Document:

Unassociated Document

     

    SECURITIES
      PURCHASE AGREEMENT

    

    SECURITIES
      PURCHASE AGREEMENT
      (the
“Agreement”),
      dated
      as of _____________, among SIONIX CORPORATION, a corporation organized under
      the
      laws of the State of Nevada (“Sionix”),
      and
[investors
      to be identified by Southridge Investment Group, LLC] (collectively,
      “Purchaser”).

    

    WHEREAS,
      Purchaser and Sionix are executing and delivering this Agreement in reliance
      upon the exemption from securities registration afforded by Section 4(2) of
      the
      Securities Act of 1933, as amended (the “1933
      Act”);

    

    WHEREAS,
      Purchaser desires to purchase, and Sionix desires to issue, upon the terms
      and
      conditions set forth in this Agreement, a subordinated debenture and a common
      stock warrant of Sionix in consideration for the payment by Purchaser to Sionix
      of $___________in
      cash;
      and

    

    NOW
      THEREFORE,
      in
      consideration of the premises and the mutual covenants contained herein and
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, the parties agree as follows:

     

    1. PURCHASE
      AND SALE OF SUBORDINATED DEBENTURE.

    

    a. Purchase
      of Subordinated Debenture.
      On the
      Closing Date (as defined below), Sionix shall issue and deliver to Purchaser,
      and Purchaser agrees to purchase from Sionix, (i) a duly executed 10%
      subordinated debenture in the principal amount of $_________,
      in
      the
      form attached hereto as Exhibit
      A
      (the
“Debenture”)
      and
      (ii) a six year warrant to purchase __________ shares of Sionix common stock
      at
      an exercise price of $0.40 per share, in the form attached hereto as Exhibit
      B
      (the “Warrant”)
      in
      consideration for $_____________ cash (the “Purchase
      Price”).
      For
      every $25,000 in principal amount of the Debenture, Purchase will receive a
      Warrant for 50,000 shares.

    

    b. Closing
      Date.
      Subject
      to the satisfaction (or waiver) of the conditions thereto set forth in Section
      5
      and Section 6 below, the date and time of the sale of the Debenture pursuant
      to
      this Agreement (the “Closing
      Date”)
      shall
      be 12:00 noon New York City Time on ______________ or such other mutually agreed
      upon time. The closing of the transactions contemplated by this Agreement (the
      “Closing”)
      shall
      occur on the Closing Date at such location as may be agreed to by the
      parties.

    

    c. Form
      of Payment.
      On the
      Closing Date, (i) Purchaser shall pay the Purchase Price in United States
      dollars by wire transfer of immediately available funds to an account designated
      in writing by Sionix for such purpose, against delivery of the Debenture and
      the
      Warrant, and (ii) Sionix shall deliver to Purchaser the Debenture and Warrant
      duly executed on behalf of Sionix, against delivery of the Purchase
      Price.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2. PURCHASER’S
      REPRESENTATIONS AND WARRANTIES.
      Purchaser represents and warrants to Sionix that:

    

    a. Accredited
      Purchaser; Investment Purpose.
      Purchaser represents that it is an “Accredited Investor” as defined in
      Regulation D under the 1933 Act. Purchaser is purchasing the Debenture and
      the
      Warrant for its own account for investment purposes only and not with a view
      toward, or for resale in connection with, the public sale or distribution
      thereof, except pursuant to sales registered or exempted under the 1993 Act
      and
      applicable state securities laws; provided,
      however,
      that by
      making the representations herein, Purchaser does not agree to hold the
      Debenture or the Warrant for any minimum or other specific term and reserves
      the
      right to dispose of the Debenture at any time in accordance with or pursuant
      to
      a registration statement or an exemption under the 1933 Act and applicable
      state
      securities laws.

    

    b. Reliance
      on Exemptions.
      Purchaser understands that the Debenture and the Warrant are being offered
      and
      sold to it in reliance upon specific exemptions from the registration
      requirements of United States federal and state securities laws and that Sionix
      is relying upon the truth and accuracy of, and Purchaser’s compliance with, the
      representations, warranties, agreements, acknowledgments and understandings
      of
      Purchaser set forth herein in order to determine the availability of such
      exemptions and the eligibility of the Purchaser to acquire the Debenture and
      the
      Warrant.

    

    c. Information.
      Purchaser and its advisors, if any, have been furnished with materials relating
      to the business, finances and operations of Sionix and materials relating to
      the
      offer and sale of the Debenture and the Warrant which have been requested by
      Purchaser or its advisors. Neither such inquiries nor any other due diligence
      investigation conducted by Purchaser or any of its advisors or representatives
      shall modify, amend or affect Purchaser’s right to rely on Sionix’s
      representations and warranties contained in Section 3 below. Purchaser
      understands that its investment in the Debenture and the Warrant involves a
      significant degree of risk, including, without limitation, the risk factors
      set
      forth on Exhibit
      C
      attached
      hereto and incorporated herein.

    

    d. Governmental
      Review.
      Purchaser understands that no United States federal or state agency or any
      other
      government or governmental agency has passed upon or made any recommendation
      or
      endorsement of the Debenture.

    

    e. Transfer
      or Resale.
      Purchaser understands that (i) the sale or resale of the Debenture and the
      Warrant and any underlying conversion shares of common stock has not been and
      is
      not being registered under the 1933 Act or any applicable state securities
      laws,
      and the Debenture and the Warrant may not be transferred unless (a) the
      Debenture, the Warrant and the common stock, par value $0.001 per share, of
      Sionix, issuable upon exercise of the Warrant (the “Warrant
      Shares”)
      are
      sold pursuant to an effective registration statement under the 1933 Act, (b)
      the
      Debenture, the Warrant, and the Warrant Shares are sold or transferred pursuant
      to an exemption from such registration, (c) the Debenture, the Warrant, and
      the
      Warrant Shares are sold or transferred to an “affiliate” (as defined in Rule 144
      promulgated under the 1933 Act (or a successor rule) (“Rule
      144”))
      of
      Purchaser who agrees to sell or otherwise transfer the Debenture or the Warrant
      only in accordance with this Section 2(e) and who is an Accredited Investor,
      or
      (d) the Debenture, the Warrant, and the Warrant Shares are sold pursuant to
      Rule
      144, if such Rule is available; (ii) any sale of such Debenture, Warrant, and
      Warrant Shares made in reliance on Rule 144 may be made only in accordance
      with
      the terms of said Rule and further, if said Rule is not applicable, any resale
      of such Debenture, Warrant, and Warrant Shares under circumstances in which
      the
      seller (or the person through whom the sale is made) may be deemed to be an
      underwriter (as that term is defined in the 1933 Act) may require compliance
      with some other exemption under the 1933 Act or the rules and regulations of
      the
      SEC thereunder; and (iii) neither Sionix nor any other person is under any
      obligation to comply with the terms and conditions of any exemption under the
      1933 Act.

     

    
      
        
        

      

      
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    f. Legends.
      Purchaser understands that the Debenture, the Warrantand the Warrant Shares
      shall bear a restrictive legend in the following form:

    

    “NEITHER
      THIS SECURITY NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE BEEN
      REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE
      SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933, AS
      AMENDED. THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED
      OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR
      EXEMPTION OR SAFE HARBOR THEREFROM.”

    

    g. Authorization;
      Enforcement.
      This
      Agreement has been duly and validly authorized by Purchaser. This Agreement
      has
      been duly executed and delivered on behalf of Purchaser, and this Agreement
      constitutes a valid and binding agreement of Purchaser enforceable in accordance
      with its terms, except as such enforceability may be limited by applicable
      bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
      laws
      relating to, or affecting generally, the enforcement of creditors’ rights and
      remedies or by other equitable principles of general application. 

    

    h. No
      Brokers.
      Purchaser has taken no action which would give rise to any claim by any person
      for brokerage commissions, finder’s fees or similar payments relating to this
      Agreement or the transactions contemplated hereby.

