EXHIBIT 10.3

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of April 10,
2007, by and among ISONICS CORPORATION, a California corporation (the
“Company”), and the undersigned Buyers listed on Schedule I attached
hereto (each, a “Buyer” and collectively, the “Buyers”).

WHEREAS:

A.            In connection with the Securities Purchase Agreement by and among
the parties hereto of even date herewith (the “Securities Purchase Agreement”),
the Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Buyers (i) secured
convertible debentures (the “Convertible Debentures”) which shall be convertible
into shares of the Company’s common stock, no par value per share (the “Common
Stock,” as converted, the “Conversion Shares”) in accordance with the terms of
the Convertible Debentures, and (ii) warrants (the “Warrants”), which will be
exercisable to purchase shares of Common Stock (as exercised, collectively, the
“Warrant Shares”).  Capitalized terms not defined herein shall have the meaning
ascribed to them in the Securities Purchase Agreement.

B.            To induce the Buyers to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
“Securities Act”), and applicable state securities laws.

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 Company and the Buyers hereby
agree as follows:

1.             DEFINITIONS.

As used in this Agreement, the following terms shall have the following
meanings:

(A)           “EFFECTIVENESS DEADLINE” MEANS, WITH RESPECT TO THE INITIAL
REGISTRATION STATEMENT REQUIRED TO BE FILED HEREUNDER, THE 120TH CALENDAR DAY
FOLLOWING THE RECEIPT OF A WRITTEN DEMAND FROM THE BUYERS REQUESTING THE FILING
OF SUCH REGISTRATION STATEMENT AND, WITH RESPECT TO ANY SUBSEQUENT REGISTRATION
STATEMENTS WHICH MAY BE REQUIRED PURSUANT TO SECTION 3(C), THE 60TH CALENDAR DAY
FOLLOWING THE DATE ON WHICH THE COMPANY FIRST KNOWS, OR REASONABLY SHOULD HAVE
KNOWN, THAT IT IS OBLIGATED TO FILE SUCH SUBSEQUENT REGISTRATION STATEMENT;
PROVIDED, HOWEVER, IN THE EVENT THE COMPANY IS NOTIFIED BY THE U.S. SECURITIES
AND EXCHANGE COMMISSION (“SEC”) THAT ONE OF THE ABOVE REGISTRATION STATEMENTS
WILL NOT BE REVIEWED OR IS NO LONGER SUBJECT TO FURTHER REVIEW AND COMMENTS, THE
EFFECTIVENESS DATE AS TO SUCH REGISTRATION STATEMENT SHALL BE THE FIFTH TRADING
DAY FOLLOWING THE DATE ON WHICH THE COMPANY IS SO NOTIFIED IF SUCH DATE PRECEDES
THE DATES REQUIRED ABOVE.

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(B)           “FILING DEADLINE” MEANS, WITH RESPECT TO THE INITIAL REGISTRATION
STATEMENT REQUIRED HEREUNDER, THE 30TH CALENDAR DAY FOLLOWING THE RECEIPT OF A
WRITTEN DEMAND FROM THE BUYERS REQUESTING THE FILING OF SUCH REGISTRATION
STATEMENT AND, WITH RESPECT TO ANY SUBSEQUENT REGISTRATION STATEMENTS WHICH MAY
BE REQUIRED PURSUANT TO SECTION 3(C), THE 30TH DAY FOLLOWING THE DATE ON WHICH
THE COMPANY FIRST KNOWS, OR REASONABLY SHOULD HAVE KNOWN THAT IT IS OBLIGATED TO
FILE SUCH SUBSEQUENT REGISTRATION STATEMENT.

(C)           “INITIAL REQUIRED REGISTRATION AMOUNT” MEANS SHARES OF THE
COMPANY’S COMMON STOCK, IN AN AMOUNT EQUAL TO NINETEEN AND NINETY-NINE ONE
HUNDREDTHS PERCENT (19.99%) IF SUCH INITIAL REGISTRATION STATEMENT IS FILED
PRIOR TO OBTAINING SHAREHOLDER APPROVAL, ON OR BEFORE NOVEMBER 30, 2007 TO ISSUE
SHARES OF THE COMPANY’S COMMON STOCK IN EXCESS OF NINETEEN AND NINETY-NINE ONE
HUNDREDTHS PERCENT (19.99%) OR IF SUCH INITIAL REGISTRATION STATEMENT IS FILED
AFTER OBTAINING SHAREHOLDER APPROVAL ON OR BEFORE NOVEMBER 30, 2007 THAN IN AN
AMOUNT EQUAL TO THIRTY THREE PERCENT (33%) OF THE OUTSTANDING SHARES OF THE
COMPANY’S COMMON STOCK EXCLUDING “INSIDERS” AS OF THE DATE THE INITIAL
REGISTRATION STATEMENT OR ANY SUBSEQUENT REGISTRATION STATEMENT, ISSUED OR TO BE
ISSUED UPON CONVERSION OF THE CONVERTIBLE DEBENTURES OR EXERCISE OF THE SERIES
WARRANTS, WITH AMOUNT INCLUDES SHARES ISSUED OR ISSUABLE BY THE COMPANY WHICH
WILL BE AGGREGATED BY THE SECURITIES AND EXCHANGE COMMISSION UNDER RULE 415(A)
IN CALCULATING THE MAXIMUM NUMBER OF SHARES THAT CAN BE REGISTERED.

(D)           “PERSON” MEANS A CORPORATION, A LIMITED LIABILITY COMPANY, AN
ASSOCIATION, A PARTNERSHIP, AN ORGANIZATION, A BUSINESS, AN INDIVIDUAL, A
GOVERNMENTAL OR POLITICAL SUBDIVISION THEREOF OR A GOVERNMENTAL AGENCY.

(E)           “PROSPECTUS” MEANS THE PROSPECTUS INCLUDED IN A REGISTRATION
STATEMENT (INCLUDING, WITHOUT LIMITATION, A PROSPECTUS THAT INCLUDES ANY
INFORMATION PREVIOUSLY OMITTED FROM A PROSPECTUS FILED AS PART OF AN EFFECTIVE
REGISTRATION STATEMENT IN RELIANCE UPON RULE 430A PROMULGATED UNDER THE
SECURITIES ACT), AS AMENDED OR SUPPLEMENTED BY ANY PROSPECTUS SUPPLEMENT, WITH
RESPECT TO THE TERMS OF THE OFFERING OF ANY PORTION OF THE REGISTRABLE
SECURITIES COVERED BY A REGISTRATION STATEMENT, AND ALL OTHER AMENDMENTS AND
SUPPLEMENTS TO THE PROSPECTUS, INCLUDING POST-EFFECTIVE AMENDMENTS, AND ALL
MATERIAL INCORPORATED BY REFERENCE OR DEEMED TO BE INCORPORATED BY REFERENCE IN
SUCH PROSPECTUS.

(F)            “REGISTRABLE SECURITIES” MEANS ALL OF (I) THE CONVERSION SHARES
ISSUABLE UPON CONVERSION OF THE CONVERTIBLE DEBENTURES, (II) THE WARRANT SHARES
ISSUED OR ISSUABLE UPON EXERCISE OF THE WARRANTS, (III) ANY ADDITIONAL SHARES
ISSUABLE IN CONNECTION WITH ANY ANTI-DILUTION PROVISIONS IN THE WARRANTS OR THE
CONVERTIBLE DEBENTURES (WITHOUT GIVING EFFECT TO ANY LIMITATIONS ON EXERCISE SET
FORTH IN THE WARRANTS OR CONVERTIBLE DEBENTURES) AND (IV) ANY SHARES OF COMMON
STOCK ISSUED OR ISSUABLE WITH RESPECT TO THE CONVERSION SHARES, THE CONVERTIBLE
DEBENTURES, THE WARRANT SHARES, OR THE WARRANTS AS A RESULT OF ANY STOCK SPLIT,
DIVIDEND OR OTHER DISTRIBUTION, RECAPITALIZATION OR SIMILAR EVENT OR OTHERWISE,
WITHOUT REGARD TO ANY LIMITATIONS ON THE CONVERSION OF THE CONVERTIBLE
DEBENTURES OR EXERCISE OF THE WARRANTS.

(G)           “REGISTRATION STATEMENT” MEANS THE REGISTRATION STATEMENTS
REQUIRED TO BE FILED HEREUNDER AND ANY ADDITIONAL REGISTRATION STATEMENTS
CONTEMPLATED BY SECTION 3(C), INCLUDING (IN EACH CASE) THE PROSPECTUS,
AMENDMENTS AND SUPPLEMENTS TO SUCH REGISTRATION STATEMENT OR PROSPECTUS,
INCLUDING PRE- AND POST-EFFECTIVE AMENDMENTS, ALL EXHIBITS THERETO, AND

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ALL MATERIAL INCORPORATED BY REFERENCE OR DEEMED TO BE INCORPORATED BY REFERENCE
IN SUCH REGISTRATION STATEMENT.

(H)           “RULE 415” MEANS RULE 415 PROMULGATED BY THE SEC PURSUANT TO THE
SECURITIES ACT, AS SUCH RULE MAY BE AMENDED FROM TIME TO TIME, OR ANY SIMILAR
RULE OR REGULATION HEREAFTER ADOPTED BY THE SEC  HAVING SUBSTANTIALLY THE SAME
PURPOSE AND EFFECT AS SUCH RULE.

