<PAGE>   1
                                                                     EXHIBIT 4.3

                           INTERNATIONAL ISOTOPES INC.

               Certificate of Designation, Preferences and Rights

                     of Preferred Stock by Resolution of the

                       Board of Directors Providing for an

                       Issue of 14,300 Shares of Preferred

                                Stock Designated

               Series B 7% Convertible Redeemable Preferred Stock

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

              We, David M. Camp, President, and Joan H. Gillett, Assistant
Secretary, of International Isotopes Inc., a Texas corporation (the "Company"),
in accordance with the provisions of Article 2.13 of the Texas Business
Corporation Act, do HEREBY CERTIFY:

              That pursuant to the authority conferred upon the Board of
Directors by the Articles of Incorporation of the Company (hereinafter referred
to as the "Articles of Incorporation"), said Board of Directors has duly adopted
the following resolution effective May 18, 2000 providing for the issuance of a
series of Preferred Stock, designated "Series B 7% Convertible Redeemable
Preferred Stock."

              RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Company by the Articles of Incorporation of the Company, the
Board of Directors hereby authorizes and provides for the issue of a series of
Convertible Redeemable Preferred Stock, $.01 par value per share, of the Company
to be designated as Series B 7% Convertible Redeemable Preferred Stock,
consisting of 14,300 shares, and does hereby fix, state and express the
designations, voting powers, preferences and relative, participating, optional
and other special rights, and the qualifications, limitations and restrictions
thereof as set forth in Exhibit A hereto.

              IN WITNESS WHEREOF, the Company has caused this Certificate to be
signed by David M. Camp, its President and Joan H. Gillett, its Assistant
Secretary, this 31st day of May, 2000. The date of adoption of this resolution
is the 18th day of May, 2000.

                                     INTERNATIONAL ISOTOPES INC.

                                     By:
                                        ----------------------------------------

                                     Name:  David M. Camp, President

                                     By:
                                        ----------------------------------------

                                     Name: Joan H. Gillett, Assistant Secretary


<PAGE>   2


                                    EXHIBIT A

                                   ARTICLE I

           DESIGNATION, AMOUNT, PAR VALUE, LIQUIDATION VALUE AND RANK

              1.1 The series of preferred stock shall be designated as Series B
7% Convertible Redeemable Preferred Stock, ("Series B Preferred Stock" or
"Preferred Stock"), and the number of shares so designated shall be up to 14,300
(which shall not be subject to increase without the consent of each of the
holders of the Series B Preferred Stock ("Holders")). Each share of Preferred
Stock, $.01 par value per share, shall have a liquidation value of $1,000 per
share plus all paid and accrued dividends to the date of determination to the
extent not previously paid in cash in accordance with the terms hereof (the
"Liquidation Value").

              1.2 The Series B Preferred Stock shall rank, pari passu with the
Series A Preferred Stock and senior to all other classes of the Company's
securities as to dividends, distributions and upon liquidation, dissolution or
winding up. No class of equity securities of the Company shall be senior to the
Series B Preferred Stock as to dividends, distributions and upon liquidation,
dissolution or winding up.

                                   ARTICLE II

                                    DIVIDENDS

              2.1 Holders of Series B Preferred Stock shall be entitled to
receive, out of funds legally available therefor, and the Company shall pay,
cumulative dividends at the rate per share (as a percentage of the Liquidation
Value per share) equal to 7% per annum, payable quarterly, on March 1, June 1,
September 1 and December 1 of each year (each a "Dividend Payment Date")
commencing on September 1, 2000, in cash or shares of Common Stock, as set forth
in Section 2.2, at the option of the Company. The "Record Date" for any dividend
payment is the close of business on February 15, May 15, August 15 and November
15, as the case may be, whether or not a Business Day, immediately preceding the
Dividend Payment Date on which such dividend is payable. Dividends on the Series
B Preferred Stock shall be calculated on the basis of a 365-day year (or 366-day
year for any leap year), shall accrue daily commencing on the Issuance Date, and
shall be deemed to accrue from such date and be cumulative whether or not earned
or declared and whether or not there are profits, surplus or other funds of the
Company legally available for the payment of dividends. Accrued and unpaid
dividends of the Preferred Stock for any shares which are being converted shall
be paid on the Conversion Date. Except as otherwise provided herein, if at any
time the Company pays less than the total amount of dividends then accrued on
account of the Preferred Stock, such payment shall be distributed ratably among
the Holders based upon the number of shares held by each Holder.

              2.2 Dividends may, at the Company's option be paid in shares of
Common Stock calculated based upon the Average Price as of the date such
dividends are due. It shall be assumed that the Company shall elect to make all
payments of dividends in cash, unless the Company shall have given written
notice to each Holder not less than four (4) Business Days'


<PAGE>   3


prior to the applicable Dividend Payment Date of its intention to pay such
dividends in Common Stock. Notwithstanding anything to the contrary contained
herein, the Company may not issue shares of Common Stock in payment of the
dividends if: (i) the number of shares of Common Stock at the time authorized,
unissued and unreserved for all other purposes is insufficient to pay dividends
hereunder in shares of Common Stock or there is an insufficient number of
authorized shares of Common Stock reserved (pursuant to Section 3.4(b) of the
Purchase Agreement) for issue for full conversion of all shares of Preferred
Stock issued pursuant to the Purchase Agreement; (ii) such shares are not either
registered for resale pursuant to the Registration Statement (as defined in the
Registration Rights Agreement) or freely transferable without volume
restrictions pursuant to Rule 144(k) promulgated under the Act, as determined by
counsel to the Company pursuant to a written opinion letter addressed and in
form and substance acceptable to the Holder and the transfer agent for such
shares, subject to receipt from the Holder of a representation from such Holder
that it is not an Affiliate of the Company; or (iii) such shares are not listed
or quoted on the Nasdaq or a Subsequent Market.

              2.3 So long as any Preferred Stock shall remain outstanding or
unconverted, except pursuant to existing agreements of the Company on the date
hereof, neither the Company nor any subsidiary thereof shall redeem, purchase or
otherwise acquire directly or indirectly any Junior Securities, nor shall the
Company directly or indirectly pay or declare any dividend or make any
distribution (other than a dividend or distribution described herein) upon, nor
shall any distribution be made in respect of, any Junior Securities, nor shall
any monies be set aside for or applied to the purchase or redemption (through a
sinking fund or otherwise) of any Junior Securities.

                                  ARTICLE III

                                  VOTING RIGHTS

              3.1 Except as otherwise provided herein and as otherwise required
by law, the Preferred Stock shall have no voting rights. However, so long as any
shares of Preferred Stock are outstanding, the Company shall not and shall cause
its subsidiaries not to, without the affirmative vote of the Holders of more
than 75% of the shares of the Preferred Stock then outstanding, (a) alter or
change adversely the absolute or relative powers, preferences or rights given to
the Preferred Stock, (b) alter or amend this Certificate of Designation, (c)
amend its, or their, Articles of Incorporation, bylaws or other charter
documents so as to affect adversely any rights of any Holders, (d) increase the
authorized number of shares of Preferred Stock, (e) sell all or substantially
all of its, or their, assets, (f) merge with or into another company, in the
event that the Company will not be the surviving entity or (g) enter into any
agreement with respect to the foregoing.


