aggregate purchase price paid by Investor pursuant to this Agreement;
provided that in no event shall the aggregate amount of cash to be paid as
Liquidated Damages pursuant to this Section 7.7 exceed 10% of the aggregate
purchase price paid by Investor. The Company shall pay the Liquidated Damages
as follows: (i) in connection with a Filing Default, on the 31st day after the
Closing Date, and each 30th day thereafter until the Registration Statement is
filed with the SEC; (ii) in connection with an Effectiveness Default, on the
106th day after the Closing Date, and each 30th day thereafter until the
Registration Statement is declared effective by the SEC; or (iii) in connection
with a Suspension Default, on either (x) the 61st day (in the aggregate) of any
Suspensions prior to June 30, 2005 or (y) after June 30, 2005, the 31st 
consecutive day of any Suspension or the 61st day (in the aggregate) of any
Suspensions in any 12-month period, and, in the case of clauses (x) and (y),
each 30th day thereafter until the Suspension is terminated in accordance with
Section 7.2. Notwithstanding the foregoing, all periods shall be tolled during
delays directly caused by the action or inaction of any Investor, and the
Company shall have no liability to any Investor in respect of any such delay.
The Liquidated Damages payable herein shall apply on a pro rata basis for any
portion of a 30-day period of a Registration Default.

     8. Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be mailed (A) if within the United States
by first-class registered or certified airmail, or nationally recognized
overnight express courier, postage prepaid, or by facsimile, or (B) if
delivered from outside the United States, by International Federal Express (or
other recognized international express courier) or facsimile, and shall be
deemed given (i) if delivered by first-class registered or certified mail,
three business days after so mailed, (ii) if delivered by nationally recognized
overnight carrier, one business day after so mailed, (iii) if delivered by
International Federal Express (or other recognized international express
courier), two business days after so mailed, (iv) if delivered by facsimile,
upon electronic confirmation of receipt and shall be delivered as addressed as
follows:

	(a)	 	if to the Company, to:

Inhibitex, Inc.

1165 Sanctuary Parkway, Suite 400

Alpharetta, GA 30004

Attn: Russell H. Plumb

Phone: (678) 746-1136

Fax: (678) 746-1299

	(b)	 	with a copy to:

Swidler Berlin Shereff Friedman, LLP

405 Lexington Avenue

New York, NY 10174

Attn: David S. Rosenthal

Phone: (212) 973-0111

Fax: (212) 891-9598

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	(c)	 	if to the Investor, at its address on the signature
page hereto, or at such other address or addresses as may have
been furnished to the Company in writing.

     9. Changes. This Agreement may be modified, amended or waived only
pursuant to a written instrument signed by the Company and (a) Investors
holding a majority of the Shares issued and sold in the Offering, provided that
such modification, amendment or waiver is made with respect to all Agreements
and does not adversely affect the Investor without adversely affecting all
Investors in a similar manner; or (b) the Investor.

     10. Headings. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.

     11. Severability. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.

     12. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
the principles of conflicts of law.

     13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties.

     14. Entire Agreement. This Agreement and the Warrants constitute the
entire agreement between the parties hereto and supersedes any prior
understandings or agreements concerning the purchase and sale of the Shares and
the Warrants and the resale registration of the Shares and Warrant Shares.

     15. Rule 144. For three years from the Closing Date, the Company
covenants that it will timely file the reports required to be filed by it under
the Securities Act and the Exchange Act and the rules and regulations adopted
by the SEC thereunder (or, if the Company is not required to file such reports,
it will, upon the request of any Investor holding Shares purchased hereunder or
Warrant Shares purchased under the Warrants made after the first anniversary of
the Closing Date, make publicly available such information as necessary to
permit sales pursuant to Rule 144 under the Securities Act), and it will take
such further action as any such Investor may reasonably request, all to the
extent required from time to time to enable such Investor to sell such Shares
and Warrant Shares without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC. Upon the request of the Investor, the
Company will deliver to such holder a written statement as to whether it has
complied with such information and requirements.

     16. Confidential Information.

          (a) The Investor represents to the Company that, at all times during the
Company’s offering of the Shares and the Warrants, the Investor has maintained
in confidence all non-public information regarding the Company received by the
Investor from the Company or its agents, including without limitation, the
existence of the transactions contemplated therein, and covenants that it will
continue to maintain in confidence such information until such information (a)
becomes generally publicly available other than through a violation of this
provision by the Investor or its agents or (b) is required to be disclosed in
legal proceedings (such as by deposition, interrogatory, request for documents,
subpoena, civil investigation demand, filing with any governmental authority or
similar process), provided, however, that before making any use or disclosure
in reliance on this subparagraph (b) the Investor shall give the Company at
least fifteen (15) days prior written notice (or such shorter period as
required by law) specifying the circumstances giving rise thereto and will
furnish only that portion of the non-public information which is legally
required and will exercise its best efforts to obtain reliable assurance that
confidential treatment will be accorded any non-public information so
furnished.

