Document:

Exhibit 10.13

 

Dated:  June 5, 2006

 

NEITHER THIS DEBENTURE NOR THE
SECURITIES INTO WHICH THIS DEBENTURE IS CONVERTIBLE HAVE BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

 

	
  No. CCP-2

  	
  $3,000,000

  

 

ISONICS CORPORATION

 

Secured Convertible Debenture

 

 

Due May 30, 2009

 

This Secured Convertible
Debenture (the “Debenture”) is issued by ISONICS
CORPORATION, a
California corporation (the “Obligor”), to CORNELL
CAPITAL PARTNERS, LP (the “Holder”), pursuant to that certain
Securities Purchase Agreement (the “Securities Purchase Agreement”) of
even date herewith.

 

FOR
VALUE RECEIVED, the Obligor hereby promises to pay to the
Holder or its successors and assigns the principal sum of Three
Million Dollars ($3,000,000) together with accrued but unpaid
interest on or before May 30, 2009 (the “Maturity Date”) in
accordance with the following terms:

 

Interest.  Interest shall accrue on the outstanding
principal balance hereof at an annual rate equal to six percent (6%).  Interest shall be calculated on the basis of
a 360-day year and the actual number of days elapsed, to the extent permitted
by applicable law.  Interest hereunder
will be paid to the Holder or its assignee (as defined in Section 5) in whose name this
Debenture is registered on the records of the Obligor regarding registration
and transfers of Debentures (the “Debenture Register”).

 

Interest
Payments.  The
Obligor at its option shall make payment of all outstanding and accrued
interest at the Maturity Date (“Scheduled Payment”) in shares of the
Company’s Common Stock or cash.  If such Schedule Payment
is made in Common Stock, such number of shares of the Company’s Common Stock
due as payment shall be calculated based on the amount of interest due divided
by eighty eight percent (88%) of the average VWAP of the Company’s Common Stock
for the five (5) Trading Days immediately preceding the date the Maturity
Date.

 

1

 

Notwithstanding the
foregoing, this Debenture shall become due and immediately payable, including
all accrued but unpaid interest, upon an Event of Default (as defined in Section 2 hereof).

 

Right
of Redemption.  The
Obligor at its option shall have the right, with ten (10) Trading Days
advance written notice (the “Redemption
Notice”), to redeem a portion or all amounts outstanding under this
Debenture prior to the Maturity Date provided that the Closing Bid Price of the
of the Obligor’s Common Stock, as reported by Bloomberg, LP, is less than Two
Dollars and Fifty Cents ($2.50) at the time of the Redemption Notice.  The Obligor shall pay an amount equal to the
principal amount being redeemed plus a redemption premium (“Redemption
Premium”) equal to twenty percent (20%) of the principal amount being
redeemed, and accrued interest, (collectively referred to as the “Redemption Amount”).  The Obligor shall deliver to the Holder the
Redemption Amount on the tenth (10th) Trading Day after the
Redemption Notice.

 

Notwithstanding
the foregoing in the event that the Obligor has elected to redeem a portion
of the outstanding principal amount and accrued interest under this Debenture
the Holder shall be permitted to convert all or any portion of this Debenture
during such ten (10) business day advance written notice period.

 

Security
Agreements.  This
Debenture is secured by Security Agreements of even date herewith between the
Obligor and the Holder as well as Isonics
Vancouver, Inc., Isonics Homeland Security and Defense Corporation, and

Protection Plus Security Corporation , all of which are wholly owned
subsidiaries of the Obligor, and the Holders (all such security agreements
shall be referred to as the “Security Agreement”).

 

Consent of Holder to Sell Capital
Stock or Grant Security Interests.  So long as any of the principal amount
on this Debenture remains unpaid and unconverted and except for Excluded
Securities, the Obligor shall not, without the prior consent of the Holder, (i) issue
or sell any shares of Common Stock without consideration or for consideration
per share less than the VWAP of the Common Stock on the Trading Day immediately
prior to its issuance, (ii) issue or sell any warrant, option, right,
contract, call, or other security or instrument granting the holder thereof the
right to acquire Common Stock without consideration or for consideration per
share less than the Closing Bid Price of the Common Stock on the date of
issuance , (iii) issue or sell any shares of preferred stock without
consideration or for consideration per share less than the VWAP of the Common
Stock on the Trading Day immediately prior to its issuance (iv) enter into
any security instrument granting the holder a security interest in any of the
assets of the Obligor, other than security interests in connection with capital
lease financing, in cases where the security interest is in the nature of a
purchase money security interest, or for funds used for acquisitions by the
Obligor or any subsidiary of a business that has positive earnings before
interest, taxes, depreciation, and amortization expenses or to refinance of the
purchase money security interest in such event the Holder shall take a second
security position, provided however in the event that a security interest is
not given in connection with acquisitions by the Obligor or any subsidiary of a
business that has positive earnings before interest, taxes, depreciation, and
amortization expenses it is understood that the Holder shall be given a first
security interest or (v) file any registration statements on Form S-8.

