SERIES F CONVERTIBLE PREFERRED STOCK
                               PURCHASE AGREEMENT

                                      Among

                               Fonix Corporation,

                             SOVEREIGN PARTNERS, LP,

                           DOMINION CAPITAL FUND, LTD,

                         DOMINION INVESTMENT FUND, LLC,

                            CANADIAN ADVANTAGE, L.P.,

                                       and

                                    QUEEN LLC


                                FEBRUARY 1, 2000

                         ------------------------------












<PAGE>



         SERIES F CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, dated
as of February 1, 2000 (this "Agreement"), between Fonix Corporation, a Delaware
corporation  (the  "Company"),  Dominion  Capital  Fund,  Ltd.,  a  [__________]
corporation ("Dominion"),  Sovereign Partners, LP, a [____________]  corporation
("Sovereign"),  Canadian Advantage, LP, a [_____________] corporation ("Canadian
Advantage"),  Dominion Investment Fund, LLC, a [____________]  limited liability
company  ("Dominion  Investment"),  and  Queen  LLC,  a  [____________]  limited
liability company ("Queen") (Dominion,  Sovereign,  Canadian Advantage, Dominion
Investment,  and Queen are each referred to as a "Purchaser" and collectively as
the "Purchasers").

                                    Recitals

         A. The Purchasers  each desire to purchase,  and the Company desires to
issue  and sell to each of them  shares  of  Series F 6%  Convertible  Preferred
Stock,  $.0001 par value per share ("Series F Preferred") (or a total of 290,000
shares) for an aggregate purchase price of $2,750,000,  in the share amounts set
forth on  Appendix  A hereto  according  to the terms and  conditions  set forth
below.

                                    Agreement

                  IN  CONSIDERATION  of the mutual  covenants and agreements set
forth  herein and for other good and  valuable  consideration,  the  receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:

                                   ARTICLE I.
                               CERTAIN DEFINITIONS

         Section 1.        Certain Definitions.  As used in this Agreement,
unless the context  requires a different  meaning,  the following terms have the
meanings indicated in this Section 1.1:

     "Affiliate" means, with respect to any Person, any Person that, directly or
indirectly,  controls,  is controlled by, or is under common control with,  such
Person. For purposes of this definition,  "control" (including, with correlative
meanings,  the terms "controlled by" and "under common control with") shall mean
the  possession,  directly  or  indirectly,  of the power to direct or cause the
direction of the  management  and policies of such Person,  whether  through the
ownership of voting securities or by contract or otherwise.

     "Agreement" shall have the meaning set forth in the recitals hereto.

     "Business  Day"  means any day  except  Saturday,  Sunday and any day which
shall be a Federal legal holiday or a day on which banking  institutions  in the
State of Delaware are authorized or required by law or other government  actions
to close.

     "Certificate  of  Designation"  shall have the meaning set forth in Section
2.1(a).



                                       -1-

<PAGE>



     "Closing" shall have the meaning set forth in Section 2.1(b).

     "Closing Date" shall have the meaning set forth in Section 2.1(b).

     "Commission" means the Securities and Exchange Commission.

     "Common Stock" means the Company's  Class A common stock,  par value $.0001
per share.

     "Company" shall have the meaning set forth in the recitals hereto.

     "Conversion  Price" shall have the meaning set forth in the  Certificate of
Designation.

     "Conversion  Ratio" shall have the meaning set forth in the  Certificate of
Designation.

     "Disclosure  Materials"  means,  collectively,  the SEC  Documents  and the
Schedules to this Agreement and all other information  furnished by or on behalf
of the  Company  relating  to or  concerning  the  Company  and  provided to the
Purchasers  or their  agents and  counsel in  connection  with the  transactions
contemplated by this Agreement.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     "Initial Reserve" shall have the meaning set forth in Section 3.1(d).

     "Intellectual  Property Rights" shall have the meaning set forth in Section
3.1(q).

     "Legal  Opinion"  means the legal opinion letter of Durham Jones & Pinegar,
P.C.,  outside counsel to the Company,  addressed to the  Purchasers,  dated the
Closing Date and in form and substance acceptable to the Purchasers.

     "Lien" means, with respect to any asset, any mortgage,  lien, pledge, right
of first refusal,  charge, security interest or encumbrance of any kind in or on
such asset or the revenues or income thereon or therefrom.

     "Material  Adverse  Effect"  shall  have the  meaning  set forth in Section
3.1(b).

     "Original  Issue  Date"  shall  mean  the  first  issuance  of any  Shares,
regardless of the number of transfers of any particular  Share and regardless of
the number of certificates which may be issued to evidence any particular Share.

     "Per  Share  Market  Value"  shall  have  the  meaning  set  forth  in  the
Certificate of Designation.



                                       -2-

<PAGE>



     "Person"  means  an  individual  or  a  corporation,   partnership,  trust,
incorporated or  unincorporated  association,  joint venture,  limited liability
company, joint stock company,  government (or an agency or political subdivision
thereof) or other entity of any kind.

     "Preferred Stock" shall have the meaning set forth in the recitals hereto.

     "Purchaser(s)" shall have the meaning set forth in the recitals hereto.

     "Required Approvals" shall have the meaning set forth in Section 3.1(f).

     "Registrable Securities" means the shares of Common Stock issuable (a) upon
conversion  in full of the  Preferred  Shares,  and  (b) as  payment  in full of
dividends on the Preferred  Shares;  provided,  however that in order to account
for the fact that the number of shares of Common  Stock that are  issuable  upon
conversion  of Preferred  Shares is  determined in part upon the market price of
the Common Stock at the time of conversion or exercise,  Registrable  Securities
contemplated  by clause of this  definition  shall be deemed to include not less
than, and the initial  Registration  Statement to be filed hereunder shall cover
no less  than,  200% of the  number  of shares of  Common  Stock  issuable  upon
conversion in full of the Preferred Shares assuming such conversion were to have
occurred  on the  Original  Issue Date.  The  Company  shall be required to file
additional  Registration Statements to the extent the actual number of shares of
Common Stock into which the  Preferred  Shares are  convertible  (together  with
dividends  thereon)  exceeds  the  number of shares  of Common  Stock  initially
registered in accordance with the immediately  prior sentence (the Company shall
have 20 days to file such additional  Registration Statement after notice of the
requirement thereof,  which the Holders may give at such time when the number of
shares of Common Stock as are issuable as payment of dividends in respect of the
Preferred  Stock and upon  conversion of the Preferred  Stock exceeds 75% of the
number of shares of Common  Stock  then  covered  by an  effective  Registration
Statement.

     "SEC Documents" shall have the meaning set forth in Section 3.1(c).

     "Securities" means, collectively, the Shares and the Underlying Shares

     "Securities Act" means the Securities Act of 1933, as amended.

     "Shares"  means the shares of  Preferred  Stock to be  purchased  or issued
pursuant to this Agreement.

     "Stated Value" means $20.00.

     "Subsequent Financing" shall have the meaning set forth in Section 4.9.

     "Subsequent  Financing  Notice" shall have the meaning set forth in Section
4.9.

     "Subsidiaries" shall have the meaning set forth in Section 3.1(a).


                                       -3-

<PAGE>



     "Trading  Day"  shall  have the  meaning  set forth in the  Certificate  of
Designation.

     "Transaction  Documents"  means  collectively,   this  Agreement,  and  the
Certificate of Designation.

     "Underlying  Shares"  means  the  shares  of  Common  Stock  issuable  upon
conversion of the Shares and as payment of dividends  thereon in accordance with
the terms of the Certificate of Designation.

     "Underlying  Securities   Registration   Statement"  means  a  registration
statement  under the  Securities  Act prepared by the Company and filed with the
Commission,  covering the resale of the Underlying  Shares and naming the holder
or holders of such Underlying Shares as "selling stockholders" thereunder.

                                   ARTICLE II.
                               PURCHASE OF SHARES

         Section 2.1       Purchase and Exchange of Shares; Closing.

                  (a) Subject to the terms and conditions  set forth below,  the
Company  shall sell to the  Purchasers,  and the  Purchasers  shall  purchase an
aggregate of two hundred  ninety  thousand  (290,000)  Shares) for the aggregate
purchase  price of two million seven hundred fifty  thousand  ($2,750,000)  (the
"Purchase  Price") in the  amounts  set forth in  Appendix A hereto.  The Shares
issued pursuant to this Agreement shall have the respective rights,  preferences
and privileges set forth in Exhibit A (the "Certificate of Designation").