                                       2
<PAGE>   4


                                   ARTICLE IV

                                   LIQUIDATION

              4.1 Upon any liquidation, dissolution or winding-up of the
Company, whether voluntary or involuntary (a "Liquidation"), the Holders shall
be entitled to receive out of the assets of the Company legally available
therefor, whether such assets are capital or surplus, for each share of
Preferred Stock an amount equal to the Liquidation Value, before any
distribution or payment shall be made to the Holders of any Junior Securities.
If the assets of the Company shall be insufficient to pay in full all amounts
due to the Holders then the entire assets to be distributed to the Holders and
the Holders of all securities ranking pari passu to the Preferred Stock ratably
in accordance with the respective amounts that would be payable on such shares
if all amounts payable thereon were paid in full. A sale, conveyance, lease,
transfer or disposition of all or substantially all of the assets of the Company
or the consummation by the Company of a transaction or series of related
transactions in which more than 40% of the voting power of the Company is
disposed of, or a consolidation or merger of the Company with or into any other
company or companies shall not be treated as a Liquidation, but instead shall be
subject to the provisions of Article VII. The Company shall mail written notice
of any such Liquidation, not less than 45 days prior to the payment date stated
therein, to each Holder.

                                   ARTICLE V

                                   CONVERSION

              5.1 RIGHT OF HOLDERS TO CONVERT PREFERRED STOCK INTO COMMON STOCK.

              (a) Conversion Price. Subject to and upon compliance with the
provisions of this Section 5.1, each share of Preferred Stock at a price per
share equal to the Original Purchase Price as set forth in the Purchase
Agreement plus any and all accrued but unpaid dividends thereon may, at any time
at or before the close of business the date the Company pays the full redemption
price therefor under Section 5.4(a) be converted into duly authorized, validly
issued, fully-paid and nonassessable shares of Common Stock at a conversion
price of $4.00 per share, subject to the provisions of this Article V (the
"Conversion Price").

              (b) Notice of Conversion. If an adjustment in the Conversion Price
and, if applicable, a change in the securities or other property issuable upon
conversion has taken place pursuant to Articles V or VII, then the conversion
described in Section 5.1(a) shall be at the applicable Conversion Price and in
such securities or other property as so adjusted. The Purchaser desiring to make
a conversion shall deliver to the Company, or, at the Purchaser's option, to the
Company's transfer agent (with a copy to the Company), a written notice of
election to convert, as provided in the form attached hereto as Exhibit A (a
"Notice of Conversion"), accompanied, if required, by the stock certificate(s)
evidencing the shares of Preferred Stock which are to be converted.

              (c) Certain Conversion Restrictions. If the Common Stock is then
listed for trading on the Nasdaq or the Nasdaq National Market and the Company
has not obtained the


                                       3
<PAGE>   5


Shareholder Approval (as defined below), then the Company is precluded from
issuing Underlying Shares at a Conversion Price that is less than the closing
sales price per share of the Common Stock on the Trading Day immediately
preceding the closing of the transactions contemplated by the Purchase
Agreement, subject to equitable adjustment in the event of stock splits and
similar events (such price, the "Market Price"), in excess of 1,928,522 shares
of Common Stock (the "Issuable Maximum") upon conversion of the Preferred Stock
and as payment of dividends thereon. The Issuable Maximum equals 19.999% of the
number of shares of Common Stock outstanding immediately prior to the closing of
transactions set forth in the Purchase Agreement. Each Holder shall be entitled
to a portion of the Issuable Maximum equal to the quotient obtained by dividing
(x) the number of shares of Preferred Stock issued and sold to such Holder on
the Original Issue Date by (y) the number of all shares of Preferred Stock
issued and sold by the Company on the Original Issue Date. If any Holder shall
no longer hold shares of Preferred Stock, then such Holder's remaining portion
of the Issuable Maximum shall be allocated pro-rata among the remaining Holders.
If on any Conversion Date (A) the Common Stock is listed for trading on the
Nasdaq or the Nasdaq National Market and (B) the Company shall not have
previously obtained the vote of shareholders (the "Shareholder Approval"), if
any, as may be required by the applicable rules and regulations of such
securities market (or any successor entity) applicable to approve the issuance
of a number of shares of Common Stock in excess of the Issuable Maximum at a
price below the Market Price, then the Company shall issue to the Holder
requesting a conversion a number of shares of Common Stock equal to the lesser
of (x) the number of shares of Common Stock issuable upon such conversion at the
Conversion Price and (y) the Holder's pro rata portion (determined as described
above) of the Issuable Maximum less all shares of Common Stock previously issued
to such Holder upon conversions of the Preferred Stock (including as payment of
dividends thereon) (but only those shares issued at a Conversion Price less than
the Market Price). With respect to the remainder of the aggregate Liquidation
Value of the shares of Preferred Stock then held by such Holder for which a
conversion in accordance with the Conversion Price would result in an issuance
of shares of Common Stock in excess of such Holder's pro-rata portion of the
Issuable Maximum (the "Excess Liquidated Value"), Company shall use its best
efforts to obtain the Shareholder Approval applicable to such issuance as soon
as is possible, but in any event not later than the 75th day after such request.
The Company shall have failed to obtain the Shareholder Approval on or prior to
the 75th day after such request, then, within three Business Days following the
request of the converting Holder, which may be given at any time following such
75th day, the Company shall pay cash to the converting Holder in an amount equal
to the Mandatory Redemption Amount for the Excess Liquidation Value. The Company
and the Holder understand and agree that shares of Common Stock issued to and
then held by a Holder as a result of conversions of Preferred Stock shall not be
entitled to vote in respect of the Shareholder Approval.

              5.2 ADJUSTMENT FOR DIVIDENDS; INTEREST PAYMENT AFTER CONVERSION.
No payment or adjustment will be made for dividends on any Common Stock except
as provided herein. On conversion of shares of Preferred Stock, any declared but
unpaid dividends thereon attributable to the period from the Original Issuance
Date to the Conversion Date with respect to the converted shares of Preferred
Stock shall not be canceled, extinguished or forfeited, but rather shall be paid
in full to the Holder thereof by the payment of an amount of shares of Common
Stock valued at the Average Price equal thereto.


