SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of July 29, 2008 between Sionix Corporation, a Nevada corporation
      (the
“Company”),
      and
      each purchaser identified on the signature pages hereto (each, including its
      successors and assigns, a “Purchaser”
and
      collectively the “Purchasers”).

     

    WHEREAS,
      subject to the terms and conditions set forth in this Agreement and pursuant
      to
      Sections 4(2) and 4(6) of the Securities Act of 1933, as amended (the
“Securities
      Act”),
      and
      Rule 506 promulgated thereunder, the Company desires to issue and sell to each
      Purchaser, and each Purchaser, severally and not jointly, desires to purchase
      from the Company, securities of the Company as more fully described in this
      Agreement.

     

    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 each Purchaser agree as
      follows:

     

    ARTICLE
      I

    DEFINITIONS

     

    1.1
      Definitions. 
      In addition to the terms defined elsewhere in this Agreement: (a) capitalized
      terms that are not otherwise defined herein have the meanings given to such
      terms in the Debentures (as defined herein), and (b) the following terms have
      the meanings set forth in this Section 1.1:

     

    “Action”
shall
      have the meaning ascribed to such term in Section 3.1(j).

     

    “Affiliate”
means
      any Person that, directly or indirectly through one or more intermediaries,
      controls or is controlled by or is under common control with a Person, as such
      terms are used in and construed under Rule 405 under the Securities
      Act. 

     

    “Board
      of Directors”
means
      the board of directors of the Company.

     

    “Business
      Day”
means
      any day except any Saturday, any Sunday, any day which is a federal legal
      holiday in the United States or any day on which banking institutions in the
      State of New York are authorized or required by law or other governmental action
      to close.

     

    “Closing”
means
      the closing of the purchase and sale of the Securities pursuant to Section
      2.1.

     

    “Closing
      Date”
means
      the Trading Day when all of the Transaction Documents have been executed and
      delivered by the applicable parties thereto, and all conditions precedent to
      (i)
      the Purchasers’ obligations to pay the Subscription Amount and (ii) the
      Company’s obligations to deliver the Securities have been satisfied or
      waived.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    “Commission”
means
      the Securities and Exchange Commission.

     

    “Common
      Stock”
means
      the common stock of the Company, par value $.001 per share, and any other class
      of securities into which such securities may hereafter be reclassified or
      changed into.

     

    “Common
      Stock Equivalents”
means
      any securities of the Company or the Subsidiaries 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 exercisable or exchangeable for, or otherwise
      entitles the holder thereof to receive, Common Stock.

     

    “Company
      Counsel”
means
      Richardson & Patel LLP, 405 Lexington Avenue, 26th
      Floor,
      New York, NY 10174.

     

    “Consent
      and Waiver”
shall
      have the meaning ascribed to such term in Section 3.1(e).

     

    “Conversion
      Price”
shall
      have the meaning ascribed to such term in the Debentures.

     

    “Debentures”
means
      the 12% Convertible Debentures due, subject to the terms therein, 12 months
      from
      their date of issuance, issued by the Company to the Purchasers hereunder,
      in
      the form of Exhibit
      A
      attached
      hereto.

     

    “Disclosure
      Schedules”
shall
      have the meaning ascribed to such term in Section 3.1.

     

    “Escrow
      Agent”
means
      Capital One Bank.

     

    “Escrow
      Agreement”
means
      the Escrow Agreement in the form attached hereto as Exhibit B.

     

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

     

    “Exempt
      Issuance”
means
      the issuance of (a) shares of Common Stock or options to employees, officers,
      directors or consultants of the Company duly approved by the Company’s Board of
      Directors, including the vote for such purpose by a majority of any non-employee
      members of the Board of Directors or a majority of any non-employee members
      of a
      committee of directors established for such purpose, (b) securities upon the
      exercise, redemption or exchange of or conversion of any Securities issued
      hereunder and/or other securities exercisable or exchangeable for or convertible
      into shares of Common Stock issued and outstanding on the date of this
      Agreement, provided that such securities have not been amended since the date
      of
      this Agreement to increase the number of such securities or to decrease the
      exercise, exchange or conversion price of such securities, and (c) securities
      issued pursuant to acquisitions or strategic transactions approved by a majority
      of the disinterested directors of the Company, provided that any such issuance
      shall only be to a Person which is, itself or through its subsidiaries, an
      operating company in a business synergistic with the business of the Company
      and
      in which the Company receives benefits in addition to the investment of funds,
      but shall not include a transaction in which the Company is issuing securities
      primarily for the purpose of raising capital or to an entity whose primary
      business is investing in securities.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    “GAAP”
shall
      have the meaning ascribed to such term in Section 3.1(h).

     

    “Indebtedness”
shall
      have the meaning ascribed to such term in Section 3.1(aa).

     

    “Intellectual
      Property Rights”
shall
      have the meaning ascribed to such term in Section 3.1(o).

     

    “Legend
      Removal Date”
shall
      have the meaning ascribed to such term in Section 4.1(c).

     

    “Liens”
means
      a
      lien, charge, security interest, encumbrance, right of first refusal, preemptive
      right or other restriction.

     

    “Material
      Adverse Effect”
shall
      have the meaning assigned to such term in Section 3.1(b).

     

    “Material
      Permits”
shall
      have the meaning ascribed to such term in Section 3.1(m).

     

    “Maximum
      Rate”
shall
      have the meaning ascribed to such term in Section 5.17.

     

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

     

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

     

    “Purchaser
      Party”
shall
      have the meaning ascribed to such term in Section 4.10.

     

    “Required
      Approvals”
shall
      have the meaning ascribed to such term in Section 3.1(e).

     

    “Required
      Minimum”
means,
      as of any date, the maximum aggregate number of shares of Common Stock then
      issued or potentially issuable in the future pursuant to the Transaction
      Documents, including any Underlying Shares issuable upon exercise or conversion
      in full of all Warrants and Debentures, ignoring any conversion or exercise
      limits set forth therein, and assuming that the Conversion Price is at all
      times
      on and after the date of determination 75% of the then Conversion Price on
      the
      Trading Day immediately prior to the date of determination.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    “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”
shall
      have the meaning ascribed to such term in Section 3.1(h).

     

    “Securities”
means
      the Debentures, the Warrants, and the Underlying Shares.

     

    “Securities
      Act”
means
      the Securities Act of 1933, as amended, and the rules and regulations
      promulgated thereunder.

     

    “Short
      Sales”
means
      all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange
      Act (but shall not be deemed to include the location and/or reservation of
      borrowable shares of Common Stock). 

     

    “Subscription
      Amount”
means,
      as to each Purchaser, the aggregate amount to be paid for Debentures and
      Warrants purchased hereunder as specified below such Purchaser’s name on the
      signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds.

     

    “Subsidiary”
means
      any subsidiary of the Company as set forth on Schedule
      3.1(a)
      and
      shall, where applicable, include any direct or indirect subsidiary of the
      Company formed or acquired after the date hereof.

     

    “Trading
      Day”
means
      a
      day on which the New York Stock Exchange is open for trading.

     

    “Trading
      Market”
means
      the following markets or exchanges on which the Common Stock is listed or quoted
      for trading on the date in question: the American Stock Exchange, the Nasdaq
      Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market,
      the
      New York Stock Exchange or the OTC Bulletin Board.

     

    “Transaction
      Documents”
means
      this Agreement, the Debentures, the Warrants, all exhibits and schedules thereto
      and hereto and any other documents or agreements executed in connection with
      the
      transactions contemplated hereunder.

     

    “Transfer
      Agent”
means
      American Registrar and Transfer Co., the current transfer agent of the Company
      with a mailing address of P.O. Box 1798, Salt Lake City, Utah 84110, and any
      successor transfer agent of the Company.

     

    “Underlying
      Shares”
means
      the shares of Common Stock issued and issuable upon conversion or redemption
      of
      the Debentures and upon exercise of the Warrants.

     

    “Variable
      Rate Transaction”
shall
      have the meaning ascribed to such term in Section 4.13(b).


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    “VWAP”
means,
      for any date, the price determined by the first of the following clauses that
      applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
      the daily volume weighted average price of the Common Stock for such date (or
      the nearest preceding date) on the Trading Market on which the Common Stock
      is
      then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day
      from
      9:30 a.m. New York City time to 4:02 p.m. New York City time); (b)  if the
      OTC Bulletin Board is not a Trading Market, the volume weighted average price
      of
      the Common Stock for such date (or the nearest preceding date) on the OTC
      Bulletin Board; (c) if the Common Stock is not then listed or quoted on the
      OTC
      Bulletin Board and if prices for the Common Stock are then reported in the
“Pink
      Sheets” published by Pink Sheets, LLC (or a similar organization or agency
      succeeding to its functions of reporting prices), the most recent bid price
      per
      share of the Common Stock so reported; or (d) in all other cases, the fair
      market value of a share of Common Stock as determined by an independent
      appraiser selected in good faith by the Purchasers of a majority in interest
      of
      the Securities then outstanding and reasonably acceptable to the Company, the
      fees and expenses of which shall be paid by the Company.

     

    “Warrants”
means,
      collectively, the Common Stock purchase warrants delivered to the Purchasers
      at
      the Closing in accordance with Section 2.2(a) hereof, which Warrants shall
      be
      exercisable immediately and have a term of exercise equal to 5 years, in the
      form of Exhibit
      C
      attached
      hereto.

     

    “Warrant
      Shares”
means
      the shares of Common Stock issuable upon exercise of the Warrants.

     

    ARTICLE
      II

    PURCHASE
      AND SALE

     

    2.1
      Closing. 
      On the Closing Date, upon the terms and subject to the conditions set forth
      herein, substantially concurrent with the execution and delivery of this
      Agreement by the parties hereto, the Company agrees to sell, and the Purchasers,
      severally and not jointly, agree to purchase, a minimum of $750,000 and a
      maximum of $2,000,000 in principal amount of the Debentures.  Each
      Purchaser shall deliver to the Escrow Agent pursuant to the Escrow Agreement,
      via wire transfer or a certified check, immediately available funds equal to
      its
      Subscription Amount and at the Closing the Company shall deliver to each
      Purchaser its respective Debenture and a Warrant, as determined pursuant to
      Section 2.2(a), and the Company and each Purchaser shall deliver the other
      items
      set forth in Section 2.2 deliverable at the Closing.  Upon satisfaction of
      the conditions set forth in Sections 2.3, the Closing shall occur at the offices
      of Company Counsel or such other location as the parties shall mutually
      agree.