 

2

 

Rights of First Refusal. 
For a period of one (1) year from the date hereof, so long as any portion
of this Debenture is outstanding (including principal or accrued interest), if
the Obligor intends to raise additional capital by the issuance or sale of
capital stock of the Obligor, including without limitation shares of any class
of Common Stock, any class of preferred stock, options, warrants or any other
securities convertible or exercisable into shares of Common Stock (whether the
offering is conducted by the Obligor, underwriter, placement agent or any third
party) the Obligor shall be obligated to offer to the Holder a percentage of
such issuance or sale of capital stock, by providing in writing the principal
amount of capital it intends to raise and outline of the material terms of such
capital raise, prior to the offering such issuance or sale of capital stock to
any third parties including, but not limited to, current or former officers or
directors, current or former shareholders and/or investors of the obligor,
underwriters, brokers, agents or other third parties.  For the purposes of
this paragraph, the percentage shall be calculated by multiplying fifty percent
(50%) by a fraction, the numerator of which is the principal amount of this
Debenture, and the denominator of which is $16,000,000.

 

After one (1) year from the date hereof, so long
as any portion of this Debenture is outstanding (including principal or accrued
interest), if the Obligor intends to raise additional capital by the issuance
or sale of capital stock of the Obligor, including without limitation shares of
any class of Common Stock, any class of preferred stock, options, warrants or
any other securities convertible or exercisable into shares of Common Stock
(whether the offering is conducted by the Obligor, underwriter, placement agent
or any third party) the Obligor shall be obligated to offer to the Holder a
percentage of such issuance or sale of capital stock, by providing in writing
the principal amount of capital it intends to raise and outline of the material
terms of such capital raise, prior to the offering such issuance or sale of
capital stock to any third parties including, but not limited to, current or
former officers or directors, current or former shareholders and/or investors
of the obligor, underwriters, brokers, agents or other third parties.  For
the purposes of this paragraph, the percentage shall be calculated by
multiplying twenty five percent (25%) by a fraction, the numerator of which is
the principal amount of this Debenture, and the denominator of which is
$16,000,000.

 

The Holder shall have five (5) Trading Days from
receipt of such notice of the sale or issuance of capital stock to accept or
reject all or a portion of such capital raising offer.  If the Holder does not accept and complete
its participation in the financing to the full extent to which the Holder is
entitled under this section, the right of first refusal shall terminate upon
the completion of the financing.

 

This Debenture is subject to the following additional
provisions:

 

Section 1.                                          This
Debenture is exchangeable for an equal aggregate principal amount of Debentures
of different authorized denominations, as requested by the Holder surrendering
the same. No service charge will be made for such registration of transfer or
exchange.

 

Section 2.                                          Events
of Default.

 

(a)                                  An
“Event of Default”, wherever used herein, means any one 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

 

3

 

regulation of any administrative or governmental
body).  An Event of Default shall only be
deemed to exist after any applicable cure or grace period has expired:

 

(i)                                     Any
default in the payment of the principal of, interest on or other charges in
respect of this Debenture, free of any claim of subordination, as and when the
same shall become due and payable (whether on the Scheduled Payment due date, a
Conversion Date or the Maturity Date or by acceleration or otherwise);

 

(ii)                                  The
Obligor shall fail to observe or perform any other covenant, agreement or
warranty contained in, or otherwise commit any breach or default of any
provision of this Debenture (except as may be covered by Section 2(a)(i) hereof) or any
Transaction Document (as defined in Section 5)
which is not cured with in the time prescribed after notice from the Holder and
an opportunity of not less than ten (10) Trading Days to cure such breach;

 