2.             REGISTRATION.

(A)           ON OR PRIOR TO EACH FILING DEADLINE, THE COMPANY SHALL PREPARE AND
FILE WITH THE SEC A REGISTRATION STATEMENT ON FORM S-3 (IF THE COMPANY IS THEN
ELIGIBLE, ON FORM S-3) OR OTHER APPROPRIATE FORM COVERING THE RESALE OF ALL OF
THE REGISTRABLE SECURITIES.  THE REGISTRATION STATEMENT PREPARED PURSUANT HERETO
SHALL REGISTER FOR RESALE AT LEAST THE NUMBER OF SHARES OF COMMON STOCK EQUAL TO
THE REQUIRED REGISTRATION AMOUNT AS OF DATE THE REGISTRATION STATEMENT IS
INITIALLY FILED WITH THE SEC.  THE REGISTRATION STATEMENT SHALL CONTAIN THE
“SELLING STOCKHOLDERS” AND “PLAN OF DISTRIBUTION” SECTIONS IN SUBSTANTIALLY THE
FORM ATTACHED HERETO AS EXHIBIT A AND CONTAIN ALL THE REQUIRED DISCLOSURES SET
FORTH ON EXHIBIT B.  THE COMPANY SHALL USE ITS BEST EFFORTS TO HAVE THE
REGISTRATION STATEMENT DECLARED EFFECTIVE BY THE SEC AS SOON AS PRACTICABLE, BUT
IN NO EVENT LATER THAN THE EFFECTIVENESS DEADLINE.  NO LATER THAN THE SECOND
(2ND) TRADING DAY FOLLOWING THE DATE OF EFFECTIVENESS, THE COMPANY SHALL FILE
WITH THE SEC IN ACCORDANCE WITH RULE 424 UNDER THE 1933 ACT THE FINAL PROSPECTUS
TO BE USED IN CONNECTION WITH SALES PURSUANT TO SUCH REGISTRATION STATEMENT. 
THE COMPANY SHALL USE ITS BEST EFFORTS TO CAUSE THE REGISTRATION STATEMENT TO
REMAIN EFFECTIVE UNTIL ALL OF THE REGISTRABLE SECURITIES HAVE BEEN SOLD OR MAY
BE SOLD WITHOUT VOLUME RESTRICTIONS PURSUANT TO RULE 144(K), AS DETERMINED BY
THE COUNSEL TO THE COMPANY PURSUANT TO A WRITTEN OPINION LETTER TO SUCH EFFECT,
ADDRESSED AND ACCEPTABLE TO THE COMPANY’S TRANSFER AGENT AND THE AFFECTED
HOLDERS (“REGISTRATION PERIOD”).  PRIOR TO THE FILING OF THE REGISTRATION
STATEMENT WITH THE SEC, THE COMPANY SHALL FURNISH A DRAFT OF THE REGISTRATION
STATEMENT TO THE BUYERS FOR THEIR REVIEW AND COMMENT.  THE BUYERS SHALL FURNISH
COMMENTS ON THE REGISTRATION STATEMENT TO THE COMPANY WITHIN TWENTY-FOUR (24)
HOURS OF THE RECEIPT THEREOF FROM THE COMPANY.

(B)           FAILURE TO FILE OR OBTAIN EFFECTIVENESS OF THE REGISTRATION
STATEMENT.     IF: (I) A REGISTRATION STATEMENT IS NOT FILED ON OR PRIOR TO ITS
FILING DATE (IF THE COMPANY FILES A REGISTRATION STATEMENT WITHOUT AFFORDING THE
HOLDERS THE OPPORTUNITY TO REVIEW AND COMMENT ON THE SAME AS REQUIRED BY SECTION
2(A), THE COMPANY SHALL NOT BE DEEMED TO HAVE SATISFIED THIS CLAUSE (I)), OR
(II) THE COMPANY FAILS TO FILE WITH THE SEC A REQUEST FOR ACCELERATION IN
ACCORDANCE WITH RULE 461 PROMULGATED UNDER THE SECURITIES ACT, WITHIN FIVE
TRADING DAYS OF THE DATE THAT THE COMPANY IS NOTIFIED (ORALLY OR IN WRITING,
WHICHEVER IS EARLIER) BY THE SEC THAT A REGISTRATION STATEMENT WILL NOT BE
“REVIEWED,” OR NOT SUBJECT TO FURTHER REVIEW, OR (III) A REGISTRATION STATEMENT
FILED OR REQUIRED TO BE FILED HEREUNDER IS NOT DECLARED EFFECTIVE BY THE SEC BY
ITS EFFECTIVENESS DEADLINE, OR (IV) AFTER THE EFFECTIVENESS, A REGISTRATION
STATEMENT CEASES FOR ANY REASON TO REMAIN CONTINUOUSLY EFFECTIVE AS TO ALL
REGISTRABLE SECURITIES FOR WHICH IT IS REQUIRED TO BE EFFECTIVE, OR THE HOLDERS
ARE OTHERWISE NOT PERMITTED TO UTILIZE THE PROSPECTUS THEREIN TO RESELL SUCH
REGISTRABLE SECURITIES FOR MORE THAN 30 CONSECUTIVE CALENDAR DAYS OR MORE THAN
AN AGGREGATE OF 40 CALENDAR DAYS DURING ANY 12-MONTH PERIOD (WHICH NEED NOT BE
CONSECUTIVE CALENDAR DAYS) (ANY SUCH FAILURE OR BREACH BEING REFERRED TO AS AN
“EVENT”), THEN IN ADDITION TO ANY OTHER RIGHTS THE HOLDERS OF THE CONVERTIBLE
DEBENTURES MAY HAVE HEREUNDER OR UNDER

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APPLICABLE LAW, ON EACH SUCH EVENT DATE AND ON EACH MONTHLY ANNIVERSARY OF EACH
SUCH EVENT DATE (IF THE APPLICABLE EVENT SHALL NOT HAVE BEEN CURED BY SUCH DATE)
UNTIL THE APPLICABLE EVENT IS CURED, THE COMPANY SHALL PAY TO EACH HOLDER OF
CONVERTIBLE DEBENTURES, AT THE COMPANY’S OPTION, EITHER AN AMOUNT IN CASH OR
SHARES OF THE COMPANY’S COMMON STOCK, AS PARTIAL LIQUIDATED DAMAGES (“LIQUIDATED
DAMAGES”) AND NOT AS A PENALTY, EQUAL TO 1.0% OF THE AGGREGATE PURCHASE PRICE
PAID BY SUCH HOLDER PURSUANT TO THE SECURITIES PURCHASE AGREEMENT FOR ANY
CONVERTIBLE DEBENTURES THEN HELD BY SUCH HOLDER.  THE PARTIES AGREE THAT (1) THE
COMPANY SHALL NOT BE LIABLE FOR LIQUIDATED DAMAGES UNDER THIS AGREEMENT WITH
RESPECT TO ANY WARRANTS OR WARRANT SHARES AND (2) THE MAXIMUM AGGREGATE
LIQUIDATED DAMAGES PAYABLE TO A HOLDER OF CONVERTIBLE DEBENTURES UNDER THIS
AGREEMENT SHALL BE TWELVE PERCENT (12%) OF THE AGGREGATE PURCHASE PRICE PAID BY
SUCH HOLDER PURSUANT TO THE SECURITIES PURCHASE AGREEMENT.  THE PARTIAL
LIQUIDATED DAMAGES PURSUANT TO THE TERMS HEREOF SHALL APPLY ON A DAILY PRO-RATA
BASIS FOR ANY PORTION OF A MONTH PRIOR TO THE CURE OF AN EVENT.

(C)           LIQUIDATED DAMAGES.  THE COMPANY AND THE BUYER HERETO ACKNOWLEDGE
AND AGREE THAT THE SUMS PAYABLE UNDER SUBSECTION 2(B) ABOVE SHALL CONSTITUTE
LIQUIDATED DAMAGES AND NOT PENALTIES AND ARE IN ADDITION TO ALL OTHER RIGHTS OF
THE BUYER, INCLUDING THE RIGHT TO CALL A DEFAULT.  THE PARTIES FURTHER
ACKNOWLEDGE THAT (I) THE AMOUNT OF LOSS OR DAMAGES LIKELY TO BE INCURRED IS
INCAPABLE OR IS DIFFICULT TO PRECISELY ESTIMATE, (II) THE AMOUNTS SPECIFIED IN
SUCH SUBSECTIONS BEAR A REASONABLE RELATIONSHIP TO, AND ARE NOT PLAINLY OR
GROSSLY DISPROPORTIONATE TO, THE PROBABLE LOSS LIKELY TO BE INCURRED IN
CONNECTION WITH ANY FAILURE BY THE COMPANY TO OBTAIN OR MAINTAIN THE
EFFECTIVENESS OF A REGISTRATION STATEMENT, (III) ONE OF THE REASONS FOR THE
COMPANY AND THE BUYER REACHING AN AGREEMENT AS TO SUCH AMOUNTS WAS THE
UNCERTAINTY AND COST OF LITIGATION REGARDING THE QUESTION OF ACTUAL DAMAGES, AND
(IV) THE COMPANY AND THE BUYER ARE SOPHISTICATED BUSINESS PARTIES AND HAVE BEEN
REPRESENTED BY SOPHISTICATED AND ABLE LEGAL COUNSEL AND NEGOTIATED THIS
AGREEMENT AT ARM’S LENGTH.

3.             RELATED OBLIGATIONS.

(A)           THE COMPANY SHALL, NOT LESS THAN THREE (3) TRADING DAYS PRIOR TO
THE FILING OF EACH REGISTRATION STATEMENT AND NOT LESS THAN ONE (1) TRADING DAY
PRIOR TO THE FILING OF ANY RELATED AMENDMENTS AND SUPPLEMENTS TO ALL
REGISTRATION STATEMENTS (EXCEPT FOR ANNUAL REPORTS ON FORM 10-K OR FORM 10-KSB),
FURNISH TO EACH BUYER COPIES OF ALL SUCH DOCUMENTS PROPOSED TO BE FILED, WHICH
DOCUMENTS (OTHER THAN THOSE INCORPORATED OR DEEMED TO BE INCORPORATED BY
REFERENCE) WILL BE SUBJECT TO THE REASONABLE AND PROMPT REVIEW OF SUCH BUYERS,
THE COMPANY SHALL NOT FILE A REGISTRATION STATEMENT OR ANY SUCH PROSPECTUS OR
ANY AMENDMENTS OR SUPPLEMENTS THERETO TO WHICH THE BUYERS SHALL REASONABLY
OBJECT IN GOOD FAITH; PROVIDED THAT, THE COMPANY IS NOTIFIED OF SUCH OBJECTION
IN WRITING NO LATER THAN TWO (2) TRADING DAYS AFTER THE BUYERS HAVE BEEN SO
FURNISHED COPIES OF A REGISTRATION STATEMENT.