    

    i. Sionix
      SEC Reports.
      Purchaser has read Sionix’ periodic and current reports filed with the SEC on
      and after June 8, 2007, including, without limitation, its annual report on
      Form
      10-KSB for the fiscal year ended September 30, 2006, which are available for
      review on the SEC’s website at www.sec.gov.

     

    
      
        
        

      

      
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    3. REPRESENTATIONS
      AND WARRANTIES OF SIONIX.
      Sionix
      represents and warrants to Purchaser that:

    

    a. Authorization;
      Enforcement.
      (i)
      Sionix has all requisite corporate power and authority to enter into and perform
      this Agreement and to consummate the transactions contemplated hereby and to
      sell the Debenture and the Warrant in accordance with the terms hereof, (ii)
      the
      execution and delivery of this Agreement by Sionix and the consummation by
      it of
      the transactions contemplated hereby (including without limitation, the sale
      of
      the Debenture to Purchaser) have been duly authorized by Sionix and no further
      consent or authorization of Sionix or its shareholders is required, (iii) this
      Agreement has been duly executed and delivered by Sionix, and (iv) this
      Agreement constitutes a legal, valid and binding obligation of Sionix
      enforceable against Sionix in accordance with its terms, except as such
      enforceability may be limited by applicable bankruptcy, insolvency,
      reorganization, moratorium, liquidation or similar laws relating to, or
      affecting generally, the enforcement of creditors’ rights and remedies or by
      other equitable principles of general application

    

    b. No
      Conflicts.
      The
      execution, delivery and performance of this Agreement by Sionix and the
      consummation by Sionix of the transactions contemplated hereby (including,
      without limitation, the sale of the Debenture and Warrant to Purchaser) will
      not
      (i) conflict with or result in a violation of any provision of its certificate
      of formation or other organizational documents, or (ii) violate or conflict
      with, or result in a breach of any provision of, or constitute a default (or
      an
      event which with notice or lapse of time or both could become a default) under,
      or give to others any rights of termination, amendment, acceleration or
      cancellation of, any agreement, note, bond, indenture or other instrument to
      which Sionix is a party, or (iii) result in a violation of any law, rule,
      regulation, order, judgment or decree (including federal and state securities
      laws and regulations and regulations of any self-regulatory organizations to
      which Sionix is subject) applicable to Sionix or by which any property of Sionix
      are bound or affected. Except as specifically contemplated by this Agreement
      and
      as required under the 1933 Act and any applicable federal and state securities
      laws, Sionix is not required to obtain any consent, authorization or order
      of,
      or make any filing or registration with, any court, governmental agency,
      regulatory agency, self regulatory organization or stock market or any third
      party in order for it to execute, deliver or perform any of its obligations
      under this Agreement in accordance with the terms hereof. Except for filings
      that may be required under applicable federal and state securities laws in
      connection with the issuance and sale of the Debenture and the Warrant, all
      consents, authorizations, orders, filings and registrations which Sionix is
      required to obtain pursuant to the preceding sentence have been obtained or
      effected on or prior to the date hereof.

    

    c. No
      Brokers.
      Sionix
      has taken no action which would give rise to any claim by any person for
      brokerage commissions, finder’s fees or similar payments relating to this
      Agreement or the transactions contemplated hereby except as disclosed in this
      Section 3(c): 

    

    Southridge
      Investment Group LLC is entitled to those cash and equity fees as provided
      for
      in that certain Investment Banking Engagement Letter dated as of February 12,
      2007, as modified by that certain Investment Banking Engagement Letter Addendum
      dated as of May 29, 2007.

    

    d. Issuance
      of Securities.
      The
      issuance of the Debenture and the Warrant are duly authorized and upon issuance
      in accordance with the terms hereof shall be free from all taxes, liens and
      charges with respect to the issue thereof. As soon as commercially practicable
      following the Closing, Sionix will increase its authorized shares of Common
      Stock to a sufficient number in order to provide that a number of shares of
      Common Stock shall have been duly authorized and reserved for issuance which
      equals or exceeds 130% of the aggregate of the maximum number of shares of
      Common Stock issuable upon exercise of the Warrant. The Warrant and, upon
      exercise, the Warrant Shares, will be validly issued, fully paid and
      nonassessable and free from all preemptive or similar rights, taxes, liens
      and
      charges with respect to the issue thereof, with the holders being entitled
      to
      all rights accorded to a holder of Common Stock. Assuming the accuracy of each
      of the representations and warranties set forth in Section 2 of this Agreement,
      the offer and issuance by the Company of the Debenture and the Warrant is exempt
      from registration under the 1933 Act.

     

    
      
        
        

      

      
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    4. COVENANTS.

    

    a. Best
      Efforts.
      The
      parties shall use their best efforts to satisfy timely each of the conditions
      described in Section 5 and Section 6 of this Agreement.

    

    b. Financial
      Reporting. Subsequent
      to Closing Date, Sionix will take no action which would adversely affect
      Purchaser’s ability to use Rule 144. Sionix shall make
      and
      keep public information available, as those terms are understood and defined
      in
      Rule 144 and shall file with the SEC in a timely manner all reports and other
      documents required of Sionix
      under
      the 1933 Act and the Securities Exchange Act of 1934, as amended.

    

    c. Reservation
      of Shares.
      Following its receipt of shareholder approval of a sufficient increase in its
      authorized shares in accordance with applicable federal securities laws, as
      provided in Section 3(d) above, Sionix shall
      take
      all action necessary to at all times have authorized, and reserved for the
      purpose of issuance, no less than 130% of the sum of the number of shares of
      Common Stock issuable upon exercise of the Warrant issued at the Closing
      (without taking into account any limitations on exercise of the Warrant set
      forth in the Debenture and Warrant, respectively).

     

    5. CONDITIONS
      TO SIONIX’S OBLIGATION TO SELL.
      The
      obligation of Sionix hereunder to sell and deliver the Debenture and the Warrant
      to Purchaser at the Closing is subject to the satisfaction, at or before the
      Closing Date of each of the following conditions thereto, provided that these
      conditions are for Sionix’s sole benefit and may be waived by Sionix at any time
      in its sole discretion:

    

    a. Purchaser
      shall have executed this Agreement and delivered the same to
      Sionix.

    

    b. Purchaser
      shall have delivered the Purchase Price in accordance with Section 1(c)
      above.

    

    c. The
      representations and warranties of Purchaser shall be true and correct in all
      material respects as of the date when made and as of the Closing Date as though
      made at that time (except for representations and warranties that speak as
      of a
      specific date), and Purchaser shall have performed, satisfied and complied
      in
      all material respects with the covenants, agreements and conditions required
      by
      this Agreement to be performed, satisfied or complied with by Purchaser at
      or
      prior to the Closing Date.

     

    
      
        
        

      

      
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    d. No
      litigation, statute, rule, regulation, executive order, decree, ruling or
      injunction shall have been enacted, entered, promulgated or endorsed by or
      in
      any court or governmental authority of competent jurisdiction or any
      self-regulatory organization having authority over the matters contemplated
      hereby which prohibits the consummation of any of the transactions contemplated
      by this Agreement.

     

    6. CONDITIONS
      TO PURCHASER’S OBLIGATION TO PURCHASE.
      The
      obligation of Purchaser hereunder to purchase the Debenture at the Closing
      is
      subject to the satisfaction, at or before the Closing Date of each of the
      following conditions, provided that these conditions are for Purchaser’s sole
      benefit and may be waived by Purchaser at any time in its sole
      discretion.

    

    a. Sionix
      shall have executed this Agreement and delivered the same to
      Purchaser.

    

    b. Sionix
      shall have delivered to Purchaser duly executed Debenture and Warrant (in such
      denominations as Purchaser shall reasonably request) in accordance with Section
      1(c) above.

    

    c. The
      representations and warranties of Sionix shall be true and correct in all
      material respects as of the date when made and as of the Closing Date as though
      made at such time (except for representations and warranties that speak as
      of a
      specific date) and Sionix shall have performed, satisfied and complied in all
      material respects with the covenants, agreements and conditions required by
      this
      Agreement to be performed, satisfied or complied with by Sionix at or prior
      to
      the Closing Date.