                                       4
<PAGE>   6


              5.3 ISSUANCE OF SHARES UPON CONVERSION.

              (a) As promptly as practicable, but in any event no later than
five (5) Trading Days after delivery of a Notice of Conversion and, if required,
the surrender, as herein provided, of any certificates for shares of Preferred
Stock for conversion, the Company shall deliver or cause to be delivered to the
Holder of the Preferred Stock delivering such Notice of Conversion, or such
Holder's designee, a certificate or certificates representing the number of duly
authorized, validly issued, fully-paid and nonassessable shares of Common Stock,
into which such shares of Preferred Stock may be converted in accordance with
the provisions of this Article V. Such conversion shall be deemed to have been
made at the time and on the date the Notice of Conversion is delivered to the
Company under Section 7.7 (the "Conversion Date"), as long as, if required, the
Preferred Stock being converted are promptly delivered to the Company and the
rights of the Holder of such Preferred Stock as a Holder (subject to the
Company's satisfaction of its obligations hereunder with respect to such
conversion) shall cease at such time with respect to the shares of Preferred
Stock that such Holder would have held had the shares of Preferred Stock
converted into Underlying Shares not been so converted (the "Converted Preferred
Stock"), the Person or Persons entitled to receive the shares of Common Stock,
upon conversion of such Preferred Stock, shall be treated for all purposes as
having become the record holder or holders of such shares of Common Stock at
such time, and such conversion shall be at the Conversion Price in effect at
such time. Subject to paragraph 5.3(b), if any certificated shares of Preferred
Stock are converted in part only, upon such conversion the Company shall execute
and deliver to the Holder thereof, as requested by such Holder, a new Preferred
Stock certificate for the number of shares of Preferred Stock equal to the
unconverted portion of such Preferred Stock certificate.

              (b) Notwithstanding anything to the contrary set forth herein,
upon conversion of shares of Preferred Stock in accordance with the terms
hereof, the Holder shall not be required to physically surrender its certificate
of Preferred Stock to the Company unless the entire amount of shares of
Preferred Stock is so converted. The Holder and the Company shall maintain
records showing the number of shares of Preferred Stock already converted and
the dates of such conversions or shall use such other method, reasonably
satisfactory to the Holder and the Company, so as not to require physical
surrender of the Preferred Stock certificate(s) upon each such conversion. In
the event of any dispute or discrepancy, such records of the Company shall be
controlling and determinative in the absence of manifest error. Notwithstanding
the foregoing, if any portion of shares of a Preferred Stock certificate is
converted, the Holder may not transfer the Preferred Stock certificate unless
the Holder first physically surrenders the certificate to the Company, whereupon
the Company shall promptly issue and deliver upon the order of the Holder a new
certificate of like tenor, registered as the Holder (upon payment by the Holder
of any applicable transfer taxes) may request, representing the number of
remaining unconverted shares of Preferred Stock. The Holder and any assignee, by
acceptance of the Preferred Stock, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of a portion of a Preferred
Stock certificate, the unpaid and unconverted shares of such Preferred Stock
certificate may be less than the amount stated on the face thereof.


                                       5
<PAGE>   7


              (c) In lieu of delivering physical certificates representing the
Conversion Shares, provided the Company's transfer agent is participating in the
Depositary Trust Company Fast Automated Securities Transfer ("FAST") program,
upon request of the Holder and in compliance with the provisions of Sections 5.1
and 5.3, the Company shall use its best efforts to cause its transfer agent to
electronically transmit the shares of Common Stock issuable upon conversion of
the Preferred Stock to the Holder by crediting the account of the Holder's Prime
Broker with DTC through its Deposit Withdrawal Agent Commission system. The time
period for delivery described in the immediately preceding paragraph shall apply
to the electronic transmittals described herein.

              (d) In addition to any other rights available to the Holder, if
the Company fails to deliver to the Holder such certificate or certificates for
shares of Common Stock pursuant to Section 5.3(a) by the 5th Trading Day after
the Conversion Date, the Company shall pay damages to the Holder equal to the
greater of (i) the actual damages incurred by the Holder as a result of the
Holder's needing to "buy in" shares of Common Stock to the extent necessary to
satisfy securities delivery requirements ("Buy In Actual Damages").

              5.4 REQUIRED REDEMPTIONS ON DECEMBER 1, 2000 AND JUNE 1, 2001.

              (a) On each of December 1, 2000 and June 1, 2001 (each a "Put
Date") the Holder shall have the option ("Put Option") to cause the Company to
purchase all, but not less than all, of the Holder's shares of Preferred Stock
at a repurchase price equal to the Liquidation Value per share (the "Put Price")
in accordance with the provisions of this Section 5.4.

              (b) The Company shall have the option to pay the Put Price in
either cash or shares of its Common Stock. If the Company elects to pay the Put
Price in Common Stock, the Common Stock shall be valued based on the Average
Price as of the Put Date. The Company shall inform the Holder whether it elects
to pay the Put Price in cash or Common Stock within ten (10) Trading Days prior
to the Put Date. The Put Price, whether in cash or in shares of Common Stock,
shall be paid to the Holder on the first Trading Day following the applicable
Put Date.

              (c) A Holder electing to cause the Company to repurchase its
shares of Preferred Stock must notify the Company of its intent to do so by the
close of business on the Put Date.

              (d) If any portion of the Put Price shall not be paid by the
Company within 7 calendar days after the applicable Put Date, interest shall
accrue thereon at the rate of 15% per annum until the Put Price plus all such
interest is paid in full (which amount shall be paid as liquidated damages and
not as a penalty).


                                       6
<PAGE>   8


              5.5 MANDATORY REDEMPTION ON MAY 31, 2003.

              (a) All outstanding and unconverted shares of Series B Preferred
Stock on May 31, 2003 shall be redeemed by the Company pursuant to this Section
5.4 from funds or shares of Common Stock legally available therefor at a price
per share equal to the purchase price as set forth in the Purchase Agreement
plus any and all accrued but unpaid dividends. Thereafter, all shares of Series
B Preferred Stock shall cease to be outstanding and shall have the status of
authorized but undesignated preferred stock. The Company, at its option, shall
pay the redemption price either in cash or in shares of Common Stock valued at
the Average Price on May 31, 2003.

              (b) If any portion of the applicable redemption price under
Section 5.4(a) shall not be paid by the Company within seven (7) calendar days
after the date due, interest shall accrue thereon at the rate of 15% per annum
until the redemption price plus all such interest is paid in full (which amount
shall be paid as liquidated damages and not as a penalty).



                                   ARTICLE VI

                            REGISTRATION REQUIREMENTS

              6.1 RESERVATION OF SHARES. The Company covenants that it will at
all times reserve and keep available out of its authorized shares of Common
Stock, free from preemptive rights, solely for the purpose of issue upon
conversion of the Preferred Stock as herein provided, such number of shares of
the Common Stock as shall then be issuable upon the conversion of all
outstanding shares of Preferred Stock into Common Stock (the "Reserved Amount").
The Company covenants that all shares of the Common Stock issued upon conversion
of the Preferred Stock which shall be so issuable shall, when issued, be duly
and validly issued and fully paid and non-assessable.

                                  ARTICLE VII

                         ADJUSTMENT OF CONVERSION PRICE

              7.1 ADJUSTMENT OF CONVERSION PRICE. In addition to any adjustment
to the Conversion Price provided elsewhere in this Certificate of Designation,
the Conversion Price in effect at any time shall be subject to adjustment from
time to time upon the happening of certain events, as follows:

              (a) Common Stock Dividends; Common Stock Splits; Reverse Common
Stock Splits. If the Company, at any time while the Preferred Stock is
outstanding, (a) shall pay a stock dividend on its Common Stock, (b) subdivide
outstanding shares of Common Stock into a larger number of shares, (c) combine
outstanding shares of Common Stock into a smaller number of shares, or (d) issue
by reclassification of shares of Common Stock any shares of Capital Stock of the
Company, the Conversion Price shall be multiplied by a fraction the numerator of
which shall be the number of shares of Common Stock (excluding treasury shares,


                                       7
<PAGE>   9


if any) outstanding before such event and the denominator of which shall be the
number of shares of Common Stock outstanding after such event. Any adjustment
made pursuant to this Section 7.1(a) shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.