                  (b) The  closing of the  purchase  and sale of the Shares (the
"Closing")  shall take place at the offices of Durham Jones & Pinegar,  P.C., 50
South Main  Street,  Suite  800,  Salt Lake City,  Utah  84144.  The date of the
Closing is hereinafter referred to as the "Closing Date."

                  (c) At the Closing the parties  shall  deliver the  following:
(i) the Company shall  deliver or cause to be delivered  (A) stock  certificates
representing two hundred ninety thousand (290,000) Shares,  registered according
to instructions  to be provided by the Purchasers at or before the Closing,  and
(B) a Legal  Opinion  addressed to the  Purchasers;  (ii) the  Purchasers  shall
deliver or cause to be delivered (x) two million  seven  hundred fifty  thousand
dollars  ($2,750,000)  in United  States  dollars in presently  available  funds
according  to wire  instructions  to be  provided  by the  Company  at or before
Closing,  minus any funds  advanced  prior to the Closing;  and (iii) each party
hereto shall  deliver or cause to be delivered all other  executed  instruments,
agreements  and  certificates  as are  required to be  delivered  by or on their
behalf at the Closing.



                                       -4-

<PAGE>



                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

                  Section 3.1 Representations and Warranties of the Company. The
Company hereby represents and warrants to the Purchasers as follows:

                  (a)   Organization  and   Qualification.   The  Company  is  a
corporation, duly incorporated,  validly existing and in good standing under the
laws of the  jurisdiction  of its  incorporation,  with the requisite  corporate
power and authority to own and use its properties and assets and to carry on its
business as currently  conducted.  The Company has no subsidiaries other than as
set forth in Schedule 3.1(a)  (collectively,  the  "Subsidiaries").  Each of the
Subsidiaries is a corporation,  duly incorporated,  validly existing and in good
standing  under  the laws of the  jurisdiction  of its  incorporation,  with the
requisite corporate power and authority to own and use its properties and assets
and to carry on its business as currently conducted. Each of the Company and the
Subsidiaries  is duly  qualified  to do  business  and is in good  standing as a
foreign  corporation  in each  jurisdiction  in which the nature of the business
conducted or property  owned by it makes such  qualification  necessary,  except
where the failure to be so  qualified or in good  standing,  as the case may be,
could not, individually or in the aggregate,  (x) adversely affect the legality,
validity or enforceability of the Shares or any Transaction Document, (y) have a
material  adverse effect on the results of  operations,  assets,  prospects,  or
condition (financial or otherwise) of the Company and the Subsidiaries, taken as
a whole or (z)  adversely  impair the  Company's  ability to perform  fully on a
timely basis its obligations under any Transaction Document (a "Material Adverse
Effect").

                  (b) Authorization;  Enforcement. The Company has the requisite
corporate  power and authority to enter into and to consummate the  transactions
contemplated  by the  Transaction  Documents  and to  otherwise  carry  out  its
obligations thereunder.  The execution and delivery of each Transaction Document
by the  Company  and the  consummation  by it of the  transactions  contemplated
thereby have been duly  authorized  by all  necessary  action on the part of the
Company.  Each  Transaction  Document has been duly executed by the Company and,
when delivered in accordance with the terms hereof,  each  Transaction  Document
shall  constitute  the  legal,  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.  Neither the Company nor any
Subsidiary is in violation of any  provision of its  respective  certificate  or
articles of incorporation, bylaws or other charter documents.

                  (c)  Capitalization.  The  authorized,  issued and outstanding
capital  stock of the  Company  is set forth in  Schedule  3.1(c).  No shares of
Common  Stock  are  entitled  to  preemptive  or  similar   rights.   Except  as
specifically  disclosed in Schedule  3.1(c),  there are no outstanding  options,
warrants,  rights  to  subscribe  to,  calls  or  commitments  of any  character
whatsoever  relating to, or,  except as a result of the purchase and sale of the
Shares, securities,  rights or obligations convertible into or exchangeable for,
or giving any Person any right to subscribe for


                                       -5-

<PAGE>



or  acquire,   any  shares  of  Common   Stock,   or   contracts,   commitments,
understandings, or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional  shares of Common Stock or securities or rights
convertible or exchangeable into shares of Common Stock. To the knowledge of the
Company,  except as  specifically  disclosed  in the SEC  Documents  or Schedule
3.1(c), no Person or group of Persons  beneficially owns (as determined pursuant
to Rule 13d-3 promulgated under the Exchange Act) or has the right to acquire by
agreement with or by obligation binding upon the Company beneficial ownership of
in excess of 5% of the Common Stock.

                  (d)  Issuance of  Securities.  The Shares are duly  authorized
and, when issued in accordance  with the terms hereof,  shall be validly issued,
fully paid and  nonassessable,  free and clear of all Liens.  Subject to Section
4.7, the Company has and at all times while any Shares are outstanding shall use
its best efforts to maintain an adequate  reserve of duly  authorized  shares of
Common  Stock to  enable  it to  perform  its  conversion,  exercise  and  other
obligations  under this  Agreement  and the  Certificate  of  Designation  which
reserve,  subject to Section  4.7,  shall be no less than the sum of (i) 200% of
(A) the number of shares of Common Stock as would be issuable upon conversion in
full of the Shares,  were such  conversion  effected on the Original Issue Date,
and (B) the  number of shares of Common  Stock as are  issuable  as  payment  of
dividends on the Shares (assuming such dividends are to be paid in Common Stock)
(such  sum,  the  "Initial  Reserve").  If at any time the sum of the  number of
shares  of  Common  Stock  issuable  (a)  upon  conversion  in full of the  then
outstanding  Shares and (b) as the payment of dividends on the Shares  (assuming
all such  dividends are to be paid in Common  Stock)  exceeds 85% of the Initial
Reserve, then the Company shall use its best efforts to duly reserve 200% of the
number  of  shares  of  Common  Stock  equal  to such  excess  to  fulfill  such
obligations.  This obligation shall similarly apply to successive excesses. When
issued in accordance with the Certificate of Designation,  the Underlying Shares
will be duly authorized, validly issued, fully paid and nonassessable,  and free
and clear of all Liens.

                  (e) No Conflicts.  The execution,  delivery and performance of
the Transaction  Documents by the Company and the consummation by the Company of
the transactions  contemplated  thereby do not and will not (i) conflict with or
violate any  provision  of its  certificate  of  incorporation,  bylaws or other
charter  documents  (each as amended  through the date hereof),  (ii) subject to
obtaining  the  consents  referred  to in  Section  3.1(f),  conflict  with,  or
constitute  a default  (or an event  which 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  of,  any  agreement,  indenture  or
instrument  (evidencing  a Company debt or  otherwise) to which the Company is a
party or by which any property or asset of the Company is bound or affected,  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 is subject (including federal and state securities laws and
regulations),  or by which  any  property  or asset of the  Company  is bound or
affected;  except in the case of each of clauses  (ii) and (iii),  as could not,
individually or in the aggregate,  have or result in a Material  Adverse Effect.
The  business of the Company is not being  conducted  in  violation  of any law,
ordinance or regulation of any  governmental  authority,  except for  violations
which, individually and in the aggregate, could not have or result in a Material
Adverse Effect.



                                       -6-

<PAGE>



                  (f)  Consents  and  Approvals.  Neither  the  Company  nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
or make any filing or  registration  with,  any court or other  federal,  state,
local,  foreign 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 of the Certificate of Designation with the
Secretary  of  State of  Delaware,  (ii) the  filing  of one or more  Underlying
Securities  Registration  Statements  with  the  Commission  and the  making  of
applicable  blue-sky  filings  under state  securities  laws with respect to the
Securities and the transactions  contemplated  hereby, (iii) the application for
the listing of the Underlying  Shares on the Nasdaq SmallCap Market (and on each
other  national  securities  exchange,  market or trading  facility on which the
Common Stock is then listed), and (iv) other than, in all other cases, where the
failure to obtain such consent,  waiver,  authorization  or order, or to give or
make such notice or filing, could not, individually or in the aggregate, have or
result in a Material Adverse Effect (the "Required Approvals").