    

    d. No
      litigation, statute, rule, regulation, executive order, decree, ruling or
      injunction shall have been enacted, entered, promulgated or endorsed by or
      in
      any court or governmental authority of competent jurisdiction or any
      self-regulatory organization having authority over the matters contemplated
      hereby which prohibits the consummation of any of the transactions contemplated
      by this Agreement.

     

    7. GOVERNING
      LAW; MISCELLANEOUS. 

    

    a. Governing
      Law; Jurisdiction.
      THIS
      AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
      LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
      ENTIRELY WITH SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.
      THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED
      STATES FEDERAL COURTS LOCATED IN THE CITY OF NEW YORK, NEW YORK WITH RESPECT
      TO
      ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN
      CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH
      PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
      MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE
      OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY
      RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
      PROCEEDING. NOTHING HEREIN SHALL AFFECT ANY PARTY’S RIGHT TO SERVE PROCESS IN
      ANY OTHER MANNER PERMITTED BY LAW. THE PARTIES AGREE THAT A FINAL NON-APPEALABLE
      JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED
      IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER.
      THE PARTIES HEREBY WAIVE A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
      COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER IN
      RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS
      AGREEMENT.

     

    
      
        
        

      

      
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    b. Counterparts;
      Signatures by Facsimile.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed an original but all of which shall constitute one and the same agreement
      and shall become effective when counterparts have been signed by each party
      and
      delivered to the other party. This Agreement, once executed by a party, may
      be
      delivered to the other party hereto by facsimile transmission or electronic
      mail
      transmission of a copy of this Agreement bearing the signature of the party
      so
      delivering this Agreement. A
      facsimile or electronic mail transmission of this signed Agreement shall be
      legal and binding on all parties hereto. 

    

    c. Headings.
      The
      headings of this Agreement are for convenience of reference only and shall
      not
      form part of, or affect the interpretation of, this Agreement.

    

    d. Severability.
      In the
      event that any provision of this Agreement is invalid or enforceable under
      any
      applicable statute or rule of law, then such provision shall be deemed
      inoperative to the extent that it may conflict therewith and shall be deemed
      modified to conform with such statute or rule of law. Any provision hereof
      which
      may prove invalid or unenforceable under any law shall not affect the validity
      or enforceability of any other provision hereof.

    

    e. Entire
      Agreement; Amendments.
      This
      Agreement and the instruments referenced herein contain the entire understanding
      of the parties with respect to the matters covered herein and therein and,
      except as specifically set forth herein or therein, neither Sionix nor Purchaser
      makes any representation, warranty, covenant or undertaking with respect to
      such
      matters. No provision of this Agreement may be waived or amended other than
      by
      an instrument in writing signed by the party to be charged with
      enforcement.

     

    
      
        
        

      

      
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    f. Notices.
      Any
      notices required or permitted to be given under the terms of this Agreement
      shall be sent by certified or registered mail (return receipt requested) or
      delivered personally or by courier (including a recognized overnight delivery
      service) or by facsimile or by electronic mail either in the text of an email
      message or attached in a commonly readable format, and shall be effective five
      days after being placed in the mail, if mailed by regular United States mail,
      or
      upon receipt, if delivered personally, by courier (including a recognized
      overnight delivery service) or by facsimile, or one day after electronically
      mailed if the sender has received no generated notice that the email message
      has
      not been successfully delivered, in each case addressed to a party. The
      addresses for such communications shall be:

     

     

    If
      to
      Sionix:

    

    2082
      Michelson Drive, Suite 304

    Irvine,
      CA 92612

    Attention:
      _______________

    Facsimile:
      (949)
      752-7998

    Email:

    

    with
      a
      copy to:

    

    Richardson
      & Patel, LLP

    405
      Lexington Avenue, 26th
      Floor

    New
      York,
      NY 10174

    Attention:
      Kevin Friedmann, Esq. 

    Facsimile:
      212-907-6687

    Email:
      kfriedmann@richardsonpatel.com

    

    

    If
      to
      Purchaser:

    

    ____________________

    ____________________

    ____________________

    Attention: 

    Facsimile:
      

    Email:
      

    

    with
      a
      copy to:

    

    ____________________

    ____________________

    Attention: 

    Facsimile:
      

    Email:
      

     

    Each
      party shall provide notice to the other party of any change in
      address.

     

    
      
        
        

      

      
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    h. Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their successors and assigns. Neither Sionix nor Purchaser shall assign this
      Agreement or any rights or obligations hereunder without the prior written
      consent of the other. Notwithstanding the foregoing, subject to Section 2(e),
      Purchaser may assign its rights hereunder to any person that purchases the
      Debenture, the Warrant, or any Warrant Shares in a private transaction from
      Purchaser or to any of its “affiliates,” as that term is defined under the 1933
      Act, without the consent of Sionix.

    

    i. Third
      Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other person. 

    

    j. Further
      Assurances.
      Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as the other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

    

    k. No
      Strict Construction.
      The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent, and no rules of strict construction
      will
      be applied against any party.

    

    [Remainder
      of page intentionally left blank.]

     

    
      
        
        

      

      
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    IN
      WITNESS WHEREOF,
      Purchaser and Sionix have caused this Securities Purchase Agreement to be duly
      executed as of the date first above written.

    

    
      	 	 	PURCHASER:
	 	 
	 
 	 
 	[_________________]
 
	 	By:  	 
	 	
              
Name:
	 	Title:

    

     

     

    
      	 	 	SIONIX:
	 	 
	 	 	
              SIONIX
                CORPORATION

                

            
	 	By:  	 
	 	
              
Name:
              Richard H. Papalian
	 	Title:
              Chief Executive Officer

    

     

    
      
        
        

      

      
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    Exhibit
      A

    

    Form
      of
      Debenture

    

    
      
        
        

      

      
        A-1

        
          

        

      

      
        
        

      

    

     

    Exhibit
      B

    

    Form
      of
      Warrant

     

    
      
        
        

      

      
        B-1

        
          

        

      

      
        
        

      

    

     

    Exhibit
      C

    

    RISK
      FACTORS

    

    As
      used
      herein, the words “we”, “us” and “our” refer to Sionix Corporation.

    

    An
      investment in shares of our Common Stock is highly speculative and involves
      a
      high degree of risk. We face a variety of risks that may affect our operations
      or financial results and many of those risks are driven by factors that we
      cannot control or predict. The following discussion addresses those risks that
      management believes are the most significant, although there may be other risks
      that could arise, or may prove to be more significant than expected, that may
      affect our operations or financial results. Only those investors who can bear
      the risk of loss of their entire investment should participate in this offering.
      Prospective investors should carefully consider the following risk factors
      in
      evaluating an investment in our Common Stock. 

    

    RISKS
      RELATED TO OUR COMPANY

    

    We
      have never generated any revenues.

    

    Although
      we have been in business for more than ten years, we have never generated any
      revenues from operations. We have been in a development stage since inception,
      and have yet to manufacture products for sale to customers. All of our working
      capital has been generated by sales of securities and loans from
      affiliates.

    

    We
      have a history of operating losses, which may
      continue.

    

    We
      have a
      history of losses and may continue to incur operating and net losses for the
      foreseeable future. We incurred a net loss of approximately $775,000 for the
      fiscal year ended September 30, 2006 and a net loss of approximately $950,000
      for the nine months ended June 30, 2007. As of June 30, 2007 our accumulated
      deficit was approximately $16,400,000. We have not achieved profitability on
      a
      quarterly or on an annual basis. We may not be able to generate revenues or
      reach a level of revenue to achieve profitability.

     

    Our
      future financial results, including our expected revenues, are unpredictable
      and
      difficult to forecast.

    

    If
      we
      begin to generate revenues, it is likely that our revenues, expenses and
      operating results will fluctuate from quarter to quarter, which could increase
      the volatility of the price of our Common Stock. We expect that our operating
      results will continue to fluctuate in the future due to a number of factors,
      some of which are beyond our control. These factors include:

     

    
      	
               

            	
              ·

            	
              Our
                ability, thus far unproven, to sell our products.

