EX-10.1






Execution Copy




SECURITIES PURCHASE AGREEMENT




This Securities Purchase Agreement (this “Agreement”) is dated as of November 7, 2005,
by and among Clearant, Inc., a Delaware corporation (the “Company”), and the purchasers
identified on the signature pages hereto (each, a “Purchaser” and collectively, the
“Purchasers”).



RECITALS




A. The Company and each Purchaser are executing and delivering this Agreement in reliance upon
the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933,
as amended (the “Securities Act”), and Rule 506 of Regulation D (“Regulation D”) as
promulgated by the United States Securities and Exchange Commission under the Securities Act.



B. Each Purchaser, severally and not jointly, wishes to purchase, and the Company wishes to
sell, upon the terms and conditions stated in this Agreement, (i) that aggregate number of shares
of the Common Stock, par value $0.0001 per share, of the Company (the “Common Stock”), set
forth below such Purchaser’s name on the signature page hereto (which aggregate amount for all
Purchasers together shall be $12,000,000 (the “Aggregate Purchase Price”) for which the
Purchasers shall receive that number of shares of Common Stock (collectively referred to herein as
the “Shares”) equal to the Aggregate Purchase Price divided by $3.18 (80% of the volume
weighted average price for the 45 Trading Day period immediately preceding the date hereof), and
(ii) warrants, in substantially the form attached hereto as Exhibit A (the
“Warrants”) to acquire up to that number of additional shares of Common Stock equal to 45%
of the number of Shares (as exercised, collectively, the “Warrant Shares”).



C. The Shares, the Warrants and the Warrant Shares issued pursuant to this Agreement are
collectively referred to herein as the “Securities”.



D. The Company has engaged Piper Jaffray & Co. as its placement agent (the “Placement
Agent”) for the offering of the Securities on a “best efforts” basis.



E. Contemporaneous with the sale of the Shares and the Warrants, the parties hereto will enter
into a Registration Rights Agreement, in the form attached hereto as Exhibit B (the
“Registration Rights Agreement”), pursuant to which, among other things, the Company will
agree to provide certain registration rights under the Securities Act and applicable state
securities laws.



NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration the receipt and adequacy of which are hereby acknowledged,
the Company and the Purchasers agree as follows:



ARTICLE I.




DEFINITIONS




1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for
all purposes of this Agreement, the following terms shall have the meanings indicated in this
Section 1.1:



“Action” means any action, suit, inquiry, notice of violation, proceeding (including
any partial proceeding such as a deposition) or investigation pending or threatened in writing
against or affecting the Company, the Subsidiary or any of their respective properties before or by
any court, arbitrator, governmental or administrative agency, regulatory authority (federal, state,
county, local or foreign), stock market, stock exchange or trading facility.



“Affiliate” means, with respect to any Person, any other Person that, directly or
indirectly through one or more intermediaries, Controls, is controlled by or is under common
control with such Person. With respect to a Purchaser, any investment fund or managed account that
is managed on a discretionary basis by the same investment manager as such Purchaser will be deemed
to be an Affiliate of such Purchaser.



“Business Day” means a day, other than a Saturday, Sunday or federal holiday.



“Buy-In” has the meaning set forth in Section 4.1(c).



“Buy-In Price” has the meaning set forth in Section 4.1(c).



“Cash Placement Agent Fees” has the meaning set forth in Section 3.1(w).



“Closing” means the closing of the purchase and sale of the Shares and the Warrants
pursuant to this Agreement.



“Closing Date” means the date of the Closing, and shall be as soon as practicable and
no later than the second Business Day after the execution of this Agreement (or such other date and
time as is mutually agreed to by the Company and each Purchaser).



"Commission” means the United States Securities and Exchange Commission.



“Common Stock” has the meaning set forth in the Recitals, and also includes any
securities into which the Common Stock may hereafter be reclassified.



“Common Stock Equivalents” means any securities of the Company or the Subsidiary which
would entitle the holder thereof to acquire at any time Common Stock, including without limitation,
any debt, preferred stock, rights, options, warrants or other instrument that is at any time
convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive, directly or indirectly, Common Stock.



“Company’s Knowledge” means the actual knowledge of the executive officers of the
Company.



“Control” (including the terms “controlling”, “controlled by” or “under common control
with”) means the possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.



“Disclosure Materials” has the meaning set forth in Section 3.1(h).



“Effective Date” means the date on which the initial Registration Statement required
by Section 2(a) of the Registration Rights Agreement is first declared effective by the Commission.



“Effectiveness Deadline” means the date on which the initial Registration Statement is
required to be declared effective by the Commission under the terms of the Registration Rights
Agreement.



“Environmental Laws” has the meaning set forth in Section 3.1(l).



“Evaluation Date” has the meaning set forth in Section 3.1(v).



“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor
statute, and the rules and regulations promulgated thereunder.



“GAAP” means U.S. generally accepted accounting principals as applied by the Company.



“Indemnified Person” has the meaning set forth in Section 4.7(b).



“Intellectual Property Rights” has the meaning set forth in Section 3.1(r).



“Lien” means any lien, charge, encumbrance, security interest, right of first refusal,
preemptive right or other restrictions of any kind.



“Losses” has the meaning set forth in Section 4.7(a).



“Material Adverse Effect” means any of (i) a material and adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a material and adverse
effect on the results of operations, assets, prospects, business or financial condition of the
Company and the Subsidiary, taken as a whole, or (iii) a material and adverse impairment to the
Company’s ability to perform on a timely basis its obligations under any Transaction Document.



“Material Contract” means any contract of the Company that was filed as an exhibit to
the SEC Reports pursuant to Item 601(b)(4) or Item 601(b)(10) of Regulation S-K.



“Material Permits” has the meaning set forth in Section 3.1(p).



“Outside Date” means November 11, 2005.



“Person” means an individual, corporation, partnership, limited liability company,
trust, business trust, association, joint stock company, joint venture, sole proprietorship,
unincorporated organization, governmental authority or any other form of entity not specifically
listed herein.



“Proceeding” means an action, claim, suit, investigation or proceeding (including,
without limitation, an investigation or partial proceeding, such as a deposition), whether
commenced or threatened in writing.



“Prohibited Transaction” has the meaning set forth in Section 3.2(g).



“Purchaser Party” has the meaning set forth in Section 4.7.



“Registration Statement” means a registration statement meeting the requirements set
forth in the Registration Rights Agreement and covering the resale by the Purchasers of the
Registrable Securities (as defined in the Registration Rights Agreement).



“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such Rule.



“SEC Reports” has the meaning set forth in Section 3.1(h).



“Secretary’s Certificate” has the meaning set forth in Section 2.2(a)(vi).



“Securities” means the Shares, the Warrants and the Warrant Shares.



“Shares” means the shares of Common Stock being purchased by the Purchasers hereunder.



“Short Sales” include, without limitation, all “short sales” as defined in Rule 3b-3
of the Exchange Act and Rule 200 promulgated under Regulation SHO under the Exchange Act, whether
or not against the box, and all types of direct and indirect stock pledges, forward sale contracts,
options, puts, calls, short sales, swaps, “put equivalent positions” (as defined in Rule 16a-1(h)
under the Exchange Act) and similar arrangements (including on a total return basis), and sales and
other transactions through non-US broker dealers or foreign regulated brokers having the effect of
hedging the securities or investment made under this Agreement.



“Subsidiary” means Clearant Licensing, Inc, a Delaware corporation.



“Trading Affiliate” has the meaning set forth in Section 3.2(g).



“Trading Day” means a day on which the Common Stock is listed or quoted on any Trading
Market; provided, that in the event that the Common Stock is not listed or quoted on any Trading
Market, then Trading Day shall mean a Business Day.



“Trading Market” means whichever of the New York Stock Exchange, the American Stock
Exchange, the NASDAQ National Market, the NASDAQ Capital Market or OTC Bulletin Board on which the
Common Stock is listed or quoted for trading on the date in question.



“Transaction Documents” means this Agreement, the schedules and exhibits attached
hereto, the Warrants, the Registration Rights Agreement, the Transfer Agent Instructions and any
other documents or agreements executed in connection with the transactions contemplated hereunder
and incorporated herein.



“Transfer Agent” means American Stock Transfer & Trust Company or any successor
transfer agent for the Company.



“Transfer Agent Instructions” means, with respect to the Company, the Transfer Agent
Instructions, in the form of Exhibit D, executed by the Company and delivered to and acknowledged
in writing by the Transfer Agent.



“Warrants” has the meaning set forth in the Preamble to this Agreement. The Placement
Agent and/or its designees are also receiving placement agent warrants as compensation for services
rendered in connection with the transactions set forth herein, which warrants shall also constitute
“Warrants” for all purposes hereunder.



ARTICLE II.




PURCHASE AND SALE




2.1 Closing. Subject to the terms and conditions set forth in this Agreement, at the
Closing, the Company shall issue and sell to each Purchaser, and each Purchaser shall, severally
and not jointly, purchase from the Company, such number of Shares and Warrants set forth opposite
such Purchaser’s name on the signature pages attached hereto in exchange for the Aggregate Purchase
Price. The Closing shall take place at the offices of the Company on the Closing Date or at such
other location or time as the parties may agree.



2.2 Closing Deliveries. (a) On the Closing Date, the Company shall issue, deliver
or cause to be delivered to each Purchaser the following:



(i) This Agreement, duly executed by the Company;



(ii) One or more stock certificates, free and clear of all restrictive and other legends
(except as expressly provided in Section 4.1(b) hereof), evidencing such number of Shares equal to
the number set forth below such Purchaser’s name on the signature pages hereto under the heading
“Number of Shares”, registered in the name of such Purchaser;



(iii) Warrants, executed by the Company and registered in the name of such Purchaser, pursuant
to which such Purchaser shall have the right to acquire such number of Warrant Shares set forth
below such Purchaser’s name on the signature pages hereto under the heading “Number of Warrants”;



(iv) a legal opinion of counsel to the Company, in the form of Exhibit E attached hereto,
executed by such counsel and addressed to the Purchasers and the Placement Agent;



(v) the Registration Rights Agreement, duly executed by the Company;



(vi) duly executed Transfer Agent Instructions acknowledged in writing by the Company’s
transfer agent.



(vii) a certificate of the Secretary of the Company (the “Secretary’s Certificate”),
dated as of the Closing Date, certifying the resolutions adopted by the Board of Directors of the
Company approving the transactions contemplated by this Agreement and the other Transaction
Documents and the issuance of the Securities, certifying the current versions of the Certificate of
Incorporation and by-laws of the Company and certifying as to the signatures and authority of
persons signing the Transaction Documents and related documents on behalf of the Company; and



(b) On the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company
the following:



(i) This Agreement, duly executed by such Purchaser;



(ii) The purchase price set forth below such Purchaser’s name on the signature pages hereto
under the heading “Aggregate Purchase Price”, in United States dollars and in immediately available
funds, by wire transfer to an account designated in writing by the Company for such purpose, as set
forth on Schedule I annexed hereto;



(iii) the Registration Rights Agreement, duly executed by such Purchaser; and



(iv) a fully completed and duly executed Stock Certificate Questionnaire, Registration
Statement Questionnaire and Purchaser Certificate in the forms attached hereto as Exhibits
C-1, C-2, and C-3.