          (b) The Company shall on the Closing Date, or on the following business
day of the Closing Date, issue a press release disclosing the material terms of
the transactions contemplated hereby (including at least the number of Shares
and Warrants sold and proceeds therefrom). The Company shall not publicly
disclose the name of Investor, or include the name of Investor in any filing
with the SEC or any regulatory agency or the Nasdaq National Market (other than
the filing of the Agreements with the SEC pursuant to the Exchange Act or the
filing of the Registration Statement in accordance with the

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provisions of Section 7 of this Agreement), without the prior written
consent of Investor, except to the extent such disclosure is required by law or
Nasdaq regulations.

     17. No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

     18. Expenses. The parties shall pay their own legal and other expenses in
connection with the preparation, negotiation and execution of the Agreements
and the consummation of the transactions contemplated herein.

-15-

 

Investors

Orion Biomedical Fund, LP

Orion Biomedical Offshore Fund, LP

LB I Group Inc.

Franklin Biotechnology Discovery Fund

Anders Hove

Domain Public Equity Partners, LP

Caxton Equity Growth LLC

Caxton Equity Growth (BVI) Limited

Caxton International Limited

Baker Bros. Investments, L.P.

Baker Bros. Investments II, L.P.

Baker/Tisch Investments, L.P.

Baker Biotech Fund I, L.P.

Baker Biotech Fund II, L.P.

Baker Biotech Fund II (Z), L.P.

Baker Biotech Fund III, L.P.

Baker Biotech Fund III (Z), L.P.

Red Abbey Venture Partners, LP

Red Abbey CEO Fund, LP

Red Abbey Venture Partners (QP), LP

SR Capital Partners L.P.

SR Capital Offshore LTD

Atlas Equity I, Ltd.

T. Rowe Price Small-Cap Value Fund, Inc.

Prospect Venture Partners II, L.P.

Prospect Associates II, L.P.

UBS O’Connor LLC F/B/O UBS O’Connor PIPES Corporate Strategies Ltd.

Abingworth Bioventures IV LP

Abingworth Bioventures IV Executives LP

J. Connor Seabrook

Alliance Technology Ventures III, L.P.

ATV III Affiliates Fund L.P.

Claudia Lynn Henos

Essex Woodlands Health Ventures V, LP

New Enterprise Associates 10, L.P.

New Enterprise Associates 11, L.P.

William Blair Capital Partners VI, LP

-16-

 

INHIBITEX, INC.

INVESTOR QUESTIONNAIRE

(ALL INFORMATION WILL BE TREATED CONFIDENTIALLY)

	 	 	 
	To:

	 	Inhibitex, Inc.
1165 Sanctuary Parkway, Suite 400
Alpharetta, GA 30004

     This Investor Questionnaire (“Questionnaire”) must be completed by each
potential investor in connection with the offer and sale of the shares of the
common stock, par value $0.001 per share, of Inhibitex, Inc. (“Common Stock”)
and warrants to purchase shares of Common Stock (collectively, the
“Securities”). The Securities are being offered and sold by Inhibitex, Inc.
(the “Corporation”) without registration under the Securities Act of 1933, as
amended (the “Act”), and the securities laws of certain states, in reliance on
the exemptions contained in Section 4(2) of the Act and on Regulation D
promulgated thereunder and in reliance on similar exemptions under applicable
state laws. The Corporation must determine that a potential investor meets
certain suitability requirements before offering or selling Securities to such
investor. The purpose of this Questionnaire is to assure the Corporation that
each investor will meet the applicable suitability requirements. The
information supplied by you will be used in determining whether you meet such
criteria, and reliance upon the private offering exemption from registration is
based in part on the information herein supplied.

     This Questionnaire does not constitute an offer to sell or a solicitation
of an offer to buy any security. Your answers will be kept strictly
confidential. However, by signing this Questionnaire you will be authorizing
the Corporation to provide a completed copy of this Questionnaire to such
parties as the Corporation deems appropriate in order to ensure that the offer
and sale of the Securities will not result in a violation of the Act or the
securities laws of any state and that you otherwise satisfy the suitability
standards applicable to purchasers of the Securities. All potential investors
must answer all applicable questions and complete, date and sign this
Questionnaire. Please print or type your responses and attach additional
sheets of paper if necessary to complete your answers to any item.

A. BACKGROUND INFORMATION

	 	 	 	 	 
	Name:

	Business Address:

	

	 	(Number and Street)	 	 
	

	(City)

	 	(State)
	 	(Zip Code)
	 
	Telephone Number: (   )

	Residence Address:

	

	 	(Number and Street)	 	 
	
 
	(City)

	 	(State)
	 	(Zip Code)
	Telephone Number: (   )

	If an individual:
	 	 	 	 
	          Age:

	 	Citizenship:

	 	Where registered to vote:

	 
	 	 	 	 
	If a corporation, partnership, limited liability company, trust or other entity:
	          Type of entity:

	          State of formation:

	 	  
	 Date of formation:

	Social Security or Taxpayer Identification No.  