     

    2.2
      Deliveries.

     

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


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    (i)     
       this
      Agreement duly executed by the Company; and

     

    (ii) a
      Debenture with a principal amount equal to such Purchaser’s Subscription Amount,
      registered in the name of such Purchaser; and

     

    (iii)    
      a Warrant registered in the name of such Purchaser to purchase up to a number
      of
      shares of Common Stock equal to 100% of such Purchaser’s Subscription Amount,
      with an exercise price equal to $0.30, subject to adjustment
      therein.

     

    (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; and

     

    (ii)
       such
      Purchaser’s Subscription Amount by wire transfer to the account as specified in
      writing by the Company.

     

    2.3
      Closing
      Conditions.

     

    (a)     
      The obligations of the Company hereunder in connection with the Closing are
      subject to the following conditions being met:

     

    (i)
      the
      accuracy in all material respects on the Closing Date of the representations
      and
      warranties of the Purchasers contained herein;

     

    (ii)
      all
      obligations, covenants and agreements of each Purchaser required to be performed
      at or prior to the Closing Date shall have been performed; and

     

    (iii)
      the
      delivery by each Purchaser of the items set forth in Section 2.2 (b) of this
      Agreement.

     

    (b)     
      The respective obligations of the Purchasers hereunder in connection with the
      Closing are subject to the following conditions being met:

     

    (i)
      the
      accuracy in all material respects when made and on the Closing Date of the
      representations and warranties of the Company contained herein;

     

    (ii)
      all
      obligations, covenants and agreements of the Company required to be performed
      at
      or prior to the Closing Date in connection with this Agreement shall have been
      performed;

     

    (iii)
      the
      delivery by the Company of the items set forth in Section 2.2(a) of this
      Agreement;


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    (iv)
      there shall have been no Material Adverse Effect with respect to the Company
      since the date hereof, other than as disclosed herein, in the Disclosure
      Schedules or in the SEC Reports; and

     

    (v)
      from
      the date hereof to the Closing Date, trading in the Common Stock shall not
      have
      been suspended by the Commission  or the Company’s principal Trading Market
      (except for any suspension of trading of limited duration agreed to by the
      Company, which suspension shall be terminated prior to the Closing), and, at
      any
      time prior to the Closing Date, trading in securities generally as reported
      by
      Bloomberg L.P. shall not have been suspended or limited, or minimum prices
      shall
      not have been established on securities whose trades are reported by such
      service, or on any Trading Market, nor shall a banking moratorium have been
      declared either by the United States or New York State authorities nor shall
      there have occurred any material outbreak or escalation of hostilities or other
      national or international calamity of such magnitude in its effect on, or any
      material adverse change in, any financial market which, in each case, in the
      reasonable judgment of each Purchaser, makes it impracticable or inadvisable
      to
      purchase the Securities at the Closing.

     

    ARTICLE
      III

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1.
      Representations
      and Warranties of the Company. 
      Except as set forth in the SEC Reports or as set forth in the Disclosure
      Schedules, which Disclosure Schedules shall be deemed a part hereof and shall
      qualify any representation or otherwise made herein to the extent of the
      disclosure contained in the corresponding section of the Disclosure Schedules,
      the Company hereby makes the following representations and warranties to each
      Purchaser:

     

    (a)
      Subsidiaries. 
      The Company owns, directly or indirectly, all of the capital stock or other
      equity interests of each Subsidiary free and clear of any Liens, and all of
      the
      issued and outstanding shares of capital stock of each Subsidiary are validly
      issued and are fully paid, non-assessable and free of preemptive and similar
      rights to subscribe for or purchase securities.  If the Company has no
      subsidiaries, all other references to the Subsidiaries or any of them in the
      Transaction Documents shall be disregarded.

     

    (b)
      Organization
      and Qualification. 
      The Company and each of the Subsidiaries 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 and use its properties and assets and
      to
      carry on its business as currently conducted.  Neither the Company nor any
      Subsidiary is in violation or default 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 Subsidiaries 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, except
      where the failure to be so qualified or in good standing, as the case may be,
      could not have or reasonably be expected to result in (i) a material adverse
      effect on the legality, validity or enforceability of any Transaction Document,
      (ii) a material adverse effect on the results of operations, assets, business,
      prospects or condition (financial or otherwise) of the Company and the
      Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
      Company’s ability to perform in any material respect on a timely basis its
      obligations under any Transaction Document (any of (i), (ii) or (iii), a
“Material
      Adverse Effect”)
      and no
      Proceeding has been instituted in any such jurisdiction revoking, limiting
      or
      curtailing or seeking to revoke, limit or curtail such power and authority
      or
      qualification.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    (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
      and otherwise to carry out its obligations hereunder and thereunder.  The
      execution and delivery of each of the Transaction Documents by the Company
      and
      the consummation by it of the transactions contemplated hereby and thereby
      have
      been duly authorized by all necessary action on the part of the Company and
      no
      further action is required by the Company, the Board of Directors or the
      Company’s stockholders in connection therewith other than in connection with the
      Required Approvals.  Each Transaction Document has been (or upon delivery
      will have been) duly executed by the Company and, when delivered in accordance
      with the terms hereof and thereof, will constitute the valid and binding
      obligation of the Company enforceable against the Company in accordance with
      its
      terms, except (i) as limited by general equitable principles and applicable
      bankruptcy, insolvency, reorganization, moratorium and other laws of general
      application affecting enforcement of creditors’ rights generally, (ii) as
      limited by laws relating to the availability of specific performance, injunctive
      relief or other equitable remedies and (iii) insofar as indemnification and
      contribution provisions may be limited by applicable law.

     

    (d)
      No
      Conflicts. 
      The execution, delivery and performance of the Transaction Documents by the
      Company and the consummation by the Company of the other transactions
      contemplated hereby and thereby do not and will not: (i) conflict with or
      violate any provision of the Company’s or any Subsidiary’s certificate or
      articles of incorporation, bylaws or other organizational or charter documents,
      or (ii) conflict with, or constitute a default (or an event that with notice
      or
      lapse of time or both would become a default) under, result in the creation
      of
      any Lien upon any of the properties or assets of the Company or any Subsidiary,
      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 any Subsidiary
      is a party or by which any property or asset of the Company or any Subsidiary
      is
      bound or affected, or (iii) subject to the Required Approvals, conflict with
      or
      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 a Subsidiary is subject (including federal and state securities
      laws
      and regulations), or by which any property or asset of the Company or a
      Subsidiary is bound or affected; except in the case of each of clauses (ii)
      and
      (iii), such as could not have or reasonably be expected to result in 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) filings required pursuant to Section
      4.6,
      (ii) the notice and/or application(s) to each applicable Trading Market for
      the
      issuance and sale of the Securities and the listing of the Underlying Shares
      for
      trading thereon in the time and manner required thereby and (iii) the filing
      of
      Form D with the Commission and such filings as are required to be made under
      applicable state securities laws (collectively, the “Required
      Approvals”).

     

    (f)
      Issuance
      of the Securities. 
      The Securities are duly authorized and, when issued and paid for in accordance
      with the applicable Transaction Documents, will be duly and validly issued,
      fully paid and nonassessable, free and clear of all Liens imposed by the Company
      other than restrictions on transfer provided for in the Transaction
      Documents.  The Underlying Shares, when issued in accordance with the terms
      of the Transaction Documents, will be validly issued, fully paid and
      nonassessable, free and clear of all Liens imposed by the Company other than
      restrictions on transfer provided for in the Transaction Documents.
      Notwithstanding the foregoing, each Purchaser acknowledges that the Company
      does
      not have a sufficient number of authorized shares of Common Stock for issuance
      of the Underlying Shares. 

     

    (g)
      Capitalization. 
      The capitalization of the Company is as set forth on Schedule
      3.1(g),
      which
Schedule
      3.1(g)
      shall
      also include the number of shares of Common Stock owned beneficially, and of
      record, by Affiliates of the Company as of the date hereof. Except as set forth
      on Schedule
      3.1(g),
      the
      Company has not issued any capital stock since its most recently filed periodic
      report under the Exchange Act, other than pursuant to the exercise of employee
      stock options under the Company’s stock option plans, the issuance of shares of
      Common Stock to employees pursuant to the Company’s employee stock purchase
      plans and pursuant to the conversion or exercise of Common Stock Equivalents
      outstanding as of the date of the most recently filed periodic report under
      the
      Exchange Act.  Except as set forth on Schedule
      3.1(g)
      and as a
      result of the purchase and sale of the Securities, there are no outstanding
      options, warrants, scrip rights to subscribe to, calls or commitments of any
      character whatsoever relating to, or securities, rights or obligations
      convertible into or exercisable 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
      Common Stock Equivalents. 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 Company securities to adjust the exercise, conversion, exchange or reset
      price under any of such securities. All of the outstanding shares of capital
      stock of the Company are validly issued, fully paid and nonassessable, have
      been
      issued in compliance with all federal and state securities laws, and none of
      such outstanding shares was issued in violation of any preemptive rights or
      similar rights to subscribe for or purchase securities.  No further
      approval or authorization of any stockholder, the Board of Directors or others
      is required for the issuance and sale of the Securities.  There are no
      stockholders agreements, voting agreements or other similar agreements with
      respect to the Company’s capital stock to which the Company is a party or, to
      the knowledge of the Company, between or among any of the Company’s
      stockholders.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    (h)
      SEC
      Reports. 
      The Company has filed all reports, schedules, forms, statements and other
      documents required to be filed by the Company under the Securities Act and
      the
      Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the
      two
      years preceding the date hereof (or such shorter period as the Company was
      required by law or regulation to file such material) (the foregoing materials,
      including the exhibits thereto and documents incorporated by reference therein,
      being collectively referred to herein as the “SEC
      Reports”).