ARTICLE III.




REPRESENTATIONS AND WARRANTIES




3.1 Representations and Warranties of the Company. The Company hereby represents and
warrants to the Purchasers and to the Placement Agent that, except as set forth in the Schedules
delivered herewith:



(a) Subsidiaries. Other than the Subsidiary, none of the Company’s subsidiaries is a
“significant subsidiary” as such term is defined in Rule 1-02 of Regulation S-X of the Securities
Act. The Company owns, directly or indirectly, all of the capital stock or comparable equity
interests of the Subsidiary free and clear of any Lien and all the issued and outstanding shares of
capital stock or comparable equity interest of the Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights.



(b) Organization and Qualification. Each of the Company and the Subsidiary is an
entity duly incorporated or otherwise organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite
power and authority to own or lease and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor the Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and the Subsidiary is duly qualified to
conduct business and is in good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or property owned by it makes such
qualification necessary or appropriate, except where the failure to be so qualified or in good
standing, as the case may be, individually or in the aggregate, have not and could not reasonably
be expected to result in a Material Adverse Effect.



(c) Authorization; Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each of the Transaction
Documents to which it is a party and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of each of the Transaction Documents to which it is a party
by the Company and the consummation by it of the transactions contemplated hereby and thereby
(including, but not limited to, the sale and delivery of the Shares and the Warrants and the
subsequent issuance of the Warrant Shares upon exercise of the Warrants) have been duly authorized
by all necessary corporate action on the part of the Company and no further corporate action is
required by the Company, its Board of Directors or its stockholders. Each Transaction Document to
which it is a party has been (or upon delivery will have been) duly executed by the Company and,
when delivered in accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of,
creditors’ rights and remedies or by other equitable principles of general application.



(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents to which it is a party by the Company and the consummation by the Company of the
transactions contemplated hereby or thereby do not and will not (i) conflict with or violate any
provision of the Company’s or the Subsidiary’s certificate or articles of incorporation, bylaws or
other organizational or charter documents, (ii) conflict with, or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of
time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the Company or the Subsidiary is a
party or by which any property or asset of the Company or the Subsidiary is bound, or affected,
except to the extent that such conflict, default, termination, amendment, acceleration or
cancellation right could not reasonably be expected to have a Material Adverse Effect, or (iii)
result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or the Subsidiary is
subject (including federal and state securities laws and regulations and the rules and regulations,
assuming the correctness of the representations and warranties made by the Purchasers herein, of
any self-regulatory organization to which the Company or its securities are subject, including all
applicable Trading Markets, or by which any property or asset of the Company or the Subsidiary is
bound or affected, except to the extent that such violation could not reasonably be expected to
have a Material Adverse Effect.



(e) Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any filing or registration
with, any court or other federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the Transaction
Documents, other than (i) the filing with the Commission of one or more Registration Statements in
accordance with the requirements of the Registration Rights Agreement, (ii) filings required by
applicable state securities laws, (iii) the filing of a Notice of Sale of Securities on Form D with
the Commission under Regulation D of the Securities Act, (iv) the filing of any requisite notices
and/or application(s) to each applicable Trading Market for the issuance and sale of the Shares and
the Warrants and the listing of the Common Stock for trading or quotation, as the case may be,
thereon in the time and manner required thereby, (v) the filings required in accordance with
Sections 4.5 and 4.6 and (vi) those that have been made or obtained prior to the date of this
Agreement.



(f) Issuance of the Securities. The Shares and the Warrant Shares are duly authorized
and, when issued and paid for in accordance with the terms of the Transaction Documents, will be
duly and validly issued, fully paid and nonassessable, free and clear of all Liens other than
restrictions on transfer provided for in the Transaction Documents or imposed by applicable
securities laws and shall not be subject to preemptive or similar rights of stockholders. Assuming
the accuracy of the representations and warranties of the Purchasers, the Shares and the Warrant
Shares will be issued in compliance with all applicable federal and state securities laws. The
issue and sale of the Securities will not, immediately or with the passage of time, obligate the
Company to issue shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under such securities.



(g) Capitalization. Except as set forth in Schedule 3.1(g): the aggregate number of
shares and type of all authorized, issued and outstanding classes of capital stock, options and
other securities of the Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) is specified in the SEC Reports. Except
as specified in the SEC Reports, no securities of the Company are entitled to preemptive or similar
rights, and no Person has any right of first refusal, preemptive right, right of participation, or
any similar right to participate in the transactions contemplated by the Transaction Documents;
except as specified in the SEC Reports, the Company has not issued any other options, warrants or
scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for, or entered into any
agreement giving any Person any right to subscribe for or acquire, any shares of Common Stock;
except as specified in the SEC Reports, there are no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional shares of the capital
stock of the Company or options, securities or rights convertible into shares of capital stock of
the Company; except for customary adjustments as a result of stock dividends, stock splits,
combination of shares, reorganizations, recapitalizations, reclassifications or other similar
events, there are no anti-dilution or price adjustment provisions contained in any security issued
by the Company (or in any agreement providing rights to security holders) and the issuance and sale
of the Securities will not obligate the Company to issue shares of Common Stock or other securities
to any Person (other than the Purchasers) and will not result in a right of any holder of
securities to adjust the exercise, conversion, exchange or reset price under such securities; the
Company is not a party to, and it has no knowledge of, any agreement restricting the voting or
transfer of any shares of the capital stock of the Company.



(h) SEC Reports. Common stock of the Company is registered pursuant to Section 12(g)
of the Exchange Act. The Company has filed all reports required to be filed by it under the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, since April 1, 2005 (the
foregoing materials being collectively referred to herein as the “SEC Reports” and together
with this Agreement, the “Disclosure Materials”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the expiration of any
such extension. As of the date hereof, the Company is not aware of any event occurring on or prior
to the Closing Date (other than the transactions contemplated by the Transaction Documents) that
requires the filing of a Form 8-K after the Closing. As of their respective dates, or to the
extent corrected by a subsequent restatement, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules and regulations of
the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any
untrue statement of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.



(i) Financial Statements. The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of filing (or to he
extent corrected by a subsequent restatement). Such financial statements have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its consolidated subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, year-end audit adjustments.



(j) Tax Matters. Each of the Company and the Subsidiary (i) has accurately and
timely prepared and filed all foreign, federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject, (ii) has paid all material
taxes and other governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those being contested in
good faith, with respect to which adequate reserves have been set aside on the books of the Company
and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations apply. There are
no unpaid taxes in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for such claim. The Company has not
waived or extended any statute of limitations at the request of any taxing authority. There are no
outstanding tax sharing agreements or other such arrangements between the Company and any other
corporation or entity and the Company is not presently undergoing any audit by a taxing authority.



(k) Material Changes. Since the date of the most recent Quarterly Report on Form
10-Q, except as specifically disclosed in the SEC Reports, (i) there has been no event, occurrence
or development that has had or that could reasonably be expected to result in a Material Adverse
Effect on the Company’s financial statements or results of operations as so reported, (ii) the
Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables,
accrued expenses and other liabilities incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company’s financial
statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii)
the Company has not altered its method of accounting, the manner in which it keeps its accounting
books and records, or the identity of its auditors, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or purchased, redeemed or
made any agreements to purchase or redeem any shares of its capital stock (other than in connection
with repurchases of unvested stock issued to employees of the Company), (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except pursuant to existing
Company stock option or stock purchase plans disclosed in the SEC Reports and (vi) there has not
been any material change or amendment to, or any waiver of any material right under, any contract
under which the Company, any subsidiary thereof, or any of their assets is bound or subject. The
Company does not have pending before the Commission any request for confidential treatment of
information.



(l) Environmental Matters. To the Company’s Knowledge, the Company or the Subsidiary
(i) is not in violation of any statute, rule, regulation, decision or order of any governmental
agency or body or any court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration of the environment or
human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), (ii)
does not own or operate any real property contaminated with any substance in violation of any
Environmental Laws, (iii) is not liable for any off-site disposal or contamination pursuant to any
Environmental Laws, and (iv) is not subject to any claim relating to any Environmental Laws; which
violation, contamination, liability or claim has had or could reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate; and there is no pending or, to the
Company’s Knowledge, threatened investigation that might lead to such a claim.



(m) Litigation. There is no Action which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii)
except as specifically disclosed in the SEC Reports, has had or could reasonably be expected to
have a Material Adverse Effect.



(n) Employment Matters. To the Company’s Knowledge, each of the Company and the
Subsidiary is in compliance with all federal, state, local and foreign laws and regulations
respecting labor, employment and employment practices and benefits, terms and conditions of
employment and wages and hours, except where the failure to be in compliance would not, either
individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor the Subsidiary is a party to any collective bargaining agreement. Each of
the Company and the Subsidiary believes that their overall relations with their employees are
satisfactory. No executive officer of the Company or the Subsidiary (as defined in Rule 501(f) of
the Securities Act) has notified the Company or the Subsidiary that such officer intends to leave
the Company or the Subsidiary or otherwise terminate such officer’s employment with the Company or
the Subsidiary.



(o) Compliance. Neither the Company nor the Subsidiary, except in each case as,
individually or in the aggregate, has not and could not reasonably be expected to result in a
Material Adverse Effect (i) is in default under or in violation of (and no event has occurred that
has not been waived that, with notice or lapse of time or both, would result in a default by the
Company or the Subsidiary under), nor has the Company or the Subsidiary received notice of a claim
that it is in default under or that it is in violation of, any indenture, loan or credit agreement
or any similar agreement or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body having jurisdiction over the
Company or its properties or assets, or (iii) to the Company’s Knowledge, is or has been in
violation of any statute, rule or regulation of any governmental authority applicable to the
Company.



(p) Regulatory Permits. To the Company’s Knowledge, the Company and the Subsidiary
possess all certificates, authorizations and permits issued by the federal, state, local or foreign
regulatory authorities necessary to conduct their respective businesses as described in the SEC
Reports, except where the failure to possess such permits, individually or in the aggregate, has
not and could not reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor the Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such Material Permit.



(q) Title to Assets. Each of the Company and the Subsidiary have good and marketable
title in all personal property owned by them that is material to the business of the Company and
the Subsidiary, in each case free and clear of all Liens, except for Liens that do not,
individually or in the aggregate, have or result in a Material Adverse Effect. Any real property
and facilities held under lease by the Company and the Subsidiary are held by them under valid,
subsisting and enforceable leases of which the Company and the are in material compliance.