	Send all correspondence to (check one): ____ Residence Address
           ____ Business Address

-1-

 

     Current
ownership of securities of the Corporation:

               shares of common stock, par value $0.001 per share (the “Common
Stock”)

               options to purchase
               shares of Common Stock

	B.	 	STATUS AS ACCREDITED INVESTOR

     The undersigned is an “accredited investor” as such term is defined in
Regulation D under the Act, as at the time of the sale of the Securities the
undersigned falls within one or more of the following categories (Please
initial one or more, as applicable):1

             (1) a bank as defined in Section 3(a)(2) of the Act, or a savings
and loan association or other institution as defined in Section 3(a)(5)(A) of
the Act whether acting in its individual or fiduciary capacity; a broker or
dealer registered pursuant to Section 15 of the Securities Exchange Act of
1934; an insurance company as defined in Section 2(13) of the Act; an
investment company registered under the Investment Corporation Act of 1940 or a
business development company as defined in Section 2(a)(48) of that Act; a
Small Business Investment Corporation licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act
of 1958; a plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions for the benefit of its employees, if such plan has total assets in
excess of $5,000,000; an employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974 if the investment decision is
made by a plan fiduciary, as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with the investment decisions made
solely by persons that are accredited investors;

             (2) a private business development company as defined in Section
202(a)(22) of the Investment Adviser Act of 1940;

             (3) an organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended, corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific purpose of
acquiring the Securities offered, with total assets in excess of $5,000,000;

             (4) a natural person whose individual net worth, or joint net worth
with that person’s spouse, at the time of such person’s purchase of the
Securities exceeds $1,000,000;

             (5) a natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that
person’s spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current year;

             (6) a trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the Securities offered, whose purchase is
directed by a sophisticated person as described in Rule 506(b)(2)(ii) of
Regulation D; and

             (7) an entity in which all of the equity owners are accredited
investors (as defined above).

	C.	 	REPRESENTATIONS

     The undersigned hereby represents and warrants to the Corporation as
follows:

	1.	 	Any purchase of the Securities would be solely for the account of the
undersigned and not for the account of any other person or with a view to
any resale, fractionalization, division, or distribution thereof.

	          1
As used in this Questionnaire, the term “net worth” means the excess of total
assets over total liabilities. In computing net worth for the purpose of
subsection (4), the principal residence of the investor must be valued at cost,
including cost of improvements, or at recently appraised value by an
institutional lender making a secured loan, net of encumbrances. In
determining income, the investor should add to the investor’s adjusted gross
income any amounts attributable to tax exempt income received, losses claimed
as a limited partner in any limited partnership, deductions claimed for
depiction, contributions to an IRA or KEOGH retirement plan, alimony payments,
and any amount by which income from long-term capital gains has been reduced in
arriving at adjusted gross income.

-2-

 

	2.	 	The information contained herein is complete and accurate and may be
relied upon by the Corporation, and the undersigned will notify the
Corporation immediately of any material change in any of such information
occurring prior to the closing, if any, with respect to the purchase of
Securities by the undersigned or any co-purchaser.
	 
	3.	 	There are no suits, pending litigation, or claims against the undersigned
that could materially affect the net worth of the undersigned as reported
in this Questionnaire.
	 
	4.	 	The undersigned acknowledges that there may occasionally be times when
the Corporation determines that it must suspend the use of the Prospectus
forming a part of the Registration Statement (as such terms are defined in
the Stock and Warrant Purchase Agreement to which this Questionnaire is
attached), as set forth in Section 7.2(c) of the Stock and Warrant
Purchase Agreement. The undersigned is aware that, in such event, the
Securities will not be subject to ready liquidation, and that any
Securities purchased by the undersigned would have to be held during such
suspension. The overall commitment of the undersigned to investments
which are not readily marketable is not excessive in view of the
undersigned’s net worth and financial circumstances, and any purchase of
the Securities will not cause such commitment to become excessive. The
undersigned is able to bear the economic risk of an investment in the
Securities.
	 
	5.	 	The undersigned is aware of its obligations under applicable federal and
state securities laws with respect to use and disclosure of non-public
information regarding the Company.
	 
	6.	 	The undersigned has carefully considered the potential risks relating to
the Corporation and a purchase of the Securities, and fully understands
that the Securities are speculative investments which involve a high
degree of risk of loss of the undersigned’s entire investment. Among
others, the undersigned has carefully considered each of the risks
identified in the Disclosure Documents.
	 
	7.	 	The undersigned understands that the Securities that it is acquiring are
characterized as “restricted securities” under the federal securities laws
inasmuch as they are being acquired in a transaction not involving a
public offering, and that under such laws and applicable regulations such
securities may be resold without registration under the Act, only in
certain limited circumstances. In this connection, the undersigned
represents that it is familiar with SEC Rule 144, as presently in effect,
and understands the resale limitations imposed thereby and by the Act.
	 
	8.	 	It us understood that the certificates evidencing the Securities shall

bear a legend, reading substantially as follows:

	 	 	 	THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE
BEEN ISSUED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933 (THE “1933 ACT”), SECTION 10-5-9(13) OF THE
OFFICIAL CODE OF GEORGIA ANNOTATED (THE “GEORGIA CODE”), AND APPROPRIATE
EXEMPTIONS FROM REGISTRATION UNDER THE SECURITIES LAWS OF OTHER APPLICABLE
JURISDICTIONS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR
TRANSFERRED OTHER THAN PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
AN EXEMPTION THEREFROM UNDER THE 1933 ACT, THE GEORGIA CODE AND THE
APPLICABLE SECURITIES LAWS OF ANY OTHER JURISDICTION. THE ISSUER SHALL BE
ENTITLED TO REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT
WITH RESPECT TO COMPLIANCE OF THE PROPOSED SALE OR TRANSFER WITH THE
REGISTRATION REQUIREMENTS OF THE 1933 ACT OR EXEMPTION THEREFROM.