(iii)                               The
Obligor or any subsidiary of the Obligor shall commence, or there shall be
commenced against the Obligor or any subsidiary of the Obligor under any
applicable bankruptcy or insolvency laws as now or hereafter in effect or any
successor thereto, or the Obligor or any subsidiary of the Obligor commences
any other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Obligor or any
subsidiary of the Obligor or there is commenced against the Obligor or any
subsidiary of the Obligor any such bankruptcy, insolvency or other proceeding
which remains undismissed for a period of 61 days; or the Obligor or any
subsidiary of the Obligor is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered; or the
Obligor or any subsidiary of the Obligor suffers any appointment of any
custodian, private or court appointed receiver or the like for it or any
substantial part of its property which continues uncontested, undischarged or
unstayed for a period of sixty one (61) days; or the Obligor or any subsidiary
of the Obligor makes a general assignment for the benefit of creditors; or the
Obligor or any subsidiary of the Obligor shall fail to pay, or shall state that
it is unable to pay, or shall be unable to pay, its debts generally as they
become due; or the Obligor or any subsidiary of the Obligor shall call a
meeting of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or the Obligor or any subsidiary of the Obligor
shall by any act or failure to act expressly indicate its consent to, approval
of or acquiescence in any of the foregoing; or any corporate or other action is
taken by the Obligor or any subsidiary of the Obligor for the purpose of
effecting any of the foregoing;

 

(iv)                              The
Obligor or any subsidiary of the Obligor shall default in any of its obligations
under any other debenture or any mortgage, credit agreement or other facility,
indenture agreement, factoring agreement or other instrument under which there
may be issued, or by which there may be secured or evidenced any indebtedness
for borrowed money or money due under any long term leasing or factoring
arrangement of the Obligor or any subsidiary of the Obligor in an amount
exceeding $500,000, whether such indebtedness now exists or shall hereafter be
created and such default shall result in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise become
due and payable;

 

(v)                                 The
Common Stock shall cease to be quoted for trading or listing for trading on
either the OTC Bulletin Board (“OTCBB”), Nasdaq Capital Market, New York
Stock

 

4

 

Exchange, American Stock Exchange or the Nasdaq
National Market (each, a “Subsequent Market”) and shall not again be
quoted or listed for trading thereon within five (5) Trading Days of such
delisting;

 

(vi)                              The
Obligor or any subsidiary of the Obligor shall be a party to any Change of
Control Transaction (as defined in Section 5)
without the consent of holders of at least a majority in principal amount of
the 6% Convertible Debentures then outstanding;

 

(vii)                           The
Obligor shall fail to comply with its obligations in the Underlying Shares
Registration Statement (as defined in Section 5)
in any material respect, after any notice and grace period or opportunity to
cure as provided by such Underlying Shares Registration Statement;

 

(viii)                        The
Obligor or the Obligor’s transfer agent, as the case maybe, shall fail for any
reason to deliver Common Stock certificates to a Holder, as contemplated under
the Irrevocable Transfer Agent Instructions dated the date hereof, prior to the
third (3rd) or sixth (6th)  Trading Day, as the case my be under the
Irrevocable Transfer Agent Instructions, after a Conversion Date or the Obligor
shall provide notice to the Holder, including by way of public announcement, at
any time, of its intention not to comply with requests for conversions of this
Debenture in accordance with the terms hereof and;

 

(x)                                   The
Obligor shall fail for any reason to deliver the payment in cash pursuant to a
Buy-In (as defined herein) within three (3) days after notice is claimed
delivered hereunder;

 

(xi)                                The
Obligor shall fail for any reason to deliver the payment in cash pursuant to Section 3
(c)(i) within three (3) days after notice is claimed delivered
hereunder.

 

(b)                                 During
the time that any portion of this Debenture is outstanding, if any Event of
Default has occurred, the full principal amount of this Debenture, together
with interest and other amounts owing in respect thereof, to the date of
acceleration shall become at the Holder’s election, immediately due and payable
in cash, provided however, the
Holder may request (but shall have no obligation to request) payment of such
amounts in Common Stock of the Obligor.   
In addition to any other remedies, the Holder shall have the right (but
not the obligation) to convert this Debenture at any time after (x) an Event of
Default or (y) the Maturity Date at the Conversion Price then in-effect.  The Holder need not provide and the Obligor
hereby waives any presentment, demand, protest or other notice of any kind, and
the Holder may immediately and without expiration of any grace period enforce
any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Such declaration may be rescinded and
annulled by Holder at any time prior to payment hereunder. No such rescission
or annulment shall affect any subsequent Event of Default or impair any right
consequent thereon.  Upon an Event of
Default, notwithstanding any other provision of this Debenture or any
Transaction Document, the Holder shall have no obligation to comply with or
adhere to any limitations, if any, on the conversion of this Debenture or the
sale of the Underlying Shares except those restrictions imposed by federal or
applicable state securities laws.