                  (g) Litigation;  Proceedings. Except as specifically disclosed
in the  Disclosure  Materials,  there is no action,  suit,  notice of violation,
proceeding or  investigation  pending or, to the best  knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries or any of
their   respective   properties   before  or  by  any  court,   governmental  or
administrative agency or regulatory authority (federal,  state, county, local or
foreign)  which (i) adversely  affects or challenges  the legality,  validity or
enforceability  of any  Transaction  Document or the  Securities  or (ii) could,
individually or in the aggregate, have or result in a Material Adverse Effect.

                  (h) No Default  or  Violation.  Neither  the  Company  nor any
Subsidiary (i) is in default under or in violation of (or has 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 other  agreement or  instrument  to
which it is a party or by which it or any of its properties is bound, (ii) is in
violation of any order of any court,  arbitrator or governmental  body, or (iii)
is in  violation  of  any  statute,  rule  or  regulation  of  any  governmental
authority, except as could not, individually or in the aggregate, have or result
in a Material  Adverse Effect or, except in the case of clause (i) above, as has
not been waived pursuant to an effective waiver.

                  (i)   Private   Offering.   Assuming   the   accuracy  of  the
representations   and  warranties  of  the  Purchasers   contained  in  Sections
3.2(b)-3.2(f),  the offering, issuance or sale of the Securities as contemplated
hereunder are exempt from the registration requirements of the Securities Act.

                  (j) Certain Fees.  Except for finders fees, which fees will be
paid by the Company,  no fees or  commissions  will be payable by the Company to
any broker,  financial advisor,  finder,  investment banker, placement agent, or
bank with respect to the transactions  contemplated hereby. The Purchasers shall
have no obligation  with respect to such fees or with respect to any claims made
by or on behalf of other Persons for fees of a type contemplated in this Section
that may be due in connection with the  transactions  contemplated  hereby.  The
Company  shall  indemnify  and  hold  harmless   Purchasers,   their  respective
employees,  officers,  directors,  agents,  and partners,  and their  respective
Affiliates, from and against all claims, losses,


                                       -7-

<PAGE>



damages,  costs  (including  the costs of preparation  and attorney's  fees) and
expenses  suffered in respect of any such claimed or existing  fees, as and when
incurred.

                  (k) SEC Documents;  Financial  Statements;  No Adverse Change.
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,  for the three years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials being collectively  referred
to herein as the "SEC  Documents")  on a timely  basis or has  received  a valid
extension of such time of filing and has filed any such SEC  Documents  prior to
the expiration of any such  extension.  As of their  respective  dates,  the SEC
Documents  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 Documents,  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.  The  financial  statements  of the  Company  included  in  the  SEC
Documents   comply  in  all  material   respects  with   applicable   accounting
requirements  and the rules  and  regulations  of the  Commission  with  respect
thereto.  Such  financial  statements  have been  prepared  in  accordance  with
generally  accepted  accounting  principles applied on a consistent basis during
the periods  involved,  except as may be otherwise  specified in such  financial
statements or the notes thereto, and fairly present in all material respects the
financial  position  of the  Company  as of and for the  dates  thereof  and the
results of  operations,  retained  earnings  and cash flows for the periods then
ended,  subject, in the case of unaudited  statements,  to normal year-end audit
adjustments.  Since  the  date  of  the  financial  statements  included  in the
Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999,
as  amended  to the date  hereof,  (a) there has been no  event,  occurrence  or
development  that has had or that  could  have or result in a  Material  Adverse
Effect,  (b)  there has been no  material  change  in the  Company's  accounting
principles,  practices or methods and (c) the Company has conducted its business
only in the ordinary  course of such  business.  The Company last filed  audited
financial statements with the Commission on April 15, 1999, and has not received
any comments from the Commission in respect thereof.

                  (l)  Seniority.  Except for the  Company's  Series A Preferred
Stock and the Series D Preferred  Stock,  no class of equity  securities  of the
Company is senior to the Shares in right of  payment,  whether  with  respect to
dividends or upon liquidation, dissolution or otherwise.

                  (m) Form S-2  Eligibility.  The Company is, and at the Closing
Date will be,  eligible to register  securities  for resale with the  Commission
under Form S-2 promulgated under the Securities Act.

                  (n)  Investment  Company.  The  Company is not,  and is not an
"Affiliate  person"  of, an  "investment  company"  within  the  meaning  of the
Investment Company Act of 1940, as amended.

                  (o) Listing and  Maintenance  Requirements  Compliance.  Other
than as previously  disclosed in writing to the Purchasers,  the Company has not
in the two years prior to the date hereof received written notice from any stock
exchange, market or trading facility on


                                       -8-

<PAGE>



which  the  Common  Stock is or has been  listed  (or on which it is or has been
quoted) to the effect that the Company is not in compliance  with the listing or
maintenance  requirements  of such  exchange,  market or trading  facility.  The
Company has  provided to the  Purchasers  true and  complete  copies of all such
notices contemplated by this Section.

                  (p) Patents and Trademarks.  The Company has, or has rights to
use, all  patents,  patent  applications,  trademarks,  trademark  applications,
service  marks,  trade  names,  copyrights,  licenses,  trade  secrets and other
intellectual  property rights which are necessary for use in connection with its
business  or which the failure to so have would have a Material  Adverse  Effect
(collectively, the "Intellectual Property Rights"). To the best knowledge of the
Company,  none of the Intellectual Property Rights infringe on any rights of any
other  Person,  and the Company  either owns or has duly  licensed or  otherwise
acquired all necessary rights with respect to the Intellectual  Property Rights.
The  Company  has not  received  any notice from any third party of any claim of
infringement by the Company of any of the Intellectual  Property Rights, and has
no  reason  to  believe  there  is any  basis  for any such  claim.  To the best
knowledge of the Company, there is no existing infringement by another Person on
any of the Intellectual Property Rights.

                  (q) Disclosure.  All information relating to or concerning the
Company  set forth in the  Transaction  Documents  or the  Disclosure  Materials
(other than the SEC Documents) is true and correct in all material  respects and
does  not  fail to  state  any  material  fact  necessary  in  order to make the
statements  herein or therein,  in light of the  circumstances  under which they
were made, not misleading.  The Company confirms that it has not provided to the
Purchasers or any of their  representatives,  agents or counsel any  information
that constitutes or might constitute material nonpublic information. The Company
understands  and confirms that the Purchasers  shall be relying on the foregoing
representation in effecting transactions in securities of the Company.

         Section 3.2  Representations  and  Warranties  of the  Purchasers.  The
Purchasers hereby jointly and not severally represent and warrant to the Company
as follows:

                  (a)  Organization;  Authority.  Such  Purchaser  is an  entity
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction of its organization with the requisite power and authority to enter
into  and  to  consummate  the  transactions  contemplated  by  the  Transaction
Documents and to carry out its  obligations  thereunder.  The acquisition of the
Securities  to be  acquired  hereunder  and the  payment of the  purchase  price
therefor by such Purchaser have been duly authorized by all necessary  action on
the part of such  Purchaser.  This  Agreement  has been  duly  executed  by such
Purchaser  and, when  delivered by such  Purchaser in accordance  with the terms
hereof,  shall  constitute  the valid and  legally  binding  obligation  of such
Purchaser,  enforceable  against it in  accordance  with its  terms,  subject to
bankruptcy,  insolvency,  fraudulent  transfer,  reorganization,  moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity.

                  (b)  Investment  Intent.   Such  Purchaser  is  acquiring  the
Securities to be acquired hereunder 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 or interest therein, without


                                       -9-

<PAGE>



prejudice, however, to such Purchaser's right, subject to the provisions of this
Agreement,  at all times to sell or otherwise dispose of all or any part of such
Securities pursuant to an effective  registration statement under the Securities
Act  and in  compliance  with  applicable  state  securities  laws or  under  an
exemption from such registration.

                  (c) Purchaser  Status.  At the time such Purchaser was offered
the Securities to be acquired  hereunder by such Purchaser,  it was, at the date
hereof, it is, and at the Closing Date, it will be, an "accredited  investor" as
defined in Rule 501(a) under the Securities Act.