     

    (i)
      Material
      Changes. 
      Since the date of the latest audited financial statements included within the
      SEC Reports, except as specifically disclosed in a subsequent SEC Report filed
      prior to the date hereof, (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, (ii) the Company has not incurred any liabilities (contingent
      or
      otherwise) other than (A) trade payables and accrued expenses 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 disclosed in filings made with the Commission, (iii) the Company has
      not
      altered its method of accounting, (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 and (v) except as disclosed on Schedule 3.1(i)(v), the Company
      has not issued any equity securities to any officer, director or Affiliate,
      except pursuant to existing Company stock option plans. The Company does not
      have pending before the Commission any request for confidential treatment of
      information.  Except for the issuance of the Securities contemplated by
      this Agreement or as set forth on Schedule
      3.1(i),
      no
      event, liability or development has occurred or exists with respect to the
      Company or its Subsidiaries or their respective business, properties, operations
      or financial condition, that would be required to be disclosed by the Company
      under applicable securities laws at the time this representation is made or
      deemed made that has not been publicly disclosed.

     

    (j)
      Litigation. 
      Except as disclosed on Schedule 3.1(j), there is no action, suit, inquiry,
      notice of violation, proceeding or investigation pending or, to the knowledge
      of
      the Company, threatened against or affecting the Company, any Subsidiary or
      any
      of their respective properties before or by any court, arbitrator, governmental
      or administrative agency or regulatory authority (federal, state, county, local
      or foreign) (collectively, an “Action”)
      which
      (i) adversely affects or challenges the legality, validity or enforceability
      of
      any of the Transaction Documents or the Securities or (ii) could, if there
      were
      an unfavorable decision, have or reasonably be expected to result in a Material
      Adverse Effect.  Neither the Company nor any Subsidiary, nor any director
      or officer thereof, is or has been the subject of any Action involving a claim
      of violation of or liability under federal or state securities laws or a claim
      of breach of fiduciary duty.  There has not been, and to the knowledge of
      the Company, there is not pending or contemplated, any investigation by the
      Commission involving the Company or any current or former director or officer
      of
      the Company.  The Commission has not issued any stop order or other order
      suspending the effectiveness of any registration statement filed by the Company
      or any Subsidiary under the Exchange Act or the Securities
      Act. 


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    (k)
      Labor
      Relations. 
      No material labor dispute exists or, to the knowledge of the Company, is
      imminent with respect to any of the employees of the Company which could
      reasonably be expected to result in a Material Adverse Effect.  None of the
      Company’s or its Subsidiaries’ employees is a member of a union that relates to
      such employee’s relationship with the Company or such Subsidiary, and neither
      the Company nor any of its Subsidiaries is a party to a collective bargaining
      agreement, and the Company and its Subsidiaries believe that their relationships
      with their employees are good. Except as set forth on Schedule 3.1(k), the
      Company and its Subsidiaries are in compliance with all U.S. federal, state,
      local and foreign laws and regulations relating to employment and employment
      practices, terms and conditions of employment and wages and hours, except where
      the failure to be in compliance could not, individually or in the aggregate,
      reasonably be expected to have a Material Adverse Effect.

     

    (l)
      [Intentionally Omitted] 

     

    (m)
      Regulatory
      Permits. 
      The Company and the Subsidiaries possess all certificates, authorizations and
      permits issued by the appropriate 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 could not
      reasonably be expected to result in a Material Adverse Effect (“Material
      Permits”),
      and
      neither the Company nor any Subsidiary has received any notice of proceedings
      relating to the revocation or modification of any Material Permit.

     

    (n)
      Title
      to Assets. 
      The Company and the Subsidiaries have good and marketable title in fee simple
      to
      all real property owned by them and good and marketable title in all personal
      property owned by them that is material to the business of the Company and
      the
      Subsidiaries, in each case free and clear of all Liens, except for Liens as
      do
      not materially affect the value of such property and do not materially interfere
      with the use made and proposed to be made of such property by the Company and
      the Subsidiaries and Liens for the payment of federal, state or other taxes,
      the
      payment of which is neither delinquent nor subject to penalties.  Any real
      property and facilities held under lease by the Company and the Subsidiaries
      are
      held by them under valid, subsisting and enforceable leases with which the
      Company and the Subsidiaries are in compliance.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    (o)
      Patents
      and Trademarks. 
      The Company and the Subsidiaries have, or have rights to use, all patents,
      patent applications, trademarks, trademark applications, service marks, trade
      names, trade secrets, inventions, copyrights, licenses and other intellectual
      property rights and similar rights necessary or material for use in connection
      with their respective businesses as described in the SEC Reports and which
      the
      failure to so have could have a Material Adverse Effect (collectively, the
      “Intellectual
      Property Rights”). 
      Neither the Company nor any Subsidiary has received a notice (written or
      otherwise) that any of the Intellectual Property Rights used by the Company
      or
      any Subsidiary violates or infringes upon the rights of any Person. To the
      knowledge of the Company, all such Intellectual Property Rights are enforceable
      and there is no existing infringement by another Person of any of the
      Intellectual Property Rights.  The Company and its Subsidiaries have taken
      reasonable security measures to protect the secrecy, confidentiality and value
      of all of their intellectual properties, except where failure to do so could
      not, individually or in the aggregate, reasonably be expected to have a Material
      Adverse Effect.

     

    (p)
      Insurance.  The Company and the Subsidiaries 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 in which the Company
      and
      the Subsidiaries are engaged, including, but not limited to, directors and
      officers insurance coverage at least equal to the aggregate Subscription
      Amount.  Neither the Company nor any Subsidiary has any reason to believe
      that it will not be able to renew its existing insurance coverage 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.

     

    (q)
      Transactions
      with Affiliates and Employees. 
      Except as set forth in the SEC Reports, none of the officers or directors of
      the
      Company and, to the knowledge of the Company, none of the employees of the
      Company is presently a party to any transaction with the Company or any
      Subsidiary (other than for services as employees, officers and directors),
      including any contract, agreement or other arrangement providing for the
      furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any officer,
      director or such employee or, to the knowledge of the Company, any entity in
      which any officer, director, or any such employee has a substantial interest
      or
      is an officer, director, trustee or partner, in each case in excess of $100,000
      other than for (i) payment of salary or consulting fees for services rendered,
      (ii) reimbursement for expenses incurred on behalf of the Company and (iii)
      other employee benefits, including stock option agreements under any stock
      option plan of the Company.

     

    (r)
      [Intentionally Omitted]  

     

    (s)
      Certain
      Fees. 
      Except as set forth on Schedule
      3.1(s),
      no
      brokerage or finder’s fees or commissions are or will be payable by the Company
      to any broker, financial advisor or consultant, finder, placement agent,
      investment banker, bank or other Person with respect to the transactions
      contemplated by the Transaction Documents.  The Purchasers shall have no
      obligation with respect to any 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 by the Transaction
      Documents. 


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    (t)
      Private
      Placement. 
      Assuming the accuracy of the Purchasers’ representations and warranties set
      forth in Section 3.2, no registration under the Securities Act is required
      for
      the offer and sale of the Securities by the Company to the Purchasers as
      contemplated hereby. The issuance and sale of the Securities hereunder does
      not
      contravene the rules and regulations of the Trading Market.

     

    (u)
      Investment
      Company.
      The
      Company is not, and is not an Affiliate of, and immediately after receipt of
      payment for the Securities, will not be or be an Affiliate of, an “investment
      company” within the meaning of the Investment Company Act of 1940, as
      amended.  The Company shall conduct its business in a manner so that it
      will not become subject to the Investment Company Act of 1940, as
      amended.

     

    (v)
      Registration
      Rights. 
      No Person has any right to cause the Company to effect the registration under
      the Securities Act of any securities of the Company except on Form
      S-8. 

     

    (w)
      Listing
      and Maintenance Requirements. 
      The Common Stock is registered pursuant to Section 12(b) or 12(g) 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.  Except as disclosed on Schedule 3.1(w), the Company has not,
      in the 12 months preceding the date hereof, received notice 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 of such Trading Market. The Company is, and has no reason to
      believe that it will not in the foreseeable future continue to be, in compliance
      with all such listing and maintenance requirements.

     

    (x)
      Application
      of Takeover Protections. 
      The Company and the Board of Directors have taken all necessary action, if
      any,
      in order to render inapplicable any control share acquisition, business
      combination, poison pill (including any distribution under a rights agreement)
      or other similar anti-takeover provision under the Company’s certificate of
      incorporation (or similar charter documents) or the laws of its state of
      incorporation that is or could become applicable to 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
      as a
      result of the Company’s issuance of the Securities and the Purchasers’ ownership
      of the Securities.

     

    (y)
      Disclosure. 
      Except with respect to the material terms and conditions of the transactions
      contemplated by the Transaction Documents, the Company confirms that neither
      it
      nor any other Person acting on its behalf has provided any of the Purchasers
      or
      their agents or counsel with any information that it believes constitutes or
      might constitute material, nonpublic information.  The Company understands
      and confirms that the Purchasers will rely on the foregoing representation
      in
      effecting transactions in securities of the Company.  All disclosure
      furnished by or on behalf of the Company to the Purchasers regarding the
      Company, its business and the transactions contemplated hereby, including the
      Disclosure Schedules to this Agreement, is true and correct and does 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.   The press
      releases disseminated by the Company during the twelve months preceding the
      date
      of this Agreement taken as a whole do not contain any untrue statement of a
      material fact or omit 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 and when made, not misleading.  The Company
      acknowledges and agrees that no Purchaser makes or has made any representations
      or warranties with respect to the transactions contemplated hereby other than
      those specifically set forth in Section 3.2 hereof.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    (z)
      No
      Integrated Offering.
      Assuming the accuracy of the Purchasers’ representations and warranties set
      forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any
      Person acting on its or their behalf has, directly or indirectly, made any
      offers or sales of any security or solicited any offers to buy any security,
      under circumstances that would cause this offering of the Securities to be
      integrated with prior offerings by the Company for purposes of (i) the
      Securities Act which would require the registration of any such securities
      under
      the Securities Act, or (ii) any applicable shareholder approval provisions
      of
      any Trading Market on which any of the securities of the Company are listed
      or
      designated.