 

5

 

Section 3.                                          Conversion.

 

(a)                                  Conversion
at Option of Holder.

 

(i)                                     (a) Provided
the Obligor has sufficient authorized shares, in which case the Obligor shall
be obligated to increase its authorized shares pursuant to Section 4 (e) of
the Securities Purchase Agreement, and provided that the Obligor has obtained
shareholder approval as contemplated in Section 4(l) of the Securities
Purchase Agreement, this Debenture shall be convertible into shares of Common
Stock at the option of the Holder, in whole or in part at any time and from
time to time, after the Original Issue Date (as defined in Section 5)
(subject to the limitations on conversion set forth in Section 3(b) hereof) provided
however the Holder shall not be entitled to sell such shares, until the later
to occur of i) the date the Underlying Shares Registration Statement is
declared effective or ii) (subject to compliance with federal and applicable
state securities laws) one hundred twenty (120) calendar days from the date
hereof (collectively referred to as the “Waiting Period”), unless waived
by the Obligor. Notwithstanding the foregoing in the event that the Underlying
Shares Registration Statement is not declared effective within one (1) year
from the date hereof the Holder shall be entitled to sell shares of the Obligor’s
Common Stock issuable hereunder pursuant to Rule 144 as applicable. The
number of shares of Common Stock issuable upon a conversion hereunder equals
the quotient obtained by dividing (x) the outstanding amount of this Debenture
to be converted by (y) the Conversion Price (as defined in Section 3(c)(i)).  The Obligor shall deliver Common Stock
certificates to the Holder prior to the Fifth (5th) Trading Day
after a Conversion Date.

 

(b)                           Provided that there is an effective Underlying Shares Registration
Statement the Obligor at its option shall have the right at any time and from
time to time, if the VWAP of the Obligor’s Common Stock as quoted by Bloomberg,
LP is equal to or greater than Two Dollars and Fifty Cents ($2.50) (the “Forced
Conversion Price”) for twenty (20) consecutive Trading Days (the “Forced
Conversion Pricing Period”), to force the Holder to convert the outstanding
Principal amount of this Debenture plus outstanding and accrued interest,
subject to the limitations in Section 3(b)(i) herein, at the Fixed
Conversion Price, in whole or in part. 
In such event the Obligor shall provide to the Holder written notice at
the end of business, but not later than 5:30 pm EST, on the last Trading Day of
the Forced Conversion Pricing Period (the “Forced Conversion Notice”).  The Holder shall than on the next Trading Day
from receipt of the Forced Conversion Notice, convert this Debenture, subject
to the limitations in Section 3(b)(i) herein, in whole or in part, at
the Fixed Conversion Price (“Forced Conversion Period”).  Provided however in the event that the VWAP
of the Obligor’s Common Stock, as quoted by Bloomberg, LP, during the Forced
Conversion Period is lower than the Forced Conversion Price the Obligor shall
not have the right to force the Holder to exercise this Debenture, in whole or
in part.

 

(ii)                                  Notwithstanding
anything to the contrary contained herein, if after December 31, 2006, on
any Conversion Date:  (1) the number
of shares of Common Stock at the time authorized, unissued and unreserved for
all purposes, or held as treasury stock, is insufficient to pay principal and
interest hereunder in shares of Common Stock; (2) the Common Stock is not
listed or quoted for trading on the OTCBB or on a Subsequent Market; (3) the
Obligor has failed to timely satisfy its conversion; or (4) the issuance
of such shares of Common Stock would result in a violation of Section 3(b), then, at the option of
the Holder, the Obligor, in lieu of delivering shares of Common Stock pursuant
to Section 3(a)(i), shall
deliver, within five (5)  Trading Days of each applicable Conversion Date,
an amount in cash equal to the product of the outstanding principal amount to
be converted plus any interest due therein divided by the

 

6

 

Conversion Price, chosen by the Holder, and multiplied
by the VWAP of the Common Stock on the date of the conversion notice until the
date that such cash payment is made.