(r) Patents and Trademarks. To the Company’s Knowledge, the Company and the
Subsidiary own, possess, license or have other rights to use all foreign and domestic patents,
patent applications, trade and service marks, trade and service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets, technology, Internet domain names, know-how and
other intellectual property (collectively, the “Intellectual Property”) necessary for the
conduct of their respective businesses as now conducted or as proposed to be conducted; except as
set forth in the SEC Reports and except where such violations or infringements would not reasonably
be expected to result in a Material Adverse Effect, (a) to the Company’s Knowledge, there are no
rights of third parties to any such Intellectual Property; (b) to the Company’s Knowledge, there is
no infringement by third parties of any such Intellectual Property; (c) there is no pending or, to
the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the
Company’s and its subsidiaries’ rights in or to any such Intellectual Property, and the Company is
unaware of any facts which would form a reasonable basis for any such claim; (d) there is no
pending or, to the Company’s Knowledge, threatened action, suit, proceeding or claim by others
challenging the validity or scope of any such Intellectual Property; and (e) there is no pending
or, to the Company’s Knowledge, threatened action, suit, proceeding or claim by others that the
Company and its subsidiaries infringe or otherwise violate any patent, trademark, copyright, trade
secret or other proprietary rights of others, and the Company is unaware of any other fact which
would form a reasonable basis for any such claim. Except as set forth in Schedule 3.1(r): all of
the licenses and sublicenses and consent, royalty or other agreements concerning Intellectual
Property which are necessary for the conduct of the Company’s business as currently conducted to
which the Company or the Subsidiary is a party or by which any of their respective assets are bound
(other than generally commercially available, non-custom, off the shelf software application
programs having a retail acquisition price of less than $10,000 per license) (collectively,
“License Agreements’) are valid and binding obligations of the Company or the Subsidiary,
as the case may be and, to the Company’s knowledge, the other parties thereto, enforceable in
accordance with their respective terms, except to the extent that enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors’ rights generally, and there exists no
event or condition which will result in a material violation or breach of or constitute (with or
without due notice or lapse of time or both) a default by the Company under such License Agreement.



(s) Insurance. The Company and the Subsidiary are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as are prudent and
customary in the businesses and location in which the Company and the Subsidiary are engaged. To
the Company’s Knowledge, it will be able to renew existing insurance coverage for the Company and
the Subsidiary as and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business without a significant increase in cost.



(t) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports made on or prior to the date hereof, none of the officers or directors of the Company and,
to the Company’s Knowledge, none of the employees of the Company is presently a party to any
transaction with the Company or the Subsidiary or to a presently contemplated transaction (other
than for services as employees, officers and directors) that would be required to be disclosed
pursuant to Item 404 of Regulation S-K promulgated under the Securities Act.



(u) Sarbanes Oxley Act. The Company is in compliance with applicable requirements of
the Sarbanes Oxley Act of 2002 and applicable rules and regulations promulgated by the Commission
thereunder, except where such noncompliance would not have, individually or in the aggregate, a
Material Adverse Effect.



(v) Accounting Controls. The Company and the Subsidiary maintain a system of internal
accounting controls 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 generally accepted
accounting principles 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.



(w) Certain Fees. Except for the cash commission to be paid (the “Cash Placement
Agent Fees”) and Warrants to be issued to the Placement Agent pursuant to the terms of the
Placement Agent Agreement, no Person will have, as a result of the transactions contemplated by
this Agreement, any valid right, interest or claim against or upon the Company or any Purchaser for
any commission, fee or other compensation pursuant to any agreement, arrangement or understanding
entered into by or on behalf of the Company.



(x) Private Placement. Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2(b)-(e), no registration under the Securities Act is required
for the offer and sale of the Shares and Warrant Shares by the Company to the Purchasers under the
Transaction Documents. The Company is eligible to register the Shares and the Warrant Shares for
resale by the Purchasers using Form S-1 promulgated under the Securities Act. The Company has not
granted or agreed to grant to any Person any rights (including “piggy-back” registration rights) to
have any securities of the Company registered with the Commission or any other governmental
authority that have not been satisfied or waived. The Company’s Common Stock is registered
pursuant to Section 15(d) of the Exchange Act, and the Company has taken no action designed to, or
which to its knowledge is likely to have the effect of terminating the registration of the Common
Stock under the Exchange Act, nor has the Company received any notification that the Commission is
contemplating terminating such registration.



(y) No Directed Selling Efforts or General Solicitation. Neither the Company, nor any
of its Affiliates, nor any Person acting on its or their behalf has conducted any “general
solicitation” or “general advertising” (as those terms are used in Regulation D) in connection with
the offer or sale of any of the Securities.



(z) No Integrated Offering. Neither the Company nor any of its Affiliates, nor any
Person acting on its or their behalf has, directly or indirectly, at any time within the past six
months made any offers or sales of any Company security or solicited any offers to buy any
security, under circumstances that would (i) eliminate the availability of the exemption from
registration under Regulation D under the Securities Act in connection with the offer and sale by
the Company of the Securities as contemplated hereby or (ii) cause the offering of the Securities
pursuant to the Transaction Documents to be integrated with prior offerings by the Company for
purposes of any applicable law, regulation or stockholder approval provisions, including, without
limitation, under the rules and regulations of any Trading Market.



(aa) Listing and Maintenance Requirements. Except as specified in the SEC Reports,
the Company has not, since April 1, 2005, received notice (written or oral) from any Trading Market
on which the Common Stock is or has been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements thereof. The Company is in compliance in
all material respects with the listing and maintenance requirements for continued listing of the
Common Stock on the Trading Market on which the Common Stock is currently listed or quoted.



(bb) Investment Company. Neither the Company nor the Subsidiary is required to be
registered as, and is not an Affiliate of, and immediately following the Closing will not be
required to register as, an “investment company” within the meaning of the Investment Company Act
of 1940, as amended.



(cc) Questionable Payments. Neither the Company nor the Subsidiary, nor, to the
Company’s Knowledge, directors, officers, employees, agents or other Persons acting on behalf of
the Company or the Subsidiary has, in the course of its actions for, or on behalf of, the Company:
(a) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to foreign or domestic political activity; (b) made any direct or indirect
unlawful payments to any foreign or domestic governmental officials or employees from corporate
funds; (c) violated in any material respect any provision of the Foreign Corrupt Practices Act of
1977, as amended or (d) made any other unlawful bribe, rebate, payoff, influence payment, kickback
or other unlawful payment to any foreign or domestic government official or employee.



(dd) Application of Takeover Protections. Except as described in the SEC Reports,
there is no control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision under the Company’s
charter documents or the laws of its state of incorporation that is or could reasonably be expected
to become applicable to any of the Purchasers as a result of the Purchasers and the Company
fulfilling their obligations or exercising their rights under the Transaction Documents, including
without limitation the Company’s issuance of the Securities and the Purchasers’ ownership of the
Securities.



(ee) Disclosure. The Company confirms that neither it nor any Person acting on its
behalf has provided any Purchaser or its respective agents or counsel with any information that
constitutes or might constitute material, non-public information except insofar as the existence,
provisions and terms of the Transaction Documents and the proposed transactions hereunder may
constitute such information. The Company understands and confirms that the Purchasers will rely on
the foregoing representations in effecting transactions in securities of the Company. All
disclosure provided to the Purchasers regarding the Company, its business and the transactions
contemplated hereby, furnished by or on behalf of the Company (including the Company’s
representations and warranties set forth in this Agreement) are true and correct in all material
respects and do not contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. To the Company’s Knowledge, no event or circumstance has
occurred or information exists with respect to the Company nor the Subsidiary or its or their
business, properties, operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed.



3.2 Representations and Warranties of the Purchasers. Each Purchaser hereby, for
itself and for no other Purchaser, represents and warrants to the Company and the Placement Agent
as follows:



(a) Organization; Authority. Such Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its organization with the
requisite corporate or partnership power and authority to enter into and to consummate the
transactions contemplated by the applicable Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution, delivery and performance by such Purchaser of
the transactions contemplated by this Agreement has been duly authorized by all necessary corporate
or, if such Purchaser is not a corporation, such partnership, limited liability company or other
applicable like action, on the part of such Purchaser. Each of this Agreement and the Registration
Rights Agreement has been duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with terms hereof, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.



(b) Investment Intent. Such Purchaser understands that the Securities are “restricted
securities” and have not been registered under the Securities Act or any applicable state
securities law and is acquiring the Securities and, upon exercise of the Warrants will acquire the
Warrant Shares issuable upon exercise thereof, as principal for its own account for investment
purposes only and not with a view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to such Purchaser’s right, subject to the provisions of this
Agreement and the Registration Rights Agreement, at all times to sell or otherwise dispose of all
or any part of such Shares or Warrant Shares pursuant to an effective registration statement under
the Securities Act or under an exemption from such registration and in compliance with applicable
federal and state securities laws. Subject to the immediately preceding sentence, nothing
contained herein shall be deemed a representation or warranty by such Purchaser to hold the
Securities for any period of time. Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business. Such Purchaser does not have any agreement, plan or understanding,
directly or indirectly, with any Person to distribute any of the Securities.



(c) Purchaser Status. At the time such Purchaser was offered the Securities, it was,
and at the date hereof it is, and on each date on which it exercises the Warrants it will be, an
“accredited investor” as defined in Rule 501(a) under the Securities Act. Such Purchaser is not a
registered broker-dealer under Section 15 of the Exchange Act.



(d) Experience of Such Purchaser. Such Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able
to bear the economic risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.



(e) Access to Information. Such Purchaser acknowledges that it reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such questions as it has
deemed necessary of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information (other than material non-public information) about the
Company and the Subsidiary and their respective financial condition, results of operations,
business, properties, management and prospects sufficient to enable it to evaluate its investment;
and (iii) the opportunity to obtain such additional information that the Company possesses or can
acquire without unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor any other investigation
conducted by or on behalf of such Purchaser or its representatives or counsel shall modify, amend
or affect such Purchaser’s right to rely on the truth, accuracy and completeness of the Disclosure
Materials and the Company’s representations and warranties contained in the Transaction Documents.



(f) Residency. Such Purchaser has, if an entity, its principal place of business or,
if an individual, its primary residence in the jurisdiction set forth immediately below such
Purchaser’s name on the signature pages hereto.



(g) Prohibited Trading Activities. Since the earlier to occur of (1) the time that
such Purchaser was first contacted by the Company, the Placement Agent or any other Person
regarding an investment in the Company and (2) the 10th Trading Day prior to the date of
this Agreement, neither the Purchaser nor any Affiliate of such Purchaser which (x) had knowledge
of the transactions contemplated hereby, (y) has or shares discretion relating to such Purchaser’s
investments or trading or information concerning such Purchaser’s investments, including in respect
of the Securities, or (z) is subject to such Purchaser’s review or input concerning such
Affiliate’s investments or trading (collectively, “Trading Affiliates”) has directly or
indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such
Purchaser or Trading Affiliate, effected or agreed to effect any transactions in the securities of
the Company (including, without limitation, any Short Sales involving the Company’s securities)
(each, a “Prohibited Transaction”). Such Purchaser shall not, and shall cause its Trading
Affiliates not to, engage, directly or indirectly, in a Prohibited Transaction or in any financial
transaction that in any way changes the Purchaser’s or its Trading Affiliates’ economic position in
the Company during the period from the date hereof until the earlier to occur of (i) the
Effectiveness Deadline or (ii) the Effectiveness Date. Each Purchaser agrees that it will not use
any of the Shares or Warrant Shares acquired pursuant to this Agreement to cover any short position
in the Common Stock if doing so would be in violation of applicable securities laws. Each
Purchaser acknowledges that it is aware that the Commission has published its position that
covering a short position established prior to effectiveness of a resale registration statement
with shares included in such registration statement would be a violation of Section 5 of the
Securities Act.