            
	
               

            	
              ·

            	
              If
                we receive orders for products, our ability to complete those orders
                in a
                timely fashion.

            

    

    
      	
               

            	
              ·

            	
              The
                costs we will incur in manufacturing products.

            
	
               

            	
              ·

            	
              The
                costs of marketing our products, including customer relations and
                warranty
                repairs

            

    

     

    
      
        
        

      

      
        C-1

        
          

        

      

      
        
        

      

    

     

    Due
      to
      all of these factors, our operating results may fall below the expectations
      of
      investors, which could cause a decline in the price of our Common
      Stock. 

    

    We
      will need to raise additional capital to meet our business requirements in
      the
      future and such capital raising may be costly or difficult to obtain and could
      dilute current stockholders’ ownership interests.

    

    We
      will
      need to raise additional capital in the future, which may not be available
      on
      reasonable terms or at all. The raising of additional capital may dilute our
      current stockholders’ ownership interests. Our income from operations will not
      be sufficient to achieve our business plan. We will need to raise additional
      funds through public or private debt or equity financings to meet various
      objectives including, but not limited to:

     

    
      	
               

            	
              ·

            	
              pursuing
                growth opportunities, including more rapid
                expansion;

            

    

    

    
      	
               

            	
              ·

            	
              acquiring
                complementary businesses;

            

    

     

    
      	
               

            	
              ·

            	
              making
                capital improvements to improve our
                infrastructure;

            

    

     

    
      	
               

            	
              ·

            	
              hiring
                qualified management and key
                employees;

            

    

     

    
      	
               

            	
              ·

            	
              developing
                new products, accessories and
                services;

            

    

    

    
      	
               

            	
              ·

            	
              responding
                to competitive pressures; and

            

    

     

    
      	
               

            	
              ·

            	
              complying
                with regulatory requirements.

            

    

     

    Any
      additional capital raised through the sale of equity or equity backed securities
      may dilute current stockholders’ ownership percentages and could also result in
      a decrease in the fair market value of our equity securities, because our assets
      would be owned by a larger pool of outstanding equity. The terms of those
      securities issued by us in future capital transactions may be more favorable
      to
      new investors, and may include preferences, superior voting rights and the
      issuance of warrants or other derivative securities, which may have a further
      dilutive effect.

    

    Furthermore,
      any additional debt or equity financing that we may need may not be available
      on
      terms favorable to us, or at all. The registration rights agreements we
      entered into in connection with a 2006 private placement and a 2007 private
      placement provide that we will not, without the prior written consent of the
      majority of registered holders, file or request the acceleration of any other
      registration statement filed with the SEC, subject to certain exceptions, until
      the SEC has declared the registration statement contemplated by those
      registration rights agreements effective. In addition, negative covenants in
      those purchase agreements limit our ability to raise additional capital,
      including through the incurrence of debt or liens on our properties or the
      issuance of equity securities that include registration rights. These negative
      covenants may impair our ability to raise additional capital. If we are unable
      to obtain required additional capital, we may have to curtail our growth plans
      or cut back on existing business and, further, we may not be able to continue
      operating if we do not generate sufficient revenues from operations needed
      to
      stay in business.

     

    
      
        
        

      

      
        C-2

        
          

        

      

      
        
        

      

    

     

    We
      may
      incur substantial costs in pursuing future capital financing, including
      investment banking fees, legal fees, accounting fees, securities law compliance
      fees, printing and distribution expenses and other costs. We may also be
      required to recognize non-cash expenses in connection with certain securities
      we
      issue, such as convertible notes and warrants, which may adversely impact our
      financial condition. 

    

    We
      may be required to pay liquidated damages to certain of our investors under
      certain circumstances.

    

    We
      entered into registration rights agreements in connection with our 2006 private
      placement and our 2007 private placement. These registration rights agreements
      require us to pay partial liquidated damages under certain circumstances if
      we
      do not satisfy our obligations under such registration rights agreements,
      including our obligations to file or obtain or maintain the effectiveness of
      registration statements as required under these registration rights agreements.
      If we are unable to satisfy our obligations under these registration rights
      agreements and we are obligated to pay partial liquidated damages, it may
      adversely impact our financial condition.

    

    Our
      auditors have indicated that our inability to generate sufficient revenue raises
      substantial doubt as to our ability to continue as a going
      concern.

    

    Our
      audited financial statements for the fiscal year ended September 30, 2006 were
      prepared on a going concern basis in accordance with United States generally
      accounting principles. The going concern basis of presentation assumes that
      we
      will continue in operation for the foreseeable future and will be able to
      realize our assets and discharge our liabilities and commitments in the normal
      course of business. However, our auditors have indicated that our inability
      to
      generate sufficient revenue raises substantial doubt as to our ability to
      continue as a going concern. In the absence of significant revenues and profits,
      we are seeking to raise additional funds to meet our working capital needs
      principally through the additional sales of our securities or debt financings.
      However, we cannot guarantee that will be able to obtain sufficient additional
      funds when needed or that such funds, if available, will be obtainable on terms
      satisfactory to us. In the event that these plans can not be effectively
      realized, there can be no assurance that we will be able to continue as a going
      concern.  

     

    
      
        
        

      

      
        C-3

        
          

        

      

      
        
        

      

    

     

    We
      intend to expand our operations and increase our expenditures in an effort
      to
      grow our business. If we are unable to achieve or manage significant growth
      and
      expansion, or if our business does not grow as we expect, our operating results
      may suffer.

     

    Our
      business plan anticipates continued additional expenditures on development,
      manufacturing and other growth initiatives. We may not achieve significant
      growth. If achieved, significant growth would place increased demands on our
      management, accounting systems, network infrastructure and systems of financial
      and internal controls. We may be unable to expand associated resources and
      refine associated systems fast enough to keep pace with expansion, especially
      to
      the extent we expand into multiple facilities at distant locations. If we fail
      to ensure that our management, control and other systems keep pace with growth,
      we may experience a decline in the effectiveness and focus of our management
      team, problems with timely or accurate reporting, issues with costs and quality
      controls and other problems associated with a failure to manage rapid growth,
      all of which would harm our results of operations.

     

    Our
      ability to effectively recruit and retain qualified officers and directors
      could
      also be adversely affected if we experience difficulty in obtaining adequate
      directors’ and officers’ liability insurance.

     

    We
      may be
      unable to maintain sufficient insurance as a public company to cover liability
      claims made against our officers and directors. If we are unable to adequately
      insure our officers and directors, we may not be able to retain or recruit
      qualified officers and directors to manage us.

    

    Losing
      key personnel or failing to attract and retain other highly skilled personnel
      could affect our ability to successfully grow our
      business.

     

    Our
      future performance depends substantially on the continued service of our senior
      management and other key personnel. We do not currently maintain key person
      life
      insurance. If our senior management were to resign or no longer be able to
      serve
      as our employees, it could impair our revenue growth, business and future
      prospects.

    

    To
      meet
      our expected growth, we believe that our future success will depend upon our
      ability to hire, train and retain other highly skilled personnel.  We
      cannot be sure that we will be successful in hiring, assimilating or retaining
      the necessary personnel, and our failure to do so could cause our operating
      results to fall below our growth and profit targets.

    

    Rules
      issued under the Sarbanes-Oxley Act of 2002 may make it difficult for us to
      retain or attract qualified officers and directors, which could adversely affect
      the management of our business and our ability to obtain or retain listing
      of
      our Common Stock.

    

    We
      may be
      unable to attract and retain those qualified officers, directors and members
      of
      board committees required to provide for our effective management because of
      rules and regulations that govern publicly held companies, including, but not
      limited to, certifications by principal executive officers. The enactment of
      the
      Sarbanes-Oxley Act has resulted in the issuance of rules and regulations and
      the
      strengthening of existing rules and regulations by the SEC, as well as the
      adoption of new and more stringent rules by the stock exchanges and NASDAQ.
      The
      perceived increased personal risk associated with these recent changes may
      deter
      qualified individuals from accepting roles as directors and executive
      officers. 

