HYPERDYNAMICS CORP
EXHIBIT 10.1
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>7
<FILENAME>ex10_1.txt
<DESCRIPTION>EXHIBIT 10.1
<TEXT>
EXHIBIT 10.1-SECURITIES PURCHASE AGREEMENT
------------------------------------------

                          SECURITIES PURCHASE AGREEMENT
                          -----------------------------

     THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of June 19,
                                               ---------
2006,  by  and  among  HYPERDYNAMICS  CORPORATION,  a  Delaware corporation (the
"Company"), and the Buyers listed on Schedule I attached hereto (individually, a
 -------
"Buyer" or collectively "Buyers").
 -----                   ------

                                   WITNESSETH
                                   ----------

     WHEREAS,  the  Company  and  the  Buyer  are  executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section  4(2) and/or Rule 506 of Regulation D ("Regulation D") as promulgated by
                                                ------------
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
                                                  ---
of 1933, as amended (the "Securities Act");
                          --------------

     WHEREAS,  the  parties  desire  that,  upon  the  terms  and subject to the
conditions  contained  herein, the Company shall issue and sell to the Buyer, as
provided  herein,  and  the  Buyer  shall  purchase  up  to  Six Million Dollars
($6,000,000)  of  secured convertible debentures (the "Convertible Debentures"),
                                                       ----------------------
which  shall be convertible into shares of the Company's common stock, par value
$0.001 (the "Common Stock") (as converted, the "Conversion Shares") of which Two
             ------------                       -----------------
Million  Dollars ($2,000,000) shall be funded within  fifteen  (15) business day
following  the  date  hereof  (the  "First  Closing"),  Two  Million  Dollars
                                     --------------
($2,000,000)  shall  be  funded  two  (2)  business  days  prior to the date the
registration  statement (the "Registration Statement") is filed, pursuant to the
                              ----------------------
Investor  Registration  Rights  Agreement dated the date hereof, with the United
States  Securities  and  Exchange Commission (the "SEC") (the "Second Closing"),
                                                   ---         --------------
and  Two  Million Dollars ($2,000,000) shall be funded within three (3) business
days  after the date the Registration Statement is declared effective by the SEC
(the  "Third  Closing")   (individually  referred to as a "Closing" collectively
       --------------                                      -------
referred  to as the "Closings"), for a total purchase price of up to Six Million
                     --------
Dollars ($6,000,000), (the "Purchase Price") in the respective amounts set forth
                            --------------
opposite each Buyer name on Schedule I (the "Subscription Amount"); and
                                             -------------------

     WHEREAS,  contemporaneously  with  the  execution  and  delivery  of  this
Agreement,  the  parties  hereto  are  executing  and  delivering  an  Investor
Registration  Rights  Agreement  (the  "Investor Registration Rights Agreement")
                                        --------------------------------------
pursuant  to which the Company has agreed to provide certain registration rights
under  the Securities Act and the rules and regulations promulgated there under,
and  applicable  state  securities  laws;  and

     WHEREAS,  contemporaneously  with  the  execution  and  delivery  of  this
Agreement,  the  Company  and the Buyers are executing and delivering a Security
Agreement, and Trendsetter Production Company, HDY Resources Corporation, each a
subsidiary  of  the  Company,  and  the  Buyers  are  executing and delivering a
Subsidiary  Security  Agreement  (collectively  referred  to  as  the  "Security
                                                                        --------
Agreement")  pursuant to which the Company, Trendsetters Production Company, and
---------
HDY  Resources  Corporation granted to the Buyers a security interest in Pledged
Collateral  (as  this  term is defined in each Security Agreement) to secure the
Company's  obligations  under  this Agreement, the Transaction Documents, or any
other  obligations  of  the  Company  to  the  Buyer;


<PAGE>
     WHEREAS,  contemporaneously  with  the  execution  and  delivery  of  this
Agreement,  the parties hereto are executing and delivering Irrevocable Transfer
Agent Instructions (the "Irrevocable Transfer Agent Instructions")
                         ---------------------------------------

     NOW,  THEREFORE,  in  consideration  of  the  mutual  covenants  and  other
agreements contained in this Agreement the Company and the Buyer hereby agree as
follows:

          1.     PURCHASE  AND  SALE  OF  CONVERTIBLE  DEBENTURES.
                 ------------------------------------------------

               (a)     Purchase  of  Convertible  Debentures.  Subject  to  the
                       -------------------------------------
satisfaction  (or  waiver)  of  the terms and conditions of this Agreement, each
Buyer  agrees,  severally  and  not jointly, to purchase at each Closing and the
Company  agrees  to  sell and issue to each Buyer, severally and not jointly, at
each  Closing,  Convertible  Debentures  in  amounts  corresponding  with  the
Subscription  Amount  set forth opposite each Buyer's name on Schedule I hereto.

               (b)     Closing Date.  The First Closing of the purchase and sale
                       ------------
of  the  Convertible  Debentures shall take place at 10:00 a.m. Eastern Standard
Time  on  the  fifth  (5th)  business  day following the date hereof, subject to
notification  of  satisfaction  of the conditions to the First Closing set forth
herein  and  in Sections 6 and 7 below (or such other date as is mutually agreed
to  by the Company and the Buyer) (the "First Closing Date"), the Second Closing
                                        ------------------
of the purchase and sale of the Convertible Debentures shall take place at 10:00
a.m.  Eastern  Standard  Time  two  (2)  business  days  prior  to  the date the
Registration  Statement  is  filed  with  the  SEC,  subject  to notification of
satisfaction  of  the  conditions  to the Second Closing set forth herein and in
Sections  6  and  7  below  (or  such later date as is mutually agreed to by the
Company and the Buyer) (the "Second Closing Date"), and the Third Closing of the
                             -------------------
purchase  and  sale of the Convertible Debentures shall take place at 10:00 a.m.
Eastern  Standard Time on the third (3rd) business day immediately following the
date  the  Registration  Statement  is declared effective by the SEC, subject to
notification  of  satisfaction  of the conditions to the Third Closing set forth
herein and in Sections 6 and 7 below (or such earlier date as is mutually agreed
to  by  the  Company  and the Buyer(s)) (the "Third Closing Date") (collectively
                                              ------------------
referred  to  a the "Closing Dates").  The Closing shall occur on the respective
                     -------------
Closing  Dates  at  the  offices of Yorkville Advisors, LLC, 3700 Hudson Street,
Suite  3700,  Jersey  City, New Jersey 07302 (or such other place as is mutually
agreed  to  by  the  Company  and  the  Buyer).

               (c)     Form  of  Payment.  Subject  to  the  satisfaction of the
                       -----------------
terms  and  conditions  of  this Agreement, on the Closing Dates, (i) the Buyers
shall  deliver  to  the  Company  such  aggregate  proceeds  for the Convertible
Debentures  to  be  issued  and  sold  to  such Buyer, minus the fees to be paid
directly  from  the  proceeds  the  Closings  as  set forth herein, and (ii) the
Company  shall deliver to each Buyer, Convertible Debentures which such Buyer is
purchasing  in  amounts indicated opposite such Buyer's name on Schedule I, duly
executed  on  behalf  of  the  Company.

          2.     BUYER'S  REPRESENTATIONS  AND  WARRANTIES.
                 -----------------------------------------

     Each Buyer represents and warrants, severally and not jointly, that:

               (a)     Investment  Purpose.  Each  Buyer  is  acquiring  the
                       -------------------
Convertible Debentures and, upon conversion of Convertible Debentures, the Buyer
will  acquire  the


                                        2
<PAGE>
Conversion Shares then issuable, for its own account for investment only and not
with  a  view  towards,  or  for  resale  in connection with, the public sale or
distribution  thereof, except pursuant to sales registered or exempted under the
Securities  Act;  provided,  however, that by making the representations herein,
such Buyer reserves the right to dispose of the Conversion Shares at any time in
accordance with or pursuant to an effective registration statement covering such
Conversion Shares or an available exemption under the Securities Act.

               (b)     Accredited Investor Status.  Each Buyer is an "Accredited
                       --------------------------                     ----------
Investor" as that term is defined in Rule 501(a)(3) of Regulation D.
--------

               (c)     Reliance  on Exemptions.  Each Buyer understands that the
                       -----------------------
Convertible  Debentures are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities  laws  and  that  the  Company  is relying in part upon the truth and
accuracy  of, and such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in
order  to  determine  the availability of such exemptions and the eligibility of
such  Buyer  to  acquire  such  securities.