(h) Brokers and Finders. No Person will have, as a result of the transactions
contemplated by this Agreement, any valid right, interest or claim against or upon the Company, or
any Purchaser for any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of the Purchaser.



(i) Limited Ownership. The purchase by such Purchaser of the Securities issuable to
it at the Closing will not result in such Purchaser (individually or together with other Person
with whom such Purchaser has identified, or will have identified, itself as part of a “group” in a
public filing made with the Commission involving the Company’s securities) acquiring, or obtaining
the right to acquire, in excess of 19.99% of the outstanding shares of Common Stock or the voting
power of the Company on a post transaction basis that assumes that the Closing shall have occurred.
Such Purchaser does not presently intend to, alone or together with others, make a public filing
with the Commission to disclose that it has (or that it together with such other Persons have)
acquired, or obtained the right to acquire, as a result of the Closing (when added to any other
securities of the Company that it or they then own or have the right to acquire), in excess of
19.99% of the outstanding shares of Common Stock or the voting power of the Company on a post
transaction basis that assumes that the Closing shall have occurred.



(j) Independent Investment Decision. Such Purchaser has independently evaluated the
merits of its decision to purchase Securities pursuant to the Transaction Documents, and such
Purchaser confirms that it has not relied on the advice of any other Purchaser’s business and/or
legal counsel in making such decision. Such Purchaser understands that nothing in this Agreement
or any other materials presented by or on behalf of the Company to the Purchaser in connection with
the purchase of the Securities constitutes legal, tax or investment advice. Such Purchaser 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 the Securities. Such Purchaser
understands that the Placement Agent has acted solely as the agent of the Company in this placement
of the Securities and such Purchaser has not relied on the business or legal advice of the
Placement Agent or any of its agents, counsel or Affiliates in making its investment decision
hereunder, and confirms that none of such Persons has made any representations or warranties to
such Purchaser in connection with the transactions contemplated by the Transaction Documents.



The Company acknowledges and agrees that no Purchaser has made or makes any representations or
warranties with respect to the transactions contemplated hereby other than those specifically set
forth in this Section 3.2.



ARTICLE IV.




OTHER AGREEMENTS OF THE PARTIES




4.1 (a) Compliance with Laws. Notwithstanding any other provision of this Article IV,
each Purchaser covenants that the Securities may only be disposed of pursuant to an effective
registration statement under, and in compliance with the requirements of, the Securities Act, or
pursuant to an available exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act, and in compliance with any applicable state and federal
securities laws. In connection with any transfer of the Securities other than pursuant to an
effective registration statement, pursuant to Rule 144(k) or in connection with a pledge as
contemplated in Section 4.1(b), except as otherwise provided herein, the transferor will provide to
the Company an opinion of counsel selected by the transferor, which counsel and the form and
substance of which opinion shall be reasonably satisfactory to the Company and its legal counsel,
to the effect that such transfer does not require registration of such transferred Securities under
the Securities Act. Notwithstanding the foregoing, the Company hereby consents to and agrees to
register on the books of the Company and with its transfer agent, without any such legal opinion,
except to the extent that the transfer agent requests such legal opinion, any transfer of
Securities by a Purchaser to an Affiliate of such Purchaser, provided that the transferee agrees to
the terms and conditions of the Securities, certifies to the Company that it is an “accredited
investor” as defined in Rule 501(a) under the Securities Act and provided that such Affiliate does
not request any removal of any existing legends on any certificate evidencing the Securities.



(b) Legends. Certificates evidencing the Securities will contain the following
legend, until such time as they are not required under Section 4.1(c):




NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.



The Company acknowledges and agrees that a Purchaser may from time to time pledge, and/or
grant a security interest in some or all of the legended Securities, in compliance with applicable
securities laws, pursuant to a bona fide margin agreement in connection with a bona fide margin
loan. Such a pledge would not be subject to approval or consent of the Company and no legal
opinion of legal counsel to the pledgee, secured party or pledgor shall be required in connection
with the pledge, but such legal opinion shall be required in connection with a subsequent transfer
or foreclosure following default by the Purchaser transferee of the pledge. No notice shall be
required of such pledge but Purchaser’s transferee shall promptly notify the Company of the pledge.
Each Purchaser acknowledges that the Company shall not be responsible for any pledges relating to,
or the grant of any security interest in, any of the Securities or for any agreement, understanding
or arrangement between any Purchaser and its pledgee or secured party. Provided that the Company
is in compliance with the terms of this Section 4.1(b), the Company’s indemnification obligations
pursuant to this Agreement shall not extend to any Proceeding or Losses arising out of or related
to this Section 4.1(b).



(c) Removal of Legends. The Company agrees to reissue certificates representing any
of the Shares or Warrant Shares, without the legend set forth above (i) while a registration
statement (including the Registration Statement) covering the resale of such Securities is
effective under the Securities Act, (ii) following any sale of such Securities pursuant to Rule 144
(assuming the transferor is not an affiliate of the Company), (iii) if such Securities are eligible
for sale under Rule 144(k) (to the extent that the applicable Purchaser provides a certification or
legal opinion to the Company to that effect), or (iv) if such legend is not required under
applicable requirements of the Securities Act (including controlling judicial interpretations and
pronouncements issued by the Commission). The Company shall cause its counsel to issue the legal
opinion referred to in the Transfer Agent Instructions to the Company’s transfer agent on the
Effective Date. Following the Effective Date or at such earlier time as a legend is no longer
required for certain Securities, the Company will no later than three Trading Days following the
delivery to the Transfer Agent with notice to the Company of a legended certificate representing
such Securities and a reasonably acceptable opinion of counsel to the extent required by Section
4.1(a), reissue a certificate representing such Securities that is free from all restrictive and
other legends. The Company may not make any notation on its records or give instructions to the
Transfer Agent that enlarge the restrictions on transfer set forth in this Section.



(d) Acknowledgement. Each Purchaser hereunder acknowledges its primary
responsibilities under the Securities Act and accordingly will not sell the Shares, the Warrant
Shares or any interest therein without complying with the requirements of the Securities Act.
While the above-referenced registration statement remains effective, each Purchaser hereunder may
sell the shares in accordance with the plan of distribution contained in the registration statement
and if it does so it will comply therewith and with the related prospectus delivery requirements.
To provide further assurance in connection with de-legending, each Purchaser hereunder commits that
it will continue to hold the shares in its own name, and not in the name of a nominee, until such
time as the shares are duly and properly sold in compliance with all relevant securities laws.
Both the Company and its transfer agent, and their respective directors, officers, employees and
agents, may rely on this subsection (d) and each Purchaser hereunder will indemnify and hold
harmless each of such persons from any breaches or violations of this paragraph.



(e) Buy-In. If within three (3) Trading Days after the Company’s receipt of a
legended certificate representing such Securities the Company shall fail to issue and deliver to
such Purchaser a certificate representing such Securities that is free from all restrictive and
other legends, and if on or after such Trading Day the Purchaser purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Purchaser of shares of Common Stock that the Purchaser anticipated receiving from the Company
without any restrictive legend (a “Buy-In”), then the Company shall, within three (3)
Trading Days after the Purchaser’s request and in the Purchaser’s sole discretion, either (i) pay
cash to the Purchaser in an amount equal to the Purchaser’s total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so purchased (the “Buy-In
Price”), at which point the Company’s obligation to deliver such certificate shall terminate
and such shares shall be cancelled, or (ii) promptly honor its obligation to deliver to the
Purchaser a certificate or certificates representing such shares of Common Stock and pay cash to
the Purchaser in an amount equal to the excess (if any) of the Buy-In Price over the product of (a)
such number of shares of Common Stock, times (b) the closing bid price on the date of delivery of
such legended certificate.



4.2 Reservation of Common Stock. The Company shall maintain a reserve from its duly
authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount
as may be required to fulfill its obligations in full under the Transaction Documents. In the
event that at any time the then authorized shares of Common Stock are insufficient for the Company
to satisfy its obligations in full under the Transaction Documents, the Company shall promptly take
such actions as may be required to increase the number of authorized shares.



4.3 Furnishing of Information. As long as any Purchaser owns the Securities, the
Company covenants to timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act. As long as any Purchaser owns Securities, if the Company is not
required to file reports pursuant to such laws, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is required for the
Purchasers to sell the Shares and Warrant Shares under Rule 144. The Company further covenants
that it will take such further action as any holder of Securities may reasonably request, all to
the extent required from time to time to enable such Person to sell the Shares and Warrant Shares
without registration under the Securities Act within the limitation of the exemptions provided by
Rule 144.



4.4 No Integration. The Company shall not, and shall use its best efforts to ensure
that no Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities Act) that will be
integrated with the offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers, or that will be
integrated with the offer or sale of the Securities for purposes of the rules and regulations of
any Trading Market.



4.5 Subsequent Registrations. Other than pursuant to the Registration Statement,
prior to the date occurring sixty (60) days after the Effective Date, the Company shall not file
any registration statement (other than on Form S-4 or S-8) with the Commission with respect to any
securities of the Company, except to the extent the Company becomes eligible to use Form S-3 and
converts the Registration Statement to a Form S-3.



4.6 Securities Laws Disclosure; Publicity. By 9:30 a.m. (New York City time) on the
Trading Day immediately following execution of this Agreement, the Company shall issue a press
release reasonably acceptable to the Placement Agent disclosing all material terms of the
transactions contemplated hereby. No later than the fourth trading day following the Closing Date,
the Company will file a Current Report on Form 8-K with the Commission (the “8-K Filing”)
describing the terms of the transactions contemplated by the Transaction Documents and including as
exhibits to such Current Report on Form 8-K this agreement and the form of Warrant, in the form
required by the Exchange Act. Thereafter, the Company shall timely file any filings and notices
required by the Commission or applicable law with respect to the transactions contemplated hereby
and provide copies thereof to the Purchasers promptly after filing. Notwithstanding the foregoing,
the Company shall not publicly disclose the name of any Purchaser, or include the name of any
Purchaser in any press release or filing with the Commission (other than the Registration
Statement) or any regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except to the extent such disclosure is required by law or Trading Market regulations,
in which case the Company shall promptly provide the Purchasers with prior notice of such
disclosure.