     IN WITNESS WHEREOF, the undersigned has executed this Questionnaire
this    day of November, 2004, and declares under oath that it is
truthful and correct.

	 	 	 	 	 	 	 
	 	 	

	 	 	Print Name
	 
	 	 	 	 	 	 
	

	 	By:	 	 	 	 
	

	 	 	 	
	 	 
	

	 	 	 	Signature	 	 
	

	 	Title:	 	 	 	 
	

	 	 	 	
	 	 
	

	 	 	 	(required for any purchaser that is a corporation,	 	 
	

	 	 	 	partnership, trust or other entity)	 	 

-3-

 

[Company Letterhead]

                                      ,200__

     Re: Inhibitex, Inc.; Registration Statement on Form S-1

Dear Selling Shareholder:

     Enclosed
please find five (5) copies of a prospectus dated
            ,
   (the “Prospectus”) for your use in reselling your shares of common stock,
$0.001 par value (the “Shares”), of Inhibitex, Inc. (the “Company”), under the
Company’s Registration Statement on Form S-1 (Registration No. 333-
            ) (the “Registration Statement”), which has been declared effective by
the Securities and Exchange Commission. As a selling shareholder under the
Registration Statement, you have an obligation to deliver a copy of the
Prospectus to each purchaser of your Shares, either directly or through the
broker-dealer who executes the sale of your Shares.

     The Company is obligated to notify you in the event that it suspends
trading under the Registration Statement in accordance with the terms of the
Stock and Warrant Purchase Agreement between the Company and you. During the
period that the Registration Statement remains effective and trading thereunder
has not been suspended, you will be permitted to sell your Shares that are
included in the Prospectus under the Registration Statement. Upon a sale of
any Shares under the Registration Statement, you or your broker will be
required to deliver to the Transfer Agent, American Stock Transfer & Trust
Company (1) your restricted stock certificate(s) representing the Shares, (2)
instructions for transfer of the Shares sold, and (3) a representation letter
from your broker, or from you if you are selling in a privately negotiated
transaction, or from such other appropriate party, in the form of Exhibit A
attached hereto (the “Representation Letter”). The Representation Letter
confirms that the Shares have been sold pursuant to the Registration Statement
and in a manner described under the caption “Plan of Distribution” in the
Prospectus and that such sale was made in accordance with all applicable
securities laws, including the prospectus delivery requirements.

     Please note that you are under no obligation to sell your Shares during
the registration period. However, if you do decide to sell, you must comply
with the requirements described in this letter or otherwise applicable to such
sale. Your failure to do so may result in liability under the Securities Act
of 1933, as amended, and the Securities Exchange Act of 1934, as amended.
Please remember that all sales of your Shares must be carried out in the manner
set forth under the caption “Plan of Distribution” in the Prospectus if you
sell under the Registration Statement. The Company may require an opinion of
counsel reasonably satisfactory to the Company if you choose another method of
sale. You should consult with your own legal advisor(s) on an ongoing basis to
ensure your compliance with the relevant securities laws and regulations.

     In order to maintain the accuracy of the Prospectus, you must notify the
undersigned upon the sale, gift, or other transfer of any Shares by you,
including the number of Shares being transferred, and in the event of any other
change in the information regarding you which is contained in the Prospectus.
For example, you must notify the undersigned if you enter into any arrangement
with a broker-dealer for the sale of shares through a block trade, special
offering, exchange distribution or secondary distribution or a purchase by a
broker-dealer. Depending on the circumstances, such transactions may require
the filing of a supplement to the prospectus in order to update the information
set forth under the caption “Plan of Distribution” in the Prospectus.

-1-

 

     Should you need any additional copies of the Prospectus, or if you have
any questions concerning the foregoing, please write to me at Inhibitex, Inc.,
1165 Sanctuary Parkway, Suite 400, Alpharetta, GA 30004. Thank you.

	 	 	 
	

	 	Sincerely,
	 
	 	 
	

	 	Chief Financial Officer

-2-

 

Exhibit A

CERTIFICATE OF SUBSEQUENT SALE

American Stock Transfer & Trust Company

	 	 	 
	RE:

	 	Sale of Shares of Common Stock of Inhibitex, Inc.
(the “Company”) pursuant to the Company’s Prospectus dated
            ,
           
(the “Prospectus”)

Dear Sir/Madam:

     The undersigned hereby certifies, in connection with the sale of shares of
Common Stock of the Company included in the table of Selling Shareholders in
the Prospectus, that the undersigned has sold the shares pursuant to the
Prospectus and in a manner described under the caption “Plan of Distribution”
in the Prospectus and that such sale complies with all securities laws
applicable to the undersigned, including, without limitation, the Prospectus
delivery requirements of the Securities Act of 1933, as amended.