     

    (aa)
      Indebtedness. 
      The Company does not intend to incur debts beyond its ability to pay such debts
      as they mature (taking into account the timing and amounts of cash to be payable
      on or in respect of its debt).  The Company has no knowledge of any facts
      or circumstances which lead it to believe that it will file for reorganization
      or liquidation under the bankruptcy or reorganization laws of any jurisdiction
      within one year from the Closing Date.  Schedule
      3.1(aa)
      sets
      forth as of the date hereof all outstanding secured and unsecured Indebtedness
      of the Company or any Subsidiary, or for which the Company or any Subsidiary
      has
      commitments.  For the purposes of this Agreement, “Indebtedness”
means
      (a) any liabilities for borrowed money or amounts owed in excess of $100,000
      (other than trade accounts payable incurred in the ordinary course of business),
      (b) all guaranties, endorsements and other contingent obligations in respect
      of
      indebtedness of others, whether or not the same are or should be reflected
      in
      the Company’s balance sheet (or the notes thereto), except guaranties by
      endorsement of negotiable instruments for deposit or collection or similar
      transactions in the ordinary course of business; and (c) the present value
      of
      any lease payments in excess of $50,000 due under leases required to be
      capitalized in accordance with GAAP.  Neither the Company nor any
      Subsidiary is in default with respect to any Indebtedness.

     

    (bb)
      Tax
      Status.
      Except
      for matters that would not, individually or in the aggregate, have or reasonably
      be expected to result in a Material Adverse Effect, or as disclosed on
Schedule
      3.1(bb),
      the
      Company and each Subsidiary has filed all necessary federal, state and foreign
      income and franchise tax returns and has paid or accrued all taxes shown as
      due
      thereon, and the Company has no knowledge of a tax deficiency which has been
      asserted or threatened against the Company or any Subsidiary.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    (cc)
      No
      General Solicitation.
      Neither
      the Company nor any person acting on behalf of the Company has offered or sold
      any of the Securities by any form of general solicitation or general
      advertising.  The Company has offered the Securities for sale only to the
      Purchasers and certain other “accredited investors” within the meaning of Rule
      501 under the Securities Act.

     

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

     

    (ee)
      Accountants. 
      The Company’s accounting firm is set forth on Schedule
      3.1(ee)
      of the
      Disclosure Schedule.  To the knowledge and belief of the Company, such
      accounting firm (i) is a registered public accounting firm as required by the
      Exchange Act and (ii) shall express its opinion with respect to the financial
      statements to be included in the Company’s Annual Report on Form 10-K (or
      10-KSB) for the year ending September 30, 2008.

     

    (ff)
      Seniority. 
      As of the Closing Date, except as set forth on Schedule
      3.1(ff),
      no
      Indebtedness or other claim against the Company is senior to the Debentures
      in
      right of payment, whether with respect to interest or upon liquidation or
      dissolution, or otherwise, other than indebtedness secured by purchase money
      security interests (which is senior only as to underlying assets covered
      thereby) and capital lease obligations (which is senior only as to the property
      covered thereby).

     

    (gg)
      [Intentionally Omitted]

     

    (hh)
      Acknowledgment
      Regarding Purchasers’ Purchase of Securities. 
      The Company acknowledges and agrees that each of the Purchasers is acting solely
      in the capacity of an arm’s length purchaser with respect to the Transaction
      Documents and the transactions contemplated thereby.  The Company further
      acknowledges that no Purchaser is acting as a financial advisor or fiduciary
      of
      the Company (or in any similar capacity) with respect to the Transaction
      Documents and the transactions contemplated thereby and any advice given by
      any
      Purchaser or any of their respective representatives or agents in connection
      with the Transaction Documents and the transactions contemplated thereby is
      merely incidental to the Purchasers’ purchase of the Securities.  The
      Company further represents to each Purchaser that the Company’s decision to
      enter into this Agreement and the other Transaction Documents has been based
      solely on the independent evaluation of the transactions contemplated hereby
      by
      the Company and its representatives.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    (ii)
      Acknowledgment
      Regarding Purchasers’ Trading Activity. 
      Notwithstanding anything in this Agreement or elsewhere herein to the contrary
      (except for Sections 3.2(f) and 4.15 hereof), it is understood and acknowledged
      by the Company that (i) none of the Purchasers has been asked to agree by the
      Company, nor has any Purchaser agreed, to desist from purchasing or selling,
      long and/or short, securities of the Company, or “derivative” securities based
      on securities issued by the Company or to hold the Securities for any specified
      term, (ii) past or future open market or other transactions by any Purchaser,
      specifically including, without limitation, Short Sales or “derivative”
transactions, before or after the closing of this or future private placement
      transactions, may negatively impact the market price of the Company’s
      publicly-traded securities, (iii) any Purchaser, and counter-parties in
“derivative” transactions to which any such Purchaser is a party, directly or
      indirectly, may presently have a “short” position in the Common Stock, and (iv)
      each Purchaser shall not be deemed to have any affiliation with or control
      over
      any arm’s length counter-party in any “derivative” transaction.  The
      Company further understands and acknowledges that (a) one or more Purchasers
      may
      engage in hedging activities at various times during the period that the
      Securities are outstanding, including, without limitation, during the periods
      that the value of the Underlying Shares deliverable with respect to Securities
      are being determined and (b) such hedging activities (if any) could reduce
      the
      value of the existing stockholders’ equity interests in the Company at and after
      the time that the hedging activities are being conducted.  The Company
      acknowledges that such aforementioned hedging activities do not constitute
      a
      breach of any of the Transaction Documents.

     

    (jj)
      Regulation
      M Compliance. 
      The Company has not, and to its knowledge no one acting on its behalf has,
      (i)
      taken, directly or indirectly, any action designed to cause or to result in
      the
      stabilization or manipulation of the price of any security of the Company to
      facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
      purchased, or paid any compensation for soliciting purchases of, any of the
      securities of the Company or (iii) paid or agreed to pay to any Person any
      compensation for soliciting another to purchase any other securities of the
      Company, other than, in the case of clauses (ii) and (iii), compensation paid
      to
      the Company’s placement agent in connection with the placement of the
      Securities.

     

    3.2
      Representations
      and Warranties of the Purchasers.   
      Each Purchaser, for itself and for no other Purchaser hereby, represents and
      warrants as of the date hereof and as of the Closing Date to the Company as
      follows:

     

    (a)
      Organization;
      Authority. 
      Such Purchaser, if not a natural person, is an entity duly organized, validly
      existing and in good standing under the laws of the jurisdiction of its
      organization with full right, corporate or partnership power and authority
      to
      enter into and to consummate the transactions contemplated by the Transaction
      Documents and otherwise to carry out its obligations hereunder and thereunder.
      The execution and delivery of the Transaction Documents and performance by
      such
      Purchaser of the transactions contemplated by the Transaction Documents have
      been duly authorized by all necessary corporate or similar action on the part of
      such Purchaser.  Each Transaction Document to which it is a party has been
      duly executed by such Purchaser, and when delivered by such Purchaser in
      accordance with the terms hereof, will constitute the valid and legally binding
      obligation of such Purchaser, enforceable against it in accordance with its
      terms, except (i) as limited by general equitable principles and applicable
      bankruptcy, insolvency, reorganization, moratorium and other laws of general
      application affecting enforcement of creditors’ rights generally, (ii) as
      limited by laws relating to the availability of specific performance, injunctive
      relief or other equitable remedies and (iii) insofar as indemnification and
      contribution provisions may be limited by applicable law.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    (b)
      Own
      Account. 
      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 as principal for its own account
      and not with a view to or for distributing or reselling such Securities or
      any
      part thereof in violation of the Securities Act or any applicable state
      securities law, has no present intention of distributing any of such Securities
      in violation of the Securities Act or any applicable state securities law and
      has no direct or indirect arrangement or understandings with any other persons
      to distribute or regarding the distribution of such Securities (this
      representation and warranty not limiting such Purchaser’s right to sell the
      Securities pursuant to a registration statement or otherwise in compliance
      with
      applicable federal and state securities laws) in violation of the Securities
      Act
      or any applicable state securities law.  Such Purchaser is acquiring the
      Securities hereunder in the ordinary course of its business.

     

    (c)
      Purchaser
      Status. 
      At the time such Purchaser was offered the Securities, it was, and as of the
      date hereof it is, and on each date on which it exercises any Warrants or
      converts any Debentures it will be either: (i) an “accredited investor” as
      defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
      Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under
      the Securities Act.  Such Purchaser is not required to be registered as a
      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)
      General
      Solicitation. 
      Such Purchaser is not purchasing the Securities as a result of any
      advertisement, article, notice or other communication regarding the Securities
      published in any newspaper, magazine or similar media or broadcast over
      television or radio or presented at any seminar or any other general
      solicitation or general advertisement.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    (f)
      Short
      Sales and Confidentiality Prior To The Date Hereof. 
      Other than consummating the transactions contemplated hereunder, such Purchaser
      has not directly or indirectly, nor has any Person acting on behalf of or
      pursuant to any understanding with such Purchaser, executed any purchases or
      sales, including Short Sales, of the securities of the Company during the
      period commencing from the time that such Purchaser first received a term sheet
      (written or oral) from the Company or any other Person representing the Company
      setting forth the material terms of the transactions contemplated hereunder
      until the date hereof (“Discussion
      Time”). 
      Notwithstanding the foregoing, in the case of a Purchaser that is a
      multi-managed investment vehicle whereby separate portfolio managers manage
      separate portions of such Purchaser’s assets and the portfolio managers have no
      direct knowledge of the investment decisions made by the portfolio managers
      managing other portions of such Purchaser’s assets, the representation set forth
      above shall only apply with respect to the portion of assets managed by the
      portfolio manager that made the investment decision to purchase the Securities
      covered by this Agreement.  Other than to other Persons party to this
      Agreement, such Purchaser has maintained the confidentiality of all disclosures
      made to it in connection with this transaction (including the existence and
      terms of this transaction).