 

Further, if the Obligor shall not have delivered any
cash due in respect of conversion of this Debenture or as payment of interest
thereon by the fifth (5th) Trading Day after the Conversion Date,
the Holder may, by notice to the Obligor, require the Obligor to issue shares
of Common Stock pursuant to Section 3(c),
except that for such purpose the Conversion Price applicable thereto shall be
the lesser of the Conversion Price on the Conversion Date and the Conversion
Price on the date of such Holder demand. Any such shares will be subject to the
provisions of this Section.

 

(iii)                               The
Holder shall effect conversions by delivering to the Obligor a completed notice
in the form attached hereto as Exhibit A (a “Conversion Notice”).  The date on which a Conversion Notice is
delivered is the “Conversion Date.” Unless the Holder is converting the
entire principal amount outstanding under this Debenture, the Holder is not
required to physically surrender this Debenture to the Obligor in order to
effect conversions.  Conversions
hereunder shall have the effect of lowering the outstanding principal amount of
this Debenture plus all accrued and unpaid interest thereon in an amount equal
to the applicable conversion. The Holder and the Obligor shall maintain records
showing the principal amount converted and the date of such conversions. In the
event of any dispute or discrepancy, the records of the Holder shall be
controlling and determinative in the absence of error.

 

(b)                                 Certain
Conversion Restrictions.

 

(i)                                     A
Holder may not convert this Debenture or receive shares of Common Stock as
payment of interest hereunder to the extent such conversion or receipt of such
interest payment would result in the Holder, together with any affiliate
thereof, beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules promulgated thereunder) in excess of 4.99%
of the then issued and outstanding shares of Common Stock, including shares
issuable upon conversion of, and payment of interest on, this Debenture held by
such Holder after application of this Section. 
Since the Holder will not be obligated to report to the Obligor the
number of shares of Common Stock it may hold at the time of a conversion
hereunder, unless the conversion at issue would result in the issuance of
shares of Common Stock in excess of 4.99% of the then outstanding shares of
Common Stock without regard to any other shares which may be beneficially owned
by the Holder or an affiliate thereof, the Holder shall have the authority and
obligation to determine whether the restriction contained in this Section will
limit any particular conversion hereunder and to the extent that the Holder
determines that the limitation contained in this Section applies, the determination
of which portion of the principal amount of this Debenture is convertible shall
be the responsibility and obligation of the Holder.  If the Holder has delivered a Conversion
Notice for a principal amount of this Debenture that, without regard to any
other shares that the Holder or its affiliates may beneficially own, would
result in the issuance in excess of the permitted amount hereunder, the Obligor
shall notify the Holder of this fact and shall honor the conversion for the
maximum principal amount permitted to be converted on such Conversion Date in
accordance with the periods described in Section 3(a)(i) and,
at the option of the Holder, either retain any principal amount tendered for
conversion in excess of the permitted amount hereunder for future conversions
or return such excess principal amount to the Holder. The provisions of this Section

 

7

 

may be waived by a Holder (but only as to itself and
not to any other Holder) upon not less than 65 days prior notice to the
Obligor. Other Holders shall be unaffected by any such waiver.

 

(ii) Commencing at the end of the Waiting Period
and for one hundred twenty (120) 
calendar days thereafter and subject to further limitations in Section 3(a)(i),
the Holder shall not convert any portion of the aggregate outstanding principal
amount and accrued interest due under all Debentures issued under the
Securities Purchase Agreement,  into
shares of the Obligor’s Common Stock in excess of Two Hundred Thousand Dollars
($200,000) at the Market Conversion Price in any seven (7) calendar day
period.  Notwithstanding the forgoing,
this conversion restriction shall not apply upon the occurrence of an Event of
Default or if waived in writing by the Obligor. 
Thereafter, the Holder shall not convert any portion of the aggregate
outstanding principal amount and accrued interest due under all Debentures
issued under the Securities Purchase Agreement, into shares of the Company’s
Common Stock in excess of Four Hundred Thousand Dollars ($400,000) at the
Market Conversion Price in any seven (7) calendar day period.

 

Notwithstanding the forgoing, the conversion
restrictions in this Section 3(b)(ii) shall not apply upon the
occurrence of an Event of Default (after notice and any applicable cure
period),  if waived in writing by the
Company or if such shares being sold have been converted at the Fixed
Conversion Price (to the extent such sales are permitted under federal and
applicable state securities laws).