     

    
      
        
        

      

      
        C-4

        
          

        

      

      
        
        

      

    

     

    Further,
      some of these recent changes heighten the requirements for board or committee
      membership, particularly with respect to an individual’s independence from the
      corporation and level of experience in finance and accounting matters. We may
      have difficulty attracting and retaining directors with the requisite
      qualifications. If we are unable to attract and retain qualified officers and
      directors, the management of our business and our ability to obtain or retain
      listing of our shares of Common Stock on any stock exchange or NASDAQ (assuming
      we elect to seek and are successful in obtaining such listing) could be
      adversely affected.

     

    RISKS
      RELATED TO OUR BUSINESS

     

    We
      Expect Intense Competition In Our Industry.

     

     Many
      of our competitors are large, diversified manufacturing companies with
      significant expertise in the water quality business and contacts with water
      utilities and industrial water consumers. These competitors have significantly
      greater name recognition and financial and other resources. We cannot assure
      you
      that we will succeed in the face of strong competition from other water
      treatment companies.

     

    Certain
      Aspects of Our Industry Are Subject To Government
      Regulation

    

    Treatment
      of domestic drinking water and wastewater is regulated by a number of federal
      state and local agencies, including the U.S. Environmental Protection Agency.
      The changing regulatory environment, including changes in water quality
      standards, could adversely affect our business or make our products
      obsolete.

    

    The
      Operation of Our Products Could Result In Product Liability
      Claims

    

    We,
      like
      any other manufacturer of products that are designed to treat food or water
      that
      will be ingested, face an inherent risk of exposure to product liability claims
      in the event that the use of our products results in injury. Such claims may
      include, among others, that our products fail to remove harmful contaminants
      or
      bacteria, or that our products introduce other contaminants into the water.
      While we intend to obtain product liability insurance, there can be no assurance
      that such insurance will continue to be available at a reasonable cost, or,
      if
      available, will be adequate to cover liabilities. We do not anticipate obtaining
      contractual indemnification from parties acquiring or using our products. In
      any
      event, any such indemnification if obtained will be limited by our terms and,
      as
      a practical matter, to the creditworthiness of the indemnifying party. In the
      event that we do not have adequate insurance or contractual indemnification,
      product liabilities relating to defective products could have a material adverse
      effect on our operations and financial conditions.

     

    
      
        
        

      

      
        C-5

        
          

        

      

      
        
        

      

    

     

    Our
      water treatment system and the related technology is unproven and may not
      achieve widespread market acceptance among our prospective
      customers.

     

    Although
      we have installed a water treatment system on a pilot basis, our products have
      not been proven in a commercial context over any significant period of time.
      We
      have developed our proprietary technology and processes for water treatment
      based on dissolved air flotation technology, which competes with other forms
      of
      water treatment technologies that currently are in operation throughout the
      United States. Our water treatment system and the technology on which it is
      based may not achieve widespread market acceptance. Our success will depend
      on
      our ability to market our system and services to businesses and water providers
      on terms and conditions acceptable to us and to establish and maintain
      successful relationships with various water providers and state regulatory
      agencies.

     

    We
      believe that market acceptance of our system and technology and our related
      success will depend on many factors including:

     

    
      	
               

            	
              •

            	
               

            	
              the
                perceived advantages of our system over competing water treatment
                solutions;

            

    

     

    
      	
               

            	
              •

            	
               

            	
              the
                actual and perceived safety and efficacy of our
                system;

            

    

     

    
      	
               

            	
              •

            	
               

            	
              the
                availability and success of alternative water treatment
                solutions;

            

    

     

    
      	
               

            	
              •

            	
               

            	
              the
                pricing and cost effectiveness of our
                system;

            

    

     

    
      	
               

            	
              •

            	
               

            	
              our
                ability to access businesses and water providers that may use our
                system;

            

    

     

    
      	
               

            	
              •

            	
               

            	
              the
                effectiveness of our sales and marketing
                efforts;

            

    

      

    
      	
               

            	
              •

            	
               

            	
              publicity
                concerning our system and technology or competitive
                solutions;

            

    

     

    
      	
               

            	
              •

            	
               

            	
              timeliness
                in assembling and installing our system on customer
                sites;

            

    

     

    
      	
               

            	
              •

            	
               

            	
              our
                ability to respond to changes in the regulatory standards
                for  levels of various contaminants;
                and

            

    

     

    
      	
               

            	
              •

            	
               

            	
              our
                ability to provide effective service and maintenance of our systems
                to our
                customers’ satisfaction.

            

    

     

    If
      our
      system or technology fails to achieve or maintain market acceptance or if new
      technologies are introduced by others that are more favorably received than
      our
      technology, are more cost effective or otherwise render our technology obsolete,
      we may experience a decline in demand for our system. If we are unable to market
      and sell our system and services successfully, our revenues would decline and
      our operating results and prospects would suffer.

     

    We
      have only recently leased a manufacturing facility for our
      products.

     

    In
      September of 2007 we leased a 60,000 square foot manufacturing facility in
      Garden Grove, California. We are currently acquiring and assembling the
      necessary equipment and machinery for manufacturing our products, but have
      yet
      to commence manufacturing at the facility. We may encounter unexpected problems
      and expenses in making the facility ready to commence
      manufacturing.

     

    
      
        
        

      

      
        C-6

        
          

        

      

      
        
        

      

    

     

    We
      must meet evolving customer requirements for water treatment and invest in
      the
      development of our water treatment technologies.

     

    If
      we are
      unable to develop or enhance our system and services to satisfy evolving
      customer demands, our business, operating results, financial condition and
      prospects will be harmed significantly. The market for water treatment is
      characterized by changing technologies, periodic new product introductions
      and
      evolving customer and industry standards. For instance, competitors in the
      water
      treatment industry are continuously searching for methods of water treatment
      that are more cost-effective and more efficient. Our current and prospective
      customers may choose water treatment systems that are offered at a lower price
      than our system. To achieve market acceptance for our system, we must
      effectively and timely anticipate and adapt to customer requirements and offer
      products and services that meet customer demands. This may cause us to pursue
      other technologies or capabilities through acquisitions or strategic alliances.
      Our customers may require us to provide water treatment systems for many
      different contaminants or higher volumes of water or to decrease the presence
      of
      contaminants. We also may experience design, engineering and other difficulties
      that could delay or prevent the development, introduction or marketing of any
      modifications to our system or our new services. Our failure to develop
      successfully and offer a system or services that satisfy customer requirements
      would significantly weaken demand for our system or services, which would likely
      cause a decrease in our revenues and harm our operating results. In addition,
      if
      our competitors introduce solutions and/or services based on new or alternative
      water treatment technologies, our existing and future system and/or services
      could become obsolete, which would also weaken demand for our system, thereby
      decreasing our revenues and harming our operating results.

     

    Failure
      to protect our intellectual property rights could impair our competitive
      position.

     

    Our
      water
      treatment systems utilize a variety of proprietary rights that are important
      to
      our competitive position and success. Because the intellectual property
      associated with our technology is evolving and rapidly changing, our current
      intellectual property rights may not protect us adequately. We rely on a
      combination of patents, trademarks, trade secrets and contractual restrictions
      to protect the intellectual property we use in our business. In addition, we
      generally enter into confidentiality or license agreements, or have
      confidentiality provisions in agreements, with our employees, consultants,
      strategic partners and customers and control access to, and distribution of,
      our
      technology, documentation and other proprietary information.

     

    Because
      legal standards relating to the validity, enforceability and scope of protection
      of patent and intellectual property rights in new technologies are uncertain
      and
      still evolving, the future viability or value of our intellectual property
      rights is uncertain. Furthermore, our competitors independently may develop
      similar technologies that limit the value of our intellectual property or design
      around patents issued to us. If competitors or third parties are able to use
      our
      intellectual property or are able to successfully challenge, circumvent,
      invalidate or render unenforceable our intellectual property, we likely would
      lose any competitive advantage we might develop. We may not be successful in
      securing or maintaining proprietary or patent protection for the technology
      used
      in our system or services, and protection that is secured may be challenged
      and
      possibly lost.