     

    (g) Acknowledgement
      of Pending Restatement of Financial Statements.
      Such
      Purchaser has reviewed Item 4.02 (Non-Reliance
      on Previously Issued Financial Statements or a Related Audit Report or Completed
      Interim Review) of (i) the
      Form
      8-K/A filed with the Commission by the Company on July 23, 2008 (Commission
      File/Film No. 002-95626-D/08965486), and (ii) the Form 8-K filed by the Company
      on July 29, 2008 (Commission File/Film No. 002-95626-D/08974982), which are
      available for review at www.sec.gov,
      and
      understands the contents thereof. Such Purchaser agrees that the restatements
      contemplated by such Form 8-K/A and Form 8-K, and the truth or accuracy of
      the
      initially filed financial statements to be restated, shall not be the subject
      or
      basis of any future claim by such Purchaser against the Company. 

    


     

    ARTICLE
      IV

    OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1
      Transfer
      Restrictions.

     

    (a)
      The
      Securities may only be disposed of in compliance with state and federal
      securities laws. In connection with any transfer of Securities other than
      pursuant to an effective registration statement or Rule 144, to the Company
      or
      to an Affiliate of a Purchaser or in connection with a pledge as contemplated
      in
      Section 4.1(b), the Company may require the transferor thereof to provide to
      the
      Company an opinion of counsel selected by the transferor and reasonably
      acceptable to the Company, the form and substance of which opinion shall be
      reasonably satisfactory to the Company, to the effect that such transfer does
      not require registration of such transferred Securities under the Securities
      Act. As a condition of transfer, any such transferee shall agree in writing
      to
      be bound by the terms of this Agreement and shall have the rights of a Purchaser
      under this Agreement.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    (b)
      The
      Purchasers agree to the imprinting, so long as is required by this Section
      4.1,
      of a legend on any of the Securities in the following form:

     

    [NEITHER]
      THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE]
      [CONVERTIBLE]] HAS [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 REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
      APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
      TO
      THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
      ACCEPTABLE TO THE COMPANY.  THIS SECURITY [AND THE SECURITIES ISSUABLE UPON
      [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH
      A
      BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
      SECURITIES.

     

    The
      Company acknowledges and agrees that a Purchaser may from time to time pledge
      pursuant to a bona fide margin agreement with a registered broker-dealer or
      grant a security interest in some or all of the Securities to a financial
      institution that is an “accredited investor” as defined in Rule 501(a) under the
      Securities Act and who agrees to be bound by the provisions of this Agreement
      and, if required under the terms of such arrangement, such Purchaser may
      transfer pledged or secured Securities to the pledgees or secured parties.
      Such
      a pledge or transfer would not be subject to approval of the Company and no
      legal opinion of legal counsel of the pledgee, secured party or pledgor shall
      be
      required in connection therewith. Further, no notice shall be required of such
      pledge. At the appropriate Purchaser’s expense, the Company will execute and
      deliver such reasonable documentation as a pledgee or secured party of
      Securities may reasonably request in connection with a pledge or transfer of
      the
      Securities.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    (c)
      Certificates evidencing the Underlying Shares shall not contain any legend
      (including the legend set forth in Section 4.1(b) hereof): (i) while a
      registration statement covering the resale of such security is effective under
      the Securities Act, (ii) following any sale of such Underlying Shares pursuant
      to Rule 144, (iii) if such Underlying Shares are eligible for sale under Rule
      144, without the requirement for the Company to be in compliance with the
      current public information required under Rule 144 as to such Underlying Shares
      and without volume or manner-of-sale restrictions or (iv) if such legend is
      not
      required under applicable requirements of the Securities Act (including judicial
      interpretations and pronouncements issued by the staff of the Commission).
      Upon
      the receipt of the documentation customary in connection with requests to remove
      legends, except as expressly provided in this Section 4.1, the Company shall
      cause its counsel to issue a legal opinion to the Transfer Agent promptly if
      required by the Transfer Agent to effect the removal of the legend hereunder.
      If
      all or any portion of a Debenture is converted at a time when there is an
      effective registration statement to cover the resale of the Underlying Shares,
      or if such Underlying Shares may be sold under Rule 144, without the requirement
      for the Company to be in compliance with the current public information required
      under Rule 144 as to such Underlying Shares and without volume or manner-of-sale
      restrictions or if such legend is not otherwise required under applicable
      requirements of the Securities Act (including judicial interpretations and
      pronouncements issued by the staff of the Commission) then such Underlying
      Shares shall be issued free of all legends. The Company agrees that at such
      time
      as such legend is no longer required under this Section 4.1(c), it will, no
      later than ten Trading Days following the delivery by a Purchaser to the Company
      or the Transfer Agent of a certificate representing Underlying Shares, as
      applicable, issued with a restrictive legend (such third Trading Day, the
“Legend
      Removal Date”),
      deliver or cause to be delivered to such Purchaser a certificate representing
      such shares 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 4.
      Certificates for Underlying Shares subject to legend removal hereunder shall
      be
      transmitted by the Transfer Agent to the Purchaser by crediting the account
      of
      the Purchaser’s prime broker with the Depository Trust Company System as
      directed by such Purchaser.

     

    (d)
      In
      addition to such Purchaser’s other available remedies, the Company shall pay to
      a Purchaser, in cash, as partial liquidated damages and not as a penalty, for
      each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on
      the
      date such Securities are submitted to the Transfer Agent) delivered for removal
      of the restrictive legend and subject to Section 4.1(c), $10 per Trading Day
      (increasing to $20 per Trading Day 10 Trading Days after such damages have
      begun
      to accrue (or the eighth day after the Legend Removal Date)) for each Trading
      Day after the Legend Removal Date until such certificate is delivered without
      a
      legend.  Nothing herein shall limit such Purchaser’s right to pursue actual
      damages for the Company’s failure to deliver certificates representing any
      Securities as required by the Transaction Documents, and such Purchaser shall
      have the right to pursue all remedies available to it at law or in equity
      including, without limitation, a decree of specific performance and/or
      injunctive relief.

     

    (e)
      Each
      Purchaser, severally and not jointly with the other Purchasers, agrees that
      such
      Purchaser will sell any Securities pursuant to either the registration
      requirements of the Securities Act, including any applicable prospectus delivery
      requirements, or an exemption therefrom, and that if Securities are sold
      pursuant to a registration statement, they will be sold in compliance with
      the
      plan of distribution set forth therein, and acknowledges that the removal of
      the
      restrictive legend from certificates representing Securities as set forth in
      this Section 4.1 is predicated upon the Company’s reliance upon this
      understanding.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    4.2
      Acknowledgment
      of Dilution. 
      The Company acknowledges that the issuance of the Securities 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 obligations under the Transaction Documents, including
      without limitation its obligation to issue the Underlying Shares pursuant to
      the
      Transaction Documents, are unconditional and absolute and not subject to any
      right of set off, counterclaim, delay or reduction, regardless of the effect
      of
      any such dilution or any claim the Company may have against any Purchaser and
      regardless of the dilutive effect that such issuance may have on the ownership
      of the other stockholders of the Company.

     

    4.3
      Furnishing
      of Information. 
      Until the earliest of the time that no Purchaser owns 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 even if the Company
      is not then subject to the reporting requirements of the Exchange
      Act.    As long as any Purchaser owns Securities, if the Company
      is not required to file reports pursuant to the Exchange Act, 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
      Securities under Rule 144.  The Company further covenants that it will take
      such further action as any holder of Securities may reasonably request, to
      the
      extent required from time to time to enable such Person to sell such Securities
      without registration under the Securities Act within the requirements of the
      exemption provided by Rule 144.

     

    4.4
      Integration. 
      The Company shall not 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 to the
      Purchasers in a manner that would require the registration under the Securities
      Act of the sale of the Securities to the Purchasers or that would be integrated
      with the offer or sale of the Securities for purposes of the rules and
      regulations of any Trading Market.

     

    4.5
      Conversion
      and Exercise Procedures. 
      The form of Notice of Exercise included in the Warrants and the form of Notice
      of Conversion included in the Debentures set forth the totality of the
      procedures required of the Purchasers in order to exercise the Warrants or
      convert the Debentures.  No additional legal opinion or other information
      or instructions shall be required of the Purchasers to exercise their Warrants
      or convert their Debentures.  The Company shall honor exercises of the
      Warrants and conversions of the Debentures and shall deliver Underlying Shares
      in accordance with the terms, conditions and time periods set forth in the
      Transaction Documents.

     

    4.6
      Securities
      Laws Disclosure; Publicity. 
      The Company shall, by 8:30 a.m. (New York City time) on the Trading Day
      following the date hereof, issue a Current Report on Form 8-K disclosing the
      material terms of the transactions contemplated hereby and attaching the
      Transaction Documents as exhibits thereto.  The Company and each Purchaser
      shall consult with each other in issuing any other press releases with respect
      to the transactions contemplated hereby, and neither the Company nor any
      Purchaser shall issue any such press release or otherwise make any such public
      statement without the prior consent of the Company, with respect to any press
      release of any Purchaser, or without the prior consent of each Purchaser, with
      respect to any press release of the Company, which consent shall not
      unreasonably be withheld or delayed, except if such disclosure is required
      by
      law, in which case the disclosing party shall promptly provide the other party
      with prior notice of such public statement or communication. 
Notwithstanding the foregoing, the Company shall not publicly disclose the
      name
      of any Purchaser, or include the name of any Purchaser in any filing with the
      Commission or any regulatory agency or Trading Market, without the prior written
      consent of such Purchaser, except: (a) as required by federal securities law
      in
      connection with the filing of final Transaction Documents (including signature
      pages thereto) with the Commission and (b) to the extent such disclosure is
      required by law or Trading Market regulations, in which case the Company shall
      provide the Purchasers with prior notice of such disclosure permitted under
      this
      clause (b).


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    4.7
      Shareholder
      Rights Plan. 
      No claim will be made or enforced by the Company or, with the consent of the
      Company, any other Person, that any Purchaser is an “Acquiring Person” under any
      control share acquisition, business combination, poison pill (including any
      distribution under a rights agreement) or similar anti-takeover plan or
      arrangement in effect or hereafter adopted by the Company, or that any Purchaser
      could be deemed to trigger the provisions of any such plan or arrangement,
      by
      virtue of receiving Securities under the Transaction Documents or under any
      other agreement between the Company and the Purchasers.