 

(iii)                           The
number of shares of Common Stock issuable upon conversion of the Debenture
shall not be greater than 6,075,785 shares (which when included with the
660,000 Buyer’s Shares (as defined in the Securities Purchase Agreement) and
the 2,000,000 Warrant Shares exercisable at $1.25 is less than 20% of the total
number of outstanding shares of Common Stock as of the date of this Debenture),
until the Obligor’s shareholders approve (without the vote of any shares
acquired in this transaction and related transactions) the issuance of the
Total Transaction Shares as outlined in Section 4(l) of the Securities
Purchase Agreement.

 

(c)                                  Conversion
Price and Adjustments to Conversion Price.

 

(i)                                     The
conversion price in effect on any Conversion Date shall be, at the sole option
of the Holder, equal to either (a) One Dollar and Twenty Five Cents
($1.25) (the “Fixed Conversion Price”)
or (b) eighty percent (80%) of the average of the two (2) lowest
daily VWAPs of the Common Stock during the five (5) Trading Days
immediately preceding the Conversion Date as quoted by Bloomberg, LP (the “Market Conversion Price”).  The Fixed Conversion Price and the Market
Conversion Price are collectively referred to as the “Conversion Price.” 
The Conversion Price may be adjusted pursuant to the other terms of this
Debenture.  Notwithstanding the
restrictions set forth in Sections 2(b)(ii) and 2(b)(iii), the Holder
shall have the absolute right to convert any or all of this Debenture at the
Fixed Conversion Price free of such restriction provided such conversion is in
compliance with the shareholder approval requirements of the Nasdaq Capital
Market.

 

8

 

Notwithstanding anything to the contrary herein, the
maximum number of shares of the Company’s Common Stock that may be issued upon
conversion of the principal amount of this Debenture is 64,000,000 (the “Conversion
Shares”).

 

In the event that all of the Conversions Shares are
issued and there remains outstanding principal amount and accrued interest
hereunder all amounts of outstanding principal and accrued interest shall be
immediately due and payable in cash.

 

 (ii)                               If
the Obligor, at any time while this Debenture is outstanding, shall (a) pay
a stock dividend or otherwise make a distribution or distributions on shares of
its Common Stock or any other equity or equity equivalent securities payable in
shares of Common Stock, (b) subdivide outstanding shares of Common Stock
into a larger number of shares, (c) combine (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number of
shares, or (d) issue by reclassification of shares of the Common Stock any
shares of capital stock of the Obligor, then the Fixed Conversion Price shall
be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding before
such event and of which the denominator shall be the number of shares of Common
Stock outstanding after such event. Any adjustment made pursuant to this Section 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.

 

(iii)                               If
the Obligor, at any time while this Debenture is outstanding, shall issue
rights, options or warrants to all holders of Common Stock (and not to the
Holder) entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the Fixed Conversion Price (not including the
issuance of Excluded Securities), then the Fixed Conversion Price shall be
multiplied by a fraction, of which the denominator shall be the number of
shares of the Common Stock (excluding treasury shares, if any) outstanding on
the date of issuance of such rights or warrants (plus the number of additional
shares of Common Stock offered for subscription or purchase), and of which the
numerator shall be the number of shares of the Common Stock (excluding treasury
shares, if any) outstanding on the date of issuance of such rights or warrants,
plus the number of shares which the aggregate offering price of the total
number of shares so offered would purchase at the Fixed Conversion Price. Such
adjustment shall be made whenever such rights or warrants are issued, and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants. However,
upon the expiration of any such right, option or warrant to purchase shares of
the Common Stock the issuance of which resulted in an adjustment in the Fixed
Conversion Price pursuant to this Section, if any such right, option or warrant
shall expire and shall not have been exercised, the Fixed Conversion Price
shall immediately upon such expiration be recomputed and effective immediately
upon such expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Fixed Conversion Price made pursuant to
the provisions of this Section after the issuance of such rights or
warrants) had the adjustment of the Fixed Conversion Price made upon the
issuance of such rights, options or warrants been made on the basis of offering
for subscription or purchase only that number of shares of the Common Stock
actually purchased upon the exercise of such rights, options or warrants
actually exercised.