              (b) Rounding. All calculations under Section 7.1 shall be made to
the nearest cent or the nearest l/l00th of a share, as the case may be.

              (c) Notice of Adjustment. Whenever the Conversion Price is
adjusted pursuant to paragraphs 7.1(a), the Company shall promptly deliver to
the Holder a notice setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.

              (d) Adjustment to Conversion Price.

                     (i) If the Company, at any time while the Preferred Stock
is outstanding, takes any of the actions described in this Section 7.1(d), then,
in order to prevent dilution of the rights granted under this Certificate of
Designation, at any time prior to the Maturity Date, the Conversion Price will
be subject to adjustment from time to time as provided in this Section 7.1(d).

                     (ii) Adjustment of Conversion Price upon Issuance of Common
Stock. If at any time while the Preferred Stock is outstanding the Company
issues or sells, or is deemed to have issued or sold, any shares of Common Stock
(other than the shares of Common Stock underlying the Warrants or the Preferred
Stock or shares issued upon exercise of the Warrants or conversion of the
Preferred Stock or shares of Common Stock deemed to have been issued by the
Company in connection with a Stock Option Plan, or shares of Common Stock
issuable upon the exercise of any options or warrants outstanding on the date
hereof or any securities to be issued in an Underwritten Offering, or shares of
Common Stock issued or deemed to have been issued as consideration for an
acquisition by the Company of a division, assets or business (or stock
constituting any portion thereof) from another Person), for a consideration per
share less than the Conversion Price in effect immediately prior to such
issuance or sale, then immediately after such issuance or sale the Conversion
Price then in effect shall be reduced to an amount equal to the consideration
per share of Common Stock in such issuance or sale. For the purpose of
determining the adjusted Conversion Price under this Section 7.1(d), the
following shall be applicable:

                          (A) Issuance of Options. If at any time while the
Preferred Stock is outstanding the Company in any manner grants any rights or
options to subscribe for or to purchase Common Stock or any stock or other
securities convertible into or exchangeable for Common Stock (other than the
Underlying Shares or shares of Common Stock deemed to have been issued by the
Company in connection with a Stock Option Plan, or shares of Common Stock
issuable upon the exercise of any options or warrants outstanding on the date
hereof, or any securities to be issued in an Underwritten Offering, or shares of
Common Stock issued or deemed to have been issued as consideration for an
acquisition by the Company of a division, assets or business (or stock
constituting any portion thereof) from another Person) (such rights or


                                       8
<PAGE>   10


options being herein called "Options" and such convertible or exchangeable stock
or securities being herein called "Convertible Securities") and the price per
share for which Common Stock is issuable upon the exercise of such Options or
upon conversion or exchange of such Convertible Securities is less than the
Conversion Price in effect immediately prior to such grant, then the Conversion
Price then in effect shall be reduced to equal the price per share for which
Common Stock is issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities. No adjustment of the
Conversion Price shall be made upon the actual issuance of such Common Stock
upon conversion or exchange of such Options.

                          (B) Issuance of Convertible Securities. If at any time
while the Preferred Stock is outstanding the Company in any manner issues or
sells any Convertible Securities and the price per share for which Common Stock
is issuable upon such conversion or exchange (other than the Underlying Shares
or shares of Common Stock deemed to have been issued by the Company in
connection with a Stock Option Plan, shares of Common Stock issuable upon the
exercise of any options or warrants outstanding on the date hereof, shares of
Common Stock issued or deemed to have been issued as consideration for an
acquisition by the Company of a division, assets or business (or stock
constituting any portion thereof) from another Person) is less than the
Conversion Price in effect immediately prior to issuance or sale, then the
Conversion Price then in effect shall be reduced to an amount equal to the price
per share for which the Common Stock is issuable upon the conversion or exchange
of such Convertible Securities. No adjustment of the Conversion Price shall be
made upon the actual issuance of such Common Stock upon conversion or exchange
of such Convertible Securities.

                          (C) Effect on Conversion Price of Certain Events. For
purposes of determining the adjusted Conversion Price under Section 7.1(d)(ii),
the following shall be applicable:

                              (I) Calculation of Consideration Received. If any
Common Stock, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received therefor will be
deemed to be the net amount received by the Company therefor. In case any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Company will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Company will be the Average Price of such security immediately
preceding the date of receipt. In case any Common Stock, Options or Convertible
Securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Company is the surviving entity the amount of
consideration therefor will be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Common Stock, Options or Convertible Securities, as the case may be. The
fair value of any consideration other than cash or securities will be determined
jointly by the Company and the Holders of Preferred Stock representing a
majority of the aggregate number of shares of Preferred Stock then outstanding.
If such parties are unable to reach agreement within ten (10) days after the
occurrence of an event requiring valuation (a "Valuation Event"), the fair value
of such consideration will be determined within forty-eight (48) hours of the
tenth (10th) day following the Valuation Event by an Appraiser selected in good
faith by the Company and agreed upon by the Holders of Preferred


                                       9
<PAGE>   11


Stock representing a majority of the aggregate number of shares of Preferred
Stock then outstanding. The determination of such Appraiser shall be binding
upon all parties absent manifest error.

                              (II) Integrated Transactions. In case any Option
is issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for an aggregate consideration of $.01.

                              (III) Treasury Shares. The number of shares of
Common Stock outstanding at any given time does not include shares owned or held
by or for the account of the Company, and the disposition of any shares so owned
or held will be considered an issue or sale of Common Stock.

                              (IV) Record Date. If the Company takes a record of
the holders of Common Stock for the purpose of entitling them (1) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (2) to subscribe for or purchase Common Stock, Options
or Convertible Securities, then such record date will be deemed to be the date
of the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.

                          (D) Certain Events. If any event occurs of the type
contemplated by the provisions of Section 7.1(d) (subject to the exceptions
stated therein) but not expressly provided for by such provisions (including,
without limitation, the granting of stock appreciation rights, phantom stock
rights or other rights with equity features), then the Company's Board of
Directors will make an appropriate adjustment in the Conversion Price so as to
protect the rights of the Holder, or assigns, of the Preferred Stock.

                          (E) Notices. The Company shall give the Holder written
notice of the occurrence of any of the events specified in this Section 7.1(d)
as soon as practicable, but in no event later than three (5) Business Days,
after such event and shall publicly disclose such event prior to or concurrently
with the giving of such notice. Such notice shall contain at least: (A) a
description of the event, (B) the adjusted Conversion Price with a reference to
the applicable paragraph in Section 7.1(d), and (C) the dates of the five (5)
Trading Day period during which the adjusted Conversion Price is in effect.