	 
	Selling Shareholder (the beneficial owner):

	Record Holder (e.g., if held in name of nominee):

	Restricted Stock Certificate No. (s):

	Number of Shares Sold:

	Date of Sale:

     In the event that you receive a stock certificate(s) representing more
shares of Common Stock than have been sold by the undersigned, then you should
return to the undersigned a newly issued certificate for such excess shares in
the name of the Record Holder and BEARING A RESTRICTIVE LEGEND. Further, you
should place a stop transfer on your records with regard to such certificate.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Very truly yours,
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dated:

	 	 	 	 	 	By:	 	 	 	 	 	 	 	 
	

	 	

	 	 	 	 	 	
	 	 	 	 	 	 
	

	 	 	 	 	 	Print Name:	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	
	 	 	 	 	 	 
	

	 	 	 	 	 	Title:	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	
	 	 	 	 	 	 

	 	 	 
	cc:

	 	Inhibitex, Inc.
	

	 	1165 Sanctuary Parkway, Suite 400
	

	 	Alpharetta, GA 30004
	

	 	Attn: Chief Financial Officer

-1-

 

EXHIBIT B

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED AND SOLD IN
RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “1933 ACT”), SECTION 10-5-9 (13) OF THE OFFICIAL CODE OF GEORGIA
ANNOTATED (THE “GEORGIA CODE”) AND APPROPRIATE EXEMPTIONS FROM REGISTRATION
UNDER THE SECURITIES LAWS OF OTHER APPLICABLE JURISDICTIONS. THE SECURITIES
MAY NOT BE OFFERED FOR SALE, SOLD OR TRANSFERRED OTHER THAN PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM UNDER THE 1933 ACT,
THE GEORGIA CODE AND THE APPLICABLE SECURITIES LAWS OF ANY OTHER JURISDICTION.
THE ISSUER SHALL BE ENTITLED TO REQUIRE AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE OF THE PROPOSED SALE OR TRANSFER
WITH THE REGISTRATION REQUIREMENTS OF THE 1933 ACT OR AN EXEMPTION THEREFROM.

INHIBITEX, INC.

WARRANT TO PURCHASE SHARES

OF COMMON STOCK

	 	 	 
	Date of Issuance: November    , 2004

	 	Certificate No.    

     THIS CERTIFIES THAT, for value received,         and its assigns are entitled to subscribe
for and purchase          shares of duly authorized, validly issued, fully
paid and nonassessable Common Stock, par value $.001 per share, (as adjusted
pursuant to Section 4 hereof, the “Warrant Shares”) of INHIBITEX, INC., a
Delaware corporation (the “Company”), at the price of $8.81 per share (such
price and such other price as shall result, from time to time, from the
adjustments specified in Section 4 hereof is herein referred to as the “Warrant
Price”), subject to the provisions and upon the terms and conditions
hereinafter set forth. As used herein the term “Date of Grant” shall mean
November    , 2004. The term “Warrant” as used herein shall be deemed to
include any warrants issued upon transfer or partial exercise of this Warrant
unless the context clearly requires otherwise. This Warrant has been issued
pursuant to a Stock and Warrant Purchase Agreement, dated as of November    ,
2004, between the Company and the registered holder of this Warrant (the
“Purchase Agreement”), and is subject to the terms and conditions set forth
therein. Capitalized Terms not otherwise defined herein shall have the meanings
ascribed to them in the Purchase Agreement.

     1. Term. The purchase right represented by this Warrant is exercisable,
in whole or in part, at any time and from time to time from the date which is
One Hundred Eighty (180) days from the Date of Grant through November    , 2009.

     2. Method of Exercise; Payment; Issuance of New Warrant. Subject to
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, at
the election of the holder hereof, by (a) the surrender of this Warrant (with
the notice of exercise substantially in the form attached hereto as Exhibit A
duly completed and executed) at the principal office of the Company and the
payment to the Company, by certified or bank check, or by wire transfer to an
account designated by the Company of an amount equal to the then applicable
Warrant Price multiplied by the number of Warrant Shares then being purchased,
or (b) exercise of the “net issuance” right provided for in Section 10.2
hereof. The person or persons in whose name(s) any certificate(s) representing
the Warrant Shares shall be issuable upon exercise of this Warrant shall be
deemed to have become the holder(s) of record of, and shall be treated for all
purposes as the record holder(s) of, the shares represented thereby (and such
shares shall be deemed to have been issued) immediately prior to the close of
business on the date or dates upon which this Warrant is exercised. In the
event of any exercise of the rights represented by this Warrant, certificates
for the shares of stock so purchased shall be delivered to the holder hereof as
soon as practicable and, if requested by the holder of

 

 

this Warrant, the Company shall cause its transfer agent to deliver the
certificate representing Warrant Shares issued upon exercise of this Warrant to
a broker or other person (as directed by the holder exercising this Warrant,
but subject to the payment by the holder of any applicable transfer taxes)
within the time period required to settle any trade made by the holder after
exercise of this Warrant.

     3. Stock Fully Paid; Reservation of Warrant Shares. All Warrant Shares
that may be issued upon the exercise of the rights represented by this Warrant
will, upon issuance pursuant to the terms and conditions herein, be fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issue thereof. During the period within which the rights represented by
this Warrant may be exercised, the Company will at all times have authorized,
and reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Common Stock to
provide for the exercise of the rights represented by this Warrant.