     

    
      
        
        

      

      
        C-7

        
          

        

      

      
        
        

      

    

     

    Risks
      Related to Our Industry

     

    Changes
      in governmental regulation and other legal uncertainties could adversely affect
      our customers or decrease demand for our systems, and thus harm our business,
      operating results and prospects.

     

    In
      the
      United States, many different federal, state and local laws and regulations
      govern the treatment and distribution of  water, as well as and
      disposal of attendant wastes. The increased interest in the treatment of
      contaminated water due to increased media attention on the adverse health
      effects from contaminated drinking water may result in intervention by the
      EPA
      or state regulatory agencies under existing or newly enacted legislation and
      in
      the imposition of restrictions, fees or charges on users and providers of
      products and services in this area. These restrictions, fees or charges could
      adversely affect our potential customers, which could negatively affect our
      revenues. Conversely, the failure of the EPA or state regulatory agencies to
      act
      on a timely basis to set interim or permanent standards for pollutants, or
      to
      delay effective dates for standards for pollutants, grant waivers of compliance
      with such standards or take other discretionary actions not to enforce these
      standards, may decrease demand for our system if water utilities and agencies
      are not required to bring their water into compliance with such regulatory
      standards. While we are not aware of any currently proposed federal regulation
      directly affecting our business, we cannot predict whether there will be future
      legislation regarding the treatment and distribution of water and the disposal
      of attendant wastes.

     

    Water
      treatment systems in the United States must generally be permitted by a
      regulatory agency prior to its use by our customers, and changing drinking
      water
      standards and other factors could affect the approval process with respect
      to
      our systems by such regulatory agencies.

     

    In
      general, water treatment systems must be permitted by applicable state or local
      regulatory agencies prior to commencement of operations. We cannot assure you
      when or whether the various regulatory agencies will approve our system for
      use
      by our customers. The application process can be time consuming and often
      involves several information requests by the regulatory agencies with respect
      to
      the system. Any long waiting periods or difficulties faced by our customers
      in
      the application process could cause some of our customers to use competing
      technologies, products, services or sources of drinking water, rather than
      use
      our technology.

    

    
      
        
        

      

      
        C-8

        
          

        

      

      
        
        

      

    

    

    Demand
      for our products could be adversely affected by a downturn in government
      spending related to water treatment, or in the cyclical residential or
      non-residential building markets.

     

    Our
      business will be dependent upon spending on water treatment systems by
      utilities, municipalities and other organizations that supply water, which
      in
      turn is often dependent upon residential construction, population growth,
      continued contamination of water sources and regulatory responses to this
      contamination. As a result, demand for our water treatment systems could be
      impacted adversely by general budgetary constraints on governmental or regulated
      customers, including government spending cuts, the inability of government
      entities to issue debt to finance any necessary water treatment projects,
      difficulty of customers in obtaining necessary permits or changes in regulatory
      limits associated with the contaminants we seek to address with our water
      treatment system.  A slowdown of growth in residential and non-residential
      building would reduce demand for drinking water and for water treatment systems.
      The residential and non-residential building markets are generally cyclical,
      and, historically, down cycles have typically lasted a number of years. Any
      significant decline in the governmental spending on water treatment systems
      or
      residential or non-residential building markets could weaken demand for our
      systems.

     

    We
      operate in a competitive market, and if we are unable to compete effectively,
      our business, operating results and prospects could
      suffer.

     

    The
      market environment in which we operate is very dynamic and is characterized
      by
      evolving standards, the development of new technology, regulations which
      continually reduce the acceptable levels for contaminants and affect the means,
      methods and costs of disposing of wastes derived from water
      treatment.

     

    We
      will
      compete with large water treatment companies, such as USFilter Corporation,
      a subsidiary of Siemens AG. Our competition may vary according to the
      contaminant being removed. Many of our current and potential competitors have
      technical and financial resources, marketing and service organizations, and
      market expertise significantly greater than ours. Many of our competitors also
      have longer operating histories, greater name recognition and large customer
      bases. Moreover, our competitors may forecast the course of market developments
      more accurately and could in the future develop new technologies that compete
      with our system and/or services or even render our system and/or services
      obsolete. Due to the evolving markets in which we compete, additional
      competitors with significant market presence and financial resources may enter
      those markets, thereby further increasing competition. These competitors may
      be
      able to reduce our market share by adopting more aggressive pricing policies
      than we can or by developing technology and services that gain wider market
      acceptance than our system and/or services. Existing and potential competitors
      also may develop relationships with distributors of our system and services
      or
      third parties with whom we have strategic relationships in a manner that could
      harm our ability to sell, market and develop our system and services
      significantly. If we do not compete successfully we may never achieve
      significant market penetration and we may be unable to maintain or increase
      our
      business or revenues, causing our operating results and prospects to suffer.
       

     

    
      
        
        

      

      
        C-9

        
          

        

      

      
        
        

      

    

     

    RISKS
      RELATED TO OUR COMMON STOCK

     

    You
      may have difficulty trading our Common Stock as there is a limited public market
      for shares of our Common Stock.

    

    Our
      Common Stock is currently quoted on the NASD’s OTC Bulletin Board under the
      symbol “SINX.OB.”
      Our
      Common Stock is not actively traded and there is a limited public market for
      our
      Common Stock. As a result, a stockholder may find it difficult to dispose of,
      or
      to obtain accurate quotations of the price of, our Common Stock. This severely
      limits the liquidity of our Common Stock, and would likely have a material
      adverse effect on the market price for our Common Stock and on our ability
      to
      raise additional capital. An active public market for shares of our Common
      Stock
      may not develop, or if one should develop, it may not be sustained.

      

    Applicable
      SEC rules governing the trading of “penny stocks” may limit the trading and
      liquidity of our Common Stock which may affect the trading price of our Common
      Stock.

    

    Our
      Common Stock is currently quoted on the NASD’s OTC Bulletin
      Board.  Stocks such as ours which trade below $5.00 per share are
      considered “penny
      stocks”
      and
      subject to SEC rules and regulations which impose limitations upon the manner
      in
      which such shares may be publicly traded. These regulations require the
      delivery, prior to any transaction involving a penny stock, of a disclosure
      schedule explaining the penny stock market and the associated risks. Under
      these
      regulations, certain brokers who recommend such securities to persons other
      than
      established customers or certain accredited investors must make a special
      written suitability determination regarding such a purchaser and receive such
      purchaser’s written agreement to a transaction prior to sale. These regulations
      have the effect of limiting the trading activity of our Common Stock and
      reducing the liquidity of an investment in our Common Stock. 

    

    We
      do not anticipate dividends to be paid on our Common Stock, and stockholders
      may
      lose the entire amount of their investment.

     

    A
      dividend has never been declared or paid in cash on our Common Stock, and we
      do
      not anticipate such a declaration or payment for the foreseeable future. We
      expect to use future earnings, if any, to fund business growth. Therefore,
      stockholders will not receive any funds absent a sale of their shares. We cannot
      assure stockholders of a positive return on their investment when they sell
      their shares, nor can we assure that stockholders will not lose the entire
      amount of their investment.

    

    You
      may experience dilution of your ownership interests because of the future
      issuance of additional shares of our Common
      Stock.