(B)           THE COMPANY SHALL (I) PREPARE AND FILE WITH THE SEC SUCH
AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) AND SUPPLEMENTS TO A
REGISTRATION STATEMENT AND THE PROSPECTUS USED IN CONNECTION WITH SUCH
REGISTRATION STATEMENT, WHICH PROSPECTUS IS TO BE FILED PURSUANT TO RULE 424
PROMULGATED UNDER THE SECURITIES ACT, AS MAY BE NECESSARY TO KEEP SUCH
REGISTRATION STATEMENT EFFECTIVE AT ALL TIMES DURING THE REGISTRATION PERIOD,
AND PREPARE AND FILE WITH THE SEC SUCH ADDITIONAL REGISTRATION STATEMENTS IN
ORDER TO REGISTER FOR RESALE UNDER THE SECURITIES ACT ALL OF THE REGISTRABLE
SECURITIES; (II) CAUSE THE RELATED PROSPECTUS TO BE AMENDED OR

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SUPPLEMENTED BY ANY REQUIRED PROSPECTUS SUPPLEMENT (SUBJECT TO THE TERMS OF THIS
AGREEMENT), AND AS SO SUPPLEMENTED OR AMENDED TO BE FILED PURSUANT TO RULE 424;
(III) RESPOND AS PROMPTLY AS REASONABLY POSSIBLE TO ANY COMMENTS RECEIVED FROM
THE SEC WITH RESPECT TO A REGISTRATION STATEMENT OR ANY AMENDMENT THERETO AND AS
PROMPTLY AS REASONABLY POSSIBLE PROVIDE THE BUYERS TRUE AND COMPLETE COPIES OF
ALL CORRESPONDENCE FROM AND TO THE SEC RELATING TO A REGISTRATION STATEMENT
(PROVIDED THAT THE COMPANY MAY EXCISE ANY INFORMATION CONTAINED THEREIN WHICH
WOULD CONSTITUTE MATERIAL NON-PUBLIC INFORMATION AS TO ANY BUYER WHICH HAS NOT
EXECUTED A CONFIDENTIALITY AGREEMENT WITH THE COMPANY); AND (IV) COMPLY WITH THE
PROVISIONS OF THE SECURITIES ACT WITH RESPECT TO THE DISPOSITION OF ALL
REGISTRABLE SECURITIES OF THE COMPANY COVERED BY SUCH REGISTRATION STATEMENT
UNTIL SUCH TIME AS ALL OF SUCH REGISTRABLE SECURITIES SHALL HAVE BEEN DISPOSED
OF IN ACCORDANCE WITH THE INTENDED METHODS OF DISPOSITION BY THE SELLER OR
SELLERS THEREOF AS SET FORTH IN SUCH REGISTRATION STATEMENT.  IN THE CASE OF
AMENDMENTS AND SUPPLEMENTS TO A REGISTRATION STATEMENT WHICH ARE REQUIRED TO BE
FILED PURSUANT TO THIS AGREEMENT (INCLUDING PURSUANT TO THIS SECTION 3(B)) BY
REASON OF THE COMPANY’S FILING A REPORT ON FORM 10-K, FORM 10-Q OR FORM 8-K OR
ANY ANALOGOUS REPORT UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE
“EXCHANGE ACT”), THE COMPANY SHALL INCORPORATE SUCH REPORT BY REFERENCE INTO THE
REGISTRATION STATEMENT, IF APPLICABLE, OR SHALL FILE SUCH AMENDMENTS OR
SUPPLEMENTS WITH THE SEC ON THE SAME DAY ON WHICH THE EXCHANGE ACT REPORT IS
FILED WHICH CREATED THE REQUIREMENT FOR THE COMPANY TO AMEND OR SUPPLEMENT THE
REGISTRATION STATEMENT.

(C)           TO THE EXTENT THAT THE BUYER HOLDS ANY REGISTRABLE SECURITIES THAT
ARE PROHIBITED FROM BEING INCLUDED ON A THE INITIAL REGISTRATION STATEMENT OR
ANY OTHER REGISTRATION STATEMENT (THE “NON-REGISTERED SHARES”) EITHER UNDER RULE
415, AS INTERPRETED BY THE SEC, OR BECAUSE THE COMPANY’S SHAREHOLDERS HAD NOT
APPROVED THE ISSUANCE OF IN EXCESS OF 19.99% OF THE OUTSTANDING SHARES OF THE
COMPANY’S COMMON STOCK AS CONTEMPLATED IN SECTION 4(Q) OF THE SECURITIES
PURCHASE AGREEMENT, THEN THE COMPANY SHALL BECOME OBLIGATED TO FILE AN
ADDITIONAL REGISTRATION STATEMENT (EACH, A “SUBSEQUENT REGISTRATION STATEMENT”)
ON THE FIRST DAY AFTER SUCH SUBSEQUENT REGISTRATION STATEMENT MAY BE FILED
WITHOUT OBJECTION BY THE SEC UNDER RULE 415 COVERING THE RESALE BY THE BUYERS OF
THE MAXIMUM NUMBER OF SUCH NON-REGISTERED SHARES ALLOWED UNDER RULE 415 AS
INTERPRETED BY THE SEC.

(D)           THE COMPANY SHALL FILE WITH THE SEC PURSUANT TO RULE 424(B) A COPY
OF THE DEFINITIVE PROSPECTUS FOR EACH REGISTRATION STATEMENT NOT LATER THAN THE
SECOND (2ND) BUSINESS DAY AFTER THE EFFECTIVENESS OF SUCH REGISTRATION
STATEMENT.  THE COMPANY SHALL PROVIDE THE BUYERS SUCH OTHER DOCUMENTS AS SUCH
BUYERS MAY REASONABLY REQUEST FROM TIME TO TIME IN ORDER TO FACILITATE THE
DISPOSITION OF THE REGISTRABLE SECURITIES OWNED BY SUCH INVESTOR.

(E)           THE COMPANY SHALL USE ITS BEST EFFORTS TO (I) REGISTER AND QUALIFY
THE REGISTRABLE SECURITIES COVERED BY A REGISTRATION STATEMENT UNDER SUCH OTHER
SECURITIES OR “BLUE SKY” LAWS OF SUCH JURISDICTIONS IN THE UNITED STATES AS ANY
BUYER REASONABLY REQUESTS, (II) PREPARE AND FILE IN THOSE JURISDICTIONS, SUCH
AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) AND SUPPLEMENTS TO SUCH
REGISTRATIONS AND QUALIFICATIONS AS MAY BE NECESSARY TO MAINTAIN THE
EFFECTIVENESS THEREOF DURING THE REGISTRATION PERIOD, (III) TAKE SUCH OTHER
ACTIONS AS MAY BE NECESSARY TO MAINTAIN SUCH REGISTRATIONS AND QUALIFICATIONS IN
EFFECT AT ALL TIMES DURING THE REGISTRATION PERIOD, AND (IV) TAKE ALL OTHER
ACTIONS REASONABLY NECESSARY OR ADVISABLE TO QUALIFY

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THE REGISTRABLE SECURITIES FOR SALE IN SUCH JURISDICTIONS; PROVIDED, HOWEVER,
THAT THE COMPANY SHALL NOT BE REQUIRED IN CONNECTION THEREWITH OR AS A CONDITION
THERETO TO (W) MAKE ANY CHANGE TO ITS ARTICLES OF INCORPORATION OR BY-LAWS, (X)
QUALIFY TO DO BUSINESS IN ANY JURISDICTION WHERE IT WOULD NOT OTHERWISE BE
REQUIRED TO QUALIFY BUT FOR THIS SECTION 3(D), (Y) SUBJECT ITSELF TO GENERAL
TAXATION IN ANY SUCH JURISDICTION, OR (Z) FILE A GENERAL CONSENT TO SERVICE OF
PROCESS IN ANY SUCH JURISDICTION.  THE COMPANY SHALL PROMPTLY NOTIFY EACH BUYER
WHO HOLDS REGISTRABLE SECURITIES OF THE RECEIPT BY THE COMPANY OF ANY
NOTIFICATION WITH RESPECT TO THE SUSPENSION OF THE REGISTRATION OR QUALIFICATION
OF ANY OF THE REGISTRABLE SECURITIES FOR SALE UNDER THE SECURITIES OR “BLUE SKY”
LAWS OF ANY JURISDICTION IN THE UNITED STATES OR ITS RECEIPT OF ACTUAL NOTICE OF
THE INITIATION OR THREAT OF ANY PROCEEDING FOR SUCH PURPOSE.

(F)            AS PROMPTLY AS PRACTICABLE AFTER BECOMING AWARE OF SUCH EVENT OR
DEVELOPMENT, THE COMPANY SHALL NOTIFY EACH BUYER IN WRITING OF THE HAPPENING OF
ANY EVENT AS A RESULT OF WHICH THE PROSPECTUS INCLUDED IN A REGISTRATION
STATEMENT, AS THEN IN EFFECT, INCLUDES AN UNTRUE STATEMENT OF A MATERIAL FACT OR
OMISSION TO STATE A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE
MADE, NOT MISLEADING (PROVIDED THAT IN NO EVENT SHALL SUCH NOTICE CONTAIN ANY
MATERIAL, NONPUBLIC INFORMATION), AND PROMPTLY PREPARE A SUPPLEMENT OR AMENDMENT
TO SUCH REGISTRATION STATEMENT TO CORRECT SUCH UNTRUE STATEMENT OR OMISSION, AND
DELIVER TEN (10) COPIES OF SUCH SUPPLEMENT OR AMENDMENT TO EACH BUYER.  THE
COMPANY SHALL ALSO PROMPTLY NOTIFY EACH BUYER IN WRITING (I) WHEN A PROSPECTUS
OR ANY PROSPECTUS SUPPLEMENT OR POST-EFFECTIVE AMENDMENT HAS BEEN FILED, AND
WHEN A REGISTRATION STATEMENT OR ANY POST-EFFECTIVE AMENDMENT HAS BECOME
EFFECTIVE (NOTIFICATION OF SUCH EFFECTIVENESS SHALL BE DELIVERED TO EACH BUYER
BY FACSIMILE ON THE SAME DAY OF SUCH EFFECTIVENESS), (II) OF ANY REQUEST BY THE
SEC FOR AMENDMENTS OR SUPPLEMENTS TO A REGISTRATION STATEMENT OR RELATED
PROSPECTUS OR RELATED INFORMATION, AND (III) OF THE COMPANY’S REASONABLE
DETERMINATION THAT A POST-EFFECTIVE AMENDMENT TO A REGISTRATION STATEMENT WOULD
BE APPROPRIATE.