               (d)     Information.  Each  Buyer  and  its advisors (and his or,
                       -----------
its  counsel),  if  any,  have been furnished with all materials relating to the
business,  finances  and  operations  of  the  Company and information he deemed
material to making an informed investment decision regarding his purchase of the
Convertible  Debentures  and the Conversion Shares, which have been requested by
such  Buyer.  Each  Buyer  and  its  advisors,  if  any,  have been afforded the
opportunity  to  ask  questions of the Company and its management.  Neither such
inquiries  nor any other due diligence investigations conducted by such Buyer or
its  advisors, if any, or its representatives shall modify, amend or affect such
Buyer's  right to rely on the Company's representations and warranties contained
in  Section  3  below.  Each  Buyer  understands  that  its  investment  in  the
Convertible Debentures and the Conversion Shares involves a high degree of risk.
Each Buyer is in a position regarding the Company, which, based upon employment,
family relationship or economic bargaining power, enabled and enables such Buyer
to obtain information from the Company in order to evaluate the merits and risks
of  this  investment.  Each  Buyer  has  sought  such  accounting, legal and tax
advice,  as  it has considered necessary to make an informed investment decision
with respect to its acquisition of the Convertible Debentures and the Conversion
Shares.

               (e)     No  Governmental  Review.  Each Buyer understands that no
                       ------------------------
United  States  federal  or state agency or any other government or governmental
agency  has  passed  on  or  made  any  recommendation  or  endorsement  of  the
Convertible  Debentures or the Conversion Shares, or the fairness or suitability
of  the  investment  in the Convertible Debentures or the Conversion Shares, nor
have  such authorities passed upon or endorsed the merits of the offering of the
Convertible  Debentures  or  the  Conversion  Shares.

               (f)     Transfer  or  Resale.  Each Buyer understands that except
                       --------------------
as  provided  in the Investor Registration Rights Agreement: (i) the Convertible
Debentures  have  not been and are not being registered under the Securities Act
or any state securities laws, and may not be offered for sale, sold, assigned or
transferred  unless  (A)  subsequently  registered thereunder, or (B) such Buyer
shall  have  delivered  to  the  Company  an  opinion  of  counsel,  in  a


                                        3
<PAGE>
generally  acceptable  form,  to  the  effect  that  such securities to be sold,
assigned  or  transferred  may  be  sold, assigned or transferred pursuant to an
exemption  from such registration requirements; (ii) any sale of such securities
made  in  reliance  on  Rule  144  under the Securities Act (or a successor rule
thereto)  ("Rule 144") may be made only in accordance with the terms of Rule 144
            --------
and  further, if Rule 144 is not applicable, any resale of such securities 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 Securities
Act)  may  require compliance with some other exemption under the Securities Act
or  the  rules  and  regulations  of  the  SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register such securities
under  the  Securities  Act  or  any state securities laws or to comply with the
terms  and  conditions  of  any  exemption thereunder.  The Company reserves the
right  to  place  stop transfer instructions against the shares and certificates
for  the  Conversion  Shares.

               (g)     Legends.  Each Buyer understands that the certificates or
                       -------
other  instruments representing the Convertible Debentures and or the Conversion
Shares  shall bear a restrictive legend in substantially the following form (and
a  stop  transfer  order  may  be  placed  against  transfer  of  such  stock
certificates):

          THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
          REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
          APPLICABLE  STATE  SECURITIES LAWS. THE SECURITIES HAVE BEEN
          ACQUIRED  SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
          TOWARD  RESALE  AND  MAY  NOT  BE  OFFERED  FOR  SALE, SOLD,
          TRANSFERRED  OR  ASSIGNED  IN  THE  ABSENCE  OF AN EFFECTIVE
          REGISTRATION  STATEMENT  FOR  THE  SECURITIES  UNDER  THE
          SECURITIES  ACT  OF  1933,  AS  AMENDED, OR APPLICABLE STATE
          SECURITIES  LAWS,  OR  AN OPINION OF COUNSEL, IN A GENERALLY
          ACCEPTABLE  FORM,  THAT  REGISTRATION  IS NOT REQUIRED UNDER
          SAID  ACT  OR  APPLICABLE  STATE  SECURITIES  LAWS.

The  legend  set  forth  above  shall  be removed and the Company within two (2)
business days shall issue a certificate without such legend to the holder of the
Conversion  Shares  upon  which  it is stamped, if, unless otherwise required by
state  securities  laws, (i) in connection with a sale transaction, provided the
Conversion  Shares are registered under the Securities Act or (ii) in connection
with  a sale transaction, after such holder provides the Company with an opinion
of  counsel,  which  opinion shall be in form, substance and scope customary for
opinions  of  counsel  in  comparable  transactions, to the effect that a public
sale,  assignment  or  transfer  of  the  Conversion  Shares may be made without
registration  under  the  Securities  Act.

               (h)     Authorization, Enforcement.  This Agreement has been duly
                       --------------------------
and  validly authorized, executed and delivered on behalf of such Buyer and is a
valid  and  binding  agreement  of such Buyer enforceable in accordance with its
terms,  except  as  such  enforceability may be limited by general principles of
equity  or  applicable  bankruptcy,  insolvency,


                                        4
<PAGE>
reorganization,  moratorium,  liquidation and other similar laws relating to, or
affecting  generally,  the  enforcement  of  applicable  creditors'  rights  and
remedies.

               (i)     Receipt  of Documents.  Each Buyer and his or its counsel
                       ---------------------
has  received  and  read  in  their  entirety:  (i)  this  Agreement  and  each
representation,  warranty  and  covenant  set  forth  herein and the Transaction
Documents  (as  defined  herein);  (ii)  all due diligence and other information
necessary  to  verify  the  accuracy  and  completeness of such representations,
warranties  and  covenants;  (iii) the Company's Form 10-KSB for the fiscal year
ended June 30, 2005; (iv) the Company's Form 10-QSB for the fiscal quarter ended
December  31,  2005 and (v) answers to all questions each Buyer submitted to the
Company regarding an investment in the Company; and each Buyer has relied on the
information  contained  therein  and has not been furnished any other documents,
literature,  memorandum  or  prospectus.

               (j)     Due  Formation  of  Corporate  and  Other Buyers.  If the
                       ------------------------------------------------
Buyer  is  a  corporation,  trust,  partnership  or  other entity that is not an
individual  person,  it  has  been  formed  and  validly exists and has not been
organized  for the specific purpose of purchasing the Convertible Debentures and
is  not  prohibited  from  doing  so.

               (k)     No  Legal  Advice  From  the  Company.  Each  Buyer
                       -------------------------------------
acknowledges,  that  it  had  the  opportunity  to review this Agreement and the
transactions  contemplated  by  this Agreement with his or its own legal counsel
and  investment  and tax advisors.  Each Buyer is relying solely on such counsel
and  advisors and not on any statements or representations of the Company or any
of  its  representatives  or  agents  for  legal,  tax or investment advice with
respect  to  this investment, the transactions contemplated by this Agreement or
the  securities  laws  of  any  jurisdiction.

          3.     REPRESENTATIONS  AND  WARRANTIES  OF  THE  COMPANY.
                 --------------------------------------------------

     The  Company  represents  and warrants as of the date hereof to each of the
Buyers  that, except as set forth in the SEC Documents (as defined herein) or in
the Disclosure Schedule attached hereto (the "Disclosure Schedule"):
                                              -------------------

               (a)     Organization  and  Qualification.  The  Company  and  its
                       --------------------------------
subsidiaries  are  corporations  duly  organized  and  validly  existing in good
standing  under the laws of the jurisdiction in which they are incorporated, and
have the requisite corporate power to own their properties and to carry on their
business  as  now  being conducted.  Each of the Company and its subsidiaries is
duly  qualified  as a foreign corporation to do business and is in good standing
in  every jurisdiction in which the nature of the business conducted by it makes
such  qualification  necessary,  except  to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company  and  its  subsidiaries  taken  as  a  whole.