     

    In
      the
      future, we may issue our authorized but previously unissued equity securities,
      resulting in the dilution of the ownership interests of our present
      stockholders.  We are currently authorized to issue an aggregate of
      150,000,000 shares of Common Stock and plan to increase our authorized shares
      as
      soon as commercially practicable to 300,000,000 shares of Common Stock, or
      such
      lower number as our board of directors deems advisable.  As of
      September 30, 2007, we had 106,635,201 shares of Common Stock issued and
      outstanding. As of December 21, 2007, we have approximately 170,786,241 shares
      of Common Stock outstanding on a fully diluted basis. We may also issue
      additional shares of our Common Stock or other securities that are convertible
      into or exercisable for Common Stock in connection with hiring or retaining
      employees, future acquisitions, future sales of our securities for capital
      raising purposes, or for other business purposes.  The future issuance of
      any such additional shares of our Common Stock or other securities may create
      downward pressure on the trading price of our Common Stock.  There can be
      no assurance that we will not be required to issue additional shares, warrants
      or other convertible securities in the future in conjunction with any capital
      raising efforts, including at a price (or exercise prices) below the price
      at
      which shares of our Common Stock are currently quoted on the OTC Bulletin
      Board. 

     

    
      
        
        

      

      
        C-10

        
          

        

      

      
        
        

      

    

     

    Even
      though we are not a California corporation, our Common Stock could still be
      subject to a number of key provisions of the California General Corporation
      Law.

     

    Under
      Section 2115 of the California General Corporation Law (the “CGCL”),
      corporations not organized under California law may still be subject to a number
      of key provisions of the CGCL. This determination is based on whether the
      corporation has significant business contacts with California and if more than
      50% of its voting securities are held of record by persons having addresses
      in
      California. In the immediate future, we will continue the business and
      operations of Sionix in California, and a majority of our business operations,
      revenue and payroll will be conducted in, derived from, and paid to residents
      of
      California. Therefore, depending on our ownership, we could be subject to
      certain provisions of the CGCL. Among the more important provisions are those
      relating to the election and removal of directors, cumulative voting, standards
      of liability and indemnification of directors, distributions, dividends and
      repurchases of shares, shareholder meetings, approval of certain corporate
      transactions, dissenters' and appraisal rights, and inspection of corporate
      records.

    

    
      
        
        

      

      
        C-11Unassociated Document

    

    THIS
      DEBENTURE HAS NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
      COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE SECURITIES ARE BEING
      OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION D
      PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”).
      THE
      SECURITIES ARE “RESTRICTED”
AND
      MAY
      NOT BE OFFERED OR SOLD UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT,
      PURSUANT TO REGULATION D OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE
      REGISTRATION REQUIREMENTS OF THE ACT AND THE COMPANY WILL BE PROVIDED WITH
      OPINION OF COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO
      CONFIRM THAT SUCH EXEMPTIONS ARE AVAILABLE. FURTHER HEDGING TRANSACTIONS
      INVOLVING THE SECURITIES MAY NOT BE MADE EXCEPT IN COMPLIANCE WITH THE
      ACT.

    

     

    SUBORDINATED
      DEBENTURE

     

    SIONIX
      CORPORATION

     

    Subordinated
      10% Debenture

     

    [Date]

     

    

    
      	
              No.
                __________

            	
              $[    
                          
                ]

            

    

    

    THIS
      DEBENTURE IS ONE IN A SERIES OF SUBORDINATED DEBENTURES (“DEBENTURE(S)”) ISSUED
      BY SIONIX CORPORATION PURSUANT TO THAT CERTAIN SECURITIES PURCHASE AGREEMENT
      OF
      EVEN DATE HEREWITH (THE “SECURITIES PURCHASE AGREEMENT”).

    

    

    This
      Subordinated Debenture is issued by Sionix Corporation, a Nevada corporation
      (“Sionix”
or
      the
“Company”),
      to
___________________ (together
      with its permitted successors and assigns, the “Holder”)
      pursuant to exemptions from registration
      under
      the Securities Act of 1933, as amended (the “1933
      Act”).
      Capitalized terms used but not defined herein have the meanings ascribed to
      them
      in the Securities Purchase Agreement.

     

    ARTICLE
      I.

     

    Section
      1.01 Principal.
      For
      value
      received, on _____________ (the “Issuance Date”), the Company hereby promises to
      pay to the order of the Holder in lawful money of the United States of America
      and in immediately available funds the principal sum of $_______________,
      plus
      accrued interest in the amount of ten percent (10%) per year for all outstanding
      principal on [the one year anniversary of the Issuance Date] (the “Maturity
      Date”). The principal plus accrued interest of this Debenture, less any amounts
      required by law to be deducted, is payable monthly, and shall be paid to the
      registered holder of this Debenture in United States dollars, at the address
      last appearing on the Debenture Register of the Company as designated in writing
      by the Holder. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
      forwarding of a check or wire transfer shall constitute a payment hereunder
      and
      shall satisfy and discharge the liability for principal on this Debenture to
      the
      extent of the sum represented by such check or wire transfer plus any amounts
      so
      deducted; provided,
      however,
      that
      the check has cleared the Holder’s bank account or the payment by wire transfer
      is made in immediately available funds.

     

    Section
      1.02 Paying
      Agent and Registrar.
      Initially, the Company will act as paying agent and registrar. The Company
      may
      change any paying agent, registrar, or Company-registrar by giving the Holder
      not less than ten (10) business days’ written notice of its election to do
      so, specifying the name, address, telephone number and facsimile number of
      the
      paying agent or registrar. The Company may act in any such
      capacity.

     

    Section
      1.03 Denominations.
      The
      Debenture is issuable in denominations of Twenty Five Thousand Dollars
      (US$25,000) and integral multiples thereof. The Debenture is exchangeable for
      an
      equal aggregate principal amount of Debenture of different authorized
      denominations, as requested by the Holder surrendering the same. No service
      charge will be made for such registration or transfer or exchange.

     

    Section
      1.04 Right
      of Redemption.
      The
      Company shall have the right to redeem this Debenture at any time by providing
      written notice to the Holder by making a cash payment to the Holder of the
      outstanding principal amount of the Debenture multiplied by a premium according
      to the following schedule, plus all accrued interest: 110% of the outstanding
      principal amount if redeemed within 120 days after the Issuance Date; 115%
      of
      the outstanding principal amount if redeemed between 121 days and within 240
      days after the Issuance Date; 125% of the outstanding principal amount if
      redeemed after 240 days after the Issuance Date. Written notice to the Holder
      shall be received at least 5 business days prior to the date of redemption
      payment (“Redemption Date”). If the redemption payment is not made on or before
      the Redemption Date, the redemption notice shall be rendered null and
      void.

     

    Section
      1.05 Subordinated
      Nature Of Debenture.
      This
      Debenture and all payments hereon, including principal or interest, shall be
      subordinate and junior in right of payment to all other debt instruments on
      the
      Company’s books immediately prior to the Closing, but shall be pari
      passu
      with all
      other Debentures.

     

    ARTICLE
      II.

     

    Section
      2.01 Amendments
      and Waiver of Default.
      The
      Debenture may not be amended. Notwithstanding the above, without the consent
      of
      the Holder, the Debenture may be amended to cure any ambiguity, defect or
      inconsistency, or to provide for assumption of the Company obligations to the
      Holder.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      III.