4.7 Indemnification.



(a) Indemnification of Purchasers. In addition to the indemnity provided in the
Registration Rights Agreement, the Company will indemnify and hold the Purchasers and their
directors, officers, shareholders, partners, employees and agents (each, a “Purchaser
Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies,
damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys’ fees and costs of investigation (collectively, “Losses”) that any
such Purchaser Party may suffer or incur as a result of or relating to any material
misrepresentation, breach or inaccuracy of any representation, warranty, covenant or agreement made
by the Company in any Transaction Document. In addition to the indemnity contained herein, the
Company will reimburse each Purchaser Party for its reasonable legal and other expenses (including
the cost of any investigation, preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred. If and to the extent that such indemnification
is unenforceable for any reason, the Company shall make the maximum contribution to the payment and
satisfaction of such losses permissible under applicable law.



(b) Conduct of Indemnification Proceedings. Promptly after receipt by any Person (the
“Indemnified Person”) of notice of any demand, claim or circumstances which would or might
give rise to a claim or the commencement of any action, proceeding or investigation in respect of
which indemnity may be sought pursuant to Section 4.7(a), such Indemnified Person shall
promptly notify the Company in writing and the Company shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Person, and shall assume the
payment of all fees and expenses; provided, however, that the failure of any
Indemnified Person so to notify the Company shall not relieve the Company of its obligations
hereunder except to the extent that the Company is actually and materially prejudiced by such
failure to notify. In any such proceeding, any Indemnified Person shall have the right to retain
its own counsel, but the fees and expenses of such counsel shall be at the expense of such
Indemnified Person unless: (i) the Company and the Indemnified Person shall have mutually agreed to
the retention of such counsel; or (ii) in the reasonable judgment of counsel to such Indemnified
Person representation of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The Company shall not be liable for any settlement of
any proceeding effected without its written consent, which consent shall not be unreasonably
withheld, delayed or conditions, but if settled without such consent, or if there be a final
judgment for the plaintiff, the Company shall indemnify and hold harmless such Indemnified Person
from and against any Losses by reason of such settlement or judgment. Without the prior written
consent of the Indemnified Person, the Company shall not effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless such settlement
includes an unconditional release of such Indemnified Person from all liability arising out of such
proceeding.



4.8 Non-Public Information. The Company covenants and agrees that neither it nor any
other Person acting on its behalf will provide or has provided any Purchaser or its agents or
counsel with any information that the Company believes constitutes material non-public information
(other than (i) the contemplated Transaction Documents and the transactions contemplated thereby
and (ii) certain financial information related to the Company, in exchange for the receipt of
which, such Purchaser has entered into a written agreement regarding the confidentiality and use of
such information ), unless prior thereto such Purchaser shall have executed a written agreement
regarding the confidentiality and use of such information. The Company understands and confirms
that each Purchaser shall be relying on the foregoing representations in effecting transactions in
securities of the Company.



4.9 Listing of Securities. Promptly following the date hereof, the Company shall take
all necessary action to cause the Shares, the Warrant Shares and the shares of Common Stock
issuable upon exercise of the Placement Agent Warrants to be approved for inclusion in the Trading
Market. In furtherance thereof, as soon as practicable after the Effectiveness Date, the Company
shall use its commercially reasonable efforts to take such actions as may be necessary to file with
the American Stock Exchange an application or other document required by the American Stock
Exchange and pay all applicable fees for the listing of the Shares, the Warrant Shares and the
shares of Common Stock issuable upon exercise of the Placement Agent Warrants and will take such
other action as is necessary to cause such Common Stock to be so listed. The Company will use
commercially reasonable efforts to continue the listing and trading of its Common Stock on the
American Stock Exchange and, in accordance, therewith, will use commercially reasonable efforts to
comply in all respects with the Company’s reporting, filing and other obligations applicable to
issuers whose securities are listed on such market.



4.10 Use of Proceeds. The Company intends to use the net proceeds from the sale of
the Securities hereunder for working capital and general corporate purposes and not to redeem any
Common Stock or Common Stock Equivalents or to settle any outstanding Action.



4.11 Limitation on Acquisition of Shares. On and after the Closing Date and for so
long as any Warrant remains outstanding, no Purchaser will acquire securities of the Company such
that it becomes the beneficial owner (as defined under Section 13 of the Exchange Act) of more than
9.99% of the outstanding shares of Common Stock.



ARTICLE V.

CONDITIONS PRECEDENT TO CLOSING




5.1 Conditions Precedent to the Obligations of the Purchasers to Purchase Securities.
The obligation of each Purchaser to acquire Securities at the Closing is subject to the fulfillment
to such Purchase’s satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by such Purchaser (as to itself only):



(a) Representations and Warranties. The representations and warranties made by the
Company in Section 3.1 hereof shall be true and correct in all material respects as of the date
when made and as of the Closing Date, as though made on and as of such date;



(b) Performance. The Company and each other Purchaser shall have performed, satisfied
and complied in all material respects with all covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing
Date;



(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;



(d) Consents. The Company shall have obtained in a timely fashion any and all
consents, permits, approvals, registrations and waivers necessary or appropriate for consummation
of the purchase and sale of the Securities, and all of which shall be and remain so long as
necessary in full force and effect;



(e) Adverse Changes. Since the date of execution of this Agreement, no event or
series of events shall have occurred that reasonably could have or result in a Material Adverse
Effect;



(f) No Suspensions of Trading in Common Stock; Listing. Trading in the Common Stock
shall not have been suspended by the Commission or any Trading Market (except for any suspensions
of trading of not more than one Trading Day solely to permit dissemination of material information
regarding the Company) at any time since the date of execution of this Agreement, and the Common
Stock shall have been at all times since such date listed for trading on a Trading Market;



(g) Company Deliverables. The Company shall have delivered the items set forth in
Section 2.2(a); and



(h) Compliance Certificate. The Company shall have delivered to each Purchaser a
certificate, dated as of the Closing Date and signed by its Chief Executive Officer or its Chief
Financial Officer, dated as of the Closing Date, certifying to the fulfillment of the conditions
specified in Sections 5.1(a), (b), (c), (d), (e) and (f).



5.2 Conditions Precedent to the Obligations of the Company to sell Securities. The
Company’s obligation to sell and issue the Securities at the Closing is subject to the fulfillment
to the satisfaction of the Company on or prior to the Closing Date of the following conditions, any
of which may be waived by the Company:



(a) Representations and Warranties. The representations and warranties made by the
Purchasers in Section 3.2 hereof shall be true and correct in all material respects as of the date
when made, and as of the Closing Date as though made on and as of such date;



(b) Performance. The Purchasers shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Purchasers at or prior to the Closing;



(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents; and



(d) Purchasers Deliverables. Each Purchaser shall have delivered the items set forth
in Section 2.2(b).



ARTICLE VI.




MISCELLANEOUS




6.1 Fees and Expenses. The Company shall reimburse (i) the Placement Agent for the
reasonable fees and expenses of Placement Agent Counsel in connection with the transactions
contemplated by this Agreement up to $50,000, which fees shall include, without limitation, the
fees and expenses associated with the negotiation, preparation and execution and delivery of this
Agreement and the other Transaction Documents and any amendments, modifications or waivers thereto;
and (ii) Fort Mason Capital LLC and its affiliates for their fees and expenses incurred in
connection herewith (including, but not limited to, legal fees and due diligence expenses), in an
amount not to exceed $20,000 in the aggregate. Except as set forth above, the Company and the
Purchasers shall each pay the fees and expenses of their respective advisers, counsel, accountants
and other experts, if any and all other expenses incurred by such party in connection with the
negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall
pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the
sale and issuance of the Securities. Each party acknowledges that Lowenstein Sandler PC has
rendered legal advice to the Placement Agent, and not to such party in connection with the
transactions contemplated hereby, and that such party has relied for such matters on the advice of
its own respective counsel.



6.2 Entire Agreement. The Transaction Documents, together with the Exhibits and
Schedules thereto which are incorporated herein by reference, contain the entire understanding of
the parties with respect to the subject matter hereof and supersede all prior agreements,
understandings, discussions and representations, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company and the Purchasers will execute
and deliver to the other such further documents as may be reasonably requested in order to give
practical effect to the intention of the parties under the Transaction Documents.



6.3 Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile, email (provided the sender receives a machine-generated confirmation of successful
transmission) at the facsimile number specified in this Section prior to 5:00 p.m. (Pacific time)
on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in this Section on a day
that is not a Trading Day or later than 5:00 p.m. (Pacific time) on any Trading Day, (c) the
Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required to be given. The
address and facsimile numbers for such notices and communications are those set forth on the
signature pages hereof, or such other address or facsimile number as may be designated in writing
hereafter, in the same manner, by any such Person. Copies of any notices or other communications
or deliveries to the Company shall be sent to:



Clearant, Inc.

11111 Santa Monica Boulevard, Suite 650

Los Angeles, California 90025

Facsimile No.: (310) 479-2959

Attention: Andrew Jacobson




with a copy (for informational purposes only) to:



Greenberg Traurig, LLP

2450 Colorado Avenue, Suite 400 East

Santa Monica, California 90404

Facsimile No. (310) 586-0286

Attention: John C. Kirkland




6.4 Amendments; Waivers; No Additional Consideration. No provision of this Agreement
may be waived or amended except in a written instrument signed, in the case of an amendment, by the
Company and each of the Purchasers or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought. No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future
or a waiver of any subsequent default or a waiver of any other provision, condition or requirement
hereof, nor shall any delay or omission of either party to exercise any right hereunder in any
manner impair the exercise of any such right. No consideration shall be offered or paid to any
Purchaser to amend or consent to a waiver or modification of any provision of any Transaction
Document unless the same consideration is also offered to all Purchasers who then hold Shares.



6.5 Construction. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
The language used in this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied against any party.
This Agreement shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement or any of the Transaction Documents.



6.6 Successors and Assigns. The provisions of this Agreement shall inure to the
benefit of and be binding upon the parties and their successors and permitted assigns. This
Agreement, or any rights or obligations hereunder, may not be assigned by the Company without the
prior written consent of the Purchasers. Any Purchaser may assign its rights hereunder in whole or
in part to any Person to whom such Purchaser assigns or transfers any Securities in compliance with
this Agreement and applicable law, provided such transferee shall agree in writing to be bound,
with respect to the transferred Securities, by the terms and conditions of this Agreement that
apply to the “Purchasers.”



6.7 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, except each Purchaser Party is an
intended third party beneficiary of Section 4.7 and may enforce the provisions of such Section
directly against the parties with obligations thereunder .



6.8 Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of California, without regard to the principles of conflicts of
law thereof. Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
If either party shall commence a Proceeding to enforce any provisions of a Transaction Document,
then the prevailing party in such Proceeding shall be reimbursed by the other party for its
reasonable attorney’s fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such Proceeding.



6.9 Survival. Subject to applicable statute of limitations, the representations,
warranties, agreements and covenants contained herein shall survive the Closing and the delivery of
the Securities.



6.10 Execution. This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission, such signature shall create a valid and binding obligation
of the party executing (or on whose behalf such signature is executed) with the same force and
effect as if such facsimile signature page were an original thereof.



6.11 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt
to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Agreement.



6.12 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued
in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and the execution by the holder
thereof of a customary lost certificate affidavit of that fact and an agreement to indemnify and
hold harmless the Company for any losses in connection therewith. The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities. If a replacement certificate or
instrument evidencing any Securities is requested due to a mutilation thereof, the Company may
require delivery of such mutilated certificate or instrument as a condition precedent to any
issuance of a replacement.