(G)           THE COMPANY SHALL USE ITS BEST EFFORTS TO PREVENT THE ISSUANCE OF
ANY STOP ORDER OR OTHER SUSPENSION OF EFFECTIVENESS OF A REGISTRATION STATEMENT,
OR THE SUSPENSION OF THE QUALIFICATION OF ANY OF THE REGISTRABLE SECURITIES FOR
SALE IN ANY JURISDICTION WITHIN THE UNITED STATES OF AMERICA AND, IF SUCH AN
ORDER OR SUSPENSION IS ISSUED, TO OBTAIN THE WITHDRAWAL OF SUCH ORDER OR
SUSPENSION AT THE EARLIEST POSSIBLE MOMENT AND TO NOTIFY EACH BUYER WHO HOLDS
REGISTRABLE SECURITIES BEING SOLD OF THE ISSUANCE OF SUCH ORDER AND THE
RESOLUTION THEREOF OR ITS RECEIPT OF ACTUAL NOTICE OF THE INITIATION OR THREAT
OF ANY PROCEEDING FOR SUCH PURPOSE.

(H)           IF, AFTER THE EXECUTION OF THIS AGREEMENT, A BUYER BELIEVES, AFTER
CONSULTATION WITH ITS LEGAL COUNSEL, THAT IT COULD REASONABLY BE DEEMED TO BE AN
UNDERWRITER OF REGISTRABLE SECURITIES, AT THE REQUEST OF ANY BUYER, THE COMPANY
SHALL FURNISH TO SUCH BUYER, ON THE DATE OF THE EFFECTIVENESS OF THE
REGISTRATION STATEMENT AND THEREAFTER FROM TIME TO TIME ON SUCH DATES AS A BUYER
MAY REASONABLY REQUEST (I) A LETTER, DATED SUCH DATE, FROM THE COMPANY’S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS IN FORM AND SUBSTANCE AS IS CUSTOMARILY
GIVEN BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS TO UNDERWRITERS IN AN
UNDERWRITTEN PUBLIC OFFERING, AND (II) AN OPINION, DATED AS OF SUCH DATE, OF
COUNSEL REPRESENTING THE COMPANY FOR PURPOSES OF SUCH REGISTRATION STATEMENT, IN
FORM, SCOPE AND SUBSTANCE AS IS CUSTOMARILY GIVEN IN AN UNDERWRITTEN PUBLIC
OFFERING, ADDRESSED TO THE BUYERS.

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(I)            IF, AFTER THE EXECUTION OF THIS AGREEMENT, A BUYER BELIEVES,
AFTER CONSULTATION WITH ITS LEGAL COUNSEL, THAT IT COULD REASONABLY BE DEEMED TO
BE AN UNDERWRITER OF REGISTRABLE SECURITIES, AT THE REQUEST OF ANY BUYER, THE
COMPANY SHALL MAKE AVAILABLE FOR INSPECTION BY (I) ANY BUYER AND (II) ONE (1)
FIRM OF ACCOUNTANTS OR OTHER AGENTS RETAINED BY THE BUYERS (COLLECTIVELY, THE
“INSPECTORS”) ALL PERTINENT FINANCIAL AND OTHER RECORDS, AND PERTINENT CORPORATE
DOCUMENTS AND PROPERTIES OF THE COMPANY (COLLECTIVELY, THE “RECORDS”), AS SHALL
BE REASONABLY DEEMED NECESSARY BY EACH INSPECTOR, AND CAUSE THE COMPANY’S
OFFICERS, DIRECTORS AND EMPLOYEES TO SUPPLY ALL INFORMATION WHICH ANY INSPECTOR
MAY REASONABLY REQUEST; PROVIDED, HOWEVER, THAT EACH INSPECTOR SHALL AGREE, AND
EACH BUYER HEREBY AGREES, TO HOLD IN STRICT CONFIDENCE AND SHALL NOT MAKE ANY
DISCLOSURE (EXCEPT TO A BUYER) OR USE  ANY RECORD OR OTHER INFORMATION WHICH THE
COMPANY DETERMINES IN GOOD FAITH TO BE CONFIDENTIAL, AND OF WHICH DETERMINATION
THE INSPECTORS ARE SO NOTIFIED, UNLESS (A) THE DISCLOSURE OF SUCH RECORDS IS
NECESSARY TO AVOID OR CORRECT A MISSTATEMENT OR OMISSION IN ANY REGISTRATION
STATEMENT OR IS OTHERWISE REQUIRED UNDER THE SECURITIES ACT, (B) THE RELEASE OF
SUCH RECORDS IS ORDERED PURSUANT TO A FINAL, NON-APPEALABLE SUBPOENA OR ORDER
FROM A COURT OR GOVERNMENT BODY OF COMPETENT JURISDICTION, OR (C) THE
INFORMATION IN SUCH RECORDS HAS BEEN MADE GENERALLY AVAILABLE TO THE PUBLIC
OTHER THAN BY DISCLOSURE IN VIOLATION OF THIS OR ANY OTHER AGREEMENT OF WHICH
THE INSPECTOR AND THE BUYER HAS KNOWLEDGE.  EACH BUYER AGREES THAT IT SHALL,
UPON LEARNING THAT DISCLOSURE OF SUCH RECORDS IS SOUGHT IN OR BY A COURT OR
GOVERNMENTAL BODY OF COMPETENT JURISDICTION OR THROUGH OTHER MEANS, GIVE PROMPT
NOTICE TO THE COMPANY AND ALLOW THE COMPANY, AT ITS EXPENSE, TO UNDERTAKE
APPROPRIATE ACTION TO PREVENT DISCLOSURE OF, OR TO OBTAIN A PROTECTIVE ORDER
FOR, THE RECORDS DEEMED CONFIDENTIAL.

(J)            THE COMPANY SHALL HOLD IN CONFIDENCE AND NOT MAKE ANY DISCLOSURE
OF INFORMATION CONCERNING A BUYER PROVIDED TO THE COMPANY UNLESS (I) DISCLOSURE
OF SUCH INFORMATION IS NECESSARY TO COMPLY WITH FEDERAL OR STATE SECURITIES
LAWS, (II) THE DISCLOSURE OF SUCH INFORMATION IS NECESSARY TO AVOID OR CORRECT A
MISSTATEMENT OR OMISSION IN ANY REGISTRATION STATEMENT, (III) THE RELEASE OF
SUCH INFORMATION IS ORDERED PURSUANT TO A SUBPOENA OR OTHER FINAL,
NON-APPEALABLE ORDER FROM A COURT OR GOVERNMENTAL BODY OF COMPETENT
JURISDICTION, OR (IV) SUCH INFORMATION HAS BEEN MADE GENERALLY AVAILABLE TO THE
PUBLIC OTHER THAN BY DISCLOSURE IN VIOLATION OF THIS AGREEMENT OR ANY OTHER
AGREEMENT.  THE COMPANY AGREES THAT IT SHALL, UPON LEARNING THAT DISCLOSURE OF
SUCH INFORMATION CONCERNING A BUYER IS SOUGHT IN OR BY A COURT OR GOVERNMENTAL
BODY OF COMPETENT JURISDICTION OR THROUGH OTHER MEANS, GIVE PROMPT WRITTEN
NOTICE TO SUCH BUYER AND ALLOW SUCH BUYER, AT THE BUYER’S EXPENSE, TO UNDERTAKE
APPROPRIATE ACTION TO PREVENT DISCLOSURE OF, OR TO OBTAIN A PROTECTIVE ORDER
FOR, SUCH INFORMATION.

(K)           THE COMPANY SHALL USE ITS BEST EFFORTS EITHER TO CAUSE ALL THE
REGISTRABLE SECURITIES COVERED BY A REGISTRATION STATEMENT (I) TO BE LISTED ON
EACH SECURITIES EXCHANGE ON WHICH SECURITIES OF THE SAME CLASS OR SERIES ISSUED
BY THE COMPANY ARE THEN LISTED, IF ANY, IF THE LISTING OF SUCH REGISTRABLE
SECURITIES IS THEN PERMITTED UNDER THE RULES OF SUCH EXCHANGE OR (II) THE
INCLUSION FOR QUOTATION ON THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.
OTC BULLETIN BOARD FOR SUCH REGISTRABLE SECURITIES.  THE COMPANY SHALL PAY ALL
FEES AND EXPENSES IN CONNECTION WITH SATISFYING ITS OBLIGATION UNDER THIS
SECTION 3(J).

(L)            THE COMPANY SHALL COOPERATE WITH EACH BUYER WHO HOLDS REGISTRABLE
SECURITIES BEING OFFERED AND, TO THE EXTENT APPLICABLE, TO FACILITATE THE TIMELY
PREPARATION AND DELIVERY OF CERTIFICATES (NOT BEARING ANY RESTRICTIVE LEGEND)
REPRESENTING THE REGISTRABLE SECURITIES

7

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TO BE OFFERED PURSUANT TO A REGISTRATION STATEMENT AND ENABLE SUCH CERTIFICATES
TO BE IN SUCH DENOMINATIONS OR AMOUNTS, AS THE CASE MAY BE, AS THE BUYERS MAY
REASONABLY REQUEST AND REGISTERED IN SUCH NAMES AS THE BUYERS MAY REQUEST.