     

    4.8
      Non-Public
      Information. 
      Except with respect to the material terms and conditions of the transactions
      contemplated by the Transaction Documents, the Company covenants and agrees
      that
      neither it nor any other Person acting on its behalf will provide any Purchaser
      or its agents or counsel with any information that the Company believes
      constitutes material non-public 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 covenant in effecting transactions in
      securities of the Company.

     

    4.9
      [Intentionally Omitted]

     

    4.10
      Indemnification
      of Purchasers.  
      Subject to the provisions of this Section 4.10, the Company will indemnify
      and
      hold each Purchaser and its directors, officers, shareholders, members,
      partners, employees and agents (and any other Persons with a functionally
      equivalent role of a Person holding such titles notwithstanding a lack of such
      title or any other title), each Person who controls such Purchaser (within
      the
      meaning of Section 15 of the Securities Act and Section 20 of the Exchange
      Act),
      and the directors, officers, shareholders, agents, members, partners or
      employees (and any other Persons with a functionally equivalent role of a Person
      holding such titles notwithstanding a lack of such title or any other title)
      of
      such controlling person (each, a “Purchaser
      Party”)
      harmless from any and all:


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    (i) 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 that any such Purchaser Party may
      suffer or incur as a result of or relating to (a) any breach of any of the
      representations, warranties, covenants or agreements made by the Company in
      this
      Agreement or in the other Transaction Documents or (b) any action instituted
      against a Purchaser in any capacity, or any of them or their respective
      Affiliates, by any stockholder of the Company who is not an Affiliate of such
      Purchaser, with respect to any of the transactions contemplated by the
      Transaction Documents (unless such action is based upon a breach of such
      Purchaser’s representations, warranties or covenants under the Transaction
      Documents or any agreements or understandings such Purchaser may have with
      any
      such stockholder or any violations by the Purchaser of state or federal
      securities laws or any conduct by such Purchaser which constitutes fraud, gross
      negligence, willful misconduct or malfeasance).

     

    (ii) 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 that any such Purchaser may suffer or
      incur as a result of or relating to, or arising out of or based upon the failure
      of the Company to register shares other than those held by Purchaser or
      otherwise obtain the registration of any holder other than Purchaser whose
      consent is required to effectuate the Purchaser’s right hereunder to be
      registered prior to and to the exclusion of such holder(s) under any
      registration rights or other similar agreement existing prior to this
      Agreement.

     

    If
      any
      action shall be brought against any Purchaser Party in respect of which
      indemnity may be sought pursuant to this Agreement, such Purchaser Party shall
      promptly notify the Company in writing, and the Company shall have the right
      to
      assume the defense thereof with counsel of its own choosing reasonably
      acceptable to the Purchaser Party.  Any Purchaser Party shall have the
      right to employ separate counsel in any such action and participate in the
      defense thereof, but the fees and expenses of such counsel shall be at the
      expense of such Purchaser Party except to the extent that (i) the employment
      thereof has been specifically authorized by the Company in writing, (ii) the
      Company has failed after a reasonable period of time to assume such defense
      and
      to employ counsel or (iii) in such action there is, in the reasonable opinion
      of
      such separate counsel, a material conflict on any material issue between the
      position of the Company and the position of such Purchaser Party, in which
      case
      the Company shall be responsible for the reasonable fees and expenses of no
      more
      than one such separate counsel.  The Company will not be liable to any
      Purchaser Party under this Agreement (i) for any settlement by a Purchaser
      Party
      effected without the Company’s prior written consent, which shall not be
      unreasonably withheld or delayed; or (ii) to the extent, but only to the extent
      that a loss, claim, damage or liability is attributable to any Purchaser Party’s
      breach of any of the representations, warranties, covenants or agreements made
      by such Purchaser Party in this Agreement or in the other Transaction
      Documents.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    4.11
      Reservation
      and Listing of Securities.

     

    (a)
      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 then
      be
      required to fulfill its obligations in full under the Transaction Documents;
      provided,
      however,
      each
      Purchaser understands and agrees that, as of the Closing Date, the Company
      shall
      not have a sufficient number of authorized shares of Common Stock to fulfill
      such obligations. The Company shall use its best efforts to increase its
      authorized common stock to a number sufficient to fulfill such obligations
      as
      soon as legally and commercially practicable following the Closing
      Date.

     

    (b)
      If,
      on any date, the number of authorized but unissued (and otherwise unreserved)
      shares of Common Stock is less than the Required Minimum on such date, then
      the
      Board of Directors shall use commercially reasonable efforts to amend the
      Company’s certificate or articles of incorporation to increase the number of
      authorized but unissued shares of Common Stock to at least the Required Minimum
      at such time, as soon as possible and in any event not later than the 75th
      day
      after such date.

     

    (c)
      The
      Company shall, if applicable: (i) in the time and manner required by the
      principal Trading Market, prepare and file with such Trading Market an
      additional shares listing application covering a number of shares of Common
      Stock at least equal to the Required Minimum on the date of such application,
      (ii) take all steps necessary to cause such shares of Common Stock to be
      approved for listing on such Trading Market as soon as possible thereafter,
      (iii) provide to the Purchasers evidence of such listing and (iv) maintain
      the
      listing of such Common Stock on any date at least equal to the Required Minimum
      on such date on such Trading Market or another Trading Market.

     

    4.12
      Participation
      in Future Financing.

     

    (a)
      From
      the date hereof until the later of the 12 month anniversary of the Closing
      Date
      and the date that the Debentures are no longer outstanding, upon any issuance
      by
      the Company or any of its Subsidiaries of Common Stock, Common Stock
      Equivalents, Indebtedness (or a combination of units hereof) (a “Subsequent
      Financing”),
      each
      Purchaser shall have the right to participate in up to an amount of the
      Subsequent Financing equal to 100% of the Subsequent Financing (the
“Participation
      Maximum”)
      on the
      same terms, conditions and price provided for in the Subsequent
      Financing.

     

    (b)
      At
      least 10 Trading Days prior to the closing of the Subsequent Financing, the
      Company shall deliver to each Purchaser a written notice of its intention to
      effect a Subsequent Financing (“Pre-Notice”),
      which
      Pre-Notice shall ask such Purchaser if it wants to review the details of such
      financing (such additional notice, a “Subsequent Financing Notice”). Upon the
      request of a Purchaser, and only upon a request by such Purchaser, for a
      Subsequent Financing Notice, the Company shall promptly, but no later than
      3
      Trading Day after such request, deliver a Subsequent Financing Notice to such
      Purchaser. The Subsequent Financing Notice shall describe in reasonable detail
      the proposed terms of such Subsequent Financing, the amount of proceeds intended
      to be raised thereunder and the Person or Persons through or with whom such
      Subsequent Financing is proposed to be effected and shall include a term sheet
      or similar document relating thereto as an attachment. 


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    (c)
      Any
      Purchaser desiring to participate in such Subsequent Financing must provide
      written notice to the Company by not later than 5:30 p.m. (New York City time)
      on the 5th Trading Day after all of the Purchasers have received the Pre-Notice
      that the Purchaser is willing to participate in the Subsequent Financing, the
      amount of the Purchaser’s participation, and that the Purchaser has such funds
      ready, willing, and available for investment on the terms set forth in the
      Subsequent Financing Notice. If the Company receives no notice from a Purchaser
      as of such 5th Trading Day, such Purchaser shall be deemed to have notified
      the
      Company that it does not elect to participate. 

     

    (d)
      If by
      5:30 p.m. (New York City time) on the 5th Trading Day after all of the
      Purchasers have received the Pre-Notice, notifications by the Purchasers of
      their willingness to participate in the Subsequent Financing (or to cause their
      designees to participate) is, in the aggregate, less than the total amount
      of
      the Subsequent Financing, then the Company may effect the remaining portion
      of
      such Subsequent Financing on the terms and with the Persons set forth in the
      Subsequent Financing Notice. 

     

    (e)
      If by
      5:30 p.m. (New York City time) on the 5th Trading Day after all of the
      Purchasers have received the Pre-Notice, the Company receives responses to
      a
      Subsequent Financing Notice from Purchasers seeking to purchase more than the
      aggregate amount of the Participation Maximum, each such Purchaser shall have
      the right to purchase its Pro Rata Portion (as defined below) of the
      Participation Maximum. “Pro Rata Portion” means the ratio of (x) the
      Subscription Amount of Securities purchased on the Closing Date by a Purchaser
      participating under this Section 4.12 and (y) the sum of the aggregate
      Subscription Amounts of Securities purchased on the Closing Date by all
      Purchasers participating under this Section 4.12.

     

    (f)
      The
      Company must provide the Purchasers with a second Subsequent Financing Notice,
      and the Purchasers will again have the right of participation set forth above
      in
      this Section 4.12, if the Subsequent Financing subject to the initial Subsequent
      Financing Notice is not consummated for any reason on the terms set forth in
      such Subsequent Financing Notice within 30 Trading Days after the date of the
      initial Subsequent Financing Notice.

     

    (g)
      Notwithstanding the foregoing, this Section 4.12 shall not apply in respect
      of
      (i) an Exempt Issuance, or (ii) an underwritten public offering of Common Stock.
      

     

    4.13
      Subsequent
      Equity Sales. 

     

    (a)
      From
      the date hereof until such time as no Purchaser holds any of the Securities,
      the
      Company shall be prohibited from effecting or entering into an agreement to
      effect any Subsequent Financing involving a Variable Rate Transaction.
“Variable
      Rate Transaction”
means
      a
      transaction in which the Company issues or sells (i) any debt or equity
      securities that are convertible into, exchangeable or exercisable for, or
      include the right to receive additional shares of Common Stock either (A) at
      a
      conversion, exercise or exchange rate or other price that is based upon and/or
      varies with the trading prices of or quotations for the shares of Common Stock
      at any time after the initial issuance of such debt or equity securities, or
      (B)
      with a conversion, exercise or exchange price that is subject to being reset
      at
      some future date after the initial issuance of such debt or equity security
      or
      upon the occurrence of specified or contingent events directly or indirectly
      related to the business of the Company or the market for the Common Stock or
      (ii) enters into any agreement, including, but not limited to, an equity line
      of
      credit, whereby the Company may sell securities at a future determined
      price.   