               (b)     Authorization,  Enforcement,  Compliance  with  Other
                       -----------------------------------------------------
Instruments.  (i) The Company has the requisite corporate power and authority to
-----------
enter  into  and  perform  this  Agreement, the Security Agreement, the Investor
Registration Rights Agreement, the Irrevocable Transfer Agent Agreement, and any
related  agreements  (collectively the "Transaction Documents") and to issue the
                                        ---------------------
Convertible  Debentures  and  the Conversion Shares in accordance with the terms
hereof and thereof, (ii) the execution and delivery of the Transaction Documents


                                        5
<PAGE>
by  the  Company  and  the  consummation  by it of the transactions contemplated
hereby  and  thereby,  including,  without  limitation,  the  issuance  of  the
Convertible  Debentures  the  Conversion Shares and the reservation for issuance
and  the  issuance of the Conversion Shares issuable upon conversion or exercise
thereof,  have  been  duly authorized by the Company's Board of Directors and no
further  consent  or  authorization  is  required  by  the Company, its Board of
Directors  or  its  stockholders, (iii) the Transaction Documents have been duly
executed and delivered by the Company, (iv) the Transaction Documents constitute
the valid and binding obligations of the Company enforceable against the Company
in  accordance with their terms, except as such enforceability may be limited by
general  principles  of  equity  or  applicable  bankruptcy,  insolvency,
reorganization,  moratorium,  liquidation  or  similar  laws  relating  to,  or
affecting  generally,  the  enforcement  of  creditors' rights and remedies. The
authorized  officer  of the Company executing the Transaction Documents knows of
no  reason  why  the  Company cannot file the registration statement as required
under the Investor Registration Rights Agreement or perform any of the Company's
other  obligations  under  such  documents.

               (c)     Capitalization.  The  authorized  capital  stock  of  the
                       --------------
Company  consists of 250,000,000 shares of Common Stock and 40,000,000 shares of
Preferred Stock, par value $0.001 ("Preferred Stock") of which 46,308,573 shares
                                    ---------------
of Common Stock and 1,945 shares of Series A Preferred Stock and 2,725 shares of
Series  B  Preferred  Stock are issued and outstanding.  All of such outstanding
shares have been validly issued and are fully paid and nonassessable.  No shares
of  Common Stock are subject to preemptive rights or any other similar rights or
any  liens  or  encumbrances  suffered  or  permitted by the Company.  Except as
previously  disclosed,  as  of  the  date  of  this  Agreement, (i) there are no
outstanding  options,  warrants,  scrip,  rights  to  subscribe  to,  calls  or
commitments  of  any  character  whatsoever relating to, or securities or rights
convertible  into,  any  shares  of  capital  stock of the Company or any of its
subsidiaries, or contracts, commitments, understandings or arrangements by which
the  Company  or  any  of  its  subsidiaries  is  or  may  become bound to issue
additional  shares of capital stock of the Company or any of its subsidiaries or
options,  warrants,  scrip,  rights to subscribe to, calls or commitments of any
character  whatsoever relating to, or securities or rights convertible into, any
shares  of  capital  stock of the Company or any of its subsidiaries, (ii) there
are  no  outstanding  debt  securities  and  (iii)  there  are  no agreements or
arrangements  under which the Company or any of its subsidiaries is obligated to
register  the  sale  of any of their securities under the Securities Act (except
pursuant to the Registration Rights Agreement) and (iv) there are no outstanding
registration  statements  and  there are no outstanding comment letters from the
SEC  or  any  other  regulatory  agency.  There are no securities or instruments
containing  anti-dilution  or  similar  provisions that will be triggered by the
issuance  of  the  Convertible  Debentures  as described in this Agreement.  The
Company  has  furnished  to  the  Buyer true and correct copies of the Company's
Articles  of  Incorporation, as amended and as in effect on the date hereof (the
"Articles  of  Incorporation"),  and  the Company's By-laws, as in effect on the
 ---------------------------
date hereof (the "By-laws"), and the terms of all securities convertible into or
                  -------
exercisable  for  Common Stock and the material rights of the holders thereof in
respect  thereto  other  than stock options issued to employees and consultants.

               (d)     Issuance  of  Securities.  The Convertible Debentures are
                       ------------------------
duly authorized and, upon issuance in accordance with the terms hereof, shall be
duly  issued,  fully  paid and nonassessable, are free from all taxes, liens and
charges  with respect to the issue thereof.  The Conversion Shares issuable upon
conversion  of  the  Convertible  Debentures  have


                                        6
<PAGE>
been  duly authorized and reserved for issuance.  Upon conversion or exercise in
accordance  with  the  Convertible Debentures the Conversion Shares will be duly
issued,  fully  paid  and  nonassessable.

               (e)     No Conflicts.  The execution, delivery and performance of
                       ------------

the  Transaction Documents by the Company and the consummation by the Company of
the  transactions  contemplated hereby will not (i) result in a violation of the
Articles  of  Incorporation,  any certificate of designations of any outstanding
series of preferred stock of the Company or the By-laws or (ii) conflict with or
constitute  a  default  (or  an event which with notice or lapse of time or both
would  become  a  default)  under,  or give to others any rights of termination,
amendment,  acceleration  or  cancellation  of,  any  agreement,  indenture  or
instrument to which the Company or any of its subsidiaries is a party, or result
in  a  violation  of  any  law,  rule,  regulation,  order,  judgment  or decree
(including  federal  and state securities laws and regulations and the rules and
regulations  of  The  National  Association  of  Securities  Dealers  Inc.'s OTC
Bulletin Board on which the Common Stock is quoted) applicable to the Company or
any  of its subsidiaries or by which any property or asset of the Company or any
of  its  subsidiaries  is  bound  or  affected.  Neither  the  Company  nor  its
subsidiaries  is in violation of any term of or in default under its Articles of
Incorporation  or  By-laws  or  their  organizational  charter  or  by-laws,
respectively,  or  any  material  contract,  agreement,  mortgage, indebtedness,
indenture,  instrument,  judgment,  decree  or  order  or  any  statute, rule or
regulation  applicable  to  the Company or its subsidiaries. The business of the
Company  and its subsidiaries is not being conducted, and shall not be conducted
in  violation  of any material law, ordinance, or regulation of any governmental
entity.  Except  as  specifically contemplated by this Agreement and as required
under  the  Securities Act and any applicable state securities laws, the Company
is  not  required  to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under or contemplated by this
Agreement  or  the  Registration  Rights  Agreement in accordance with the terms
hereof  or  thereof.  All  consents,  authorizations,  orders,  filings  and
registrations  which the Company is required to obtain pursuant to the preceding
sentence  have  been  obtained  or  effected on or prior to the date hereof. The
Company  and  its  subsidiaries  are unaware of any facts or circumstance, which
might  give  rise  to  any  of  the  foregoing.

               (f)     SEC  Documents:  Financial  Statements.  Since January 1,
                       --------------------------------------
2003,  the Company has filed all reports, schedules, forms, statements and other
documents  required to be filed by it with the SEC under the Securities Exchange
Act  of  1934, as amended (the "Exchange Act") (all of the foregoing filed prior
                                ------------
to  the  date  hereof or amended after the date hereof and all exhibits included
therein  and  financial  statements  and  schedules  thereto  and  documents
incorporated  by  reference  therein,  being hereinafter referred to as the "SEC
                                                                             ---
Documents").  The  Company has delivered to the Buyers or their representatives,
---------
or  made  available  through  the  SEC's website at http://www.sec.gov, true and
complete  copies  of  the  SEC  Documents.  As  of  their  respective dates, the
financial  statements  of  the  Company  disclosed  in  the  SEC  Documents (the
"Financial  Statements")  complied  as  to  form  in  all material respects with
 ---------------------
applicable  accounting  requirements  and the published rules and regulations of
the  SEC  with respect thereto.  Such financial statements have been prepared in
accordance  with generally accepted accounting principles, consistently applied,
during  the  periods  involved (except (i) as may be otherwise indicated in such
Financial  Statements  or  the  notes  thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or  summary


                                        7
<PAGE>
statements)  and, fairly present in all material respects the financial position
of  the  Company  as  of the dates thereof and the results of its operations and
cash  flows  for  the  periods  then  ended  (subject,  in the case of unaudited
statements, to normal year-end audit adjustments). No other information provided
by  or  on  behalf  of the Company to the Buyer which is not included in the SEC
Documents,  including,  without  limitation,  information  referred  to  in this
Agreement,  contains  any  untrue statement of a material fact or omits to state
any  material  fact  necessary  in  order to make the statements therein, in the
light  of  the  circumstances  under  which  they  were  made,  not  misleading.