(M)          THE COMPANY SHALL USE ITS BEST EFFORTS TO CAUSE THE REGISTRABLE
SECURITIES COVERED BY THE APPLICABLE REGISTRATION STATEMENT TO BE REGISTERED
WITH OR APPROVED BY SUCH OTHER GOVERNMENTAL AGENCIES OR AUTHORITIES AS MAY BE
NECESSARY TO CONSUMMATE THE DISPOSITION OF SUCH REGISTRABLE SECURITIES.

(N)           THE COMPANY SHALL OTHERWISE USE ITS BEST EFFORTS TO COMPLY WITH
ALL APPLICABLE RULES AND REGULATIONS OF THE SEC IN CONNECTION WITH ANY
REGISTRATION HEREUNDER.

(O)           WITHIN TWO (2) BUSINESS DAYS AFTER A REGISTRATION STATEMENT WHICH
COVERS REGISTRABLE SECURITIES IS DECLARED EFFECTIVE BY THE SEC, THE COMPANY
SHALL DELIVER, AND SHALL CAUSE LEGAL COUNSEL FOR THE COMPANY TO DELIVER, TO THE
TRANSFER AGENT FOR SUCH REGISTRABLE SECURITIES (WITH COPIES TO THE BUYER WHOSE
REGISTRABLE SECURITIES ARE INCLUDED IN SUCH REGISTRATION STATEMENT) CONFIRMATION
THAT SUCH REGISTRATION STATEMENT HAS BEEN DECLARED EFFECTIVE BY THE SEC IN THE
FORM ATTACHED HERETO AS EXHIBIT C.

(P)           THE COMPANY SHALL TAKE ALL OTHER REASONABLE ACTIONS NECESSARY TO
EXPEDITE AND FACILITATE DISPOSITION BY EACH BUYER OF REGISTRABLE SECURITIES
PURSUANT TO A REGISTRATION STATEMENT.

4.             OBLIGATIONS OF THE BUYERS.

(A)           EACH BUYER AGREES THAT, UPON RECEIPT OF ANY NOTICE FROM THE
COMPANY OF THE HAPPENING OF ANY EVENT OF THE KIND DESCRIBED IN SECTION 3(F) OR
THE FIRST SENTENCE OF SECTION 3(E), SUCH BUYER WILL IMMEDIATELY DISCONTINUE
DISPOSITION OF REGISTRABLE SECURITIES PURSUANT TO ANY REGISTRATION STATEMENT
COVERING SUCH REGISTRABLE SECURITIES UNTIL SUCH BUYER’S RECEIPT OF THE COPIES OF
THE SUPPLEMENTED OR AMENDED PROSPECTUS CONTEMPLATED BY SECTION 3(F) OR THE FIRST
SENTENCE OF SECTION 3(E) OR RECEIPT OF NOTICE THAT NO SUPPLEMENT OR AMENDMENT IS
REQUIRED.  NOTWITHSTANDING ANYTHING TO THE CONTRARY, THE COMPANY SHALL CAUSE ITS
TRANSFER AGENT TO DELIVER UNLEGENDED CERTIFICATES FOR SHARES OF COMMON STOCK TO
A TRANSFEREE OF A BUYER IN ACCORDANCE WITH THE TERMS OF THE SECURITIES PURCHASE
AGREEMENT IN CONNECTION WITH ANY SALE OF REGISTRABLE SECURITIES WITH RESPECT TO
WHICH A BUYER HAS ENTERED INTO A CONTRACT FOR SALE PRIOR TO THE BUYER’S RECEIPT
OF A NOTICE FROM THE COMPANY OF THE HAPPENING OF ANY EVENT OF THE KIND DESCRIBED
IN SECTION 3(F) OR THE FIRST SENTENCE OF 3(E) AND FOR WHICH THE BUYER HAS NOT
YET SETTLED.

(B)           EACH BUYER COVENANTS AND AGREES THAT IT WILL COMPLY WITH THE
PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT AS APPLICABLE TO IT OR AN
EXEMPTION THEREFROM IN CONNECTION WITH THE SALE OF REGISTERABLE SECURITIES
PURSUANT TO THE REGISTRATION STATEMENT.

5.             EXPENSES OF REGISTRATION.

All expenses incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers, legal and accounting
fees shall be paid by the Company.

8

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6.             INDEMNIFICATION.

With respect to Registrable Securities which are included in a Registration
Statement under this Agreement:

(A)           TO THE FULLEST EXTENT PERMITTED BY LAW, THE COMPANY WILL, AND
HEREBY DOES, INDEMNIFY, HOLD HARMLESS AND DEFEND EACH BUYER, THE DIRECTORS,
OFFICERS, PARTNERS, EMPLOYEES, AGENTS, REPRESENTATIVES OF, AND EACH PERSON, IF
ANY, WHO CONTROLS ANY BUYER WITHIN THE MEANING OF THE SECURITIES ACT OR THE
EXCHANGE ACT (EACH, AN “INDEMNIFIED PERSON”), AGAINST ANY LOSSES, CLAIMS,
DAMAGES, LIABILITIES, JUDGMENTS, FINES, PENALTIES, CHARGES, COSTS, REASONABLE
ATTORNEYS’ FEES, AMOUNTS PAID IN SETTLEMENT OR EXPENSES, JOINT OR SEVERAL
(COLLECTIVELY, “CLAIMS”) INCURRED IN INVESTIGATING, PREPARING OR DEFENDING ANY
ACTION, CLAIM, SUIT, INQUIRY, PROCEEDING, INVESTIGATION OR APPEAL TAKEN FROM THE
FOREGOING BY OR BEFORE ANY COURT OR GOVERNMENTAL, ADMINISTRATIVE OR OTHER
REGULATORY AGENCY, BODY OR THE SEC, WHETHER PENDING OR THREATENED, WHETHER OR
NOT AN INDEMNIFIED PARTY IS OR MAY BE A PARTY THERETO (“INDEMNIFIED DAMAGES”),
TO WHICH ANY OF THEM MAY BECOME SUBJECT INSOFAR AS SUCH CLAIMS (OR ACTIONS OR
PROCEEDINGS, WHETHER COMMENCED OR THREATENED, IN RESPECT THEREOF) ARISE OUT OF
OR ARE BASED UPON: (I) ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A
MATERIAL FACT IN A REGISTRATION STATEMENT OR ANY POST-EFFECTIVE AMENDMENT
THERETO OR IN ANY FILING MADE IN CONNECTION WITH THE QUALIFICATION OF THE
OFFERING UNDER THE SECURITIES OR OTHER “BLUE SKY” LAWS OF ANY JURISDICTION IN
WHICH REGISTRABLE SECURITIES ARE OFFERED (“BLUE SKY FILING”), OR THE OMISSION OR
ALLEGED OMISSION TO STATE A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING; (II) ANY UNTRUE
STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT CONTAINED IN ANY FINAL
PROSPECTUS (AS AMENDED OR SUPPLEMENTED, IF THE COMPANY FILES ANY AMENDMENT
THEREOF OR SUPPLEMENT THERETO WITH THE SEC) OR THE OMISSION OR ALLEGED OMISSION
TO STATE THEREIN ANY MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS MADE
THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THE STATEMENTS THEREIN WERE
MADE, NOT MISLEADING; OR (III) ANY VIOLATION OR ALLEGED VIOLATION BY THE COMPANY
OF THE SECURITIES ACT, THE EXCHANGE ACT, ANY OTHER LAW, INCLUDING, WITHOUT
LIMITATION, ANY STATE SECURITIES LAW, OR ANY RULE OR REGULATION THERE UNDER
RELATING TO THE OFFER OR SALE OF THE REGISTRABLE SECURITIES PURSUANT TO A
REGISTRATION STATEMENT (THE MATTERS IN THE FOREGOING CLAUSES (I) THROUGH (III)
BEING, COLLECTIVELY, “VIOLATIONS”).  THE COMPANY SHALL REIMBURSE THE BUYERS AND
EACH SUCH CONTROLLING PERSON PROMPTLY AS SUCH EXPENSES ARE INCURRED AND ARE DUE
AND PAYABLE, FOR ANY LEGAL FEES OR DISBURSEMENTS OR OTHER REASONABLE EXPENSES
INCURRED BY THEM IN CONNECTION WITH INVESTIGATING OR DEFENDING ANY SUCH CLAIM. 
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, THE INDEMNIFICATION
AGREEMENT CONTAINED IN THIS SECTION 6(A): (X) SHALL NOT APPLY TO A CLAIM BY AN
INDEMNIFIED PERSON ARISING OUT OF OR BASED UPON A VIOLATION WHICH OCCURS IN
RELIANCE UPON AND IN CONFORMITY WITH INFORMATION FURNISHED IN WRITING TO THE
COMPANY BY SUCH INDEMNIFIED PERSON EXPRESSLY FOR USE IN CONNECTION WITH THE
PREPARATION OF THE REGISTRATION STATEMENT OR ANY SUCH AMENDMENT THEREOF OR
SUPPLEMENT THERETO; (Y) SHALL NOT BE AVAILABLE TO THE EXTENT SUCH CLAIM IS BASED
ON A FAILURE OF THE BUYER TO DELIVER OR TO CAUSE TO BE DELIVERED THE PROSPECTUS
MADE AVAILABLE BY THE COMPANY, IF SUCH PROSPECTUS WAS TIMELY MADE AVAILABLE BY
THE COMPANY PURSUANT TO SECTION 3(C); AND (Z) SHALL NOT APPLY TO AMOUNTS PAID IN
SETTLEMENT OF ANY CLAIM IF SUCH SETTLEMENT IS EFFECTED WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMPANY, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD. SUCH
INDEMNITY SHALL REMAIN IN FULL FORCE AND EFFECT REGARDLESS OF ANY INVESTIGATION
MADE BY OR ON BEHALF OF THE INDEMNIFIED PERSON AND SHALL SURVIVE THE TRANSFER OF
THE REGISTRABLE SECURITIES BY THE BUYERS PURSUANT TO SECTION 9 HEREOF.