     4. Adjustment of Warrant Price and Number of Warrant Shares. The number
and kind of securities purchasable upon the exercise of this Warrant and the
Warrant Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:

          (a) Reclassification or Merger. In case of any reclassification or change
of securities of the class issuable upon exercise of this Warrant (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or in case of any
merger of the Company with or into another corporation (other than a merger
with another corporation in which the Company is the surviving corporation and
which does not result in any reclassification or change of outstanding
securities issuable upon exercise of this Warrant), the Company, or such
surviving corporation, as the case may be, shall duly execute and deliver to
the holder of this Warrant a new Warrant (which, if not in substantially the
form of this Warrant, shall be in form and substance reasonably satisfactory to
the holder of this Warrant), or the Company shall make appropriate provision
without the issuance of a new Warrant, so that the holder of this Warrant shall
have the right to receive upon exercise of this Warrant, at a total purchase
price not to exceed that payable upon the exercise of the then unexercised
portion of this Warrant, and in lieu of the shares of Common Stock theretofore
issuable upon exercise of this Warrant, the kind and amount of shares of stock,
other securities, money and property receivable upon such reclassification,
change or merger by a holder of the number of shares of Common Stock
purchasable under this Warrant immediately preceding the consummation of such
reclassification or merger. Such new Warrant shall provide for adjustments
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 4. The provisions of this subparagraph (a) shall
similarly apply to successive reclassifications, changes and mergers.

          (b) Subdivision or Combination of Warrant Shares. If the Company at any
time while this Warrant remains outstanding and unexpired shall subdivide or
combine its outstanding shares of Common Stock, the Warrant Price shall be
proportionately decreased and the number of Warrant Shares issuable hereunder
shall be proportionately increased in the case of a subdivision and the Warrant
Price shall be proportionately increased and the number of Warrant Shares
issuable hereunder shall be proportionately decreased in the case of a
combination.

          (c) Stock Dividends. If the Company at any time while this Warrant is
outstanding and unexpired shall pay a dividend with respect to its Common Stock
payable in Common Stock, then the Warrant Price shall be adjusted, from and
after the record date fixed for the determination of the shareholders of the
Company entitled to receive such dividend or distribution, to that price
determined by multiplying the Warrant Price in effect immediately prior to such
date of determination by a fraction (A) the numerator of which shall be the
total number of shares of Common Stock outstanding immediately prior to such
dividend or distribution, and (B) the denominator of which shall be the total
number of shares of Common Stock outstanding immediately after such dividend or
distribution.

2

 

          (d) Adjustment of Number of Warrant Shares. Upon each adjustment in the
Warrant Price pursuant to Section 4(c) above, the number of Warrant Shares
purchasable hereunder shall be adjusted, to the nearest whole share, to the
product obtained by multiplying the number of Warrant Shares purchasable
immediately prior to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately prior to such
adjustment and the denominator of which shall be the Warrant Price immediately
thereafter.

     5. Notice of Adjustments. Whenever the Warrant Price or the number of
Warrant Shares purchasable hereunder shall be adjusted pursuant to Section 4
hereof, the Company shall make a certificate signed by its chief financial
officer setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the Warrant Price and the number of Warrant Shares
purchasable hereunder after giving effect to such adjustment, and shall cause
copies of such certificate to be mailed (without regard to Section 13 hereof)
by first class mail, postage prepaid to the holder of this Warrant at such
holder’s last known address.

     6. Fractional Shares. No fractional shares of Common Stock will be issued
in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value of the Common Stock on the date of exercise as reasonably determined in
good faith by the Company’s Board of Directors.

     7. Compliance with Securities Act. This Warrant and all Warrant Shares
issued upon exercise of this Warrant (unless registered under the Securities
Act and any applicable state securities laws) shall be stamped or imprinted
with a legend in substantially the form as set forth in the Purchase Agreement.
Said legend shall be removed by the Company, upon the request of a holder, at
such time as the restrictions on the transfer of the applicable security shall
have terminated.

     8. Rights as Shareholders; Information. No holder of this Warrant, as
such, shall be entitled to vote or receive dividends or be deemed the holder of
Common Stock or any other securities which may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the holder of this Warrant, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or (except as provided in Section 10.1) to receive notice of meetings, or to
receive dividends or subscription rights or otherwise until this Warrant shall
have been exercised and the Warrant Shares purchasable upon the exercise hereof
shall have become deliverable, as provided herein.

     9. Registration Rights. The Company has granted registration rights to
the holder of this Warrant for the resale of the Common Stock of the Company
obtained upon exercise hereof, pursuant to the Purchase Agreement.

     10. Additional Rights.

10.1 Notice of Corporate Action. In the event the Company proposes to:
(i) pay, distribute, or take a record of the holders of its Common Stock
for the purpose of determining the holders thereof who are entitled to
receive, any dividend or other distribution, or any right to subscribe
for, purchase or otherwise acquire any shares of capital stock or any
other securities or property, or (ii) consummate any capital
reorganization, reclassification, recapitalization, consolidation,
merger, transfer of all or substantially all of the Company’s assets,
dissolution, liquidation or winding-up, or any similar transaction, then,
at least 10 days prior to the earlier of any applicable record date or
such event, as the case may be, the Company shall mail to the holder of
this Warrant a notice specifying: (a) the date or expected date on which
any such payment or distribution is to be made or record is to be taken
and the amount and character of any such dividend, distribution or right;
(b) the date or expected date on which any such reorganization,

3

 

reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation, winding-up or similar transaction is to take
effect and any record date therefor; (c) the time as of which any holders
of record of shares of Common Stock and/or any other class of securities
shall be entitled to exchange their shares of Common Stock and/or other
securities for the securities or other property deliverable upon such
reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation, winding-up or similar
transaction and a description in reasonable detail of such transaction;
and (d) in each case, the expected effect on the Warrant Price of each
such transaction or event. The Company shall update any such notice to
reflect any change in the foregoing information.