6.13 Remedies. In addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, each of the Purchasers and the Company will be
entitled to specific performance under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation (other than in connection with any action for a
temporary restraining order) the defense that a remedy at law would be adequate.



6.14 Payment Set Aside. To the extent that the Company makes a payment or payments to
any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent
of any such restoration the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.



6.15 Independent Nature of Purchasers’ Obligations and Rights. The obligations of
each Purchaser under any Transaction Document are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser under any Transaction Document. The decision of each Purchaser
to purchase Securities pursuant to the Transaction Documents has been made by such Purchaser
independently of any other Purchaser and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company or the Subsidiary which
may have been made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser and any of its agents or employees shall have any liability to any
other Purchaser (or any other Person) relating to or arising from any such information, materials,
statement or opinions. Nothing contained herein or in any Transaction Document, and no action
taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or create a presumption
that the Purchasers are in any way acting in concert or as a group with respect to such obligations
or the transactions contemplated by the Transaction Documents. Each Purchaser acknowledges that no
other Purchaser has acted as agent for such Purchaser in connection with making its investment
hereunder and that no Purchaser will be acting as agent of such Purchaser in connection with
monitoring its investment in the Securities or enforcing its rights under the Transaction
Documents. Each Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose. The Company acknowledges that each of the
Purchasers has been provided with the same Transaction Documents for the purpose of closing a
transaction with multiple Purchasers and not because it was required or requested to do so by any
Purchaser.



6.16  Termination. This Agreement may be terminated and the sale and purchase of the
Shares and the Warrants abandoned at any time prior to the Closing by either the Company or any



1




Purchaser (with respect to itself only) upon written notice to the other, if the Closing has
not been consummated on or prior to 5:00 p.m. (Pacific time) on the Outside Date; provided,
however, that the right to terminate this Agreement under this Section 6.16 shall not be available
to any Person whose failure to comply with its obligations under this Agreement has been the cause
of or resulted in the failure of the Closing to occur on or before such time. Nothing in this
Section 6.16 shall be deemed to release any party from any liability for any breach by such party
of the terms and provisions of this Agreement or the other Transaction Documents or to impair the
right of any party to compel specific performance by any other party of its obligations under this
Agreement or the other Transaction Documents.



IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.




CLEARANT, INC.




	 	 	 	By:     






Name:




Title:



2




By its execution and delivery of this signature page, the undersigned Purchaser hereby joins
in and agrees to be bound by the terms and conditions of the Securities Purchase Agreement dated as
of November 7, 2005 (the “Purchase Agreement”) by and among Clearant, Inc. and the Purchasers (as
defined therein), as to the number of shares of Common Stock and Warrants set forth below, and
authorizes this signature page to be attached to the Purchase Agreement or counterparts thereof.



NAME OF PURCHASER:



     



By:

Name:

Title:




ADDRESS FOR NOTICE:



c/o:



Street:



City/State/Zip:



Attention:



Telephone No.:



Facsimile No.:



AGGREGATE PURCHASE PRICE: $



NUMBER OF SHARES:



NUMBER OF WARRANTS:



3




Exhibit A




FORM OF WARRANT




4




Exhibit B




FORM OF REGISTRATION RIGHTS AGREEMENT




5




Exhibit C




INSTRUCTION SHEET FOR PURCHASER




(to be read in conjunction with the entire




Securities Purchase Agreement)




A. Complete the following items in the Securities Purchase Agreement:




1. Complete and execute the Purchaser Signature Page. The Agreement must be executed by an
individual authorized to bind the Purchaser.




2. Exhibit C-1 — Stock Certificate Questionnaire:




Provide the information requested by the Stock Certificate Questionnaire;




3. Exhibit C-2 — Registration Statement Questionnaire:




Provide the information requested by the Registration Statement Questionnaire.




4. Exhibit C-3 — Purchaser Certificate:




Provide the information requested by the Certificate for Corporate, Partnership, Trust,
Foundation and Joint Purchasers.




5. Return, via facsimile, the signed Securities Purchase Agreement including the properly
completed Exhibits C-1 through C-3, to:



Greenberg Traurig, LLP

2450 Colorado Avenue

Suite 400 East

Santa Monica, California 90404

Attn: John C. Kirkland

Facsimile No.: (310) 586-0286





6. After completing instruction number five (5) above, deliver the original signed
Securities Purchase Agreement including the properly completed Exhibits C-1 through C-3 to:



Greenberg Traurig, LLP

2450 Colorado Avenue

Suite 400 East

Santa Monica, California 90404

Attn: John C. Kirkland

Facsimile No.: (310) 586-0286





	 	B.	 	Wire to the following account, immediately available funds in an amount equal to the
Aggregate Purchase Price set forth on the signature page to the Securities Purchase Agreement.






Wire to:




City National Bank



1950 Avenue of the Stars



Los Angeles, CA 90067




ABA# 122016066




Swift Code: CINAUF6L (International Use)




Attn: Iesha Kirby



	 	 	 	 	 
	FOR CREDIT TO: GREENBERG TRAURIG TRUST ACCOUNT

	ACCOUNT NUMBER: 101438643
	 	 	 	 
	REFERENCE: CLIENT NAME:
	 	Clearant, Inc.

	FILE NUMBER:
	 	 	74745.010000	 
	ATTORNEY NAME:
	 	John C. Kirkland







6




Exhibit C-1




Clearant, Inc.




STOCK CERTIFICATE QUESTIONNAIRE




Please provide us with the following information:




	 	 	 
	1.

	 	The exact name that the Shares and the Warrants are to be

registered in (this is the name that will appear on the stock

certificate(s)). You may use a nominee name if appropriate:
	 
	 	 
	2.

	 	The relationship between the Purchaser of the Shares and the

Warrants and the Registered Holder listed in response to item 1

above:
	 
	 	 
	3.

	 	The mailing address, telephone and telecopy number of the

Registered Holder listed in response to item 1 above:
	 
	 	 
	4.

	 	The Tax Identification Number of the Registered Holder listed in

response to item 1 above:






7




Exhibit C-2




Clearant, Inc.




Registration Statement Questionnaire




1. Your identity and background as the Beneficial Holder of Common Stock and Warrants



	 	 	 	 	 
	1.1

	 	(a)
	 	Your full legal name:
	
 
	 	 	 	 
	1.2

	 	(b)Citizenship:
	 	

	 
	 	 	 	 
	 	 	 

	 
	 	 	 	 
	1.3

	 	(c)
	 	Social Security No. or Taxpayer ID No.:







(d) Your address, telephone number, facsimile number and email address:




Address:




     




Telephone No.:




Fax No.:




Email Address:




Contact Person:




	 	1.4	 	Full legal name of person through which you hold the Shares and Warrants only if
different than as set forth in Item 1(a) above (i.e. name of your broker or the DTC
participant, if applicable, through which your shares of Common Stock are held):






Name of broker:




DTC No.:




Contact Person:




Telephone No.:



2. Your Relationship with the Company




	 	(a)	 	Have you or any of your affiliates, officers, directors or principal equity
holders (owners of 5% or more of the equity securities of the undersigned) held any
position or office or have you had any other material relationship with the Company (or
its predecessors or affiliates) within the past three years?






Yes




No




(b) If your response to Item 2(a) above is yes, please state the nature and duration of your
relationship with the Company:




     




     



3. Your interest in the Common Stock and Warrants




(a) State the total number of shares (identifying separately those number of shares of
Common Stock underlying the Warrants) you expect to purchase in connection with the proposed
sale of Common Stock and Warrants by the Company:




     




(b) Do you beneficially own1 any securities of the Company other than the
securities you will receive in connection with the proposed sale of Common Stock and Warrants
by the Company?




Yes




No




(c) If your answer to Item 3(b) above is yes, state the type, the aggregate amount or
number of shares of such other securities of the Company beneficially owned by you:




Type:




Aggregate Amount/Number of Shares:




CUSIP No(s).:




Holder of record:




Note: List separately shares held of record jointly with another person, in a fiduciary
capacity or in a name other than your own. Attach additional sheets and itemize, if
necessary.




(d) Do you have both sole voting power and sole investment power with
respect to all the shares to be purchased in the proposed sale of Common Stock and
Warrants by the Company and any shares already beneficially owned by you?




Yes




No




(e) If your answer to Item 3(d) above is no, provide information in the space below with
respect to why you do not have sole voting power and sole investment power, including the
number of shares as to which you do not have sole voting or investment power.




     




     




     




(f) Do you wish to disclaim beneficial ownership of any of the shares of Common Stock and
Warrants (either to be purchased in the proposed offering or currently owned) that are
described above?




Yes




No




(g) If your answer to Item 3(f) is yes, provide information in the space below with
respect to why you wish to disclaim beneficial ownership, including the number of shares as to
which beneficial ownership is disclaimed.




     




     




     




(h) Do you have the right to acquire beneficial ownership of any shares of Common Stock
within 60 days?




Yes




No




(i) If your answer to Item 3(h) is yes, state the number of shares as to which you have
the right to acquire beneficial ownership within 60 days in the space provided below and
describe the date and circumstances under which you have any such right of acquisition.




     




     




     




(j) At the time of your receipt of the Common Stock and Warrants upon the completion of
the proposed sale of Common Stock and Warrants, will you have any agreements or
understandings, directly or indirectly, with any person to distribute the Common Stock and
Warrants?




Yes




No




(k) If your response to Item 3(j) above is yes, please describe such agreements or
understandings:




     




     



4. Beneficial Ownership




(a) Is the beneficial holder of the Common Stock and Warrants (whether now held or to be
purchased) an SEC-reporting company?




Yes




No




(b) If your answer to Item 4(a) above is no, name the natural person(s) who exercise
voting or investment control over the Common Stock and Warrants (whether now held or to be
purchased) and give their current titles and describe the relationship of such individuals to
the beneficial owner, including their relationships with any intermediate entities, naming
such entities:




Name(s) of Natural Person(s) and Title(s):      




     




     



Section 2



5. NASD Affiliates and Associates




(a) Are you a member of The National Association of Securities Dealers, Inc. (“NASD”) or
a broker-dealer registered pursuant to Section 15 of the Exchange Act?




Yes




No




(b) Are any of your affiliates or any member of your immediate family2 a member
of the NASD or a broker-dealer registered pursuant to Section 15 of the Exchange Act?




Yes




No




(c) If your response to Item 5(a) and 5(b) above is no, are you, any of your affiliates
or any member of your immediate family an “affiliate” of a member of the NASD or a
broker-dealer registered pursuant to Section 15 of the Exchange Act?




Yes




No




NOTE: For the purposes of this Item 5(c), an “affiliate” of a registered broker-dealer
shall include any company that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such NASD member or
broker-dealer, but excludes any individuals who are merely employed by such NASD member or
broker-dealer or its affiliates.