9

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(B)           IN CONNECTION WITH A REGISTRATION STATEMENT, EACH BUYER AGREES TO
SEVERALLY AND NOT JOINTLY INDEMNIFY, HOLD HARMLESS AND DEFEND, TO THE SAME
EXTENT AND IN THE SAME MANNER AS IS SET FORTH IN SECTION 6(A), THE COMPANY, EACH
OF ITS DIRECTORS, EACH OF ITS OFFICERS, EMPLOYEES, REPRESENTATIVES, OR AGENTS
AND EACH PERSON, IF ANY, WHO CONTROLS THE COMPANY WITHIN THE MEANING OF THE
SECURITIES ACT OR THE EXCHANGE ACT (EACH AN “INDEMNIFIED PARTY”), AGAINST ANY
CLAIM OR INDEMNIFIED DAMAGES TO WHICH ANY OF THEM MAY BECOME SUBJECT, UNDER THE
SECURITIES ACT, THE EXCHANGE ACT OR OTHERWISE, INSOFAR AS SUCH CLAIM OR
INDEMNIFIED DAMAGES ARISE OUT OF OR IS BASED UPON ANY VIOLATION, IN EACH CASE TO
THE EXTENT, AND ONLY TO THE EXTENT, THAT SUCH VIOLATION OCCURS IN RELIANCE UPON
AND IN CONFORMITY WITH WRITTEN INFORMATION FURNISHED TO THE COMPANY BY SUCH
BUYER EXPRESSLY FOR USE IN CONNECTION WITH SUCH REGISTRATION STATEMENT; AND,
SUBJECT TO SECTION 6(D), SUCH BUYER WILL REIMBURSE ANY LEGAL OR OTHER EXPENSES
REASONABLY INCURRED BY THEM IN CONNECTION WITH INVESTIGATING OR DEFENDING ANY
SUCH CLAIM; PROVIDED, HOWEVER, THAT THE INDEMNITY AGREEMENT CONTAINED IN THIS
SECTION 6(B) AND THE AGREEMENT WITH RESPECT TO CONTRIBUTION CONTAINED IN SECTION
7 SHALL NOT APPLY TO AMOUNTS PAID IN SETTLEMENT OF ANY CLAIM IF SUCH SETTLEMENT
IS EFFECTED WITHOUT THE PRIOR WRITTEN CONSENT OF SUCH BUYER, WHICH CONSENT SHALL
NOT BE UNREASONABLY WITHHELD; PROVIDED, FURTHER, HOWEVER, THAT THE BUYER SHALL
BE LIABLE UNDER THIS SECTION 6(B) FOR ONLY THAT AMOUNT OF A CLAIM OR INDEMNIFIED
DAMAGES AS DOES NOT EXCEED THE NET PROCEEDS TO SUCH BUYER AS A RESULT OF THE
SALE OF REGISTRABLE SECURITIES PURSUANT TO SUCH REGISTRATION STATEMENT.  SUCH
INDEMNITY SHALL REMAIN IN FULL FORCE AND EFFECT REGARDLESS OF ANY INVESTIGATION
MADE BY OR ON BEHALF OF SUCH INDEMNIFIED PARTY AND SHALL SURVIVE THE TRANSFER OF
THE REGISTRABLE SECURITIES BY THE BUYERS PURSUANT TO SECTION 9.  NOTWITHSTANDING
ANYTHING TO THE CONTRARY CONTAINED HEREIN, THE INDEMNIFICATION AGREEMENT
CONTAINED IN THIS SECTION 6(B) WITH RESPECT TO ANY PROSPECTUS SHALL NOT INURE TO
THE BENEFIT OF ANY INDEMNIFIED PARTY IF THE UNTRUE STATEMENT OR OMISSION OF
MATERIAL FACT CONTAINED IN THE PROSPECTUS WAS CORRECTED AND SUCH NEW PROSPECTUS
WAS DELIVERED TO EACH BUYER PRIOR TO SUCH BUYER’S USE OF THE PROSPECTUS TO WHICH
THE CLAIM RELATES.

(C)           PROMPTLY AFTER RECEIPT BY AN INDEMNIFIED PERSON OR INDEMNIFIED
PARTY UNDER THIS SECTION 6 OF NOTICE OF THE COMMENCEMENT OF ANY ACTION OR
PROCEEDING (INCLUDING ANY GOVERNMENTAL ACTION OR PROCEEDING) INVOLVING A CLAIM,
SUCH INDEMNIFIED PERSON OR INDEMNIFIED PARTY SHALL, IF A CLAIM IN RESPECT
THEREOF IS TO BE MADE AGAINST ANY INDEMNIFYING PARTY UNDER THIS SECTION 6,
DELIVER TO THE INDEMNIFYING PARTY A WRITTEN NOTICE OF THE COMMENCEMENT THEREOF,
AND THE INDEMNIFYING PARTY SHALL HAVE THE RIGHT TO PARTICIPATE IN, AND, TO THE
EXTENT THE INDEMNIFYING PARTY SO DESIRES, JOINTLY WITH ANY OTHER INDEMNIFYING
PARTY SIMILARLY NOTICED, TO ASSUME CONTROL OF THE DEFENSE THEREOF WITH COUNSEL
MUTUALLY SATISFACTORY TO THE INDEMNIFYING PARTY AND THE INDEMNIFIED PERSON OR
THE INDEMNIFIED PARTY, AS THE CASE MAY BE; PROVIDED, HOWEVER, THAT AN
INDEMNIFIED PERSON OR INDEMNIFIED PARTY SHALL HAVE THE RIGHT TO RETAIN ITS OWN
COUNSEL WITH THE FEES AND EXPENSES OF NOT MORE THAN ONE (1) COUNSEL FOR SUCH
INDEMNIFIED PERSON OR INDEMNIFIED PARTY TO BE PAID BY THE INDEMNIFYING PARTY,
IF, IN THE REASONABLE OPINION OF COUNSEL RETAINED BY THE INDEMNIFYING PARTY, THE
REPRESENTATION BY SUCH COUNSEL OF THE INDEMNIFIED PERSON OR INDEMNIFIED PARTY
AND THE INDEMNIFYING PARTY WOULD BE INAPPROPRIATE DUE TO ACTUAL OR POTENTIAL
DIFFERING  INTERESTS BETWEEN SUCH INDEMNIFIED PERSON OR INDEMNIFIED PARTY AND
ANY OTHER PARTY REPRESENTED BY SUCH COUNSEL IN SUCH PROCEEDING.  THE INDEMNIFIED
PARTY OR INDEMNIFIED PERSON SHALL COOPERATE FULLY WITH THE INDEMNIFYING PARTY IN
CONNECTION WITH ANY NEGOTIATION OR DEFENSE OF ANY SUCH ACTION OR CLAIM BY THE
INDEMNIFYING PARTY AND SHALL FURNISH TO THE INDEMNIFYING PARTY ALL INFORMATION
REASONABLY AVAILABLE TO THE INDEMNIFIED PARTY OR INDEMNIFIED PERSON WHICH
RELATES TO SUCH ACTION OR CLAIM.  THE INDEMNIFYING PARTY SHALL KEEP THE
INDEMNIFIED PARTY OR

10

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INDEMNIFIED PERSON FULLY APPRISED AT ALL TIMES AS TO THE STATUS OF THE DEFENSE
OR ANY SETTLEMENT NEGOTIATIONS WITH RESPECT THERETO.  NO INDEMNIFYING PARTY
SHALL BE LIABLE FOR ANY SETTLEMENT OF ANY ACTION, CLAIM OR PROCEEDING EFFECTED
WITHOUT ITS PRIOR WRITTEN CONSENT; PROVIDED, HOWEVER, THAT THE INDEMNIFYING
PARTY SHALL NOT UNREASONABLY WITHHOLD, DELAY OR CONDITION ITS CONSENT.  NO
INDEMNIFYING PARTY SHALL, WITHOUT THE PRIOR WRITTEN CONSENT OF THE INDEMNIFIED
PARTY OR INDEMNIFIED PERSON, CONSENT TO ENTRY OF ANY JUDGMENT OR ENTER INTO ANY
SETTLEMENT OR OTHER COMPROMISE WHICH DOES NOT INCLUDE AS AN UNCONDITIONAL TERM
THEREOF THE GIVING BY THE CLAIMANT OR PLAINTIFF TO SUCH INDEMNIFIED PARTY OR
INDEMNIFIED PERSON OF A RELEASE FROM ALL LIABILITY IN RESPECT TO SUCH CLAIM OR
LITIGATION.  FOLLOWING INDEMNIFICATION AS PROVIDED FOR HEREUNDER, THE
INDEMNIFYING PARTY SHALL BE SUBROGATED TO ALL RIGHTS OF THE INDEMNIFIED PARTY OR
INDEMNIFIED PERSON WITH RESPECT TO ALL THIRD PARTIES, FIRMS OR CORPORATIONS
RELATING TO THE MATTER FOR WHICH INDEMNIFICATION HAS BEEN MADE.  THE FAILURE TO
DELIVER WRITTEN NOTICE TO THE INDEMNIFYING PARTY WITHIN A REASONABLE TIME OF THE
COMMENCEMENT OF ANY SUCH ACTION SHALL NOT RELIEVE SUCH INDEMNIFYING PARTY OF ANY
LIABILITY TO THE INDEMNIFIED PERSON OR INDEMNIFIED PARTY UNDER THIS SECTION 6,
EXCEPT TO THE EXTENT THAT THE INDEMNIFYING PARTY IS PREJUDICED IN ITS ABILITY TO
DEFEND SUCH ACTION.

(D)           THE INDEMNIFICATION REQUIRED BY THIS SECTION 6 SHALL BE MADE BY
PERIODIC PAYMENTS OF THE AMOUNT THEREOF DURING THE COURSE OF THE INVESTIGATION
OR DEFENSE, AS AND WHEN BILLS ARE RECEIVED OR INDEMNIFIED DAMAGES ARE INCURRED.