 

9

 

(iv)                              If
the Obligor or any subsidiary thereof, as applicable, at any time while this
Debenture is outstanding, shall issue shares of Common Stock or rights,
warrants, options or other securities or debt that are convertible into or
exchangeable for shares of Common Stock (“Common Stock Equivalents”) entitling
any Person to acquire shares of Common Stock, at a price per share less than
the Fixed Conversion Price (if the holder of the Common Stock or Common Stock
Equivalent so issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange prices
or otherwise, or due to warrants, options or rights per share which is issued
in connection with such issuance, be entitled to receive shares of Common Stock
at a price per share which is less than the Fixed Conversion Price (in all
cases, other than Excluded Securities), such issuance shall be deemed to have
occurred for less than the Fixed Conversion Price), then, at the sole option of
the Holder, the Fixed Conversion Price shall be adjusted to mirror the
conversion, exchange or purchase price for such Common Stock or Common Stock
Equivalents (including any reset provisions thereof) at issue. Such adjustment
shall be made whenever such Common Stock or Common Stock Equivalents are
issued. The Obligor shall notify the Holder in writing, no later than one (1) business
day following the issuance of any Common Stock or Common Stock Equivalent
subject to this Section, indicating therein the applicable issuance price, or
of applicable reset price, exchange price, conversion price and other pricing
terms. No adjustment under this Section shall be made as a result of
issuances and exercises of options to purchase shares of Common Stock issued
for compensatory purposes pursuant to any of the Obligor’s stock option or
stock purchase plans.

 

(v)                                 If
the Obligor, at any time while this Debenture is outstanding, shall distribute
to all holders of Common Stock (and not to the Holder) evidences of its
indebtedness or assets or rights or warrants to subscribe for or purchase any
security, then in each such case the Fixed Conversion Price at which this
Debenture shall thereafter be convertible shall be determined by multiplying
the Fixed Conversion Price in effect immediately prior to the record date fixed
for determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Closing Bid Price determined as
of the record date mentioned above, and of which the numerator shall be such
Closing Bid Price on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holder of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.

 

(vi)                              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, the Holder shall have the right thereafter to, at its
option,  (A) convert the then
outstanding principal amount, together with all accrued but unpaid interest and
any other amounts then owing hereunder in respect of this Debenture into the
shares of stock and other securities, cash and property receivable upon or
deemed to be held by holders of the Common Stock following such
reclassification or share exchange, and the Holder of this Debenture shall be
entitled upon such event to receive such amount of securities, cash or property
as the shares of the Common Stock of the Obligor into which the then
outstanding principal amount, together

 

10

 

with all accrued but unpaid interest and any other
amounts then owing hereunder in respect of this Debenture could have been
converted immediately prior to such reclassification or share exchange would
have been entitled, or (B) require the Obligor to prepay the outstanding
principal amount of this Debenture, plus all interest and other amounts due and
payable thereon. The entire prepayment price shall be paid in cash.  This provision shall similarly apply to
successive reclassifications or share exchanges.

 

(vii)                           The
Obligor shall at all times after December 31, 2006 reserve and keep
available out of its authorized Common Stock the full number of shares of
Common Stock issuable upon conversion of all outstanding amounts under this Debenture;
and within three (3) Trading Days following the receipt by the Obligor of
a Holder’s notice that such minimum number of Underlying Shares is not so
reserved, the Obligor shall promptly reserve a sufficient number of shares of
Common Stock to comply with such requirement.

 

(viii)                        All
calculations under this Section 3
shall be rounded up to the nearest $0.001 or whole share.

 

(ix)                                Whenever
the Conversion Price is adjusted pursuant to Section 3
hereof, the Obligor shall promptly mail or send by electronic means (including
without limitation e-mail) 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.

 

(x)                                   If
(A) the Obligor shall declare a dividend (or any other distribution) on
the Common Stock; (B) the Obligor shall declare a special nonrecurring
cash dividend on or a redemption of the Common Stock; (C) the Obligor
shall authorize the granting to all holders of the Common Stock rights or
warrants to subscribe for or purchase any shares of capital stock of any class
or of any rights; (D) the approval of any stockholders of the Obligor
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Obligor is a party, any sale or
transfer of all or substantially all of the assets of the Obligor, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; or (E) the Obligor shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Obligor; then, in each case, the Obligor shall cause to be filed at each
office or agency maintained for the purpose of conversion of this Debenture,
and shall cause to be mailed to the Holder at its last address as it shall
appear upon the stock books of the Obligor, at least twenty (20) calendar days
prior to the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution, redemption, rights or warrants, or if a record is
not to be taken, the date as of which the holders of the Common Stock of record
to be entitled to such dividend, distributions, redemption, rights or warrants
are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange,
provided, that the failure to mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of the corporate action required
to be specified in such notice.  The
Holder is entitled to convert this Debenture during the 20-day

 

11

 

calendar period commencing the date of such notice to
the effective date of the event triggering such notice.