              7.2 CERTAIN RECLASSIFICATIONS, MERGERS AND ACQUISITIONS

              (a) In case of any reclassification of the Common Stock, or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property (other than as contemplated by paragraph (b)
below of this Section), the Holders of the Preferred Stock then outstanding
shall have the right thereafter to convert such shares only into the shares of
stock and other securities, cash and property receivable upon or deemed to be
held by holders of Common Stock following such reclassification or share
exchange, and the Holders of the Preferred Stock shall be entitled upon such
event to receive such amount of securities,


                                       10
<PAGE>   12


cash or property as a holder of the number of shares of Common Stock of the
Company into which such shares of Preferred Stock could have been converted
immediately prior to such reclassification or share exchange would have been
entitled. This provision shall similarly apply to successive reclassifications
or share exchanges.

              (b) In case of any (1) merger or consolidation of the Company with
or into another Person or, for purposes of Clause (B) below, the accumulation by
any Person or "group" of Persons (as defined under Rule 13(d) of the Exchange
Act) of in excess of 40% of the shares of Common Stock then outstanding, or (2)
sale by the Company of more than one-half of the assets of the Company in one or
a series of related transactions, a Holder shall have the right thereafter to
(A) convert its shares of Preferred Stock into the shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such merger, consolidation or sale, and such Holder shall
be entitled upon such event or series of related events to receive such amount
of securities, cash and property as the shares of Common Stock into which such
shares of Preferred Stock could have been converted immediately prior to such
merger, consolidation or sale would have been entitled, or (C) in the case of a
merger or consolidation, (x) require the surviving entity to issue shares of
convertible preferred stock or convertible debentures with such aggregate stated
value or in such face amount, as the case may be, equal to the Stated Value of
the shares of Preferred Stock then held by such Holder, plus all accrued and
unpaid dividends and other amounts owing thereon, which newly issued shares of
preferred stock or debentures shall have terms identical (including with respect
to conversion) to the terms of the Preferred Stock (except, in the case of
debentures, as may be required to reflect the differences between debt and
equity) and shall be entitled to all of the rights and privileges of a Holder of
Preferred Stock set forth herein and the agreements pursuant to which the
Preferred Stock was issued (including, without limitation, as such rights relate
to the acquisition, transferability, registration and listing of such shares of
stock other securities issuable upon conversion thereof), and (y) simultaneously
with the issuance of such convertible preferred stock or convertible debentures,
shall have the right to convert such instrument only into shares of stock and
other securities, cash and property receivable upon or deemed to be held by
holders of Common Stock following such merger or consolidation. In the case of
clause (C), the conversion price applicable for the newly issued shares of
convertible preferred stock or convertible debentures shall be based upon the
amount of securities, cash and property that each share of Common Stock would
receive in such transaction, the Conversion Ratio immediately prior to the
effectiveness or closing date for such transaction and the Conversion Price
stated herein. The terms of any such merger, sale or consolidation shall include
such terms so as continue to give the Holders of Preferred Stock the right to
receive the securities, cash and property set forth in this Section upon any
conversion or redemption following such event. This provision shall similarly
apply to successive such events.

              7.3 OFFICER'S CERTIFICATE. Whenever the number of shares
purchasable upon conversion shall be adjusted as required by the provisions of
Section 7.1, the Company shall forthwith file in the custody of its Secretary or
an Assistant Secretary at its principal office and with its stock transfer
agent, if any, an officer's certificate showing the adjusted number of shares
determined as herein provided, setting forth in reasonable detail the facts
requiring such adjustment and the manner of computing such adjustment. Each such
officer's certificate shall be signed by the chairman, president or chief
financial officer of the Company and by the secretary


                                       11
<PAGE>   13


or any assistant secretary of the Company. Each such officer's certificate shall
be made available at all reasonable times for inspection by any holder of the
Preferred Stock and the Company shall, forthwith after each such adjustment,
deliver a copy of such certificate to the each of the Holders.

              7.4 COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. The Company
covenants that if any shares of Common Stock required to be reserved for
purposes of conversion of Preferred Stock hereunder require registration with or
approval of any governmental authority under any Federal or state law, or any
national securities exchange, before such shares may be issued upon conversion,
the Company will use its best efforts to cause such shares to be duly registered
or approved, as the case may be.

              7.5 FRACTIONAL SHARES. Upon a conversion hereunder, the Company
shall not be required to issue stock certificates representing fractions of
shares of the Common Stock, but may if otherwise permitted, make a cash payment
in respect of any final fraction of a share based on the Per Share Market Value
at such time. If the Company elects not, or is unable, to make such a cash
payment, the holder shall be entitled to receive, in lieu of the final fraction
of a share, one whole share of Common Stock.

              7.6 PAYMENT OF TAX UPON ISSUE OR TRANSFER. The issuance of
certificates for shares of the Common Stock on conversion of the Preferred Stock
shall be made without charge to the Holders thereof for any documentary stamp or
similar taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon conversion in a name other than that of the Holder
of such Preferred Stock so converted and the Company shall not be required to
issue or deliver such certificates unless or until the Person or Persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.

              7.7 NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back delivered), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if delivered by
8:00 p.m. CST where such notice is to be delivered), or the first Business Day
following such delivery (if delivered after 8:00 p.m. CST where such notice is
to be delivered) or (b) on the second Business Day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications are (i) if to the Company to International Isotopes Inc.,
1500 Spencer Road, Denton, Texas 76205, Telephone: (940) 323-2612, Facsimile:
(940) 483-0431, Attention: David M. Camp with copies (which are not required for
a Conversion Notice to be effective)to Locke Liddell & Sapp, LLP, 100 Congress,
Suite 300, Austin, Texas 78731, Attention: Curtis R. Ashmos, and (ii) if to any
Holder to the address set forth on [Schedule II to the Purchase Agreement] or
such other address as may be designated in writing hereafter, in the same
manner, by such Person.


                                       12
<PAGE>   14


              7.8 ALLOCATIONS OF RESERVED AMOUNT. The Reserved Amount shall be
allocated pro rata among the Holders based on the number of shares of Preferred
Stock issued to each Holder. Each increase to the Reserved Amount shall be
allocated pro rata among the Holders based on the number of shares of Preferred
Stock held by each Holder at the time of the increase in the Reserved Amount. In
the event a Holder shall sell or otherwise transfer any of such Holder's
Preferred Stock, each transferee shall be allocated a pro rata portion of such
transferor's Reserved Amount. Any portion of the Reserved Amount which remains
allocated to any person or entity which does not hold any Preferred Stock shall
be allocated to the remaining Holders, pro rata, based on the number of shares
of Preferred Stock then held by such Holders.

              7.9 NASDAQ LIMITATION. In no event shall the Company be required
to issue shares of Common Stock upon the conversion of Preferred Stock if such
issuance would violate the rules of Nasdaq.