     10.2 Right to Convert Warrant into Stock: Net Issuance.

          (a) Right to Convert. In addition to and without limiting the
rights of the holder under the terms of this Warrant, the holder shall
have the right to convert this Warrant or any portion thereof (the
“Conversion Right”) into shares of Common Stock as provided in this
Section 10.2 at any time or from time to time during the term of this
Warrant. Upon exercise of the Conversion Right with respect to a
particular number of Warrant Shares subject to this Warrant (the
“Converted Warrant Shares”), the Company shall deliver to the holder
(without payment by the holder of any exercise price or any cash or other
consideration) that number of shares of fully paid and nonassessable
Common Stock as is determined according to the following formula:

	 	 	 
	X =

	 	B - A
	

	 	   Y

	 	 	 
	Where: X =

	 	the number of shares of Common Stock to be issued to the
holder upon such exercise

	 
	 	 
	Y =

	 	the fair market value of one share of Common Stock
	 
	 	 
	A =

	 	the aggregate Warrant Price of the specified number of Converted Warrant Shares immediately
prior to the exercise of the Conversion Right (i.e., the
number of Converted Warrant Shares multiplied by the
Warrant Price)

	 
	 	 
	B =

	 	the aggregate fair market value of the
specified number of Converted Warrant Shares (i.e., the
number of Converted Warrant Shares multiplied by the fair
market value of one Converted Warrant Share)

No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance
with the foregoing formula is other than a whole number, the Company
shall pay to the holder an amount in cash equal to the fair market value
of the resulting fractional share on the Conversion Date (as hereinafter
defined). For purposes of Section 9 of this Warrant, shares issued
pursuant to the Conversion Right shall be treated as if they were issued
upon the exercise of this Warrant.

          (b) Method of Exercise. The Conversion Right may be exercised by
the holder by the surrender of this Warrant at the principal office of
the Company together with a written statement (which may be in the form
of Exhibit A) specifying that the holder thereby intends to exercise the
Conversion Right and indicating the number of shares subject to this
Warrant which are being surrendered (referred to in Section 10.2(a)
hereof as the Converted Warrant Shares) in

4

 

exercise of the Conversion Right. Such conversion shall be
effective upon receipt by the Company of this Warrant together with the
aforesaid written statement, or on such later date as is specified
therein (the “Conversion Date”). Certificates for the Warrant Shares
issuable upon exercise of the Conversion Right and, if applicable, a new
Warrant evidencing the balance of the Warrant Shares remaining subject to
this Warrant, shall be issued as of the Conversion Date and shall be
delivered to the holder within thirty (30) days following the Conversion
Date.

          (c) Determination of Fair Market Value. For purposes of this
Section 10.2, “fair market value” of a share of Common Stock as of a
particular date (the “Determination Date”) shall mean:

               (i) If traded on a securities exchange, the Nasdaq National Market
or Nasdaq SmallCap Market, the fair market value of the Common Stock
shall be deemed to be the average of the closing prices of the Common
Stock on such exchange or market over the five trading days immediately
prior to the Determination Date;

               (ii) If traded on the Nasdaq Stock Market (other than the Nasdaq
National Market or Nasdaq SmallCap Market) or other over-the-counter
system, the fair market value of the Common Stock shall be deemed to be
the average of the closing bid prices of the Common Stock over the five
trading days immediately prior to the Determination Date; and

               (iii) If there is no public market for the Common Stock, then fair
market value shall be determined by (A) mutual agreement of the holders
of a majority-in-interest of the warrants issued pursuant to the Purchase
Agreement who are then seeking to exercise their Conversion Rights (the
“Converting Holders”) and the Company or (B) if no such mutual agreement
can be reached within 15 days, then the higher of (x) the book value of a
share of the Common Stock as determined by a firm of independent public
accountants selected (within 10 days after the failure of the Company and
the Converting Holders to reach mutual agreement) by the Board of
Directors of the Company with the consent of the holders of the
majority-in-interest of the warrants issued pursuant to the Purchase
Agreement that are beneficially owned by Converting Holders, which
consent shall not be unreasonably withheld or delayed, as at the last day
of any month ending within 60 days preceding the date as of which the
determination is to be made (such determination of the independent public
accountant to be completed within 30 days after such independent public
accountant is chosen by the Company and the Converting Holders) or (y)
the fair value thereof determined in good faith by an independent
appraiser (chosen within 10 days after the failure of the Company and the
Converting Holders to reach mutual agreement by the Board of Directors of
the Company with the consent of the Converting Holder exercising the
Conversion Right with respect to the greatest number of shares, which
consent shall not be unreasonably withheld or delayed) as of a date which
is within 15 days of the date as of which the determination is to be made
(such determination of the independent appraiser to be completed within
30 days after such independent appraiser is chosen by the Company and the
Converting Holders). The fees and expenses of any such independent
public accountant or independent appraiser shall be borne one half by the
Converting Holders (among the Converting Holders, pro rata according to
the number of shares for which Conversion Rights are being exercised) and
one half by the Company.