     

    Section
      3.01 Events
      of Default.
      The
      following shall constitute an “Event of Default”:

     

    (a) The
      Company shall default in the payment of principal and interest on this Debenture
      and same shall continue for a period of thirty (30) days; or

    

    (b) Any
      of
      the representations or warranties made by the Company herein, in any certificate
      or financial or other written statements heretofore or hereafter furnished
      by
      the Company in connection with the execution and delivery of this Debenture
      shall be false or misleading in any material respect at the time made;
      or

    

    (c) The
      Company shall fail to perform or observe, in any material respect, any other
      covenant, term, provision, condition, agreement or obligation of the Debenture
      and such failure shall continue uncured for a period of ten (10) days after
      written notice from the Holder of such failure; or

     

    (d) The
      Company shall (1) admit in writing its inability to pay its debts generally
      as
      they mature; (2) make an assignment for the benefit of creditors or commence
      proceedings for its dissolution; or (3) apply for or consent to the appointment
      of a trustee, liquidator or receiver for its or for a substantial part of its
      property or business; or

     

    (e) A
      trustee, liquidator or receiver shall be appointed for the Company or for a
      substantial part of its property or business without its consent and shall
      not
      be discharged within sixty (60) days after such appointment; or

     

    (f) Any
      governmental agency or any court of competent jurisdiction at the instance
      of
      any governmental agency shall assume custody or control of the whole or any
      substantial portion of the properties or assets of the Company and shall not
      be
      dismissed within sixty (60) days thereafter; or

     

    (g) Any
      money
      judgment, writ or warrant of attachment, or similar process in excess of one
      hundred thousand dollars ($100,000) in the aggregate shall be entered or filed
      against the Company or any of its properties or other assets and shall remain
      unpaid, unvacated, unbonded or unstayed for a period of sixty (60) days or
      in
      any event later than five (5) days prior to the date of any proposed sale
      thereunder; or

     

    (i) Bankruptcy,
      reorganization, insolvency or liquidation proceedings or other proceedings
      for
      relief under any bankruptcy law or any law for the relief of debtors shall
      be
      instituted by or against the Company and, if instituted against the Company,
      shall not be dismissed within sixty (60) days after such institution or the
      Company shall by any action or answer approve of, consent to, or acquiesce
      in
      any such proceedings or admit the material allegations of, or default in
      answering a petition filed in any such proceeding; or

     

    (j) The
      Company shall have its Common Stock suspended or delisted from an exchange
      or
      over-the-counter market from trading for in excess of five (5) trading days;
      or

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (k) Breach
      by
      the Company of its obligations under the Securities Purchase Agreement, the
      Warrant or any other agreement entered into on the date hereof between the
      Company and the Holder which is not cured by the Company within ten (10) days
      after receipt of written notice thereof. 

    

    Then,
      or
      at any time thereafter, and in each and every such case, unless such Event
      of
      Default shall have been waived in writing by the Holder (which waiver shall
      not
      be deemed to be a waiver of any subsequent default) at the option of the Holder
      and in the Holder's sole discretion, the Holder may consider all obligations
      under this Debenture immediately due and payable within five (5) days of notice,
      without presentment, demand, protest or notice of any kinds, all of which are
      hereby expressly waived, anything herein or in any note or other instruments
      contained to the contrary notwithstanding, and the Holder may immediately
      enforce any and all of the Holder's rights and remedies provided herein or
      any
      other rights or remedies afforded by law. 

     

    ARTICLE
      IV.

     

    [RESERVED]

    

     

    ARTICLE
      V.

     

    Section
      5.01 Permitted
      Withholding.
      The
      Company shall be entitled to withhold from all payments of principal of this
      Debenture any amounts required to be withheld under the applicable provisions
      of
      the United States income tax laws or other applicable laws at the time of such
      payments, and Holder shall execute and deliver all required documentation in
      connection therewith.

     

    Section
      5.02 Absolute
      Obligation of the Company.
      No
      provision of this Debenture shall alter or impair the obligation of the Company,
      which is absolute and unconditional, to pay the principal of this Debenture
      at
      the time, place, and rate, and in the coin or currency, herein prescribed.
      This
      Debenture is a direct obligation of the Company.

     

    Section
      5.03 Transfer.
      This
      Debenture has been issued subject to investment representations of the original
      purchaser hereof and may be transferred or exchanged only in compliance with
      the
      1933 Act, and other applicable state and foreign securities laws. In the event
      of any proposed transfer of this Debenture, the Company may require, prior
      to
      issuance of a new Debenture in the name of such other person, that it receive
      reasonable transfer documentation including legal opinions that the issuance
      of
      the Debenture in such other name does not and will not cause a violation of
      the
      1933 Act or any applicable state or foreign securities laws. Prior to due
      presentment for transfer of this Debenture, the Company and any agent of the
      Company may treat the person in whose name this Debenture is duly registered
      on
      the Company's Debenture Register as the owner hereof for the purpose of
      receiving payment as herein provided and for all other purposes, whether or
      not
      this Debenture be overdue, and neither the Company nor any such agent shall
      be
      affected by notice to the contrary.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    Section
      5.04 Investment
      Purpose. The
      Holder of the Debenture, by acceptance hereof, agrees that this Debenture is
      being acquired for investment and that such Holder will not offer, sell or
      otherwise dispose of this Debenture except under circumstances which will not
      result in a violation of the 1933 Act or any applicable state Blue Sky or
      foreign laws or similar laws relating to the sale of securities.

     

    Section
      5.05 Notices.
      Any
      notices required or permitted to be given under the terms of this Agreement
      shall be sent by certified or registered mail (return receipt requested) or
      delivered personally or by courier (including a recognized overnight delivery
      service) or by facsimile or by electronic mail either in the text of an email
      message or attached in a commonly readable format, and shall be effective five
      days after being placed in the mail, if mailed by regular United States mail,
      or
      upon receipt, if delivered personally, by courier (including a recognized
      overnight delivery service) or by facsimile, or one day after electronically
      mailed if the sender has received no generated notice that the email message
      has
      not been successfully delivered, in each case addressed to a party. The
      addresses for such communications shall be:

     

    If
      to
      Sionix:

    

    2082
      Michelson Drive, Suite 304

    Irvine,
      CA 92612

    Attention:
      _______________

    Facsimile:
      (949)
      752-7998

    Email:

    

    with
      a
      copy to:

    

    Richardson
      & Patel, LLP

    405
      Lexington Avenue, 26th
      Floor

    New
      York,
      NY 10174

    Attention:
      Kevin Friedmann, Esq. 

    Facsimile:
      212-907-6687

    Email:
      

    

    

    If
      to
      Purchaser:

    

    ____________________

    ____________________

    ____________________

    Attention: 

    Facsimile:
      

    Email:
      

    

    with
      a
      copy to:

    

    ____________________

    ____________________

    ____________________

    Attention: 

    Facsimile:
      

    Email:
      

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    Each
      party shall provide notice to the other party of any change in
      address.

    

    Section
      5.06 Governing
      Law.
      This
      Debenture shall be governed by and construed in accordance with the laws of
      the
      State of New York. Each of the parties consents to the jurisdiction of the
      federal courts whose districts encompass any part of the City of New York or
      the
      state courts of the State of New York sitting in the City of New York in
      connection with any dispute arising under this Debenture and hereby waives,
      to
      the maximum extent permitted by law, any objection, including any objection
      based on forum
      non coveniens,
      to the
      bringing of any such proceeding in such jurisdictions. Each of the parties
      hereby waives the right to a trial by jury in connection with any dispute
      arising under this Debenture.

     

    Section
      5.07 Severability.
      The
      invalidity of any of the provisions of this Debenture shall not invalidate
      or
      otherwise affect any of the other provisions of this Debenture, which shall
      remain in full force and effect.

     

    Section
      5.08 Entire
      Agreement and Amendments.
      This
      Debenture represents the entire agreement between the parties hereto with
      respect to the subject matter hereof and there are no representations,
      warranties or commitments, except as set forth herein. This Debenture may be
      amended only by an instrument in writing executed by the parties
      hereto.

     

    Section
      5.09 Counterparts.
      This
      Debenture may be executed in multiple counterparts, each of which shall be
      an
      original, but all of which shall be deemed to constitute on
      instrument.

     

    Section
      5.10 Lost
      Documents.
      Upon
      receipt by the Company of evidence satisfactory to it of the loss, theft,
      destruction or mutilation of this Debenture or any Debenture exchanged for
      it,
      and (in the case of loss, theft or destruction) of indemnity satisfactory to
      it,
      and upon surrender and cancellation of such Debenture, if mutilated, the Company
      will make and deliver in lieu of such Debenture a new Debenture of like tenor
      and unpaid principal amount and dated as of the original date of this
      Debenture.

     

    

    [Remainder
      of page intentionally left blank]

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      with
      the intent to be legally bound hereby, the Company as executed this Debenture
      as
      of the date first written above.

     

    
      	 	 	 
	 	
              SIONIX
                CORPORATION

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:
                Richard H. Papalian 

            
	 	
              Title:
                Chief Executive Officer 

            

    

     

    
      
        
        

      

      
        7

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