(d) If your response to Item 5(a) and 5(b) above is no, are you, any of your affiliates
or any member of your immediate family an “associate” of an NASD member or a broker-dealer
registered pursuant to Section 15 of the Exchange Act?




Yes




No




NOTE: For the purposes of this Item 5(d), an “associate” of an NASD member or a registered
broker-dealer shall include any sole proprietor, partner, officer, director or branch
manager of such NASD member or registered broker-dealer, any natural person occupying a
similar status or performing similar functions, or any natural person engaged in the
investment banking or securities business who, directly or indirectly, controls or is
controlled by such NASD member or registered broker-dealer (including, for example, as an
employee thereof), whether or not such person is registered or exempt from registration with
the NASD.




(e) If your response to Item 5(d) above is yes, describe the nature of the relationship
between you and each broker-dealer or broker-dealer associate.




     




     




(f) Do you or any of your affiliates own stock or other securities of any NASD member or
registered broker-dealer or any affiliate thereof?




Yes




No




(g) If your response to Item 5(f) above is yes, please briefly describe the facts
(including the names of the NASD member or broker-dealer or affiliate and the percentage
ownership).




     




     




(h) Have you or any of your affiliates made any subordinated loan to any NASD member or
registered broker-dealer?




Yes




No




(i) If your response to Item 5(h) above is yes, please briefly describe the facts
(including the names of the NASD member or broker-dealer or affiliate, the amount of the loan
and interest payable, and applicable dates)




     




     




(j) Please identify any of the following relationships you have with any NASD member:



	 	 	 
	Advisor

Officer

Director

Trustee

Founder

Registered Representative

5% Stockholder

Employee

Immediate Family

Broker/Dealer

Promoter

Consultant

Finder

Bridge Lender

General Partner

Limited Partner

Equity Purchaser

Client or Customer

Subordinated Debt Holder

Other

	 	?

?

?

?

?

?

?

?

?

?

?

?

?

?

?

?

?

?

?

?







(k) If you identified any of the relationships referred to in Item 5(j), please describe
in detail the nature of any such relationship and the NASD member.




     




     




(l) Do you have any oral and/or written agreements with any NASD member or registered
broker-dealer or any person associated with such NASD member or registered broker-dealer
concerning the disposition of your securities of the Company?




Yes




No




(m) If your response to Item 5(l) above is yes, please briefly describe the facts
(including the names of the NASD member or broker-dealer or associate), and attach copies of
any written agreements or correspondence describing such arrangement.




     




     



Certain legal consequences arise from being named as a Selling Shareholder in a Registration
Statement and the related prospectus. Accordingly, beneficial owners of Common Stock and Warrants
are advised to consult their own securities law counsel regarding the consequences of being named
or not being named as a Selling Shareholder in the Registration Statement and the related
prospectus.



The undersigned acknowledges its obligation to comply with the provisions of the Securities
Exchange Act of 1934 and the rules thereunder relating to stock manipulation, particularly
Regulation M thereunder (or any successor rules or regulations), in connection with any offering of
Common Stock pursuant to the Registration Statement. The undersigned agrees that neither it nor
any person acting on its behalf will engage in any transaction in violation of such provisions.



The undersigned hereby acknowledges and is advised of the following Interpretation A.65 of the July
1997 SEC Manual of Publicly Available Telephone Interpretations regarding short selling:


“An Issuer filed a Form S-3 registration statement for a secondary offering of common stock which
is not yet effective. One of the selling shareholders wanted to do a short sale of common stock
“against the box” and cover the short sale with registered shares after the effective date. The
issuer was advised that the short sale could not be made before the registration statement become
effective, because the shares underlying the short sale are deemed to be sold at the time such sale
is

8


made. There would, therefore, be a violation of Section 5 if the shares were effectively
sold prior to the effective date.”



By returning this Questionnaire, the undersigned will be deemed to be aware of the foregoing
interpretation.



Upon any sale of Common Stock pursuant to the Registration Statement, the Selling Securityholder
will be required to deliver to the Transfer Agent (with a copy to the Company) the Notice of
Transfer (completed and signed) in the form attached as Annex A hereto and hereby
undertakes to do so.



In the event that the undersigned transfers all or any portion of the Company’s Common Stock or
Warrants after the date on which the information in this Questionnaire is provided to the Company,
the undersigned agrees to notify the transferee(s) at the time of transfer of its rights and
obligations hereunder.



By signing below, the undersigned consents to the disclosure of the information contained in this
Questionnaire and the inclusion of such information in the Registration Statement, the related
prospectus and any state securities or “Blue Sky” applications. The undersigned understands that
the information in this Questionnaire will be relied upon by the Company in connection with the
preparation or amendment of the Registration Statement or related prospectus.



By signing below, the undersigned represents that the information provided herein is accurate and
complete. The undersigned agrees to promptly notify the Company of any inaccuracies or changes in
the information provided herein that may occur subsequent to the date hereof at any time while the
Registration Statement remains effective.



Once this Questionnaire is executed by the undersigned beneficial holder and received by the
Company, the terms of this Questionnaire, and the representations and warranties contained herein,
shall be binding on, shall inure to the benefit of and shall be enforceable by the respective
successors, heirs, personal representatives and assigns of the Company and shall be governed in all
respects by the internal laws of the State of California.



Dated:      , 2005




     


(Name) [Please print or type]




By:      




(Authorized Signature)




Title:      



9




Annex A to

Registration Statement Questionnaire




FORM OF NOTICE OF TRANSFER

PURSUANT TO REGISTRATION STATEMENT




American Stock Transfer & Trust Company


6201 15th Avenue


New York, NY 11219



with a copy to:



Clearant, Inc.


11111 Santa Monica Boulevard


Suite 650


Los Angeles, California 90025


Attention: Andrew Jacobson



	 	 	 
	Re:

	 	Clearant, Inc. (the “Company”)

Common Stock, par value $0.0001 per share (the “Common Stock”)






Ladies and Gentlemen:



Please be advised that      has transferred      shares of the Company’s
Common Stock pursuant to the Registration Statement on Form S-1 (File No. 333-     ) filed by the
Company.



We hereby certify that the prospectus delivery requirements of the Securities Act of 1933, as
amended, have been satisfied with respect to the transfer described above and that the above-named
beneficial owner of Common Stock is named as a selling stockholder in the Prospectus dated
     , 200     or in amendments or supplements thereto, and that the number of Common
Stock transferred are [all] [a portion] of the Common Stock listed in such Prospectus as amended or
supplemented opposite such owner’s name.



Dated:




Very truly yours,




     


(Name)




By:      




(Authorized Signature)



10




Exhibit C-3




Clearant, Inc.




CERTIFICATE FOR CORPORATE, PARTNERSHIP,




TRUST, FOUNDATION AND JOINT PURCHASERS




If the investor is a corporation, partnership, trust, pension plan, foundation, joint
purchaser (other than a married couple) or other entity, an authorized officer, partner, or trustee
must complete, date and sign this Certificate.



CERTIFICATE




The undersigned certifies that the representations and responses below are true and accurate:



(a) The investor has been duly formed and is validly existing and has full power and authority
to invest in the Company. The person signing on behalf of the undersigned has the authority to
execute and deliver the Securities Purchase Agreement on behalf of the Purchaser and to take other
actions with respect thereto.



(b) Indicate the form of entity of the undersigned:



	 	 	 
	     

     

     

	 	Limited Partnership

General Partnership

Corporation






     Revocable Trust (identify each grantor and indicate under what circumstances the trust is
revocable by the grantor): .



(Continue on a separate piece of paper, if necessary.)



     Other type of Trust (indicate type of trust and, for trusts other than pension trusts,
name the grantors and beneficiaries): .



(Continue on a separate piece of paper, if necessary.)



     Other form of organization (indicate form of organization ( ).



(c) Indicate the approximate date the undersigned entity was formed: .



(d) In order for the Company to offer and sell the Shares and Warrants in conformance with
state and federal securities laws, the following information must be obtained regarding your
investor status. Please initial each category applicable to you as an investor in the
Company.




	 	 	 	     1. A bank as defined in Section 3(a)(2) of the Securities Act, or
any savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity;






	 	 	 	     2. A broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934;






	 	 	 	     3. An insurance company as defined in Section 2(13) of the
Securities Act;






	 	 	 	     4. An investment company registered under the Investment Company
Act of 1940 or a business development company as defined in Section 2(a)(48) of
that Act;






	 	 	 	     5. A Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958;






	 	 	 	     6. 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;






	 	 	 	     7. 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
advisor, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made solely by
persons that are accredited investors;






	 	 	 	     8. A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;






	 	 	 	     9. An organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the Shares, with
total assets in excess of $5,000,000;






	 	 	 	     10. A trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the Shares, whose purchase is
directed by a sophisticated person as described in Rule 506(b)(2)(ii) of the
Exchange Act;










11




	 	 	 	       11. An entity in which all of the equity owners qualify under any
of the above subparagraphs. If the undersigned belongs to this investor
category only, list the equity owners of the undersigned, and the investor
category which each such equity owner satisfies:



        .



(Continue on a separate piece of paper, if necessary.)



Please set forth in the space provided below the (i) states, if any, in the U.S. in which you
maintained your principal office during the past two years and the dates during which you
maintained your office in each state, (ii) state(s), if any, in which you are incorporated or
otherwise organized and (iii) state(s), if any, in which you pay income taxes.



Dated: , 2005



Name of investor



Signature and title of authorized officer, partner or trustee



12




Exhibit D




Clearant, Inc.




FORM OF TRANSFER AGENT INSTRUCTIONS




CLEARANT, INC.




as of November __, 2005




American Stock Transfer & Trust Company


6201 15th Avenue


New York, NY 11219



Attn: Donna Ansbro



Attention:



Ladies and Gentlemen:



Reference is made to that certain Securities Purchase Agreement, dated as of November 7, 2005
(the “Agreement”), by and among Clearant, Inc., a Delaware corporation (the “Company”), and the
purchasers named on the signature pages thereto (collectively, the “Holders”), pursuant to which
the Company is issuing to the Holders shares (the “Shares”) of Common Stock of the Company, par
value $0.0001 per share (the “Common Stock”), and warrants (the “Warrants”), which are exercisable
into shares of Common Stock.



This letter shall serve as our irrevocable authorization and direction to you (provided that
you are the transfer agent of the Company at such time):



(i) to issue shares of Common Stock upon transfer or resale of the Shares; and



(ii) to issue shares of Common Stock upon the exercise of the Warrants (the “Warrant Shares”)
to or upon the order of a Holder from time to time upon delivery to you of a properly completed and
duly executed Exercise Notice, in the form attached hereto as Exhibit I, which has been
acknowledged by the Company as indicated by the signature of a duly authorized officer of the
Company thereon.