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    (b)
      Notwithstanding the foregoing, this Section 4.13 shall not apply (i) in respect
      of an Exempt Issuance, except that no Variable Rate Transaction shall be an
      Exempt Issuance.

     

    4.14
      Equal
      Treatment of Purchasers. 
      No consideration (including any modification of any Transaction Document) shall
      be offered or paid to any Person to amend or consent to a waiver or modification
      of any provision of any of the Transaction Documents unless the same
      consideration is also offered to all of the parties to the Transaction
      Documents. Further, the Company shall not make any payment of principal or
      interest on the Debentures in amounts which are disproportionate to the
      respective principal amounts outstanding on the Debentures at any applicable
      time.  For clarification purposes, this provision constitutes a separate
      right granted to each Purchaser by the Company and negotiated separately by
      each
      Purchaser, and is intended for the Company to treat the Purchasers as a class
      and shall not in any way be construed as the Purchasers acting in concert or
      as
      a group with respect to the purchase, disposition or voting of Securities or
      otherwise.

     

    4.15
      Short
      Sales and Confidentiality After The Date Hereof.
      Each
      Purchaser, severally and not jointly with the other Purchasers, covenants that
      neither it nor any Affiliate acting on its behalf or pursuant to any
      understanding with it will execute any Short Sales during the period commencing
      at the Discussion Time and ending at the time that the transactions contemplated
      by this Agreement are first publicly announced as described in Section
      4.6.  Each Purchaser, severally and not jointly with the other Purchasers,
      covenants that until such time as the transactions contemplated by this
      Agreement are publicly disclosed by the Company as described in Section 4.6,
      such Purchaser will maintain the confidentiality of the existence and terms
      of
      this transaction and the information included in the Disclosure Schedules.
      Notwithstanding the foregoing, no Purchaser makes any representation, warranty
      or covenant hereby that it will not engage in Short Sales in the securities
      of
      the Company after the time that the transactions contemplated by this Agreement
      are first publicly announced as described in Section 4.6; provided, however,
      each Purchaser agrees, severally and not jointly with any other Purchasers,
      that
      they will not enter into any Net Short Sales (as hereinafter defined) from
      the
      period commencing on the Closing Date and ending on the date that is the earlier
      of (x) the 6 month anniversary of the Closing Date or (y) the date that such
      Purchaser no longer holds any Debentures.  For purposes of this
      Section 4.15, a “Net
      Short Sale”
by
      any
      Purchaser shall mean a sale of Common Stock by such Purchaser that is marked
      as
      a short sale and that is made at a time when there is no equivalent offsetting
      long position in Common Stock held by such Purchaser.  For purposes of
      determining whether there is an equivalent offsetting long position in Common
      Stock held by the Purchaser, Underlying Shares that have not yet been converted
      pursuant to the Debentures and Warrant Shares that have not yet been exercised
      pursuant to the Warrants shall be deemed to be held long by the Purchaser,
      and
      the amount of shares of Common Stock held in a long position shall be all
      unconverted Underlying Shares and unexercised Warrant Shares (ignoring any
      exercise limitations included therein) issuable to such Purchaser on such date,
      plus any shares of Common Stock or Common Stock Equivalents otherwise then
      held
      by such Purchaser.  Notwithstanding the foregoing, in the case of a
      Purchaser that is a multi-managed investment vehicle whereby separate portfolio
      managers manage separate portions of such Purchaser’s assets and the portfolio
      managers have no direct knowledge of the investment decisions made by the
      portfolio managers managing other portions of such Purchaser’s assets, the
      covenant set forth above shall only apply with respect to the portion of assets
      managed by the portfolio manager that made the investment decision to purchase
      the Securities covered by this Agreement.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    4.16
      Form
      D; Blue Sky Filings. 
      The Company agrees to timely file a Form D with respect to the Securities as
      required under Regulation D and to provide a copy thereof, promptly upon request
      of any Purchaser. The Company shall take such action as the Company shall
      reasonably determine is necessary in order to obtain an exemption for, or to
      qualify the Securities for, sale to the Purchasers at the Closing under
      applicable securities or “Blue Sky” laws of the states of the United States, and
      shall provide evidence of such actions promptly upon request of any
      Purchaser.

     

    4.17
      Capital
      Changes. 
      Until such time that the Debentures are no longer outstanding, the Company
      shall not undertake a reverse stock split of the Common Stock without the prior
      written consent of the Purchasers holding 60% of the principal amount
      outstanding of the Debentures.

     

    4.18
      Most
      Favored Nation Provision. 
      From the date hereof until such time that the Debentures are no longer
      outstanding, if the Company or any Subsidiary proposes to issue any Common
      Stock
      or Common Stock Equivalents (such an issuance, a “Subsequent
      Financing”),
      each
      Purchaser may elect, in its sole discretion, to exchange all or some of the
      Debentures then held by such Purchaser for any securities issued in a Subsequent
      Financing on a $1.00 for $1.00 basis based on the outstanding principal amount
      of such Debentures, along with any liquidated damages and other amounts owing
      thereon, and the effective price at which such securities are to be sold in
      such
      Subsequent Financing; provided,
      however,
      that
      this Section 4.18 shall not apply with respect to (i) an Exempt Issuance or
      (ii)
      an underwritten public offering of Common Stock. At least 10 Trading Days prior
      to the closing of any Subsequent Financing, the Company shall deliver to each
      Purchaser a written notice of its intention to effect a Subsequent Financing
      (“Pre-Notice”),
      which
      Pre-Notice shall ask such Purchaser if it wants to review the details of such
      financing (such additional notice, a “Subsequent
      Financing Notice”). 
      Upon the request of a Purchaser, and only upon a request by such Purchaser,
      for
      a Subsequent Financing Notice, the Company shall promptly, but no later than
      1
      Trading Day after such request, deliver a Subsequent Financing Notice to such
      Purchaser.  The Subsequent Financing Notice shall describe in reasonable
      detail the proposed terms of such Subsequent Financing, the amount of proceeds
      intended to be raised thereunder and the Person or Persons through or with
      whom
      such Subsequent Financing is proposed to be effected and shall include a term
      sheet or similar document relating thereto as an
      attachment.   Any Purchaser desiring to exercise its rights
      pursuant to this Section in respect of  such Subsequent Financing must
      provide written notice to the Company by not later than 5:30 p.m. (New York
      City
      time) on the 10th
      Trading
      Day after all of the Purchasers have received the Pre-Notice that the Purchaser
      desires to exercise its rights pursuant to this Section and the amount of
      Debentures as to which it desires to exercise such rights.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    4.19
      Public
      Information. 
      At any time during the period commencing from the six (6) month anniversary
      of
      the Closing Date and ending at such time that all of the Securities, may be
      sold
      without the requirement for the Company to be in compliance with Rule 144(c)(1)
      and otherwise without restriction or limitation pursuant to Rule 144, if the
      Company shall fail for any reason to satisfy the current public information
      requirement under Rule 144(c) (a “Public
      Information Failure”)
      then,
      in addition to such Purchaser’s other available remedies, the Company shall pay
      to a Purchaser, in cash, as partial liquidated damages and not as a penalty,
      by
      reason of any such delay in or reduction of its ability to sell the Securities,
      an amount in cash equal to two percent (2.0%) of the aggregate Subscription
      Amount of such Purchaser’s Securities on the day of a Public Information Failure
      and on every thirtieth (30th)
      day
      (pro rated for periods totaling less than thirty days) thereafter until the
      earlier of (a) the date such Public Information Failure is cured and (b) such
      time that such public information is no longer required  for the Purchasers
      to transfer the Underlying Shares pursuant to Rule 144.  The payments to
      which a Purchaser shall be entitled pursuant to this Section 4.19 are referred
      to herein as “Public
      Information Failure Payments.” 
      Public Information Failure Payments shall be paid on the earlier of (i) the
      last
      day of the calendar month during which such Public Information Failure Payments
      are incurred and (ii) the third (3rd)
      Business Day after the event or failure giving rise to the Public Information
      Failure Payments is cured. In the event the Company fails to make Public
      Information Failure Payments in a timely manner, such Public Information Failure
      Payments shall bear interest at the rate of 1.5% per month (prorated for partial
      months) until paid in full. Nothing herein shall limit such Purchaser’s right to
      pursue actual damages for the Public Information Failure, and such Purchaser
      shall have the right to pursue all remedies available to it at law or in equity
      including, without limitation, a decree of specific performance and/or
      injunctive relief.

     

    ARTICLE
      V

    MISCELLANEOUS

     

    5.1
      Termination. 
      This Agreement may be terminated by any Purchaser, as to such Purchaser’s
      obligations hereunder only and without any effect whatsoever on the obligations
      between the Company and the other Purchasers, by written notice to the other
      parties, if the Closing has not been consummated on or before August 1, 2008;
      provided,
      however,
      that
      such termination will not affect the right of any party to sue for any breach
      by
      the other party (or parties).


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    5.2
      Fees
      and Expenses. 
      At the Closing, the Company has agreed to reimburse Calico Capital Management,
      LLC (“Calico”)
      the
      non-accountable sum of $40,000 for its legal fees and expenses in connection
      with this transaction, none of which has been paid prior to the Closing. 
The Company shall deliver to each Purchaser, prior to the Closing, a completed
      and executed copy of the Closing Statement attached hereto as Annex
      A. 
      Except as expressly set forth in the Transaction Documents to the contrary,
      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 transfer agent fees, stamp taxes and
      other taxes and duties levied in connection with the delivery of any Securities
      to the Purchasers.

     

    5.3
      Entire
      Agreement. 
      The Transaction Documents, together with the exhibits and schedules thereto,
      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, which the parties acknowledge have been
      merged into such documents, exhibits and schedules.