                                  ARTICLE VIII

                               OPTIONAL REDEMPTION

              8.1 OPTIONAL REDEMPTION.

              (a) The shares of Preferred Stock are redeemable, in whole or in
part, at the option of the Company during the following time periods, from time
to time, under the following conditions and subject also to the conditions set
forth in Section 8.1(b) (the "Optional Redemption"):

                  (i) Prior to the first anniversary of the Original Issue Date,
the Company may redeem the shares of Preferred Stock subject to the other
conditions herein, if the average closing price of the Company's Common Stock
over five (5) consecutive Trading Days reaches over 200% of the Conversion Price
as at the Original Issue Date;

                  (ii) During the period commencing on the first Business Day
immediately after the first anniversary of the Original Issue Date and ending on
the second anniversary of the Original Issue Date, the Company may redeem the
shares of Preferred Stock subject to the other conditions herein, if the average
closing price of the Company's Common Stock over five (5) consecutive Trading
Days reaches over 175% of the Conversion Price as at the Original Issue Date;
and

                  (iii) After the second anniversary of the Original Issue Date,
the Company may redeem the shares of Preferred Stock subject to the other
conditions herein, if the average closing price of the Company's Common Stock
over five (5) consecutive Trading Days reaches over 150% of the Conversion Price
as at the Original Issue Date.

              (b) Subject to the conditions set forth in Section 8.1(a), so long
as (i) any Registration Statement required to be filed and be effective pursuant
to the Registration Rights Agreement is then in effect and has been in effect
and sales of all of the Registrable Securities can be made thereunder for at
least twenty (20) days prior to the Redemption Notice Date (as defined below)
and (ii) the Company has a sufficient number of authorized shares of Common


                                       13
<PAGE>   15


Stock reserved for issuance upon full conversion of the Preferred Stock, upon
ten (10) Business Days prior written notice to the Holder (a "Redemption
Notice"), the full number of outstanding shares of Preferred Stock may be
redeemed by the Company, in whole at a price equal to the original purchase
price of the Preferred Stock (the "Redemption Price"), together with any
declared but unpaid dividends and all liquidated damages and other amounts due
in respect thereof up to the Redemption Date (as defined below) (subject to the
right of the Holder on the Record Date to receive dividends due on the Dividend
Payment Date).

              8.2 MECHANICS OF REDEMPTION. The Company shall exercise its right
to redeem by delivering its Redemption Notice by facsimile and overnight courier
to each Holder (such date that the notice is given, the "Redemption Notice
Date"). Such Redemption Notice shall indicate (A) the Redemption Price, (B) each
Holder's pro rata allocation of such maximum amount, and (C) a confirmation of
the date ("Redemption Date") that the Company shall effect the redemption, which
date shall be not less than thirty (30) Business Days and not more than sixty
(60) calendar days after the Redemption Notice Date. Notwithstanding anything in
this Section 8.2, the Company shall convert any Preferred Stock pursuant to
Article VIII if the Conversion Notice for shares of Preferred Stock submitted
for conversion is (i) delivered before the Redemption Date, (ii) for a
Conversion Price greater than or equal to the Redemption Price (appropriately
adjusted in accordance with the terms hereof) or (iii) in excess of such
Holder's pro rata allocation of the maximum Redemption Price indicated in its
Redemption Notice.

              8.3 PAYMENT OF REDEMPTION PRICE. The Company shall pay the
applicable Redemption Price to the Holder of the shares of Preferred Stock being
redeemed in cash on the Redemption Date. If the Company shall fail to pay the
applicable Redemption Price to such Holder on the Redemption Date, in addition
to any remedy such Holder may have under this Certificate of Designation and the
Purchase Agreement, such unpaid amount shall bear interest at the rate of 2.0%
per month until paid in full.

              8.4 REDEMPTION UPON TRIGGERING EVENTS.

              (a) Upon the occurrence of a Triggering Event, each Holder shall
(in addition to all other rights it may have hereunder or under applicable law),
have the right, exercisable at the sole option of such Holder, to require the
Company to redeem all or a portion of the Preferred Stock then held by such
Holder for a redemption price, in cash, equal to the sum of (i) the Mandatory
Redemption Amount plus (ii) the product of (A) the number of Underlying Shares
issued in respect of conversions hereunder not more than twenty Trading Days
prior to the Triggering Event at issue and then held by the Holder and (B) the
Per Share Market Value on the date such redemption is demanded or the date the
redemption price hereunder is paid in full, whichever is greater (such sum, the
"Redemption Price"). The Redemption Price shall be due and payable within ten
Trading Days of the date on which the notice for the payment therefor is
provided by a Holder

              A "Triggering Event" means any one or more of the following events
(whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):


                                       14
<PAGE>   16


                    (i) the failure of an Underlying Shares Registration
Statement to be declared effective by the Commission on or prior to the 180th
day after the Original Issue Date;

                    (ii) if, during the Effectiveness Period, the effectiveness
of the Underlying Shares Registration Statement lapses for any reason for more
than an aggregate of twenty Trading Days (which need not be consecutive Trading
Days), or the Holder shall not be permitted to resell Registrable Securities
under the Underlying Shares Registration Statement for more than an aggregate of
twenty Trading Days (which need not be consecutive Trading Days);

                    (iii) the Common Stock is not listed for trading on the
Nasdaq or listed or quoted for trading on a Subsequent Market for an aggregate
of 20 Trading Days (which need to be consecutive Trading Days);

                    (iv) the Company shall be a party to any Change of Control
Transaction, shall agree to sell (in one or more series of related transactions)
more than 50% of its assets or shall redeem or repurchase more than a de minus
amount of Junior Securities (other than redemptions of Underlying Shares).

                    (v) the Company shall fail to observe or perform any other
material covenant, agreement or warranty contained in, or otherwise commit any
material breach of the Transaction Documents, and such failure or breach shall
not, if subject to the possibility of a cure by the Company, have been remedied
or cured within twenty Business Days after the date on which written notice of
such failure or breach shall have been given.

                                   ARTICLE IX

                                   DEFINITIONS

              9.1 DEFINITIONS. For the purposes hereof, the following terms
shall have the following meanings:

              "Act" means the Securities Act of 1993, as amended.

              "Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to any Person means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.

              "Appraiser" means a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing

              "Average Price" on any date means (x) the sum of the Per Share
Market Value for the five (5) Trading Days immediately preceding such date,
divided by (y) five (5), subject to equitable adjustment for stock splits of
similar events during such period.


                                       15
<PAGE>   17


              "BSE" means the Boston Stock Exchange.

              "Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized or required
by law to close.

              "Change of Control" means the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity or "group"
(as described in Section 13(d)(3) of the Exchange Act) of in excess of 40% of
the voting securities of the Issuer, (ii) a replacement of more than one-half of
the members of the Issuer's Board of Directors which is not approved by a
majority of those individuals who are members of the Board of Directors on the
date hereof, or their duly elected successors who are directors immediately
prior to such transaction, in one or a series of related transactions, (iii) the
merger of the Issuer with or into another entity, unless following such
transaction, the Holders of the Issuer's securities continue to hold at least
67% of such securities following such transaction, (iv) the consolidation or
sale of all or substantially all of the assets of the Issuer in one or a series
of related transactions, or (v) the execution by the Issuer of an agreement to
which the Issuer is a party or by which it is bound, providing for any of the
events set forth above in (i), (ii), (iii) or (iv).