               (g)     10(b)-5.  The  SEC  Documents  do  not include any untrue
                       -------
statements  of  material  fact,  nor  do  they  omit  to state any material fact
required to be stated therein necessary to make the statements made, in light of
the  circumstances  under  which  they  were  made,  not  misleading.

               (h)     Absence  of Litigation.  To the knowledge of the Company,
                       ----------------------
there  is no action, suit, proceeding, inquiry or investigation before or by any
court,  public  board,  government  agency, self-regulatory organization or body
pending  against  or  affecting  the  Company,  the  Common  Stock or any of the
Company's subsidiaries, wherein an unfavorable decision, ruling or finding would
(i)  have a material adverse effect on the transactions contemplated hereby (ii)
adversely  affect the validity or enforceability of, or the authority or ability
of  the  Company  to perform its obligations under, this Agreement or any of the
documents  contemplated  herein,  or (iii) have a material adverse effect on the
business,  operations, properties, financial condition or results of  operations
of  the  Company  and  its  subsidiaries  taken  as  a  whole.

               (i)     Acknowledgment  Regarding  Buyer's  Purchase  of  the
                       -----------------------------------------------------
Convertible  Debentures.  The  Company acknowledges and agrees that the Buyer is
-----------------------
acting  solely in the capacity of an arm's length purchaser with respect to this
Agreement  and  the  transactions  contemplated  hereby.  The  Company  further
acknowledges that the Buyer is not acting as a financial advisor or fiduciary of
the  Company (or in any similar capacity) with respect to this Agreement and the
transactions  contemplated  hereby  and  any advice given by the Buyer or any of
their respective representatives or agents in connection with this Agreement and
the  transactions  contemplated  hereby  is  merely  incidental  to such Buyer's
purchase  of  the  Convertible Debentures or the Conversion Shares.  The Company
further  represents  to the Buyer that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation by the Company and
its  representatives.

               (j)     No General Solicitation.  Neither the Company, nor any of
                       -----------------------
its affiliates, nor any person acting on its or their behalf, has engaged in any
form  of  general  solicitation  or  general  advertising (within the meaning of
Regulation  D  under the Securities Act) in connection with the offer or sale of
the  Convertible  Debentures  or  the  Conversion  Shares.

               (k)     No  Integrated Offering.  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 require registration of the
Convertible  Debentures  or  the  Conversion  Shares  under  the


                                        8
<PAGE>
Securities  Act  or  cause  this  offering  of the Convertible Debentures or the
Conversion  Shares  to  be  integrated  with  prior offerings by the Company for
purposes  of  the  Securities  Act.

               (l)     Employee  Relations.  Neither  the Company nor any of its
                       -------------------
subsidiaries  is  involved  in  any  labor  dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened.  None of the
Company's  or its subsidiaries' employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are good.

               (m)     Intellectual  Property  Rights.  The  Company  and  its
                       ------------------------------
subsidiaries  own  or possess adequate rights or licenses to use all trademarks,
trade  names, service marks, service mark registrations, service names, patents,
patent  rights,  copyrights,  inventions,  licenses,  approvals,  governmental
authorizations,  trade  secrets and rights necessary to conduct their respective
businesses  as  now  conducted. The Company and its subsidiaries do not have any
knowledge  of  any infringement by the Company or its subsidiaries of trademark,
trade  name  rights,  patents,  patent rights, copyrights, inventions, licenses,
service  names, service marks, service mark registrations, trade secret or other
similar  rights  of  others,  and,  to  the knowledge of the Company there is no
claim,  action  or proceeding being made or brought against, or to the Company's
knowledge,  being  threatened against, the Company or its subsidiaries regarding
trademark,  trade  name,  patents, patent rights, invention, copyright, license,
service  names, service marks, service mark registrations, trade secret or other
infringement;  and  the Company and its subsidiaries are unaware of any facts or
circumstances  which  might  give  rise  to  any  of  the  foregoing.

               (n)     Environmental Laws.  The Company and its subsidiaries are
                       ------------------
(i)  in compliance with any and all applicable foreign, federal, state and local
laws  and regulations relating to the protection of human health and safety, the
environment  or  hazardous  or  toxic  substances  or  wastes,  pollutants  or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
               ------------------
other  approvals required of them under applicable Environmental Laws to conduct
their  respective  businesses  and  (iii)  are  in compliance with all terms and
conditions of any such permit, license or approval.

               (o)     Title.  Any real property and facilities held under lease
                       -----
by the Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with  the use made and proposed to be made of such property and buildings by the
Company  and  its  subsidiaries.

               (p)     Insurance.  The  Company and each of its subsidiaries are
                       ---------
insured  by  insurers of recognized financial responsibility against such losses
and  risks  and  in  such  amounts  as  management of the Company believes to be
prudent  and  customary  in  the  businesses  in  which  the  Company  and  its
subsidiaries  are  engaged. Neither the Company nor any such subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any  such 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 at a cost that would not materially and adversely affect the condition,
financial  or  otherwise, or the earnings, business or operations of the Company
and  its  subsidiaries,  taken  as  a  whole.


                                        9
<PAGE>
               (q)     Regulatory  Permits.  The  Company  and  its subsidiaries
                       -------------------
possess  all  material  certificates,  authorizations  and permits issued by the
appropriate  federal,  state  or  foreign  regulatory  authorities  necessary to
conduct  their  respective  businesses,  and  neither  the  Company nor any such
subsidiary  has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.

               (r)     Internal  Accounting  Controls.  The  Company and each of
                       ------------------------------
its subsidiaries maintain a system of internal accounting controls sufficient to
provide  reasonable  assurance  that (i) transactions are executed in accordance
with  management's  general  or  specific  authorizations, (ii) transactions are
recorded  as  necessary  to  permit  preparation  of  financial  statements  in
conformity  with  generally accepted accounting principles and to maintain asset
accountability,  and  (iii) the recorded amounts for assets is compared with the
existing  assets  at  reasonable  intervals and appropriate action is taken with
respect  to  any  differences.

               (s)     No  Material  Adverse Breaches, etc.  Neither the Company
                       -----------------------------------
nor  any of its subsidiaries is subject to any charter, corporate or other legal
restriction,  or  any  judgment,  decree, order, rule or regulation which in the
judgment  of  the  Company's officers has or is expected in the future to have a
material  adverse  effect  on  the  business,  properties, operations, financial
condition,  results  of  operations  or  prospects  of  the  Company  or  its
subsidiaries.  Neither  the  Company nor any of its subsidiaries is in breach of
any  contract  or  agreement  which  breach,  in  the  judgment of the Company's
officers,  has or is expected to have a material adverse effect on the business,
properties,  operations, financial condition, results of operations or prospects
of  the  Company  or  its  subsidiaries.

               (t)     Tax Status.  The Company and each of its subsidiaries has
                       ----------
made  and  filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject and (unless
and  only  to  the  extent that the Company and each of its subsidiaries has set
aside  on its books provisions reasonably adequate for the payment of all unpaid
and  unreported taxes) has paid all taxes and other governmental assessments and
charges  that  are  material  in  amount,  shown or determined to be due on such
returns,  reports  and  declarations, except those being contested in good faith
and  has set aside on its books provision reasonably adequate for the payment of
all  taxes  for periods subsequent to the periods to which such returns, reports
or declarations apply.  There are no unpaid taxes in any material amount claimed
to  be  due by the taxing authority of any jurisdiction, and the officers of the
Company  know  of  no  basis  for  any  such  claim.

               (u)     Certain  Transactions.  Except  for  arm's  length
                       ---------------------
transactions pursuant to which the Company makes payments in the ordinary course
of  business  upon  terms  no  less favorable than the Company could obtain from
third  parties  and  other  than the grant of stock options disclosed in the SEC
Documents,  none  of  the  officers,  directors,  or employees of the Company is
presently  a  party to any transaction with the Company (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 corporation, partnership, trust or other entity in which any
officer,  director,  or  any  such  employee has a substantial interest or is an
officer,  director,  trustee  or  partner.


                                       10
<PAGE>
               (v)     Fees  and  Rights  of  First Refusal.  The Company is not
                       ------------------------------------
obligated  to offer the securities offered hereunder on a right of first refusal
basis  or otherwise to any third parties including, but not limited to, Dutchess
Private Equities Fund II, LP (or related entity) ("Dutchess"), current or former
                                                   --------
shareholders  of  the  Company,  underwriters,  brokers,  agents  or other third
parties.