     

    5.4
      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 at the facsimile number set forth
      on
      the signature pages attached hereto prior to 5:30 p.m. (New York City 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
      set
      forth on the signature pages attached hereto on a day that is not a Trading
      Day
      or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second
      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 for such notices and
      communications shall be as set forth on the signature pages attached
      hereto.

     

    5.5
      Amendments;
      Waivers. 
      No provision of this Agreement may be waived, modified, supplemented or amended
      except in a written instrument signed, in the case of an amendment, by the
      Company and the Purchasers of at least 60% in interest of the Securities still
      held by Purchasers or, in the case of a waiver, by the party against whom
      enforcement of any such waived provision 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 any party to exercise
      any
      right hereunder in any manner impair the exercise of any such
      right.

     

    5.6
      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.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    5.7
      Successors
      and Assigns.
       This Agreement shall be binding upon and inure to the benefit of the
      parties and their successors and permitted assigns.  The Company may not
      assign this Agreement or any rights or obligations hereunder without the prior
      written consent of each Purchaser (other than by merger).  Any Purchaser
      may assign any or all of its rights under this Agreement to any Person to whom
      such Purchaser assigns or transfers any Securities, provided that such
      transferee agrees in writing to be bound, with respect to the transferred
      Securities, by the provisions of the Transaction Documents that apply to the
      “Purchasers.”

     

    5.8
      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 as otherwise
      set forth in Section 4.10.

     

    5.9
      Governing
      Law. 
      All questions concerning the construction, validity, enforcement and
      interpretation of the Transaction Documents shall be governed by and construed
      and enforced in accordance with the internal laws of the State of New York,
      without regard to the principles of conflicts of law thereof.  Each party
      agrees that all legal proceedings concerning the interpretations, enforcement
      and defense of the transactions contemplated by this Agreement and any other
      Transaction Documents (whether brought against a party hereto or its respective
      affiliates, directors, officers, shareholders, employees or agents) shall be
      commenced exclusively in the state and federal courts sitting in the City of
      New
      York.  Each party hereby irrevocably submits to the exclusive jurisdiction
      of the state and federal courts sitting in the City of New York, borough of
      Manhattan for the adjudication of any dispute hereunder or in connection
      herewith or with any transaction contemplated hereby or discussed herein
      (including with respect to the enforcement of any of the Transaction Documents),
      and hereby irrevocably waives, and agrees not to assert in any suit, action
      or
      proceeding, any claim that it is not personally subject to the jurisdiction
      of
      any such court, that such suit, action or proceeding is improper or is an
      inconvenient venue for such proceeding.  Each party hereby irrevocably
      waives personal service of process and consents to process being served in
      any
      such suit, action or proceeding by mailing a copy thereof via registered or
      certified mail or overnight delivery (with evidence of delivery) to such party
      at the address in effect for notices to it under this Agreement and agrees
      that
      such service shall constitute good and sufficient service of process and notice
      thereof.  Nothing contained herein shall be deemed to limit in any way any
      right to serve process in any other manner permitted by law.   If
      either party shall commence an action or proceeding to enforce any provisions
      of
      the Transaction Documents, then the prevailing party in such action or
      proceeding shall be reimbursed by the other party for its reasonable attorneys’
fees and other costs and expenses incurred with the investigation, preparation
      and prosecution of such action or proceeding.

     

    5.10
      Survival. 
      The representations and warranties shall survive the Closing and the delivery
      of
      the Securities for the applicable statute of limitations.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    5.11
      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 or by e-mail delivery of a “.pdf” format data file, 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 or “.pdf” signature page were an original thereof.

     

    5.12
      Severability.
      If any
      term, provision, covenant or restriction of this Agreement is held by a court
      of
      competent jurisdiction to be invalid, illegal, void or unenforceable, the
      remainder of the terms, provisions, covenants and restrictions set forth herein
      shall remain in full force and effect and shall in no way be affected, impaired
      or invalidated, and the parties hereto shall use their commercially reasonable
      efforts to find and employ an alternative means to achieve the same or
      substantially the same result as that contemplated by such term, provision,
      covenant or restriction. It is hereby stipulated and declared to be the
      intention of the parties that they would have executed the remaining terms,
      provisions, covenants and restrictions without including any of such that may
      be
      hereafter declared invalid, illegal, void or unenforceable.

     

    5.13
      Rescission
      and Withdrawal Right. 
      Notwithstanding anything to the contrary contained in (and without limiting
      any
      similar provisions of) any of the other Transaction Documents, whenever any
      Purchaser exercises a right, election, demand or option under a Transaction
      Document and the Company does not timely perform its related obligations within
      the periods therein provided, then such Purchaser may rescind or withdraw,
      in
      its sole discretion from time to time upon written notice to the Company, any
      relevant notice, demand or election in whole or in part without prejudice to
      its
      future actions and rights; provided,
      however,
      in the
      case of a rescission of a conversion of a Debenture or exercise of a Warrant,
      the Purchaser shall be required to return any shares of Common Stock delivered
      in connection with any such rescinded conversion or exercise
      notice.

     

    5.14
      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 (in the case of mutilation),
      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.  The applicant for a new certificate or
      instrument under such circumstances shall also pay any reasonable third-party
      costs (including customary indemnity) associated with the issuance of such
      replacement Securities.

     

    5.15
      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 contained in the
      Transaction Documents and hereby agrees to waive and not to assert in any action
      for specific performance of any such obligation the defense that a remedy at
      law
      would be adequate. 


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    5.16
      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.

     

    5.17
      Usury. 
      To the extent it may lawfully do so, the Company hereby agrees not to insist
      upon or plead or in any manner whatsoever claim, and will resist any and all
      efforts to be compelled to take the benefit or advantage of, usury laws wherever
      enacted, now or at any time hereafter in force, in connection with any claim,
      action or proceeding that may be brought by any Purchaser in order to enforce
      any right or remedy under any Transaction Document.  Notwithstanding any
      provision to the contrary contained in any Transaction Document, it is expressly
      agreed and provided that the total liability of the Company under the
      Transaction Documents for payments in the nature of interest shall not exceed
      the maximum lawful rate authorized under applicable law (the “Maximum
      Rate”),
      and,
      without limiting the foregoing, in no event shall any rate of interest or
      default interest, or both of them, when aggregated with any other sums in the
      nature of interest that the Company may be obligated to pay under the
      Transaction Documents exceed such Maximum Rate.  It is agreed that if the
      maximum contract rate of interest allowed by law and applicable to the
      Transaction Documents is increased or decreased by statute or any official
      governmental action subsequent to the date hereof, the new maximum contract
      rate
      of interest allowed by law will be the Maximum Rate applicable to the
      Transaction Documents from the effective date forward, unless such application
      is precluded by applicable law.  If under any circumstances whatsoever,
      interest in excess of the Maximum Rate is paid by the Company to any Purchaser
      with respect to indebtedness evidenced by the Transaction Documents, such excess
      shall be applied by such Purchaser to the unpaid principal balance of any such
      indebtedness or be refunded to the Company, the manner of handling such excess
      to be at such Purchaser’s election.

     

    5.18
      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 or non-performance of the obligations
      of any other Purchaser under any Transaction Document.  Nothing contained
      herein or in any other 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 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.  Each Purchaser has been represented by
      its own separate legal counsel in their review and negotiation of the
      Transaction Documents.  


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    5.19
      Liquidated
      Damages. 
      The Company’s obligations to pay any partial liquidated damages or other amounts
      owing under the Transaction Documents is a continuing obligation of the Company
      and shall not terminate until all unpaid partial liquidated damages and other
      amounts have been paid notwithstanding the fact that the instrument or security
      pursuant to which such partial liquidated damages or other amounts are due
      and
      payable shall have been canceled.

     

    5.20
      Saturdays,
      Sundays, Holidays, etc.  If
      the last or appointed day for the taking of any action or the expiration of
      any
      right required or granted herein shall not be a Business Day, then such action
      may be taken or such right may be exercised on the next succeeding Business
      Day.

     

    5.21
      Construction.
      The
      parties agree that each of them and/or their respective counsel has reviewed
      and
      had an opportunity to revise the Transaction Documents and, therefore, the
      normal rule of construction to the effect that any ambiguities are to be
      resolved against the drafting party shall not be employed in the interpretation
      of the Transaction Documents or any amendments hereto.

     

    5.22
      Waiver
      of Jury Trial. 
      In any action, suit or proceeding in any jurisdiction brought by any party
      against any other party, the parties each knowingly and intentionally, to the
      greatest extent permitted by applicable law, hereby absolutely, unconditionally,
      irrevocably and expressly waives forever trial by jury.

     

    (Signature
      Pages Follow)


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    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.

    


    
      	
              SIONIX
                Corporation

            
	 	 
	
              By:

            	
               

            
	 	
              Name:
                Richard Papalian

            
	 	
              Title:
                CEO

            


    

    


    Address
      for Notice:

     

    SIONIX
      Corporation

    Airport
      Tower Plaza

    2082
      Michelson Drive Suite 304

    Irvine,
      CA 92612

    Attn:
      Richard Papalian, CEO

     

    With
      a
      copy to (which shall not constitute notice):

    


    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGE FOR PURCHASER
      FOLLOWS]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    [PURCHASER
      SIGNATURE PAGES TO SIONIX SECURITIES PURCHASE AGREEMENT]

     

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

     

    Name
      of
      Purchaser: ________________________

     

    Signature
      of Authorized Signatory of Purchaser:
      __________________________________

     

    Name
      of
      Authorized Signatory:
      ____________________________________________________

     

    Title
      of
      Authorized Signatory:
      _____________________________________________________

     

    Email
      Address of Purchaser:
      ________________________________________________

     

    Facsimile
      Number of Purchaser:
      ________________________________________________

     

    Address
      for Notice of Purchaser:

     

    Address
      for Delivery of Securities for Purchaser (if not same as address for
      notice):

     

    Subscription
      Amount: $

     

    Warrant
      Shares: 

     

    EIN
      Number:  [PROVIDE
      THIS UNDER SEPARATE COVER]

     

    [SIGNATURE
      PAGES CONTINUE]