                  (d) Experience of 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.

                  (e)  Ability of  Purchaser  to Bear Risk of  Investment.  Such
Purchaser  acknowledges  that an investment in the Securities is speculative and
involves a high degree of risk. Such Purchaser is able to bear the economic risk
of an investment in the Securities to be acquired  hereunder by such  Purchaser,
and, at the present time, is able to afford a complete loss of such investment.

                  (f) Access to Public Information.  Such Purchaser acknowledges
receipt of the Disclosure  Materials and further  acknowledges  that it 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 public  information  about the
Company and the Company's 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   public
information  which 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  and to verify the accuracy and  completeness  of the
information  contained in the Disclosure  Materials.  Neither such inquiries nor
any other  investigation  conducted  by or on behalf  of such  Purchaser  or its
representatives,   agents  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.

                  (g) Reliance. Such Purchaser understands and acknowledges that
(i) the  Securities to be acquired by it hereunder are being offered and sold to
it without  registration under the Securities Act in a private placement that is
exempt  from the  registration  provisions  of the  Securities  Act and (ii) the
availability  of such  exemption,  depends in part on, and the Company will rely
upon the accuracy and  truthfulness of, the foregoing  representations  and such
Purchaser hereby consents to such reliance.

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



                                      -10-

<PAGE>



                                   ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

         Section  4.1  Transfer  Restrictions.  (a) The  Securities  may only be
disposed of pursuant to an effective registration statement under the Securities
Act,  to  the  Company  or  pursuant  to an  available  exemption  from  or in a
transaction not subject to the registration  requirements thereof. In connection
with  any  transfer  of any  Securities  other  than  pursuant  to an  effective
registration statement or to the Company, the Company may require the transferor
thereof  to  provide to the  Company  an  opinion  of  counsel  selected  by the
transferor,  the  form  and  substance  of which  opinion  shall  be  reasonably
satisfactory  to the Company,  to the effect that such transfer does not require
registration  under the  Securities  Act.  Notwithstanding  the  foregoing,  the
Company hereby consents to and agrees to register (i) any transfer of Securities
by the Purchasers to an Affiliate of the Purchasers,  or any transfers among any
such  Affiliates,  and (ii) any  transfer by the  Purchasers  to any  investment
entity under common  management  with the  Purchasers,  provided in each case of
clauses  (i) and (ii) the  transferee  certifies  to the  Company  that it is an
"accredited  investor" as defined in Rule 501(a) under the  Securities  Act. Any
such transferee shall have the rights of the Purchasers under this Agreement.

                  (b) The  Purchasers  agree  to the  imprinting,  so long as is
required by this Section 4.1(b), of the following legend (or such  substantially
similar legend as is acceptable to the Purchasers and their counsel, the parties
agreeing that any unacceptable legended Securities shall be replaced promptly by
and at the Company's cost) on the Securities:

         NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES
         ARE  CONVERTIBLE  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.

         [ONLY FOR  UNDERLYING  SHARES TO THE EXTENT  THE RESALE  THEREOF IS NOT
         COVERED  BY  AN  EFFECTIVE   REGISTRATION  STATEMENT  AT  THE  TIME  OF
         CONVERSION,  ISSUANCE  OR  EXERCISE]  THE  SHARES  REPRESENTED  BY THIS
         CERTIFICATE  HAVE NOT 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


                                      -11-

<PAGE>



         REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
         APPLICABLE STATE SECURITIES LAWS.

         Underlying  Shares  shall not contain the legend set forth above or any
other  restrictive  legend if the  conversion  of Shares or other  issuances  of
Underlying  Shares,  as the case may be,  occurs at any time while an Underlying
Securities  Registration  Statement is effective under the Securities Act or, in
the event there is not an effective Underlying Securities Registration Statement
at such time,  if in the  opinion of counsel to the  Company  such legend is not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements  issued by the staff of the Commission).  The
Company  agrees  that it will  provide  the  Purchasers,  upon  request,  with a
certificate  or  certificates  representing  Underlying  Shares,  free from such
legend at such time as such legend is no longer required hereunder.  The Company
may not make any  notation on its records or give  instructions  to any transfer
agent of the Company  which  enlarge the  restrictions  of transfer set forth in
this Section 4.1(b).

         Section 4.2 Acknowledgment of Dilution.  The Company  acknowledges that
the issuance of Underlying  Shares upon  conversion of the Shares and as payment
of dividends thereon may result in dilution of the outstanding  shares of Common
Stock,  which dilution may be substantial under certain market  conditions.  The
Company further  acknowledges  that its obligation to issue Underlying Shares in
accordance  with the  Certificate of Designation is  unconditional  and absolute
regardless of the effect of any such dilution.

         Section 4.3  Furnishing of  Information.  As long as the Purchasers own
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 Section
13(a) or 15(d) of the  Exchange  Act.  If at any time prior to the date on which
the  Purchasers  may  resell  all of  their  Underlying  Shares  without  volume
restrictions  pursuant to Rule 144(k)  promulgated  under the Securities Act (as
determined  by counsel to the Company  pursuant to a written  opinion  letter to
such effect,  addressed and  acceptable to the Company's  transfer agent for the
benefit of and  enforceable  by the  Purchasers)  the Company is not required to
file  reports  pursuant  to such  sections,  it will  prepare and furnish to the
Purchasers  and  make  publicly   available  in  accordance   with  Rule  144(c)
promulgated under the Securities Act annual and quarterly financial  statements,
together with a discussion and analysis of such financial statements in form and
substance  substantially similar to those that would otherwise be required to be
included in reports  required by Section  13(a) or 15(d) of the  Exchange Act in
the time period  that such  filings  would have been  required to have been made
under the Exchange  Act. 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  Securities
without  registration  under the  Securities  Act within the  limitation  of the
exemptions  provided by Rule 144 promulgated under the Securities Act, including
the legal opinion referenced above in this Section. Upon the request of any such
Person,  the Company shall deliver to such Person a written  certification  of a
duly authorized officer as to whether it has complied with such requirements.

         Section 4.4       Use of Disclosure Materials.  The Company consents to
the use of the Disclosure Materials and any information provided by or on behalf
of the Company pursuant to


                                      -12-

<PAGE>



Section 4.3, and any amendments and  supplements  thereto,  by the Purchasers in
connection  with resales of the  Securities  other than pursuant to an effective
registration statement.

         Section 4.5 Blue Sky Laws.  The Company  shall  qualify the  Underlying
Shares  under  the  securities  or Blue  Sky laws of such  jurisdictions  as the
Purchasers may reasonably  request and shall continue such  qualification at all
times until the Purchasers notify the Company in writing that they no longer own
Securities;  provided,  however,  that neither the Company nor its  Subsidiaries
shall be required in  connection  therewith to qualify as a foreign  corporation
where they are not now so qualified or to take any action that would subject the
Company to general service of process in any such  jurisdiction  where it is not
then so subject.

         Section 4.6  Integration.  The Company shall not and shall use its best
efforts to ensure that no Affiliate 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 would be integrated with the offer or sale of the
Securities in a manner that would require the registration  under the Securities
Act of the issue, offer or sale of the Securities to the Purchasers.