              "Closing Date" means the date of the closing of the purchase and
sale of the Preferred Stock.

              "Commission" means the United States Securities and Exchange
Commission, or any successor to such agency.

              "Common Stock" means the Company's common stock, $.01 par value
per share, of the Company and stock of any other class into which such shares
may hereafter have been reclassified or changed.

              "Conversion Date" has the meaning set forth in Section 5.3(a).

              "Conversion Default Payments" has the meaning set forth in Section
6.2.

              "Conversion Price" has the meaning set forth in Section 5.1.

              "Conversion Ratio" means, at any time, a fraction, the numerator
of which is the Liquidation Value and the denominator of which is the Conversion
Price at such time.

              "Converted Preferred Stock" has the meaning set forth in Section
5.3(a).

              "Convertible Securities" has the meaning set forth in Section
7.1(d)(ii)(A).

              "Dividend Payment Date" has the meaning set forth in Section 2.1.

              "DTC" means the Depositary Trust Corporation.

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


                                       16
<PAGE>   18


              "Holder" or other similar terms means the registered holder of any
share of Preferred Stock.

              "Junior Securities" means the Common Stock and all other equity
securities of the Company which are junior in rights and liquidation preference
to Preferred Stock., but does not include the Series A Preferred Stock, which
shall be pari passu with the Preferred Stock.

              "Liquidation Value" has the meaning set forth in Section 1.1.

              "Mandatory Redemption Amount" for each share of Preferred Stock
means the greater of (i) 100% of the Liquidation Value, and (ii) the product of
the Average Price times the Conversion Ratio.

              "Nasdaq" means the Nasdaq Smallcap Market.

              "Notice of Conversion" has the meaning set forth in Section
5.1(b).

              "Options" has the meaning set forth in Section 7.1(d)(ii)(A).

              "Original Issue Date" shall mean the date of the first issuance of
any shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.

              "Original Purchase Price" shall mean the price per share paid for
the Preferred Stock on the Closing Date.

              "Per Share Market Value" means (i) on any particular date the
closing bid price per share of the Common Stock on such date (as reported by
Bloomberg Information Services, Inc., or any successor reporting service) on
Nasdaq or, if the Common Stock is not then quoted on Nasdaq, any Subsequent
Market on which the Common Stock is then listed or if there is no such price on
such date, then the closing bid price on such exchange or quotation system on
the date nearest preceding such date or (ii) if the Common Stock is not listed
then on Nasdaq or any Subsequent Market, the closing bid price for a share of
Common Stock in the over-the-counter market, as reported by the National
Quotation Bureau Incorporated (or similar organization or agency succeeding to
its functions of reporting prices) at the close of business on such date, or
(iii) if the Common Stock is not then publicly traded the fair market value of a
share of Common Stock as determined by an Appraiser selected in good faith by
the Holder; provided, however, that the Company, after receipt of the
determination by such Appraiser, shall have the right to select in good faith an
additional Appraiser, in which case, the fair market value shall be equal to the
average of the determinations by each such Appraiser; and provided, further that
all determinations of the Per Share Market Value shall be appropriately adjusted
for any stock dividends, stock splits or other similar transactions during such
period.

              "Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.


                                       17
<PAGE>   19


              "Purchase Agreement" means the Securities Purchase Agreement,
dated as of the Original Issue Date, among the Company and the original Holders
of the Preferred Stock.

              "Put Date" has the meaning set forth in Section 5.4.

              "Put Price" has the meaning set forth in Section 5.4.

              "Record Date" has the meaning set forth in Section 2.1.

              "Redemption Date" has the meaning set forth in Section 8.2.

              "Redemption Notice" has the meaning set forth in Section 8.1(b).

              "Redemption Notice Date" has the meaning set forth in Section 8.2.

              "Redemption Price" has the meaning set forth in Section 8.1(b).

              "Registrable Securities" has the meaning set forth in the
Registration Rights Agreement.

              "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, by and among the Company and the
original Holders.

              "Registration Statement" has the meaning set forth in the
Registration Rights Agreement.

              "Reserved Amount" has the meaning set forth in Section 6.1.

              "Reset Date" has the meaning set forth in Section 5.1(b).

              "Series A Preferred Stock" means the Company's 5% Convertible
Redeemable Preferred Stock.

              "Stock Option Plan" means any contract, plan or agreement which
has been approved by the Board of Directors of the Issuer, pursuant to which the
Issuer's securities may be issued to any employee, officer, director or
consultant.

              "Subsidiary" means, with respect to any Person, any corporation or
other entity of which a majority of the Capital Stock or other ownership
interests having ordinary voting power to elect a majority of the Board of
Directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person.

              "Subsequent Market" means the New York Stock Exchange, American
Stock Exchange or Nasdaq National Market.

              "Trading Day" means (a) a day on which the Common Stock is traded
on Nasdaq or, if the Common Stock is not then designated on Nasdaq, on such
Subsequent Market on which the Common Stock is then listed or quoted or (b) if
the Common Stock is not listed on Nasdaq or


                                       18
<PAGE>   20


a Subsequent Market, a day on which the Common Stock is traded in the
over-the-counter Market, as reported by the OTC Bulletin Board, or (c) if the
Stock is not quoted on the OTC Bulletin Board, a day on which the Common Stock
is quoted in the over-the-counter market as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding its
functions or reporting prices) provided, however that in any event that the
Common Stock is not listed or quoted as set forth in (a), (b), or (c) hereof,
then a Trading Day shall mean any Business Day.

              "Underlying Shares" means the number of shares of Common Stock
into which the shares of Preferred Stock are convertible in accordance with the
terms hereof and the Purchase Agreement.

              "Unpaid Redemption Shares" has the meaning set forth in Section
5.4(b).

              "Valuation Event" has the meaning set forth in Section
7.1(d)(ii)(D)(I).

              "Warrant" or "Warrants" has the meaning set forth in the Purchase
Agreement.

                                   ARTICLE X

                                  MISCELLANEOUS

              10.1 MODIFICATION OF CERTIFICATE OF DESIGNATION. This Certificate
of Designation may be modified without prior notice to any Holder upon the
written consent of the Company and the Holders of more than 50% of the shares of
Preferred Stock then outstanding. The Holders of more than 50% of the shares of
Preferred Stock then outstanding may waive compliance by the Company with any
provision of this Certificate of Designation without prior notice to any Holder.
However, without the consent of each Holder affected, an amendment, supplement
or waiver may not (1) reduce the number of shares of Preferred Stock whose
Holders must consent to an amendment, supplement or waiver, or (2) make any
shares of Preferred Stock payable in money or property other than as stated in
the Certificate of Designation.

              10.2 MISCELLANEOUS. This Certificate of Designation shall be
governed by and construed and enforced in accordance with the internal laws of
the State of Texas without regard to the principles of conflicts of law thereof.
Each party hereby irrevocably submits to the nonexclusive jurisdiction of the
state and federal courts sitting in Denton, County, Texas, 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 improper. The parties hereto, including all guarantors or
endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance and
enforcement of this Certificate of Designation, except as specifically provided
herein, and assent to extensions of the time of payment, or forbearance or other
indulgence without notice. The Holder of Preferred Stock by acceptance of a
share of Preferred Stock agrees to be bound by the provisions of this
Certificate of Designation which are expressly binding on such Holder.