(E)           THE INDEMNITY AGREEMENTS CONTAINED HEREIN SHALL BE IN ADDITION TO
(I) ANY CAUSE OF ACTION OR SIMILAR RIGHT OF THE INDEMNIFIED PARTY OR INDEMNIFIED
PERSON AGAINST THE INDEMNIFYING PARTY OR OTHERS, AND (II) ANY LIABILITIES THE
INDEMNIFYING PARTY MAY BE SUBJECT TO PURSUANT TO THE LAW.

7.             CONTRIBUTION.

To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that:  (i) no
seller of Registrable Securities guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.

8.             REPORTS UNDER THE EXCHANGE ACT.

With a view to making available to the Buyers the benefits of Rule 144
promulgated under the Securities Act or any similar rule or regulation of the
SEC that may at any time permit the Buyers to sell securities of the Company to
the public without registration (“Rule 144”) the Company agrees to:

(A)           MAKE AND KEEP PUBLIC INFORMATION AVAILABLE, AS THOSE TERMS ARE
UNDERSTOOD AND DEFINED IN RULE 144;

11

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(B)           FILE WITH THE SEC IN A TIMELY MANNER ALL REPORTS AND OTHER
DOCUMENTS REQUIRED OF THE COMPANY UNDER THE SECURITIES ACT AND THE EXCHANGE ACT
SO LONG AS THE COMPANY REMAINS SUBJECT TO SUCH REQUIREMENTS (IT BEING UNDERSTOOD
THAT NOTHING HEREIN SHALL LIMIT THE COMPANY’S OBLIGATIONS UNDER SECTION 4(C) OF
THE SECURITIES PURCHASE AGREEMENT) AND THE FILING OF SUCH REPORTS AND OTHER
DOCUMENTS AS ARE  REQUIRED BY THE APPLICABLE PROVISIONS OF RULE 144; AND

(C)           FURNISH TO EACH BUYER SO LONG AS SUCH BUYER OWNS REGISTRABLE
SECURITIES, PROMPTLY UPON REQUEST, (I) A WRITTEN STATEMENT BY THE COMPANY THAT
IT HAS COMPLIED WITH THE REPORTING REQUIREMENTS OF RULE 144, THE SECURITIES ACT
AND THE EXCHANGE ACT, (II) A COPY OF THE MOST RECENT ANNUAL OR QUARTERLY REPORT
OF THE COMPANY AND SUCH OTHER REPORTS AND DOCUMENTS SO FILED BY THE COMPANY, AND
(III) SUCH OTHER INFORMATION AS MAY BE REASONABLY REQUESTED TO PERMIT THE BUYERS
TO SELL SUCH SECURITIES PURSUANT TO RULE 144 WITHOUT REGISTRATION.

9.             AMENDMENT OF REGISTRATION RIGHTS.

Provisions of this Agreement may be amended and the observance thereof may be
waived (either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Buyers who then
hold at least two-thirds (2/3) of the Registrable Securities.  Any amendment or
waiver effected in accordance with this Section 9 shall be binding upon each
Buyer and the Company.  No such amendment shall be effective to the extent that
it applies to fewer than all of the holders of the Registrable Securities.  No
consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of this Agreement unless the same
consideration also is offered to all of the parties to this Agreement.

10.           MISCELLANEOUS.

(A)           A PERSON IS DEEMED TO BE A HOLDER OF REGISTRABLE SECURITIES
WHENEVER SUCH PERSON OWNS OR IS DEEMED TO OWN OF RECORD SUCH REGISTRABLE
SECURITIES OR OWNS THE RIGHT TO RECEIVE THE REGISTRABLE SECURITIES.  IF THE
COMPANY RECEIVES CONFLICTING INSTRUCTIONS, NOTICES OR ELECTIONS FROM TWO (2) OR
MORE PERSONS WITH RESPECT TO THE SAME REGISTRABLE SECURITIES, THE COMPANY SHALL
ACT UPON THE BASIS OF INSTRUCTIONS, NOTICE OR ELECTION RECEIVED FROM THE
REGISTERED OWNER OF SUCH REGISTRABLE SECURITIES.

(B)           NO PIGGYBACK ON REGISTRATIONS.  EXCEPT AS SET FORTH ON SCHEDULE
10(B) ATTACHED HERETO, CONTEMPLATED WITH RESPECT TO THE PRIVATE PLACEMENT
OFFERING BEING COMPLETED BY CLAYTON DUNNING & CO., INC., NEITHER THE COMPANY NOR
ANY OF ITS SECURITY HOLDERS (OTHER THAN THE BUYERS IN SUCH CAPACITY PURSUANT
HERETO) MAY INCLUDE SECURITIES OF THE COMPANY IN THE INITIAL REGISTRATION
STATEMENT OTHER THAN THE REGISTRABLE SECURITIES.  THE COMPANY SHALL NOT FILE ANY
OTHER REGISTRATION STATEMENTS UNTIL THE INITIAL REGISTRATION STATEMENT REQUIRED
HEREUNDER IS DECLARED EFFECTIVE BY THE SEC, PROVIDED THAT THIS SECTION 10(B)
SHALL NOT PROHIBIT THE COMPANY FROM FILING AMENDMENTS TO REGISTRATION STATEMENTS
ALREADY FILED.

(C)           PIGGY-BACK REGISTRATIONS.  IF AT ANY TIME DURING THE REGISTRATION
PERIOD THERE IS NOT AN EFFECTIVE REGISTRATION STATEMENT COVERING ALL OF THE
REGISTRABLE SECURITIES AND THE COMPANY SHALL DETERMINE TO PREPARE AND FILE WITH
THE SEC A REGISTRATION STATEMENT RELATING TO AN

12

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OFFERING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF OTHERS UNDER THE SECURITIES ACT
OF ANY OF ITS EQUITY SECURITIES, OTHER THAN ON FORM S-4 OR FORM S-8 (EACH AS
PROMULGATED UNDER THE SECURITIES ACT) OR THEIR THEN EQUIVALENTS RELATING TO
EQUITY SECURITIES TO BE ISSUED SOLELY IN CONNECTION WITH ANY ACQUISITION OF ANY
ENTITY OR BUSINESS OR EQUITY SECURITIES ISSUABLE IN CONNECTION WITH THE STOCK
OPTION OR OTHER EMPLOYEE BENEFIT PLANS, THEN THE COMPANY SHALL SEND TO EACH
BUYER A WRITTEN NOTICE OF SUCH DETERMINATION AND, IF WITHIN FIFTEEN (15) DAYS
AFTER THE DATE OF SUCH NOTICE, ANY SUCH BUYER SHALL SO REQUEST IN WRITING, THE
COMPANY SHALL INCLUDE IN SUCH REGISTRATION STATEMENT ALL OR ANY PART OF SUCH
REGISTRABLE SECURITIES SUCH BUYER REQUESTS TO BE REGISTERED; PROVIDED, HOWEVER,
THAT, THE COMPANY SHALL NOT BE REQUIRED TO REGISTER ANY REGISTRABLE SECURITIES
PURSUANT TO THIS SECTION 10(C) THAT ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144(K) PROMULGATED UNDER THE SECURITIES ACT OR THAT ARE THE SUBJECT OF A THEN
EFFECTIVE REGISTRATION STATEMENT.

(D)           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 RECEIPT, WHEN SENT BY FACSIMILE (PROVIDED CONFIRMATION OF
TRANSMISSION IS MECHANICALLY OR ELECTRONICALLY GENERATED AND KEPT ON FILE BY THE
SENDING PARTY); OR (III) ONE (1) BUSINESS 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:

 

Isonics Corporation

 

 

 

 

5906 McIntyre Street

 

 

 

 

Golden, CO 80403

 

 

 

 

Attention:

John Sakys, President

 

 

 

Telephone:

(303) 279-7900

 

 

 

Facsimile:

(303) 279-7300

 

 

 

 

 

 

With Copy to:

 

Burns, Figa & Will, P.C.

 

 

 

 

6400 South Fiddler’s Green Circle — Suite 1000

 

 

 

 

Greenwood Village, CO 80111

 

 

 

 

Attention:

Herrick K. Lidstone, Jr., Esq.

 

 

 

Telephone:

(303) 796-2626

 

 

 

Facsimile:

(303) 796-2777

 

If to an Buyer, to its address and facsimile number on the Schedule of Buyers
attached hereto, with copies to such Buyer’s representatives as set forth on the
Schedule of Buyers or to such other address and/or facsimile number and/or to
the attention of such other person as the recipient party has specified by
written notice given to each other party five (5) days prior to the
effectiveness of such change.  Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender’s facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.

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(E)           FAILURE OF ANY PARTY TO EXERCISE ANY RIGHT OR REMEDY UNDER THIS
AGREEMENT OR OTHERWISE, OR DELAY BY A PARTY IN EXERCISING SUCH RIGHT OR REMEDY,
SHALL NOT OPERATE AS A WAIVER THEREOF.

(F)            THE LAWS OF THE STATE OF NEW JERSEY SHALL GOVERN ALL ISSUES
CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND THE BUYERS AS ITS
STOCKHOLDERS.  ALL OTHER QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY,
ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW JERSEY, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW JERSEY OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW JERSEY.  EACH PARTY HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE SUPERIOR COURTS OF THE STATE OF
NEW JERSEY, SITTING IN HUDSON COUNTY, NEW JERSEY AND FEDERAL COURTS FOR THE
DISTRICT OF NEW JERSEY SITTING NEWARK, NEW JERSEY, FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED
HEREBY OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO
ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT,
ACTION OR PROCEEDING IS IMPROPER.  EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL
SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION
OR PROCEEDING BY MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS FOR SUCH
NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE
GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF.  NOTHING CONTAINED
HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY
MANNER PERMITTED BY LAW.  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.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

(G)           THIS AGREEMENT SHALL INURE TO THE BENEFIT OF AND BE BINDING UPON
THE PERMITTED SUCCESSORS AND ASSIGNS OF EACH OF THE PARTIES HERETO.

(H)           THE HEADINGS IN THIS AGREEMENT ARE FOR CONVENIENCE OF REFERENCE
ONLY AND SHALL NOT LIMIT OR OTHERWISE AFFECT THE MEANING HEREOF.