If closing prices or closing bid prices are no longer reported by a
securities exchange or other trading system, the closing price or closing
bid price shall be that which is reported by such securities exchange or
other trading system at 4:00 p.m. New York City time on the applicable
trading day.

5

 

10.3 Exercise Prior to Expiration. To the extent this Warrant is not
previously exercised as to all of the Warrant Shares subject hereto, and
if the fair market value of one share of the Common Stock is greater than
the Warrant Price then in effect, this Warrant shall be deemed
automatically exercised pursuant to Section 10.2 above (even if not
surrendered) immediately before its expiration. For purposes of such
automatic exercise, the fair market value of one share of Common Stock
upon such expiration shall be determined pursuant to Section 10.2(c). To
the extent this Warrant or any portion thereof is deemed automatically
exercised pursuant to this Section 10.3, the Company agrees to promptly
notify the holder hereof of the number of Warrant Shares, if any, the
holder hereof is to receive by reason of such automatic exercise.

      11. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the Company and (i) Investors holding Warrants representing at least
a majority of the number of Warrant Shares then issuable upon exercise of the
Warrants sold in the Offering (as such terms are defined in the Purchase
Agreement), provided that such modification, amendment or waiver is made with
respect to all Warrants issued in the Offering and does not adversely affect
the holder of this Warrant without adversely affecting all Investors in a
similar manner; or (ii) the holder of this Warrant.

      12. Notices. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered, or shall be sent by certified or registered mail,
postage prepaid, to each such holder at its address as shown on the books of
the Company or to the Company at the address indicated therefor on the
signature page of this Warrant with a copy to the Chief Financial Officer at
the same address and with another copy to Swidler Berlin Shereff Friedman, LLP,
405 Lexington Avenue, New York, NY 10174; tel. (212) 891-9262, fax (212)
891-9598; Attn: David S. Rosenthal, or at such other address as such party may
designate by ten (10) days’ advance written notice to the other parties.

      13. Transfers. Subject to compliance with applicable federal and state
securities laws, this Warrant may be transferred by the holder with respect to
any or all of the Warrant Shares. Upon surrender of this Warrant to the
Company, together with the assignment hereof properly endorsed, for transfer of
this Warrant as an entirety by the holder, the Company shall issue a new
warrant of the same denomination to the assignee. Upon surrender of this
Warrant to the Company, together with the assignment hereof properly endorsed,
by the Holder for transfer with respect to a portion of the Warrant Shares
purchasable hereunder, the Company shall issue a new warrant to the assignee,
in such denomination as shall be requested by the holder hereof, and shall
issue to such holder a new warrant covering the number of Warrant Shares in
respect of which this Warrant shall not have been transferred.

      14. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger or consolidation and all of the
obligations of the Company relating to the Warrant Shares issuable upon the
exercise or conversion of this Warrant shall survive the exercise, conversion
and termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof.

      15. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.

6

 

      16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.

      17. Governing Law. This Warrant shall be governed by and construed in
accordance with, the internal laws of the State of Delaware, without giving
effect to the principles of conflicts of law.

      18. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific
performance of any such covenant or agreement contained in this Warrant.

      19. No Impairment of Rights. The Company will not, by amendment of its
certificate of incorporation or through any other means, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to
protect the rights of the holder of this Warrant against impairment.

      20. Severability. The invalidity or unenforceability of any provision of
this Warrant in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction, or affect any other
provision of this Warrant, which shall remain in full force and effect.

      21. Entire Agreement; Modification. This Warrant constitutes the entire
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

7

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed in its
corporate name by its duly authorized officer and to be dated as of the Date of
Grant set forth on the first page to this Warrant.

	 	 	 
	

	 	INHIBITEX, INC.
	 
	 	 
	

	 	By:                                                         
	 
	 	 
	

	 	Name:
	

	 	Title:
	

	 	Address:

[Signature page to Warrant]

 

 

EXHIBIT A

NOTICE OF EXERCISE

To: INHIBITEX, INC. (the “Company”)

	 	 	 	 	 
	1.

	 	 	 	The undersigned hereby:
	 
	 	 	 	 
	

	 	o
	 	elects to purchase       shares of Common Stock of the Company
pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price of such shares in full, or
	 
	 	 	 	 
	

	 	o
	 	*elects to exercise its net issuance rights pursuant to Section
10.2 of the attached Warrant with respect to       shares of Common Stock.
	 
	 	 	 	 
	2.

	 	 	 	Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are
specified below:
	

	 	 	 	                                      
	

	 	 	 	(Name)
	 
	 	 	 	 
	

	 	 	 	                                      
	

	 	 	 	                                      
	

	 	 	 	(Address)
	 
	 	 	 	 
	3.

	 	 	 	The undersigned represents that the aforesaid shares are being acquired
for the account of the undersigned for investment and not with a view to,
or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such
shares, all except as in compliance with applicable securities laws.
	 
	 	 	 	 
	

	 	 	 	                                      
	

	 	 	 	(Signature)
	 
	 	 	 	 
	

	 	 	 	                                      
	

	 	 	 	(Date)

A-1

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