                                       19
<PAGE>   21


              10.3 PREFERRED STOCK OWNED BY COMPANY DEEMED NOT OUTSTANDING. In
determining whether the holders of the requisite number of shares of Preferred
Stock have concurred in any direction, consent or waiver under this Certificate
of Designation, shares of Preferred Stock which are owned by the Company or any
other obligor on the Preferred Stock or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any other obligor on the Preferred Stock shall be disregarded and
deemed not to be outstanding for the purpose of any such determination; provided
that any shares of Preferred Stock owned by the Purchasers shall be deemed
outstanding for purposes of making such a determination. Shares of Preferred
Stock so owned which have been pledged in good faith may be regarded as
outstanding if the pledgee establishes to the satisfaction of the Company the
pledgee's right so to act with respect to such shares of Preferred Stock and
that the pledgee is not the Company or any other obligor upon the Preferred
Stock or any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any other obligor on the
Preferred Stock.

              10.4 NOTICE TO HOLDERS PRIOR TO TAKING CERTAIN TYPES OF ACTION. In
case:

                   (a) the Company shall authorize the issuance, at any time
from and after the Original Issue Date, to all holders of any class or series of
its Capital Stock, of rights or warrants to subscribe for or purchase shares of
its capital stock or of any other right;

                   (b) the Company shall authorize, at any time from and after
the Original Issue Date, the distribution to all holders of any class or series
of its Capital Stock, of evidences of its indebtedness or assets;

                   (c) the Company shall declare a dividend (or other
distribution) on its Common Stock or the Company shall declare a special
nonrecurring dividend on or a redemption of its Common Stock;

                   (d) of any subdivision, combination or reclassification of
any class or series of Capital Stock of the Company at any time from and after
the Original Issue Date or of any consolidation or merger to which the Company
is a party and for which approval by the shareholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company or any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property; or

                   (e) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company;

then the Company shall cause to be mailed to the Holders, at their last
addresses as they shall appear upon the registration books of the Company, at
least 10 days prior to the applicable record date hereinafter specified, a
notice stating (i) the date as of which the holders of record of such class or
series of Capital Stock are to be entitled to receive any such rights, warrants
or distribution are to be determined, or (ii) the date on which any such
subdivision, combination, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation, winding up or other action is expected to
become effective, and the date as of which it is expected that holders of record
of such class or series of Capital Stock record shall be entitled to exchange
their stock


                                       20
<PAGE>   22


for securities or other property, if any, deliverable upon such subdivision,
combination, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation, winding up or other action.

         The failure to give the notice required by this Section 10.4 or any
defect therein shall not affect the legality or validity of any distribution,
right, warrant, subdivision, combination, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation, winding up or other action, or
the vote upon any of the foregoing.

              10.5 EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.

              10.6 REFERENCES. References to Sections and Articles are to
Sections and Articles of this Certificate of Designation, unless otherwise
expressly provided.

              10.7 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privileges. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.

              10.8 LOST OR STOLEN CERTIFICATES. Upon receipt by the Company of
evidence reasonably satisfactory to the Company (including any bond the
Company's transfer agent requires the Holders to post) of the loss, theft,
destruction or mutilation of any stock certificates representing Preferred
Stock, and, in the case of loss, theft or destruction, of any indemnification
undertaking by the Holder to the Company in customary form and, in the case of
mutilation, upon surrender and cancellation of such Series B Preferred Stock
certificate(s), the Company shall execute and deliver new preferred stock
certificate(s) of like tenor and date; provided, however, the Company shall not
be obligated to re-issue preferred stock certificates if the Holder
contemporaneously requests the Company to convert such Preferred Stock into
Common Stock.

              10.9 REMEDIES CHARACTERIZED; OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Certificate of Designation
shall be cumulative and in addition to all other remedies available under this
Certificate of Designation, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a Holder's right to pursue actual damages for any
failure by the Company to comply with the terms of this Certificate of
Designation. The Company covenants to each Holder of Preferred Stock that there
shall be no characterization concerning this instrument other than as expressly
provided herein. The Company further covenants that it will not take any action
which might materially and adversely affect the rights of the Holders of
Preferred Stock. Amounts set forth or provided for herein with respect to
payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the Holder thereof and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holders of the
Preferred Stock and


                                       21
<PAGE>   23


that the remedy at law in the event of any such breach may be inadequate. The
Company therefore agrees that, in the event of any such breach or threatened
breach, the Holders of the Preferred Stock shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.

               10.10 SPECIFIC SHALL NOT LIMIT GENERAL; CONSTRUCTION. No specific
provision contained in this Certificate of Designation shall limit or modify any
more general provision contained herein. This Certificate of Designation shall
be deemed to be jointly drafted by the Company and all Holders and shall not be
construed against any person as the drafter hereof.

               10.11 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on
the part of a Holder of Preferred Stock in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.

               10.12 PAYMENT OF TAX UPON ISSUE OF TRANSFER. The issuance of
certificates for shares of the Common Stock upon conversion of the Preferred
Shares shall be made without charge to the Holders thereof for any documentary
stamp or similar taxes that may be payable in respect of the issue or delivery
of such certificate, provided that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate upon conversion in a name other than that of
the Holders so converted and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.

                          [SIGNATURE PAGE(S) TO FOLLOW]


                                       22
<PAGE>   24


         IN WITNESS WHEREOF International Isotopes Inc. has caused this
Certificate of Designation to be signed by its President and Secretary on this
___ day of May, 2000.

                                            By:
                                               ---------------------------------
                                            Name: David M. Camp

                                                      President


                                            By:
                                               ---------------------------------
                                            Name: Joan H. Gillett

                                                      Assistant Secretary


                                       23
<PAGE>   25


                                    EXHIBIT A

                              NOTICE OF CONVERSION
                            AT THE ELECTION OF HOLDER

(To be Executed by the Registered Holder in
order to convert shares of Series B
Convertible Redeemable Preferred Stock)

         The undersigned hereby elects to convert the number of shares of 7%
Series B Convertible Redeemable Preferred Stock ("Series B Preferred Stock")
indicated below, into shares of common stock, par value $.01 per share (the
"Common Stock"), of International Isotopes Inc. (the "Company") according to the
conditions hereof, as of the date written below. If shares are to be issued in
the name of a person other than undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in accordance
therewith. No fee will be charged to the Holder for any conversion, except for
such transfer taxes, if any.

Conversion calculations:
                                   --------------------------------------------
                                   Date to effect conversion

                                   --------------------------------------------
                                   Number of shares of Series B Preferred Stock
                                   to be converted

                                   --------------------------------------------
                                   Number of shares of Common Stock to be issued

                                   --------------------------------------------
                                   Applicable Conversion Price

                                   --------------------------------------------
                                   Signature

                                   --------------------------------------------
                                   Name

                                   --------------------------------------------
                                   Address