         Section 4.7 Increase in Authorized  Shares. At such time as the Company
would be, if a notice of conversion were to be delivered on such date, precluded
from (a)  converting  in full all of the  Shares or all of the then  issued  and
outstanding  shares  of the  Company's  Series F  Preferred  Stock  that  remain
unconverted at such date (and paying any accrued but unpaid dividends in respect
thereof in shares of Common  Stock) due to the  unavailability  of a  sufficient
number of shares of authorized  but unissued or  re-acquired  Common Stock,  the
Board of  Directors  of the Company  shall  promptly  (and in any case within 30
Business  Days from  such  date)  prepare  and mail to the  shareholders  of the
Company  proxy  materials  requesting   authorization  to  amend  the  Company's
certificate  of  incorporation  to increase the number of shares of Common Stock
which the Company is authorized to issue to at least a number of shares equal to
the sum of (i) all shares of Common Stock then  outstanding,  (ii) the number of
shares of Common Stock issuable on account of all outstanding warrants,  options
and convertible  securities  (other than the Preferred  Stock) and on account of
all shares reserved under any stock option,  stock purchase,  warrant or similar
plan,  and (iii)  200% of the  number  of  Underlying  Shares  as would  then be
issuable upon a conversion in full of the then outstanding  Shares and shares of
Series F  Preferred  Stock and as  payment of all  future  dividends  thereon in
shares of Common Stock in  accordance  with the terms of this  Agreement and the
Certificate  of  Designation.  In connection  therewith,  the Board of Directors
shall (x) adopt proper resolutions  authorizing such increase,  (y) recommend to
and  otherwise  use its best  efforts to promptly  and duly  obtain  shareholder
approval  to carry  out such  resolutions  (and hold a  special  meeting  of the
shareholders  no later than the 60th day after  delivery of the proxy  materials
relating  to such  meeting)  and (z) within 5 Business  Days of  obtaining  such
shareholder  authorization,  file  an  appropriate  amendment  to the  Company's
certificate of incorporation to evidence such increase. If the shareholders fail
to approve such increase,  the Company does not receive shareholder approval for
such increase or the Company fails to file an appropriate  amendment in the time
provided therefor by the immediately preceding sentence,  then the provisions of
Section 5(a)(iii)(B) of the Certificate of Designation shall apply.

         Section 4.8       Right of First Refusal.


                                      -13-

<PAGE>




                  (a) The Company shall not, directly or indirectly, without the
prior written consent of the Preferred Stock Investors,  as that term is defined
below,  offer,  sell, grant any option to purchase,  or otherwise dispose of (or
announce any offer,  sale, grant or any option to purchase or other disposition)
any of its or its  Affiliates'  equity or  equity-equivalent  securities  or any
instrument  that permits the holder thereof to acquire shares of Common Stock at
any time over the life of the  security  or  investment  at a price that is less
than the  market  price of the  Common  Stock  at the time of  issuance  of such
security or instrument (a  "Subsequent  Placement")  for a period of one hundred
eighty  (180) days after the  Original  Issue Date,  except (i) the  granting of
options or warrants to employees,  officers and  directors,  and the issuance of
shares upon exercise of options granted,  under any stock option plan heretofore
or hereinafter duly adopted by the Company,  (ii) shares issued upon exercise of
any currently outstanding warrants or options in each case disclosed in Schedule
3.1(c),  (iii) shares of Common Stock  issued upon  conversion  of the Shares or
shares of the Series F  Preferred  Stock,  as payment  of  dividends  in respect
thereof,  in accordance with their respective terms, (iv) shares of Common Stock
issued in connection with the capitalization or creation of a joint venture with
a strategic  partner (a Person whose business is primarily that of investing and
selling of securities  shall not be deemed a strategic  partner),  (v) shares of
Common Stock issued to pay part or all of the purchase price for the acquisition
by the Company of a Person  (which,  for purposes of this clause (v),  shall not
include an individual or group of  individuals)  and (vi) shares of Common Stock
issued in a bona fide  public  offering by the Company of its (and not of any of
its stockholders') securities, unless (A) the Company delivers to each Preferred
Stock  Investor a written  notice  (the  "Subsequent  Placement  Notice") of its
intention effect such Subsequent  Placement,  which Subsequent  Placement Notice
shall  describe  in  reasonable  detail the  proposed  terms of such  Subsequent
Placement,  the amount of proceeds intended to be raised thereunder,  the Person
with whom such Subsequent Placement shall be affected (if known to the Company),
and attached to which shall be a term sheet or similar document relating thereto
and (B) no Preferred Stock Investor shall have notified the Company by 5:00 p.m.
(Salt Lake City time) on the third  (3rd)  Trading  Day after its receipt of the
Subsequent  Placement Notice of its willingness to provide (or to cause its sole
designee  to   provide),   subject  to   completion   of   mutually   acceptable
documentation,  financing to the Company on substantially the terms set forth in
the Subsequent Placement Notice. If no Preferred Stock Investor shall notify the
Company  of its  intention  to enter  into such  negotiations  within  such time
period, the Company may effect the Subsequent  Placement  substantially upon the
terms  and to the  Persons  (or  Affiliates  of such  Persons)  set forth in the
Subsequent  Placement  Notice (if such  Persons are set forth in the  Subsequent
Placement Notice); provided, that the Company shall provide each Preferred Stock
Investor with a second  Subsequent  Placement  Notice,  and the Preferred  Stock
Investors  shall  again have the right of first  refusal set forth above in this
Section  4.8, if the  Subsequent  Placement  subject to the  initial  Subsequent
Placement Notice shall not have been consummated for any reason on the terms set
forth in such Subsequent  Placement Notice within thirty (30) Trading Days after
the date of the  initial  Subsequent  Placement  Notice  with the  Person (or an
Affiliate  of such  Person)  (if any)  identified  in the  Subsequent  Placement
Notice. If the Preferred Stock Investors shall indicate a willingness to provide
financing in excess of the amount set forth in the Subsequent  Placement Notice,
then each  Preferred  Stock  Investor  shall be  entitled  to provide  financing
pursuant  to such  Subsequent  Placement  Notice up to an  amount  equal to such
Purchaser's pro rata portion of the total number of the Series F Preferred Stock
and the Shares purchased under


                                      -14-

<PAGE>



this Agreement,  but the Company shall not be required to accept  financing from
the Preferred  Stock Investors in an amount in excess of the amount set forth in
the Subsequent Placement Notice.

                  (b)  Except  for  Underlying  Shares,  and other  "Registrable
Securities,"  the  Company  shall not,  for a period of not less than 90 Trading
Days after the date that the  Underlying  Securities  Registration  Statement is
declared  effective by the Commission,  without the prior written consent of the
Preferred  Stock  Investors,  (i)  issue  or  sell  any  of  its  or  any of its
Affiliates'  equity or  equity-equivalent  securities  pursuant to  Regulation S
promulgated under the Securities Act, or (ii) register for resale any securities
of the Company.  Any days that a Preferred  Stock  Investor is not  permitted to
sell Underlying Shares under the Underlying  Securities  Registration  Statement
shall be added to such 90 Trading  Day period for the  purposes  of (i) and (ii)
above.

                  (c)  For  purposes  of  this  Section  4.8,  "Preferred  Stock
Investor"  shall mean the holder of any then  issued and  outstanding  shares of
Series F Preferred Stock or Shares,  provided that to the extent of any conflict
under this Section  4.8, the holders of the Series F Preferred  Stock shall have
priority.

         Section 4.9 Listing of  Underlying  Shares.  The Company  shall (a) not
later  than the time  prescribed  by the rules  and  regulations  of the  Nasdaq
SmallCap  Market,  prepare and file with the Nasdaq  SmallCap Market (as well as
any other national securities exchange,  market or trading facility on which the
Common Stock is then listed) an additional shares listing  application  covering
at least  the sum of two  times  the  number  of  Underlying  Shares as would be
issuable  upon a  conversion  in full of (and as payment of dividends in respect
of) the Shares,  assuming such conversion occurred on the Original Issue Date or
the Filing Date (whichever yields a lower Conversion  Price), (b) take all steps
necessary  to cause the such  shares to be  approved  for  listing on the Nasdaq
SmallCap Market (as well as on any other national securities exchange, market or
trading  facility on which the Common  Stock is then listed) as soon as possible
thereafter,  and (c) provide to the Purchaser evidence of such listing,  and the
Company  shall  maintain  the  listing of its Common  Stock on such  exchange or
market.  In  addition,  if at any time the  number of  shares  of  Common  Stock
issuable on conversion of all then outstanding Shares, on account of accrued and
unpaid  dividends  thereon is greater  than the number of shares of Common Stock
theretofore  listed with the Nasdaq SmallCap Market (and any such other national
securities  exchange,  market or trading  facility),  the Company shall promptly
take such action (including the actions described in the preceding  sentence) to
file an additional  shares listing  application  with the Nasdaq SmallCap Market
(and any such other national  securities  exchange,  market or trading facility)
covering at least a number of shares  equal to the sum of 200% of (A) the number
of Underlying  Shares as would then be issuable upon a conversion in full of the
Shares and (B) the number of  Underlying  Shares as would be issuable as payment
of dividends on the Shares.