               (w)     Dutchess  Equity Line.  The equity line of credit entered
                       ---------------------
into  with  Dutchess  in  August  2005 (the "Dutchess Equity Line") is currently
                                             --------------------
available  for  draw  downs or "puts" by the Company and the Company knows of no
reason  why  such  equity  line would be unavailable to the Company. The Company
shall  take all steps necessary in its control to maintain the effectiveness and
availability  of the equity line and shall not terminate the equity line without
the prior consent of the Buyer. The Company may only issue and sell Common Stock
through  puts  under the Dutchess Equity Line for aggregate gross proceeds of up
to $500,000 per sixty (60) day period, provided however, if (a) the Registration
Statement has been filed, (b) no Event of Default (as defined in the Convertible
Debentures) has occurred, (c) the Closing Bid Price of the Common Stock is above
$5  for  five  consecutive Trading Days, (d) the Closing Bid Price remains above
$5.00  on  the day a put is made, then the Company may exceed the limitation set
forth  above  and instead make up to two puts under the Dutchess Equity Line per
30 day period for aggregate gross proceeds of no more than the amount determined
under  the  volume matrix formula set forth in Section 2b of the Dutchess Equity
Line  for  each  of  the  two  puts.

          4.     COVENANTS.

               (a)     Best  Efforts.  Each  party shall use its best efforts to
                       -------------
timely  satisfy  each  of  the  conditions  to be satisfied by it as provided in
Sections  6  and  7  of  this  Agreement.

               (b)     Blue  Sky.  The  Company  shall, on or before the Closing
                       ---------
Date, take such action as the Company shall reasonably determine is necessary to
qualify  the Conversion Shares, or obtain an exemption for the Conversion Shares
for  sale  to  the  Buyers  at  the  Closing  pursuant  to  this Agreement under
applicable securities or "Blue Sky" laws of the states of the United States, and
shall  provide evidence of any such action so taken to the Buyers on or prior to
the  Closing  Date.

               (c)     Reporting  Status.  Until  the earlier of (i) the date as
                       -----------------
of  which  the  Buyer  may sell all of the Conversion Shares without restriction
pursuant  to  Rule  144(k)  promulgated  under  the Securities Act (or successor
thereto),  or  (ii)  the  date  on  which  (A) the Buyer shall have sold all the
Conversion  Shares  and  (B)  none of the Convertible Debentures are outstanding
(the  "Registration  Period"),  the  Company  shall  file in a timely manner all
       --------------------
reports  required  to be filed with the SEC pursuant to the Exchange Act and the
regulations  of  the  SEC  thereunder,  and  the Company shall not terminate its
status  as an issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would otherwise permit such
termination.

               (d)     Use  of Proceeds.  The Company will use the proceeds from
                       ----------------
the sale of the Convertible Debentures for general corporate and working capital
purposes.


                                       11
<PAGE>
               (e)     Reservation  of  Shares.  On the date hereof, the Company
                       -----------------------
shall  reserve  for  issuance  to  the Buyers 6,000,000 shares for issuance upon
conversions  of  the Convertible Dentures and 2,100,000 shares for issuance upon
exercise  of  the  Warrants  (collectively,  the  "Share Reserve").  The Company
                                                   -------------
represents that it has sufficient authorized and unissued shares of Common Stock
available  to  create  the Share Reserve after considering all other commitments
that  may  require  the  issuance  of  Common Stock.  The Company shall take all
action  reasonably  necessary  to at all times have authorized, and reserved for
the  purpose  of  issuance,  such  number  of shares of Common Stock as shall be
necessary  to  effect  the full conversion of the Convertible Debentures and the
full exercise of the Warrants.  If at any time the Share Reserve is insufficient
to effect the full conversion of the Convertible Debentures or the full exercise
of  the  Warrants, the Company shall increase the Share Reserve accordingly.  If
the  Company  does  not have sufficient authorized and unissued shares of Common
Stock available to increase the Share Reserve, the Company shall call and hold a
special  meeting of the shareholders within thirty (30) days of such occurrence,
for  the  sole  purpose  of  increasing  the  number  of shares authorized.  The
Company's  management  shall  recommend  to the shareholders to vote in favor of
increasing  the  number  of shares of Common Stock authorized.  Management shall
also  vote  all  of  its  shares in favor of increasing the number of authorized
shares  of  Common  Stock.

               (f)     Listings or Quotation.  The Company shall promptly secure
                       ---------------------
the  listing or quotation of the Conversion Shares upon each national securities
exchange,  automated  quotation system or The National Association of Securities
Dealers  Inc.'s  Over-The-Counter  Bulletin  Board  ("OTCBB")  (each  a "Primary
                                                      -----              -------
Market"),  if  any,  upon which shares of Common Stock are then listed or quoted
------
(subject  to  official  notice  of  issuance)  and shall use its best efforts to
maintain,  so  long as any other shares of Common Stock shall be so listed, such
listing  of  all Conversion Shares from time to time issuable under the terms of
this  Agreement.

               (g)     Fees  and  Expenses.
                       -------------------

                    (i)     Each  of  the  Company  and  the Buyer shall pay all
costs  and  expenses  incurred by such party in connection with the negotiation,
investigation, preparation, execution and delivery of the Transaction Documents.
The  Company shall pay Yorkville Advisors, LLC a fee equal to eight percent (9%)
of the Purchase Price which shall be paid pro rata directly from the proceeds of
the  each  Closing.

                    (ii)     The  Company  shall  pay  a  structuring  fee  to
Yorkville  Advisors,  LLC  of  Fifteen Thousand Dollars ($15,000) which shall be
paid  directly  from  the  proceeds  of  the  First  Closing.

                    (iii)     The  Company  shall  pay Yorkville Advisors, LLC a
non-refundable  due  diligence fee of Five Thousand Dollars ($5,000) which shall
be  paid  directly  from  the  proceeds  of  the  First  Closing.

                    (iv)     Upon  the First Closing, the Company shall issue to
the  Buyer  (a)  a  warrant  to  purchase  955,000  shares of Common Stock at an
exercise  price  of $2.50 per share, (b) a warrant to purchase 715,000 shares of
Common  Stock  at  an  exercise  price  of $3.50 per share, and (c) a warrant to
purchase  430,000  shares  of  Common  Stock  at  an  exercise


                                       12
<PAGE>
price  of $4.00 per share (collectively, the "Warrants").  Each Warrant shall be
                                              --------
in  the  form  of  Warrant attached hereto as "Exhibit A".  The shares of Common
                                               ---------
Stock  issuable  under  the  Warrants  shall  collectively be referred to as the
"Warrant  Shares".
 ---------------

                    (v)     The  Warrant  Shares  shall  have  "piggy-back"  and
demand  registration  rights.

               (h)     Corporate  Existence.  So  long as any of the Convertible
                       --------------------
Debentures  remain  outstanding,  the  Company  shall not directly or indirectly
consummate  any  merger,  reorganization,  restructuring,  reverse  stock  split
consolidation,  sale  of all or substantially all of the Company's assets or any
similar  transaction  or  related  transactions  (each  such  transaction,  an
"Organizational  Change")  unless,  prior  to the consummation an Organizational
 ----------------------
Change, the Company obtains the written consent of each Buyer which shall not be
unreasonably  withheld.  In  any  such  case,  the Company will make appropriate
provision  with respect to such holders' rights and interests to insure that the
provisions of this Section 4(h) will thereafter be applicable to the Convertible
Debentures.