You acknowledge and agree that so long as you have previously received (a) written
confirmation from the Company’s legal counsel that either (i) a registration statement covering
resales of the Shares and the Warrant Shares has been declared effective by the Securities and
Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the
“Securities Act”), or (ii) sales of the Shares and the Warrant Shares may be made in conformity
with Rule 144 under the Securities Act (“Rule 144”) and (b) if applicable, a copy of such
registration statement, then, unless otherwise required by law, within three (3) business days of
your receipt of the notice referred to in (ii above), you shall issue the certificates representing
the Shares and the Warrant Shares so sold to the transferees registered in the names of such
transferees, and such certificates shall not bear any legend restricting transfer of the Shares and
the Warrant Shares thereby and should not be subject to any stop-transfer restriction.



 A form of written confirmation (to be used in connection with any sale) from
the Company’s outside legal counsel that a registration statement covering resales of the Shares
and the Warrant Shares has been declared effective by the Commission under the Securities Act is
attached hereto as Exhibit II.



Please be advised that the Holders are relying upon this letter as an inducement to enter into
the Agreement and, accordingly, each Holder is a third party beneficiary to these instructions.



Please execute this letter in the space indicated to acknowledge your agreement to act in
accordance with these instructions.



Very truly yours,



CLEARANT, INC.




By:      

Name:      

Title:      




ACKNOWLEDGED AND AGREED:



AMERICAN STOCK TRANSFER & TRUST COMPANY




By:      





Name:      





Title:      



Date:      



13




Exhibit I




FORM OF EXERCISE NOTICE




(To be executed by the Holder to exercise the right to purchase shares




of Common Stock under the foregoing Warrants)




To: Clearant, Inc.



The undersigned is the Holder of Warrant No.   (the “Warrants”)
issued by Clearant, Inc., a Delaware corporation (the “Company”). Capitalized terms used herein and
not otherwise defined have the respective meanings set forth in the Warrants.



1. The Warrants are currently exercisable to purchase a total of  
Warrant Shares.



2. The undersigned Holder hereby exercises its right to purchase  
Warrant Shares pursuant to the Warrants.



3. The holder (i) shall pay the sum of $  to the Company in
accordance with the terms of the Warrants, or (ii) hereby elects to utilize the cashless exercise
option and convert      percent (     %) of the value of the Warrant pursuant to the
provisions of Section 10(b) of the Warrant.



4. Pursuant to this exercise, the Company shall deliver to the holder 
 Warrant Shares in accordance with the terms of the Warrants.



5. Following this exercise, the Warrants shall be exercisable to purchase a total of 
 additional Warrant Shares.



Dated:     ,      



Name of Holder:



	 
	 

	(Print)

	 

	By:

	 

	Name:

	 

	Title:







(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)



1 NOTE: For purposes of this question, shares are
considered “beneficially owned” by a person if the person, directly
or indirectly, through any contract, arrangement, understanding, relationship
or otherwise, has or shares voting power and/or investment power with respect
to such shares. “Voting power” is the power to vote or direct the
voting of the shares, and “investment power” is the power to
dispose of (or direct the disposition of) the shares.



2 Immediate family includes your parents, mother-in-law,
father-in-law, spouse, sibling, brother-in-law or sister-in-law, children,
son-in-law or daughter-in-law, and any other individual who is supported to a
materiel extent by you.



14



ACKNOWLEDGMENT




The Company hereby acknowledges this Exercise Notice and hereby directs American Stock
Transfer & Trust Company to issue the above indicated number of shares of Common Stock in
accordance with the Transfer Agent Instructions dated November      , 2005 from the Company and
acknowledged and agreed to by American Stock Transfer & Trust Company.



	 	 	 	 	 
	CLEARANT, INC.	 	 	 	 
	By:
	 	 	—	 
	   Name:

	   Title:







15




Exhibit II




FORM OF NOTICE OF EFFECTIVENESS




OF REGISTRATION STATEMENT




	 	 	 	 	 
	American Stock Transfer & Trust Company

	6201 15th Avenue
New York, NY 11219
	 	 	 	 
	Attn:
	 	Donna Ansbro

	 
	 	Re: Clearant, Inc.







Ladies and Gentlemen:



We are counsel to Clearant, Inc., a Delaware corporation (the “Company”), and have represented
the Company in connection with that certain Securities Purchase Agreement, dated as of November 7,
2005, entered into by and among the Company and the buyers named therein (collectively, the
“Purchasers”) pursuant to which the Company issued to the Purchasers shares of the Company’s Common
Stock, par value $0.0001 per share (the “Common Stock”) and warrants exercisable for shares of
Common Stock (the “Warrants”). Pursuant to that certain Registration Rights Agreement of even date,
the Company agreed to register the resale of the Common Stock, including the shares of Common Stock
issuable upon exercise of the Warrants (collectively, the “Registrable Securities”) under the
Securities Act of 1933, as amended (the “Securities Act”). In connection with the Company’s
obligations under the Registration Rights Agreement, on  , 2005, the
Company filed a Registration Statement on Form S-1 (File No. 333- ) (the
“Registration Statement”) with the Securities and Exchange Commission (the “Commission”) relating
to the Registrable Securities which names each of the Purchasers as a selling stockholder
thereunder.



In connection with the foregoing, we advise you that a member of the Commission’s staff has
advised us by telephone that the Commission has entered an order declaring the Registration
Statement effective under the Securities Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF
EFFECTIVENESS] and we have no knowledge, after telephonic inquiry of a member of the staff, that
any stop order suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the Commission and the Registrable Securities are
available for resale under the Securities Act pursuant to the Registration Statement.



This letter shall serve as our standing notice to you that the Common Stock may be freely
transferred by the Purchasers pursuant to the Registration Statement so long as the Holders certify
they have complied with the prospectus delivery requirements of the Securities Act. You need not
require further letters from us to effect any future legend-free issuance or reissuance of shares
of Common Stock to the transferees of the Purchasers as contemplated by the Company’s Irrevocable
Transfer Agent Instructions dated November     , 2005. This letter shall serve as our standing
instructions with regard to this matter.



	 
	 

	Very truly yours,

	 

	GREENBERG TRAURIG, LLP

	 

	By:







	 	 	 
	CC:

	 	Purchasers

Piper Jaffray & Co.






16




Exhibit E




Clearant, Inc.




Form of Legal Opinion of Greenberg Traurig, LLP




Based on the foregoing, and subject to the qualifications and assumptions stated herein, we
are of the opinion that:



1. Each of the Company and the Subsidiary is a corporation validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate power and
authority to own, lease and operate its properties and to conduct its business as presently being
conducted.



2. Each of the Company and the Subsidiary is duly qualified to transact business and is in
good standing as a foreign corporation in the State of California.



3. The Shares and Warrant Shares to be issued by the Company pursuant to the Agreement have
been duly authorized and reserved, when issued and delivered in the manner contemplated by the
Agreement and the Warrant, respectively, will be validly issued, fully paid and nonassessable, and
free of preemptive rights arising under law or pursuant to the Company’s Certificate of
Incorporation.



4. Assuming the Purchaser acquires the Shares and Warrant being sold to it pursuant to the
Agreement without notice of an adverse claim thereto, upon (a) the delivery to the Purchaser of
such Shares and Warrant, (b) payment by the Purchaser therefor in the manner contemplated by the
Agreement, and (c) the acquisition by the Purchaser of control of such Shares and Warrant, the
Purchaser will acquire such Shares and Warrant free of any adverse claim. For purposes of this
paragraph 5, the terms “delivery,” “control,” “adverse claim” and “notice of an adverse claim” have
the respective meanings assigned to them in Sections 8301, 8106, 810 (a)(1) and 8105 of the
California Commercial Code in effect on the date hereof.



5. The Company has all requisite corporate power and authority to execute and deliver the
Transaction Documents and to perform its obligations thereunder. The execution, delivery and
performance of the Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby have been duly authorized by all requisite corporate action on
the part of the Company.



6. The Agreement has been duly and validly executed and delivered by the Company and (assuming
the due authorization, execution and delivery thereof by the Purchasers) constitutes the legal,
valid and binding obligation of the Company, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
conservatorship, moratorium and similar laws affecting creditors’ rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (irrespective of whether enforcement is
sought in a proceeding at law or in equity) and except that (A) rights to indemnification and
contribution thereunder may be limited by federal or state securities laws or public policy
relating thereto, (B) no opinion is expressed herein with respect to Sections 6.7 and 6.8 of the
Agreement and (C) certain remedial provisions of the Agreement are or may be unenforceable in whole
or in part under the laws of the State of California, but the inclusion of such provisions does not
affect the validity of the Agreement.



7. The execution and delivery by the Company of the Agreement, and the performance by the
Company with its obligations thereunder, do not constitute a default under or violate (i) any
provisions of the articles of incorporation or by-laws of the Company presently in effect, (ii) any
of the terms or provisions of any material document, agreement or other instrument to which the
Company is a party or by which it is bound, of which we are aware, (iii) any California, Delaware
corporate or United States federal law or regulation (other than federal and state securities or
“blue sky” laws, as to which we express no opinion in this paragraph 8), or (iv) any judgment,
writ, injunction, decree, order or ruling of any California, Delaware corporate or United States
federal court or public or governmental authority binding on the Company, of which we are aware.



8. No consent, approval, waiver, license or authorization or other action by or filing or
registration with any California, Delaware corporate or United States federal public or
governmental authority is required in connection with the valid execution and delivery by the
Company of the Agreement or the consummation by the Company of the transactions contemplated
thereby, except for filings, registrations and other actions required pursuant to the Securities
Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the respective rules
and regulations thereunder; filings by or on behalf of the underwriters with the Corporate
Financing Department of the National Association of Securities Dealers, Inc., filings in connection
with state securities or “blue sky” laws, in each case as to which we express no opinion in this
paragraph 9, and those which already have been obtained by the Company.



9. Except as set forth in the Company’s SEC Reports or as otherwise identified in any
Transaction Document, to our knowledge there is no litigation, proceeding or public or governmental
investigation pending or threatened in writing against the Company that relates to the transactions
contemplated by the Agreement or which, if determined adversely to the Company, would have a
material adverse effect on the business, assets or financial condition of the Company and its
Subsidiaries, considered as an entirety.



10. Our opinion has been requested as to the availability of the exemption from the
registration requirements of Section 5 of the Securities Act of 1933, as amended (the “Securities
Act”), provided by Regulation D thereunder (“Regulation D”), with respect to the sale of the Shares
and Warrants pursuant to the Agreement. Based upon and subject to the following assumptions, we
are of the opinion that the sale of the Shares and the Warrants by the Company complies with the
provisions of Regulation D, and, accordingly, such sale may be effected without registration under
the Act in reliance on Regulation D. We are relying on the representation of the Company contained
in the Agreement as to no general solicitation and the representations of the Purchasers contained
in the Agreement, including without limitation to the effect that the Purchaser (i) is an
“accredited investor” within the meaning of Regulation D under the Securities Act, (ii) has such
knowledge and experience in financial and business matters that the Purchaser is capable of
evaluating the merits and risks of the prospective investment, and (iii) is acquiring the
Securities for its own account, for investment purposes and without a view to distribution. The
Securities are legended to reflect that they have not been registered under the Securities Act or
the securities laws of any state and may not be sold or transferred in the absence of such
registration or an exemption therefrom under the Securities Act and such state securities laws.




17