         Section 4.10 Notice of Breaches. Each of the Company and the Purchasers
shall  give  prompt  written  notice  to the  other of any  breach  by it of any
representation,  warranty  or  other  agreement  contained  in  any  Transaction
Document,  as well as any events or  occurrences  arising after the date hereof,
which would reasonably be likely to cause any representation or warranty or


                                      -15-

<PAGE>



other agreement of such party, as the case may be,  contained in the Transaction
Document to be  incorrect  or  breached as of such  Closing  Date.  However,  no
disclosure by either party  pursuant to this Section shall be deemed to cure any
breach of any  representation,  warranty  or other  agreement  contained  in any
Transaction  Document.  Notwithstanding  the  generality of the  foregoing,  the
Company shall promptly  notify the Purchasers of any notice or claim (written or
oral) that it  receives  from any lender of the  Company to the effect  that the
consummation  of the  transactions  contemplated  by the  Transaction  Documents
violates or would violate any written  agreement or  understanding  between such
lender and the Company,  and the Company shall promptly  furnish by facsimile to
the Purchasers a copy of any written statement in support of or relating to such
claim or notice.

         Section  4.11  Conversion  procedures.   Exhibit  "C"  sets  forth  all
procedures,  required  information  and  instructions  that are  required  to be
followed  in order to permit  holders of Shares to  smoothly  and  expeditiously
exercise their rights to convert Shares and which are not specifically set forth
in the  Certificate  of  Designation,  including the form of legal  opinion,  if
necessary,  that shall be rendered to the Company's transfer agent to effect the
delivery of  Underlying  Shares in  compliance  with the terms hereof and of the
Certificate  of  Designation.  If the Company  changes its transfer agent at any
time prior to the  conversion of all of the Shares held by the  Purchasers,  the
Company shall deliver any transfer agent  instructions  contained in Exhibit "C"
to such  replacement  transfer  agent and cause  such  transfer  agent to comply
therewith.

         Section 4.12  Conversion and Exercise  Obligations of the Company.  The
Company  shall  honor  conversions  of the Shares and shall  deliver  Underlying
Shares upon such  conversions  and exercises in accordance  with the  respective
terms  and  conditions  and  time  periods  set  forth  in  the  Certificate  of
Designation.

         Section 4.13      Use of Proceeds.  The Company shall use the  proceeds
from the sale of the Shares to the Purchasers as follows: $2,650,000 for working
capital to pay operating expenses and $100,000 for fees and expenses incurred on
connection with the offering of the Shares.

         Section 4.14 Transfer of Intellectual  Property  Rights.  Except in the
ordinary  course of the Company's  business  consistent with past practice or in
connection  with  the  sale of all or  substantially  all of the  assets  of the
Company,  the Company  shall not  transfer,  sell or  otherwise  dispose of, any
Intellectual  Property  Rights,  or allow the  Intellectual  Property  Rights to
become subject to any Liens, or fail to renew such Intellectual  Property Rights
(if renewable and would otherwise expire).

         Section 4.15 Certain Conversion  Restrictions.  In no event (except (i)
with respect to an automatic  conversion of the  Preferred  Stock as provided in
Section  5(a)(ii) of the Certificate of  Designation,  (ii) if the Company is in
default of any of its obligations hereunder or any of the Transaction Documents,
as defined in Section 7 of the  Certificate of  Designation,  or (iii) except as
otherwise  set forth in the  Certificate  of  Designation)  shall any  Holder be
entitled  to  convert  any  Preferred  Stock  to the  extent  that,  after  such
conversion,  the sum of (1) the  number of shares of Common  Stock  beneficially
owned by such Holder and its  affiliates  (other than the shares of Common Stock
which may be deemed beneficially owned through the ownership of the


                                      -16-

<PAGE>



unconverted  portion of the  Preferred  Stock),  and (2) the number of shares of
Common Stock issuable upon the conversion of the Preferred Stock with respect to
which  the  determination  of this  proviso  is  being  made,  would  result  in
beneficial  ownership by the Holder and its affiliates of more than 4.99% of the
outstanding  shares of Common Stock.  For purposes of the immediately  preceding
sentence,  beneficial  ownership  shall be determined in accordance with section
13(d) of the Securities  Exchange Act of 1934, as amended (the "Exchange  Act"),
except as otherwise  provided in clause (1) of the  preceding  sentence.  To the
extent  that  the   limitation   contained  in  this  paragraph   applies,   the
determination  of whether shares of Preferred Stock are convertible (in relation
to other  securities  owned by a Holder) and of which shares of Preferred  Stock
are  convertible  shall  be in the  sole  discretion  of  the  Holder,  and  the
submission of shares of Preferred Stock for conversion shall be deemed to be the
Holder's determination of whether such shares of Preferred Stock are convertible
(in relation to other  securities  owned by the Holder) and of which  portion of
such shares of  Preferred  Stock are  convertible,  in each case subject to such
aggregate  percentage  limitation,  and the Company  shall have no obligation to
verify or confirm the accuracy of such determination.  Nothing contained in this
paragraph  shall be deemed to restrict the right of the Holder to convert shares
of  Preferred  Stock  at such  time as such  conversion  will  not  violate  the
provisions of this paragraph. The provisions of this paragraph will not apply to
any conversion  pursuant to Section 5 (a)(ii) of the Certificate of Designation,
and may be  waived  by a Holder  (but  only as to  itself  and not to any  other
Holder)  upon not less than 75 days prior  notice to the Company (in which case,
the Holder shall make such filings with the Commission, including under Rule 13D
or 13G, as are required by applicable  law),  and the provisions of this Section
shall  continue to apply until such 75th day (or later,  if stated in the notice
of waiver). Other Holders shall be unaffected by any such waiver.

         Section 4.16 Mandatory  Redemption.  If, at any time the Company denies
the right of a holder of Series F Preferred to effect a conversion of its shares
of Series F Preferred  into Common Stock or  otherwise  dishonors or rejects any
Conversion  Notice  delivered in accordance  with the terms of this Agreement or
the Certificate of Designations,  except in circumstances  where (i) the Company
has obtained an order from a court having  jurisdiction  over the holder,  which
order  expressly  allows the Company to deny  conversion or dishonor or reject a
conversion  notice,  and  (ii)  such  holder  has  received  notice  of  and  an
opportunity  to oppose any motion of the Company  seeking such order,  then such
holder shall have the right,  by written  notice to the Company,  to require the
Company to promptly redeem the holder's outstanding shares of Series F Preferred
for cash at the Mandatory  Redemption  Amount.  The Mandatory  Redemption Amount
will be payable to such holder in cash within  five (5)  business  days from the
date such holder  gives the Company  written  notice that it is  exercising  its
rights under this paragraph.

         Section 4.17 Restrictions.  Subject to the completeness and accuracy of
the Buyer's  representations  and warranties herein and provided that all of the
qualifications and requirements of Regulation S under the Securities Act of 1933
("Regulation  S") are met,  upon the  conversion  of any Series F Preferred by a
person  who is  not a U.S.  Person  as  defined  in  Regulation  S (a  "non-U.S.
Person"),  the  Company  shall,  at  its  expense,  take  all  necessary  action
(including  the issuance of an opinion of counsel) to assure that the  Company's
transfer agent shall issue stock certificates without restrictive legend or stop
orders, other than as required for compliance with applicable statutes and laws,
including but not limited to  securities  laws, in the name of the Buyer (or its
nominee (being a non-U.S. Person) or such non-U.S. Persons as may be designated


                                      -17-

<PAGE>



by  the  Buyer)  and  in  such  denominations  to  be  specified  at  conversion
representing the number of shares of Common Stock issuable upon such conversion,
as  applicable.  The Company  warrants  that no  instructions  (other than these
instructions  or  instructions  to  impose a "stop  transfer"  instruction  with
respect to the Series F Preferred  until the end of the Restricted  Period) have
been or will be given to the  transfer  agent  and that the  Shares  will not be
subject to any  transfer  limitations  other than  those  imposed by  applicable
securities laws.

                                   ARTICLE V.
                             CONDITIONS; TERMINATION

         Section 5.1  Conditions Precedent.

                  (a)  Conditions  Precedent to the Obligation of the Company to
Sell the Shares. The obligation of the Company to sell the Shares hereunder to a
Purchaser is subject to the satisfaction or waiver by the Company,  at or before
the Closing, of each of the following conditions:

                           (1)  Accuracy of the Purchasers' Representations and
Warranties.  The  representations and warranties of the Purchasers 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; and

                           (2)  Performance  by the  Purchasers.  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 it at or prior to the Closing.