(I)            THIS AGREEMENT MAY BE EXECUTED IN IDENTICAL COUNTERPARTS, EACH OF
WHICH SHALL BE DEEMED AN ORIGINAL BUT ALL OF WHICH SHALL CONSTITUTE ONE AND THE
SAME AGREEMENT.  THIS AGREEMENT, ONCE EXECUTED BY A PARTY, MAY BE DELIVERED TO
THE OTHER PARTY HERETO BY FACSIMILE TRANSMISSION OF A COPY OF THIS AGREEMENT
BEARING THE SIGNATURE OF THE PARTY SO DELIVERING THIS AGREEMENT.

(J)            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

14

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INTENT AND ACCOMPLISH THE PURPOSES OF THIS AGREEMENT AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY.

(K)           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.

(L)            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.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, each Buyer and the Company have caused their signature page
to this Registration Rights Agreement to be duly executed as of the date first
above written.

COMPANY:

 

 

ISONICS CORPORATION

 

 

 

 

By:

 

 

Name:

John Sakys

 

Title:

President and Interim Chief Executive Officer

 

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IN WITNESS WHEREOF, each Buyer and the Company have caused their signature page
to this Registration Rights Agreement to be duly executed as of the date first
above written.

BUYER:

 

 

 

CORNELL CAPITAL PARTNERS, L.P.

 

 

 

 

 

By:

Yorkville Advisors, LLC

 

 

Its:

Investment Manager

 

 

 

 

 

 

 

 

 

 

By:

 

 

Name:

Mark Angelo

 

 

Title:

Portfolio Manager

 

 

 

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SCHEDULE I

SCHEDULE OF BUYERS

 

Buyer

 

Address/Facsimile
Number of Buyer

 

Address/Facsimile
Number of Buyer’s Representative

 

 

 

 

 

 

 

 

 

 

Cornell Capital Partners, L.P.

 

101 Hudson Street — Suite 3700

 

101 Hudson Street — Suite 3700

 

 

Jersey City, NJ 07303

 

Jersey City, NJ 07303

 

 

Facsimile:(201) 985-8266

 

Facsimile:(201) 985-8266

 

 

 

 

Attention: David Gonzalez, Esq.

 

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EXHIBIT A

SELLING STOCKHOLDERS

AND PLAN OF DISTRIBUTION

Selling Stockholders

The shares of Common Stock being offered by the selling stockholders are
issuable upon conversion of the convertible debentures and upon exercise of the
warrants.  For additional information regarding the issuance of those
convertible notes and warrants, see “Private Placement of Convertible Debentures
and Warrants” above.  We are registering the shares of Common Stock in order to
permit the selling stockholders to offer the shares for resale from time to
time.  Except as otherwise notes and except for the ownership of the convertible
Debentures and the warrants issued pursuant to the Securities Purchase
Agreement, the selling stockholders have not had any material relationship with
us within the past three years.

The table below lists the selling stockholders and other information regarding
the beneficial ownership of the shares of Common Stock by each of the selling
stockholders.  The second column lists the number of shares of Common Stock
beneficially owned by each selling stockholder, based on its ownership of the
convertible debentures and warrants, as of                  , 200      ,
assuming conversion of all convertible debentures and exercise of the warrants
held by the selling stockholders on that date, without regard to any limitations
on conversions or exercise.

The third column lists the shares of Common Stock being offered by this
prospectus by the selling stockholders.

In accordance with the terms of a registration rights agreement with the selling
stockholders, this prospectus generally covers the resale of at least (i)
nineteen and ninety-nine one hundredths percent (19.99%) if such initial
Registration Statement is filed prior to obtaining shareholder approval, on or
before November 30, 2007 to issue shares of the Company’s Common Stock in excess
of nineteen and ninety-nine one hundredths percent (19.99%) or if such initial
Registration Statement is filed after obtaining shareholder approval on or
before November 30, 2007 than in an amount equal to thirty three percent (33%)
of the outstanding shares of the Company’s Common Stock excluding “insiders” as
of the date the initial Registration Statement or any Subsequent Registration
Statement, issued or to be issued upon conversion of the Convertible Debentures
(“Conversion Shares”) and (ii) 100% of the number of warrant shares issued and
issuable pursuant to the warrants as of the trading day immediately preceding
the date the registration statement is initially filed with the SEC.  Because
the conversion price of the convertible debentures and the exercise price of the
warrants may be adjusted, the number of shares that will actually be issued may
be more or less than the number of shares being offered by this prospectus.  The
fourth column assumes the sale of all of the shares offered by the selling
stockholders pursuant to this prospectus.

Under the terms of the convertible debentures and the warrants, a selling
stockholder may not convert the convertible debentures or exercise the warrants
to the extent such conversion or

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exercise would cause such selling stockholder, together with its affiliates, to
beneficially own a number of shares of Common Stock which would exceed 4.99% of
our then outstanding shares of Common Stock following such conversion or
exercise, excluding for purposes of such determination shares of Common Stock
issuable upon conversion of the convertible debentures which have not been
converted and upon exercise of the warrants which have not been exercised.  The
number of shares in the second column does not reflect this limitation.  The
selling stockholders may sell all, some or none of their shares in this
offering.  See “Plan of Distribution.”

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

 

 

 

 

Maximum Number of Shares

 

 

 

 

Number of Shares Owned

 

to be Sold Pursuant to this

 

Number of Shares Owned

Name of Selling Stockholder

 

Prior to Offering

 

Prospectus

 

After Offering

Cornell Capital Partners, L.P. (1)

 

 

 

 

 

 

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

(1)             Cornell Capital Partners, L.P. is a Cayman Island exempt limited
partnership.  Cornell is managed by Yorkville Advisors, LLC.  Investment
decisions for Yorkville Advisors are made by Mark Angelo, its portfolio manager.

 

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

 

Plan of Distribution

Each Selling Stockholder (the “Selling Stockholders”) of the common stock and
any of their pledgees, assignees and successors-in-interest may, from time to
time, sell any or all of their shares of common stock on the                 or
any other stock exchange, market or trading facility on which the shares are
traded or in private transactions.  These sales may be at fixed or negotiated
prices.  A Selling Stockholder may use any one or more of the following methods
when selling shares:

·                  ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;

·                  block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;

·                  purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;

·                  an exchange distribution in accordance with the rules of the
applicable exchange;

·                  privately negotiated transactions;

·                  broker-dealers may agree with the Selling Stockholders to
sell a specified number of such shares at a stipulated price per share;

·                  through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;

·                  a combination of any such methods of sale; or

·                  any other method permitted pursuant to applicable law.

The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the “Securities Act”), if available, rather
than under this prospectus.

Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales.  Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated, but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage commission
in compliance with NASDR Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.

In connection with the sale of the common stock or interests therein, the
Selling Stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
Common Stock in the course of hedging the positions they assume.  The Selling
Stockholders may also enter into option or other

4

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transactions with broker-dealers or other financial institutions or the creation
of one or more derivative securities which require the delivery to such
broker-dealer or other financial institution of shares offered by this
prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).

The Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales.  In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.  Each Selling Stockholder has informed the
Company that it does not have any written or oral agreement or understanding,
directly or indirectly, with any person to distribute the Common Stock. In no
event shall any broker-dealer receive fees, commissions and markups which, in
the aggregate, would exceed eight percent (8%).

The Company is required to pay certain fees and expenses incurred by the Company
incident to the registration of the shares.  The Company has agreed to indemnify
the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.

Because Selling Stockholders may be deemed to be “underwriters” within the
meaning of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act including Rule 172 thereunder.  In addition,
any securities covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under Rule 144 rather than under
this prospectus.  There is no underwriter or coordinating broker acting in
connection with the proposed sale of the resale shares by the Selling
Stockholders.

We agreed to use our best efforts to keep this prospectus effective until the
earlier of (i) the date on which the shares may be resold by the Selling
Stockholders without registration and without regard to any volume limitations
by reason of Rule 144(k) under the Securities Act or any other rule of similar
effect or (ii) all of the shares have been sold pursuant to this prospectus or
Rule 144 under the Securities Act or any other rule of similar effect.  The
resale shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states, the resale shares may not be sold unless they have been
registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is complied with.

Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale shares may not simultaneously engage
in market making activities with respect to the common stock for the applicable
restricted period, as defined in Regulation M, prior to the commencement of the
distribution.  In addition, the Selling Stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of purchases and
sales of shares of the common stock by the Selling Stockholders or any other
person.  We will make copies of this prospectus available to the Selling
Stockholders and have informed them of the need to deliver a

5

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copy of this prospectus to each purchaser at or prior to the time of the sale
(including by compliance with Rule 172 under the Securities Act).

6

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EXHIBIT B

OTHER DISCLOSURES

See attachment provided separately.

7

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EXHIBIT C

FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT

Attention:

Re:                               ISONICS CORPORATION

Ladies and Gentlemen:

We are counsel to Isonics Corporation, a California corporation (the “Company”),
and have represented the Company in connection with that certain Securities
Purchase Agreement (the “Securities Purchase Agreement”) entered into by and
among the Company and the Buyers named therein (collectively, the “Buyers”)
pursuant to which the Company issued to the Buyers shares of its Common Stock,
no par value per share (the “Common Stock”).  Pursuant to the Purchase
Agreement, the Company also has entered into a Registration Rights Agreement
with the Buyers (the “Registration Rights Agreement”) pursuant to which the
Company agreed, among other things, to register the Registrable Securities (as
defined in the Registration Rights Agreement) under the Securities Act of 1933,
as amended (the “Securities Act”).  In connection with the Company’s obligations
under the Registration Rights Agreement, on                          
            , the Company filed a Registration Statement on Form
                     (File No. 333-                         ) (the “Registration
Statement”) with the Securities and Exchange Commission (the “SEC”) relating to
the Registrable Securities which names each of the Buyers as a selling
stockholder there under.

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

Very truly yours,

 

[Law Firm]

 

By:

 

cc:

[LIST NAMES OF BUYERS]

 

 

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