               (i)     Transactions With Affiliates.  So long as any Convertible
                       ----------------------------
Debentures  are  outstanding, the Company shall not, and shall cause each of its
subsidiaries  not  to,  enter  into,  amend, modify or supplement, or permit any
subsidiary  to  enter  into,  amend,  modify  or  supplement  any  agreement,
transaction,  commitment,  or  arrangement  with  any of its or any subsidiary's
officers,  directors,  person  who were officers or directors at any time during
the  previous two (2) years, stockholders who beneficially own five percent (5%)
or  more  of  the  Common  Stock,  or  Affiliates (as defined below) or with any
individual  related  by  blood,  marriage, or adoption to any such individual or
with  any entity in which any such entity or individual owns a five percent (5%)
or  more  beneficial interest (each a "Related Party"), except for (a) customary
                                       -------------
employment  arrangements  and  benefit  programs  on  reasonable  terms, (b) any
investment  in  an  Affiliate  of  the Company,  (c) any agreement, transaction,
commitment,  or  arrangement  on an arms-length basis on terms no less favorable
than  terms  which  would  have  been  obtainable  from a person other than such
Related  Party, (d) any agreement, transaction, commitment, or arrangement which
is  approved  by  a  majority of the disinterested directors of the Company; for
purposes  hereof,  any  director  who  is  also an officer of the Company or any
subsidiary  of the Company shall not be a disinterested director with respect to
any  such  agreement,  transaction, commitment, or arrangement.  "Affiliate" for
                                                                  ---------
purposes  hereof  means, with respect to any person or entity, another person or
entity  that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest  in  that  person  or entity, (ii) has ten percent (10%) or more common
ownership  with  that person or entity, (iii) controls that person or entity, or
(iv)  shares common control with that person or entity.  "Control" or "controls"
                                                          -------      --------
for  purposes  hereof  means  that  a  person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or entity.

               (j)     Transfer  Agent.  The  Company covenants and agrees that,
                       ---------------
in  the  event  that  the  Company's agency relationship with the transfer agent
should be terminated for any reason prior to a date which is two (2) years after
the  Closing Date, the Company shall use its best efforts to immediately appoint
a  new  transfer agent and shall require that the new transfer agent execute and
agree  to  be  bound by the terms of the Irrevocable Transfer Agent Instructions
(as  defined  herein).


                                       13
<PAGE>
               (k)     Neither  the Buyer nor any of its affiliates have an open
short  position in the Common Stock of the Company, and the Buyer agrees that it
shall  not,  and  that  it will cause its affiliates not to, engage in any short
sales of or hedging transactions with respect to the Common Stock as long as any
Convertible  Debentures shall remain outstanding, except that the Buyer may sell
shares  of  Common  Stock acquired upon submission of a proper conversion notice
(in  accordance  with  the  Convertible  Debentures).

               (l)     Restriction  on Issuance of the Capital Stock. So long as
                       ---------------------------------------------
any  Convertible Debentures are outstanding, except with respect to the Excluded
Securities  (as defined below), the Company shall not, without the prior written
consent  of  the Buyer(s), (i) issue or sell shares of Common Stock or Preferred
Stock  without  consideration or for a consideration per share less than the bid
price  of  the  Common  Stock determined immediately prior to its issuance, (ii)
issue  any  preferred  stock,  warrant,  option, right, contract, call, or other
security  or  instrument granting the holder thereof the right to acquire Common
Stock without consideration or for a consideration less than such Common Stock's
Bid  Price  determined  immediately prior to it's issuance, (iii) enter into any
security  instrument  granting  the  holder  a  security interest in any and all
assets  of  the  Company,  or  (iv) file any registration statement on Form S-8,
except  to  register up to 1,000,000 shares of common stock issued in connection
with  the  Company's  employee stock option plan.  Notwithstanding the forgoing,
the Company may issue and sell shares to Dutchess Equity Line in accordance with
Section  4(  )  herein.  For the purposes hereof, the term "Excluded Securities"
                                                            -------------------
shall  mean  up  to  300,000  shares  per  90  day  period issued at any time as
compensation  to  employees  or  consultants, provided such shares are issued at
current  market  prices  at  the  time  of  issuance.

          5.   TRANSFER AGENT INSTRUCTIONS.
               ---------------------------

               (a)     The  Company  shall  issue the Irrevocable Transfer Agent
Instructions  to  its transfer agent irrevocably appointing David Gonzalez, Esq.
as  the Company's agent for purpose of having certificates issued, registered in
the  name  of  the Buyer or its respective nominee(s), for the Conversion Shares
representing  such  amounts  of Convertible Debentures as specified from time to
time  by the Buyer to the Company upon conversion of the Convertible Debentures,
for  interest  owed  pursuant  to the Convertible Debenture, and for any and all
Liquidated  Damages (as this term is defined in the Investor Registration Rights
Agreement).  David  Gonzalez,  Esq.  shall  be  paid a cash fee of Fifty Dollars
($50)  for  every  occasion  they act pursuant to the Irrevocable Transfer Agent
Instructions.  The  Company  shall  not  change  its  transfer agent without the
express  written consent of the Buyer, which may be withheld by the Buyer in its
sole  discretion.  Prior  to  registration  of  the  Conversion Shares under the
Securities  Act,  all  such  certificates  shall  bear  the  restrictive  legend
specified  in  Section  2(g)  of  this  Agreement.  The Company warrants that no
instruction  other  than the Irrevocable Transfer Agent Instructions referred to
in this Section 5, and stop transfer instructions to give effect to Section 2(g)
hereof  (in  the  case  of  the  Conversion Shares prior to registration of such
shares  under  the  Securities Act) will be given by the Company to its transfer
agent  and  that the Conversion Shares shall otherwise be freely transferable on
the  books  and  records  of  the  Company as and to the extent provided in this
Agreement  and  the  Investor  Registration  Rights  Agreement.  Nothing in this
Section  5  shall  affect  in  any  way the Buyer's obligations and agreement to
comply with all applicable securities laws upon resale of Conversion Shares.  If
the  Buyer  provides  the Company with an opinion of counsel, in form, scope and
substance


                                       14
<PAGE>
customary  for opinions of counsel in comparable transactions to the effect that
registration  of  a  resale  by the Buyer of any of the Conversion Shares is not
required  under  the  Securities  Act, the Company shall within two (2) business
days  instruct its transfer agent to issue one or more certificates in such name
and  in  such denominations as specified by the Buyer.  The Company acknowledges
that  a breach by it of its obligations hereunder will cause irreparable harm to
the  Buyer  by  vitiating the intent and purpose of the transaction contemplated
hereby.  Accordingly,  the  Company  acknowledges  that  the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees, in
the  event  of a breach or threatened breach by the Company of the provisions of
this  Section  5,  that  the  Buyer  shall be entitled, in addition to all other
available  remedies,  to  an  injunction  restraining  any  breach and requiring
immediate  issuance and transfer, without the necessity of showing economic loss
and  without  any  bond  or  other  security  being  required.

          6.   CONDITIONS  TO  THE  COMPANY'S  OBLIGATION  TO  SELL.
               ----------------------------------------------------

     The  obligation  of the Company hereunder to issue and sell the Convertible
Debentures  to  the  Buyer at the Closings is subject to the satisfaction, at or
before  the  Closing  Dates,  of each of the following conditions, provided that
these  conditions  are  for  the Company's sole benefit and may be waived by the
Company  at  any  time  in  its  sole  discretion:

               (a)     Each  Buyer shall have executed the Transaction Documents
and  delivered  them  to  the  Company.

               (b)     The  Buyer  shall  have  delivered  to  the  Company  the
Purchase  Price  for  Convertible  Debentures in respective amounts as set forth
next  to  each  Buyers name as outlined on Schedule I attached hereto, minus any
fees  to be paid directly from the proceeds the Closings as set forth herein, by
wire  transfer  of  immediately  available  U.S.  funds  pursuant  to  the  wire
instructions  provided  by  the  Company.

               (c)     The  representations and warranties of the Buyer shall be
true and correct in all material respects as of the date when made and as of the
Closing  Dates  as  though  made  at  that  time (except for representations and
warranties  that  speak  as  of  a  specific  date),  and  the  Buyer 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  the  Buyer  at  or  prior  to  the  Closing  Dates.

          7.   CONDITIONS  TO  THE  BUYER'S  OBLIGATION  TO  PURCHASE.
               ------------------------------------------------------

               (a)     The  obligation  of  the  Buyer hereunder to purchase the
Convertible  Debentures  at the First Closing is subject to the satisfaction, at
or  before  the  First  Closing  Date,  of  each  of  the  following conditions:

                    (i)     The  Company  shall  have  executed  the Transaction
Documents  and  delivered  the  same  to  the  Buyer.

                    (ii)     The  Common Stock shall be authorized for quotation
on  a  Primary Market, trading in the Common Stock shall not have been suspended
for  any  reason, and the Conversion Shares shall have been approved for listing
or  quotation  on  a  Primary  Market.