                  (b)  Conditions  Precedent to the Obligation of the Purchasers
to Purchase the Shares.  The obligation of the Purchasers to acquire and pay for
the Shares to be  acquired by it  hereunder  is subject to the  satisfaction  or
waiver by the  Purchasers,  at or before the Closing,  of each of the  following
conditions:

                           (1)  Accuracy of the Company's Representations and
Warranties.  The  representations and warranties of the Company set forth herein
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;

                           (2)  Performance  by the Company.  The Company  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 Company at or prior to the Closing;

                           (3)  No Prohibitions.  The purchase of and payment
for the Shares to be purchased by the Purchasers (and upon  conversion  thereof,
the  Underlying  Shares)  hereunder  (i) shall  not be  prohibited  or  enjoined
(temporarily or  permanently)  by any applicable law or governmental  regulation
and (ii) shall not subject the  Purchasers  to any penalty,  or in its judgment,
other onerous condition under or pursuant to any applicable law or governmental


                                      -18-

<PAGE>



regulation  that would  materially  reduce the benefits to the Purchasers of the
purchase of the Shares or the Underlying  Shares (provided,  however,  that such
regulation,  law or onerous condition was not in effect in such form at the date
of this Agreement);

                           (4)  Adverse Changes.  No event or series of events
which,  individually  or in the  aggregate,  could  have or result in a Material
Adverse Effect shall have occurred  between the date of execution hereof and the
Closing;

                           (5)  No Suspensions of Trading in Common Stock.
Trading in the Common  Stock shall not have been  suspended  from trading on the
Nasdaq SmallCap Market or any subsequent  exchange,  market, or trading facility
at any time between the date hereof and the Closing;

                           (6)      Listing of Common Stock.  The Common Stock
shall have at all times between the date hereof and the Closing Date been listed
for trading on the Nasdaq SmallCap Market or the OTC Bulletin Board;

                           (7)      Reserved.

                           (8)  Required Approvals.  All Required Approvals
shall have been obtained; and

                           (9)  Certificate of  Designation.  The Certificate of
Designation  shall have been duly filed with the Secretary of State of Delaware,
and the Company shall have delivered a copy thereof to the Purchasers  certified
as filed by the office of the Secretary of State of Delaware.

         Section 5.2 Termination.

                  (a)  Termination  by Mutual  Consent.  This  Agreement and the
transactions  contemplated hereby may be terminated at any time prior to Closing
by the mutual consent of the Company and the Purchasers.

                  (b)  Termination  by  the  Company  or  the  Purchasers.  This
Agreement  and  the  transactions   contemplated  hereby  with  respect  to  the
Purchasers  may be  terminated  prior to Closing  by either  the  Company or the
Purchasers, by giving written notice of such termination to the other party, if:

                           (1) there shall be in effect any statute,  rule,  law
         or regulation  that  prohibits the  consummation  of the Closing or the
         transaction  contemplated  by  the  Transaction  Documents  or  if  the
         consummation of the Closing Documents would violate any  non-appealable
         final judgment,  order, decree, ruling or injunction of any court of or
         governmental authority having competent jurisdiction; or

                           (2) there shall have been an amendment to  Regulation
         D  promulgated  under the  Securities  Act or an  interpretive  release
         promulgated or issued thereunder,


                                      -19-

<PAGE>



         which, in the judgment of the terminating  party,  could have or result
         in a Material Adverse Effect.

                  (c)  Termination  by  the  Company.  This  Agreement  and  the
transactions  contemplated  hereby may be terminated  prior to Closing as to the
Purchasers by the Company,  by giving written notice of such  termination to the
Purchasers,  if the  Purchasers  have  breached  in  any  material  respect  any
representation,  warranty,  covenant or agreement  contained in any  Transaction
Document and such breach is not cured within five (5)  Business  Days  following
receipt by the Purchasers of notice of such breach.

                  (d)  Termination  by the  Purchasers.  This  Agreement and the
transactions contemplated hereby may be terminated as to the Purchasers prior to
Closing by the Purchasers,  by giving written notice of such  termination to the
Company, if:

                           (1) the Company has breached in any material respects
         any  representation,  warranty,  covenant or agreement contained in any
         Transaction  Document  and such  breach  is not  cured  within  one (1)
         Business Day following receipt by the Company of notice of such breach;

                           (2) there has  occurred  an event or series of events
         which,  individually  or in the  aggregate,  could  have or result in a
         Material  Adverse Effect which is not disclosed fully in the Disclosure
         Materials;

                           (3) trading in the Common Stock has been suspended or
         the  Common  Stock  has  failed  to be listed  for  trading  on the OTC
         Bulletin  Board  or on any  subsequent  exchange,  market,  or  trading
         facility.


                                   ARTICLE VI.
                                  MISCELLANEOUS

         Section  6.1 Fees  and  Expenses.  Each  party  shall  pay the fees and
expenses of its advisers,  counsel,  accountants and other experts,  if any, and
all  other  expenses  incurred  by  such  party  incident  to  the  negotiation,
preparation,  execution, delivery and performance of this Agreement. The Company
shall pay all stamp and other  taxes and duties  levied in  connection  with the
issuance of the Shares pursuant hereto.  The Purchasers shall be responsible for
their own  respective tax liability that may arise as a result of the investment
hereunder or the transactions contemplated by this Agreement.

         Section 6.2 Entire Agreement;  Amendments, Exhibits and Schedules. This
Agreement,  together with the Exhibits and Schedules hereto, and the Certificate
of Designation  contain the entire  understanding of the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
oral or written,  with respect to such  matters.  The Exhibits and  Schedules to
this  Agreement  are hereby  incorporated  herein and made a part hereof for all
purposes as if fully set forth herein.



                                      -20-

<PAGE>



         Section 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 (i) the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  telephone  number  specified in this Section prior to 5:00 p.m. (Salt
Lake City  time) on a  Business  Day,  (ii) the  Business  Day after the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  telephone number specified in the Purchase  Agreement later than 5:00
p.m.  (Salt Lake City time) on any date and earlier  than 11:59 p.m.  (Salt Lake
City time) on such date,  (iii) the Business Day  following the date of mailing,
if sent by nationally  recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is  required  to be given.  The address
for such notices and communications shall be as follows:

         If to the Company:                      Fonix Corporation
                                                 60 East South Temple Street
                                                 Suite 1225
                                                 Salt Lake City, Utah  84111
                                                 Facsimile No.:  (801) 328-8778
                                                 Attn: Roger D. Dudley,
                                                 Executive Vice President

         With copies to:                         Durham Jones & Pinegar, P.C.
                                                 Suite 800 Key Bank Tower
                                                 50 South Main Street
                                                 Salt Lake City, Utah  84144
                                                 Facsimile No.: (801) 538-2425
                                                 Attn: Jeffrey M. Jones, Esq.

         If to Dominion, Sovereign,              Dominion Capital Fund, Ltd.
         Canadian Advantage,                     Sovereign Partners, LP
         Dominion Investment, or                 Canadian Advantage, LP
         Queen:                                  Dominion Investment Fund, LLC
                                                 Queen LLC
                                                 c/o Thomson Kernaghan & Co.
                                                 365 Bay Street
                                                 Toronto, Canada
                                                 Fax (416) 860-3610
                                                 Attention: ______________

         With copies to:                         Krieger & Prager
                                                 39 Broadway, Suite 1440
                                                 New York, New York  10006
                                                 Fax: (212) 363-2999
                                                 Attn.  Samuel M. Krieger, Esq.

or such other  address as may be designated  in writing  hereafter,  in the same
manner, by such Person.



                                      -21-

<PAGE>



         Section 6.4 Amendments;  Waivers. No provision of this Agreement may be
waived  or  amended  except in a written  instrument  signed,  in the case of an
amendment, by both the Company and the Purchasers,  or, in the case of a waiver,
by the party  against whom  enforcement  of any such waiver is sought,  provided
however  that  Section  6.7 and to the extent it  affects  such  sections,  this
Section 6.4 may not be waived or amended  without the prior  written  consent of
any party  identified  therein as a third  party  beneficiary.  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 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 accruing to it thereafter.

         Section 6.5 Headings.  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.

         Section 6.6  Successors and Assigns.  This  Agreement  shall be binding
upon and inure to the benefit of the parties and their  successors and permitted
assigns,  including  any Persons to whom the  Purchasers  transfer  Shares.  The
assignment by a party of this Agreement or any rights hereunder shall not affect
the obligations of such party under this Agreement.

         Section 6.7 No  Third-Party  Beneficiaries.  This Agreement is intended
for the benefit of the parties hereto and their respective  permitted successors
and assigns and,  other than with respect to permitted  assignees  under Section
6.6, is not for the benefit of, nor may any provision hereof be enforced by, any
other Person.

         Section 6.8 Governing Law;  Venue.  This Agreement shall be governed by
and construed and enforced in accordance  with the internal laws of the State of
Delaware  without  regard  to  the  principles  of  conflicts  of  law  thereof.
Additionally,  any action  arising out of the  interpretation  of or performance
under this  Agreement  by either  party shall be brought in a court of competent
jurisdiction in the State of Delaware.

         Section 6.9       Survival. The representations, warranties, agreements
and covenants  contained in this Agreement shall survive the Closing and the and
conversion of the Shares.

         Section 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  parties,  it being  understood  that all
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) the same with the same force and effect as if such facsimile signature
page were an original thereof.

         Section 6.11  Publicity.  The Company and the Purchasers  shall consult
with each  other in  issuing  any press  releases  or  otherwise  making  public
statements  with respect to the  transactions  contemplated  hereby and no party
shall issue any such press release or otherwise  make any such public  statement
without the prior written consent of the other party, which consent shall not be
unreasonably withheld or delayed, except that no prior consent shall be


                                      -22-

<PAGE>



required  if such  disclosure  is  required  by law,  in  which  such  case  the
disclosing  party shall  provide  the other  parties  with prior  notice of such
public statement.  Notwithstanding the foregoing, the Company shall not publicly
disclose the name of the  Purchasers  without the prior  written  consent of the
Purchasers,  except to the extent  required  by law,  in which case the  Company
shall  provide  the  Purchasers   with  prior  written  notice  of  such  public
disclosure.

         Section 6.12 Severability. In case any one or more of the provisions of
this Agreement shall 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  which  shall  be a  reasonable
substitute  therefor,  and upon so agreeing,  shall  incorporate such substitute
provision in this Agreement.

         Section  6.13   Remedies.   Each  of  the  parties  to  this  Agreement
acknowledges  and agrees that the other parties would be damaged  irreparably in
the  event  any of the  provisions  of  this  Agreement  are  not  performed  in
accordance  with their  specific  terms or otherwise are breached.  Accordingly,
each of the parties hereto agrees that the other parties shall be entitled to an
injunction  or  injunctions  to  prevent  breaches  of the  provisions  of  this
Agreement  and  to  enforce  specifically  this  Agreement  and  the  terms  and
provisions of this Agreement in any action instituted in any court of the United
States of America or any state thereof having  jurisdiction  over the parties to
this Agreement and the matter, in addition to any other remedy to which they may
be entitled, at law or in equity.

         Section 6.14 Rights in Bankruptcy. The holder of any shares of Series F
Preferred shall be entitled to exercise its conversion privilege with respect to
the Series F Preferred  notwithstanding  the  commencement  of any case under 11
U.S.C.  section 101 et seq. (the "Bankruptcy Code"). In the event the Company is
a debtor under the Bankruptcy  Code,  the Company hereby waives,  to the fullest
extent permitted,  any rights to relief it may have under 11 U.S.C.  section 362
in respect of the conversion of the Series F Preferred.

         Section 6.15 Information. The Company will authorize its transfer agent
to give  information  relating to the Company  directly to the Purchasers or the
Purchasers'  representatives  upon the  request  of the  Purchasers  or any such
representative,  to the  extent  such  information  relates to (i) the status of
shares of Common  Stock  issued or  claimed  to be issued to the  Purchasers  in
connection with a Notice of Conversion, or (ii) the number of outstanding shares
of Common Stock of all stockholders as of a current or other specified date. The
Company will provide the Purchasers with a copy of the authorization so given to
the transfer agent.

                            [SIGNATURE PAGES FOLLOW]



                                      -23-

<PAGE>



                  IN WITNESS WHEREOF, the parties hereto have caused this Series
F Convertible  Preferred Stock Purchase  Agreement to be duly executed as of the
date first indicated above.

FONIX CORPORATION                       DOMINION CAPITAL FUND, LTD



By: /s/ Roger D. Dudley                 By: /s/ David K. Sims
Name:                                   Name: David K. Sims
Title:                                  Title: Director




                                        SOVEREIGN PARTNERS, LP



                                        By: /s/ [Signature illegible]
                                        Name:
                                        Title:

                                        CANADIAN ADVANTAGE, LP



                                        By: /s/ M. McKinnon
                                        Name: M. McKinnon
                                        Title:

                                        DOMINION INVESTMENT FUND, LLC



                                        By: /s/ [Signature illegible]
                                        Name: Navigator Management, Ltd.
                                        Title: Director

                                        QUEEN LLC



                                        By: /s/ [Signature illegible]
                                        Name: Navigator Management, Ltd.
                                        Title: Director


                                      -24-

<PAGE>



                                 SCHEDULE 3.1(a)

                                  SUBSIDIARIES


1.   fonix systems corporation, a Utah corporation, wholly owned by the Company.

2.   fonix/AcuVoice, Inc., a Utah corporation, wholly owned by the Company.

3.   ASI  Acquisition  Corporation,  a Utah  corporation,  wholly  owned  by the
     Company.

4.   Papyrus Acquisition  Corporation,  a Utah corporation,  wholly owned by the
     Company.




                                      -25-

<PAGE>



                                 SCHEDULE 3.1(c)

                                 CAPITALIZATION

The Company has an authorized capitalization consisting of 300,000,000 shares of
Common  Stock,  par value $.0001 per share,  and  5,000,000  shares of Preferred
Stock,  par value  $.0001 per  shares.  As of the date  hereof,  the Company has
issued and outstanding  139,102,720 shares of Common Stock.  3,325,000 shares of
Common  Stock are  subject  to  issuance  upon the  conversion  or  exercise  of
presently issued and outstanding warrants and options of the Company. 16,698,233
shares of Common Stock are reserved for issuance  under the  Company's  existing
stock option plans.  166,667 shares of Series A Preferred Stock have been issued
and 166,667 shares are  outstanding,  which shares are convertible  into 166,667
shares of Common  Stock.  310,000  shares of Series D 4%  Convertible  Preferred
Stock are issued and  outstanding,  which are convertible  into shares of Common
Stock  according to a formula that is  determined,  in part, by reference to the
prevailing  market price of the Series D Preferred  Stock.  Assuming that all of
the issued and outstanding  shares of Series D Preferred were to be converted as
of February 1, 2000,  the Company  would issue a total of  25,871,936  shares of
Common Stock, including shares issued as accrued dividends.  Except as set forth
above,  as of the date of this  Agreement,  there  are no  outstanding  options,
warrants,  rights  to  subscribe  to,  calls  or  commitments  of any  character
whatsoever  relating to, or,  except as a result of the purchase and sale of the
Shares, securities,  rights or obligations convertible into or exchangeable for,
or giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts,  commitments,  understandings, or arrangements by which the
Company or any Subsidiary is or may become bound to issue  additional  shares of
Common Stock or securities or rights  convertible or exchangeable into shares of
Common Stock, except as disclosed herein.

5% Beneficial Owners

The Company is aware of the  following  persons or groups who  beneficially  own
more than 5% of the Company's issued and outstanding Common Stock:

         Stephen M. Studdert
         Thomas A. Murdock
         Roger D. Dudley
         Beesmark Investments, L.C.





                                      -26-

<PAGE>


                                   APPENDIX A

Investor                                        Shares Received

Sovereign Partners, LP                                 71,275

Dominion Capital Fund, Ltd                             64,543

Canadian Advantage, L.P.                               11,325

Dominion Investment Fund LLC                            5,357

Queen LLC                                             137,500




                                      -27-