                                       15
<PAGE>
                    (iii)     The  representations and warranties of the Company
shall  be  true  and correct in all material respects (except to the extent that
any  of  such  representations  and  warranties  is  already  qualified  as  to
materiality  in  Section  3  above,  in  which  case,  such  representations and
warranties  shall  be  true and correct without further qualification) as of the
date  when  made  and  as  of the First Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date) and
the  Company  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 the Company at or prior
to  the  First  Closing  Date.  If  requested by the Buyer, the Buyer shall have
received  a  certificate,  executed by the President of the Company, dated as of
the  First Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by the Buyer including, without limitation an update
as  of  the First Closing Date regarding the representation contained in Section
3(c)  above.

                    (iv)     The  Company  shall  have executed and delivered to
the  Buyer  the  Convertible  Debentures  in  the  respective  amounts set forth
opposite  each  Buyer  name  on  Schedule  I  attached  hereto.

                    (v)     The  Buyer shall have received an opinion of counsel
from  counsel  to  the  Company  in  a  form  satisfactory  to  the  Buyer.

                    (vi)     The  Company  shall  have  provided  to the Buyer a
certificate of good standing from the secretary of state from the state in which
the  company  is  incorporated.

                    (vii)     The  Company or the Buyers shall have filed a form
UCC-1  or such other forms as may be required to perfect the Buyer's interest in
the  Pledged  Property  as  detailed  in  the  Security Agreement dated the date
hereof.

                    (viii)     The  Company  shall have provided to the Buyer an
acknowledgement,  to  the  satisfaction  of  the  Buyer,  from  the  Company's
independent  certified  public  accountants  as  to  its  ability to provide all
consents  required  in order to file a registration statement in connection with
this  transaction.

                    (ix)     The  Company  shall  have  reserved  out  of  its
authorized  and  unissued  Common Stock, solely for the purpose of effecting the
conversion  of  the Convertible Debentures, shares of Common Stock to effect the
conversion  of  all  of  the  Conversion  Shares  then  outstanding.

                    (x)     The Irrevocable Transfer Agent Instructions, in form
and  substance  satisfactory  to  the  Buyer,  shall  have been delivered to and
acknowledged  in  writing  by  the  Company's  transfer  agent.

                    (xi)     The Conversion Shares and Warrant Shares shall have
been  approved  and eligible for quotation on the AMEX and trading in the Common
Stock  shall  not  have  been  suspended  for  any  reason.


                                       16
<PAGE>
               (b)     The  obligation  of  the  Buyer  hereunder  to accept the
Convertible  Debentures at the Second Closing is subject to the satisfaction, at
or  before  the  Second  Closing  Date,  of  each  of  the following conditions:

                    (i)     The  Common  Stock shall be authorized for quotation
on  the  a  Primary  Market,  trading  in  the  Common Stock shall not have been
suspended for any reason, and the Conversion Shares shall have been approved for
listing  or  quotation  on  the  Primary  Market.

                    (ii)     The  representations  and warranties of the Company
shall  be  true  and correct in all material respects (except to the extent that
any  of  such  representations  and  warranties  is  already  qualified  as  to
materiality  in  Section  3  above,  in  which  case,  such  representations and
warranties  shall  be  true and correct without further qualification) as of the
date  when  made  and  as of the Second Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date) and
the  Company  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 the Company at or prior
to  the  Second  Closing  Date

                    (iii)     The  Company  shall have executed and delivered to
the  Buyer  the  Convertible  Debentures  in  the  respective  amounts set forth
opposite  each  Buyer  name  on  Schedule  I  attached  hereto.

                    (iv)     The  Company  shall  certify  that it will file the
Registration Statement with the SEC in compliance with the rules and regulations
promulgated by the SEC for filing thereof two (2) business days after the Second
Closing.

                    (v)     The Company shall not be in default under any of the
Transaction  Documents.

                    (vi)     All conditions to the First Closing shall have been
performed.

                    (vii)     The  Company shall provide a certificate, executed
by  two  officers  of the Company that all conditions to the Second Closing have
been  satisfied.

               (c)     The  obligation  of  the Buyer(s) hereunder to accept the
Convertible  Debentures  at the Third Closing is subject to the satisfaction, at
or  before  the  Third  Closing  Date,  of  each  of  the  following conditions:

                    (i)     The  Common  Stock shall be authorized for quotation
on  the  a  Primary  Market,  trading  in  the  Common Stock shall not have been
suspended for any reason, and the Conversion Shares shall have been approved for
listing  or  quotation  on  the  Primary  Market.

                    (ii)     The  representations  and warranties of the Company
shall  be  true  and correct in all material respects (except to the extent that
any  of  such  representations  and  warranties  is  already  qualified  as  to
materiality  in  Section  3  above,  in  which  case,  such


                                       17
<PAGE>
representations  and  warranties  shall  be  true  and  correct  without further
qualification)  as  of  the  date  when made and as of the Third Closing Date as
though  made  at that time (except for representations and warranties that speak
as  of  a  specific  date)  and  the Company 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 the
Company  at  or  prior  to  the  Third  Closing  Date.

                    (iii)      The  Company shall have executed and delivered to
the  Buyer(s)  the  Convertible  Debentures  in the respective amounts set forth
opposite  each  Buyer(s)  name  on  Schedule  I  attached  hereto.

                    (iv)      The  Registration  Statement  shall  have  been
declared  effective  by  the  SEC.

                    (v)     The Company shall not be in default under any of the
Transaction  Documents.

                    (vi)     All  conditions to the First Closing and the Second
Closing  shall  have  been  performed.

                    (vii)     The Company shall have certified, in a certificate
executed  by two officers of the Company and dated as of the Third Closing Date,
that  all  conditions  to  the  Third  Closing  have  been  satisfied.

          8.     INDEMNIFICATION.
                 ---------------

               (a)     In consideration of the Buyer's execution and delivery of
this  Agreement  and  acquiring  the  Convertible  Debentures and the Conversion
Shares  hereunder,  and  in  addition  to all of the Company's other obligations
under  this  Agreement,  the  Company  shall defend, protect, indemnify and hold
harmless  the  Buyer,  and  all of its officers, directors, employees and agents
(including,  without  limitation,  those  retained  in  connection  with  the
transactions  contemplated  by  this  Agreement)  (collectively,  the  "Buyer
                                                                        -----
Indemnitees")  from  and  against  any and all actions, causes of action, suits,
-----------
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection  therewith  (irrespective  of  whether any such Buyer Indemnitee is a
party  to  the  action  for  which  indemnification  hereunder  is  sought), and
including  reasonable  attorneys'  fees  and  disbursements  (the  "Indemnified
                                                                    -----------
Liabilities"),  incurred by the Buyer Indemnitees or any of them as a result of,
-----------
or  arising  out  of,  or relating to (a) any misrepresentation or breach of any
representation  or  warranty  made  by  the  Company  in  this  Agreement,  the
Convertible  Debentures  or  the  Investor  Registration Rights Agreement or any
other  certificate,  instrument  or document contemplated hereby or thereby, (b)
any  breach of any covenant, agreement or obligation of the Company contained in
this  Agreement,  or  the  Investor  Registration  Rights Agreement or any other
certificate,  instrument  or document contemplated hereby or thereby, or (c) any
cause  of  action,  suit  or  claim  brought or made against such Indemnitee and
arising  out  of  or  resulting  from  the  execution,  delivery, performance or
enforcement  of  this  Agreement  or any other instrument, document or agreement
executed  pursuant hereto by any of the parties hereto, any transaction financed
or to be financed in whole or in part, directly or indirectly, with the proceeds
of  the  issuance  of  the  Convertible  Debentures


                                       18
<PAGE>
or  the  status  of  the  Buyer  or  holder  of  the Convertible Debentures  the
Conversion Shares,  as a Buyer of Convertible Debentures in the Company.  To the
extent  that  the  foregoing undertaking by the Company may be unenforceable for
any  reason,  the Company shall make the maximum contribution to the payment and
satisfaction  of each of the Indemnified Liabilities, which is permissible under
applicable  law.

               (b)     In  consideration of the Company's execution and delivery
of this Agreement, and in addition to all of the Buyer's other obligations under
this Agreement, the Buyer shall defend, protect, indemnify and hold harmless the
Company  and  all  of  its officers, directors, employees and agents (including,
without  limitation,  those  retained  in  connection  with  the  transactions
contemplated  by  this Agreement) (collectively, the "Company Indemnitees") from
                                                      -------------------
and  against  any and all Indemnified Liabilities incurred by the Indemnitees or
any  of  them  as  a  result  of,  or  arising  out  of,  or relating to (a) any
misrepresentation  or breach of any representation or warranty made by the Buyer
in  this  Agreement,  instrument  or  document  contemplated  hereby  or thereby
executed  by  the Buyer, (b) any breach of any covenant, agreement or obligation
of  the  Buyer  contained  in  this Agreement,  the Investor Registration Rights
Agreement  or  any other certificate, instrument or document contemplated hereby
or  thereby  executed  by  the  Buyer, or (c) any cause of action, suit or claim
brought  or  made  against  such  Company  Indemnitee  based  on  material
misrepresentations  or  due to a material breach and arising out of or resulting
from  the execution, delivery, performance or enforcement of this Agreement, the
Investor  Registration  Rights  Agreement  or  any other instrument, document or
agreement  executed pursuant hereto by any of the parties hereto.  To the extent
that  the  foregoing  undertaking  by  each  Buyer  may be unenforceable for any
reason,  each  Buyer  shall  make  the  maximum  contribution to the payment and
satisfaction  of each of the Indemnified Liabilities, which is permissible under
applicable  law.

          9.   GOVERNING  LAW:  MISCELLANEOUS.
               ------------------------------

               (a)     Governing  Law.  This  Agreement shall be governed by and
                       --------------
interpreted  in  accordance  with  the  laws  of the State of New Jersey without
regard  to  the  principles of conflict of laws.  The parties further agree that
any  action  between  them  shall  be  heard  in  Hudson County, New Jersey, and
expressly  consent  to  the  jurisdiction and venue of the Superior Court of New
Jersey,  sitting  in  Hudson County and the United States District Court for the
District of New Jersey sitting in Newark, New Jersey for the adjudication of any
civil  action  asserted  pursuant  to  this  Paragraph.

               (b)     Counterparts.  This  Agreement  may be executed in two or
                       ------------
more  identical  counterparts, all of which 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.  In the event any signature page is
delivered  by  facsimile  transmission,  the  party using such means of delivery
shall  cause  four  (4)  additional  original  executed  signature  pages  to be
physically  delivered  to  the other party within five (5) days of the execution
and  delivery  hereof.

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


                                       19
<PAGE>
               (d)     Severability.  If  any  provision of this Agreement shall
                       ------------
be  invalid  or  unenforceable  in  any  jurisdiction,  such  invalidity  or
unenforceability  shall  not  affect  the  validity  or  enforceability  of  the
remainder  of  this  Agreement  in  that  jurisdiction  or  the  validity  or
enforceability  of  any  provision  of this Agreement in any other jurisdiction.

               (e)     Entire  Agreement, Amendments.  This Agreement supersedes
                       -----------------------------
all other prior oral or written agreements between the Buyer, the Company, their
affiliates  and  persons  acting  on  their  behalf  with respect to the matters
discussed  herein,  and  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  the Company nor any Buyer 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.

               (f)     Notices.  Any  notices,  consents,  waivers,  or  other
                       -------
communications  required  or  permitted  to  be  given  under  the terms of this
Agreement  must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon confirmation of receipt, when sent
by  facsimile;  (iii)  three  (3)  days after being sent by U.S. certified mail,
return  receipt  requested,  or (iv) one (1) day after deposit with a nationally
recognized  overnight  delivery  service, in each case properly addressed to the
party  to  receive  the  same.  The  addresses  and  facsimile  numbers for such
communications  shall  be:

If to the Company, to:             Hyperdynamics Corporation
                                   One Sugar Creek Center Boulevard, Suite 125
                                   Sugar Land, Texas 77478
                                   Attention:   Kent P. Watts
                                   Telephone:   (713) 353-9400
                                   Facsimile:   (713) 353-9421

With a copy to:                    Joel Seidner, Esq.
                                   880 Tully Road #50
                                   Houston, TX 77079
                                   Telephone:   (281) 493-1311
                                   Facsimile:   (281) 667-3292

     If  to  the  Buyer, to its address and facsimile number on Schedule I, with
copies  to  the  Buyer's  counsel  as set forth on Schedule I.  Each party shall
provide  five (5) days' prior written notice to the other party of any change in
address  or  facsimile  number.

               (g)     Successors  and Assigns.  This Agreement shall be binding
                       -----------------------
upon and inure to the benefit of the parties and their respective successors and
assigns.  Neither  the  Company nor any Buyer shall assign this Agreement or any
rights  or  obligations hereunder without the prior written consent of the other
party  hereto.


                                       20
<PAGE>
               (h)     No 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.

               (i)     Survival.  Unless  this  Agreement  is  terminated  under
                       --------
Section  9(l),  the  representations and warranties of the Company and the Buyer
contained  in  Sections  2  and  3,  the  agreements  and covenants set forth in
Sections  4, 5 and 9, and the indemnification provisions set forth in Section 8,
shall  survive  the  Closing for a period of two (2) years following the date on
which  the  Convertible  Debentures  are  converted in full.  The Buyer shall be
responsible  only  for  its  own  representations,  warranties,  agreements  and
covenants  hereunder.

               (j)     Publicity.  The  Company  and  the  Buyer  shall have the
                       ---------
right  to  approve,  before  issuance  any  press  release  or  any other public
statement  with  respect  to  the  transactions  contemplated hereby made by any
party;  provided, however, that the Company shall be entitled, without the prior
approval  of  the  Buyer,  to issue any press release or other public disclosure
with  respect to such transactions required under applicable securities or other
laws or regulations (the Company shall use its best efforts to consult the Buyer
in  connection  with  any such press release or other public disclosure prior to
its  release  and  Buyer  shall  be  provided  with  a copy thereof upon release
thereof).

               (k)     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.

               (l)     Termination.  In  the  event  that  the  American  Stock
                       -----------
Exchange  has  not  approved the transactions contemplated hereby within 15 days
following  the  date  hereof,  unless  extended  by  the mutual agreement of all
parties  hereto,  then  this  Agreement and the transactions contemplated hereby
shall  terminate  15  days following the date hereof and such transactions shall
then  be of no legal consequence or effect.  In the event that the Closing shall
not  have occurred with respect to the Buyers on or before fifteen (15) business
days from the date hereof due to the Company's or the Buyer's failure to satisfy
the  conditions  set  forth  in  Sections  6  and 7 above (and the non-breaching
party's failure to waive such unsatisfied condition(s)), the non-breaching party
shall have the option to terminate this Agreement with respect to such breaching
party  at  the  close of business on such date without liability of any party to
any  other party; provided, however, that if this Agreement is terminated by the
Company  pursuant  to  this  Section 9(l), the Company shall remain obligated to
reimburse  the  Buyer  for  the  fees  and  expenses  of  Yorkville Advisors LLC
described  in  Section  4(g)  above.

               (m)     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 PAGE INTENTIONALLY LEFT BLANK]


                                       21
<PAGE>
     IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.


                                   COMPANY:
                                   HYPERDYNAMICS CORPORATION

                                   By: /s/ Kent P. Watts
                                   Name:   Kent P. Watts
                                   Title:  President and Chief Executive Officer


                                       22
<PAGE>
<TABLE>
<CAPTION>
                                                SCHEDULE I
                                                ----------

                                            SCHEDULE OF BUYERS
                                            ------------------


                                                                   ADDRESS/FACSIMILE           AMOUNT OF
            NAME                        SIGNATURE                   NUMBER OF BUYER          SUBSCRIPTION
----------------------------  -----------------------------  ------------------------------  -------------
<S>                           <C>                            <C>                             <C>

Cornell Capital Partners, LP  By:   Yorkville Advisors, LLC  101 Hudson Street - Suite 3700  $   6,000,000
                              Its:  General Partner          Jersey City, NJ  07303
                                                             Facsimile:      (201) 985-8266

                              By:  /s/ Mark Angelo
                              Name:    Mark Angelo
                              Its:     Portfolio Manager

With a copy to:               David Gonzalez, Esq.           101 Hudson Street - Suite 3700
                                                             Jersey City, NJ 07302
                                                             Facsimile:      (201) 985-8266
</TABLE>


<PAGE>
                               DISCLOSURE SCHEDULE
                               -------------------



                                        2
<PAGE>
                                    EXHIBIT A
                                    ---------

                                 FORM OF WARRANT
                                 ---------------



                                        3

</TEXT>
</DOCUMENT>