 

(xi)                                In
case of any merger or consolidation of the Obligor or any subsidiary of the
Obligor with or into another Person, a Holder shall have the right to (A) exercise
any rights under Section 2(b),
(B) convert the aggregate amount of this Debenture then outstanding 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 aggregate principal
amount of this Debenture could have been converted immediately prior to such merger,
consolidation or sales would have been entitled, or (C) in the case of a
merger or consolidation, require the surviving entity to issue to the Holder a
convertible Debenture with a principal amount equal to the aggregate principal
amount of this Debenture then held by such Holder, plus all accrued and unpaid
interest and other amounts owing thereon, which such newly issued convertible
Debenture shall have terms identical (including with respect to conversion) to
the terms of this Debenture, and shall be entitled to all of the rights and
privileges of the Holder of this Debenture set forth herein and the agreements
pursuant to which this Debentures were issued. 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 and the Conversion Price in effect immediately prior to the
effectiveness or closing date for such transaction. The terms of any such
merger, sale or consolidation shall include such terms so as to continue to
give the Holder 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.

 

(d)                                 Other
Provisions.

 

(i)                                     The
Obligor covenants that it will at all times after December 31, 2006
reserve and keep available out of its authorized and unissued shares of Common
Stock solely for the purpose of issuance upon conversion of this Debenture and
payment of interest on this Debenture, each as herein provided, free from
preemptive rights or any other actual contingent purchase rights of persons
other than the Holder, not less than such number of shares of the Common Stock
as shall (subject to any additional requirements of the Obligor as to
reservation of such shares set forth in this Debenture) be issuable (taking
into account the adjustments and restrictions of Sections 2(b) and 3(c)) upon the conversion of the
outstanding principal amount of this Debenture and payment of interest
hereunder. The Obligor covenants that all shares of Common Stock that shall be
so issuable shall, upon issue, be duly and validly authorized, issued and fully
paid, nonassessable and, if the Underlying Shares Registration Statement has
been declared effective under the Securities Act, registered for public sale in
accordance with such Underlying Shares Registration Statement.

 

(ii)                                  Upon
a conversion hereunder the Obligor 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 Closing Bid Price at such time. If the Obligor elects not, or is
unable, to make such a cash payment, the

 

12

 

Holder shall be entitled to receive, in lieu of the
final fraction of a share, one whole share of Common Stock.

 

(iii)                               The
issuance of certificates for shares of the Common Stock on conversion of this
Debenture shall be made without charge to the Holder 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 Obligor 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 Debenture so converted and the Obligor
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
Obligor the amount of such tax or shall have established to the satisfaction of
the Obligor that such tax has been paid.

 

(iv)                              Nothing
herein shall limit a Holder’s right to pursue actual damages or declare an
Event of Default pursuant to Section 2
herein for the Obligor ‘s failure to deliver certificates representing shares
of Common Stock upon conversion within the period specified herein and such
Holder shall have the right to pursue all remedies available to it at law or in
equity including, without limitation, a decree of specific performance and/or injunctive
relief, in each case without the need to post a bond or provide other security.
The exercise of any such rights shall not prohibit the Holder from seeking to
enforce damages pursuant to any other Section hereof or under applicable
law.

 

(v)                                 In
addition to any other rights available to the Holder, if the Obligor fails to
deliver to the Holder such certificate or certificates pursuant to Section 3(a)(i) by the fifth (5th)
Trading Day after the Conversion Date, and if after such fifth (5th)
Trading Day the Holder purchases (in an open market transaction or otherwise)
Common Stock to deliver in satisfaction of a sale by such Holder of the
Underlying Shares which the Holder anticipated receiving upon such conversion
(a “Buy-In”), then the Obligor shall (A) pay in cash to the Holder
(in addition to any remedies available to or elected by the Holder) the amount
by which (x) the Holder’s total purchase price (including brokerage
commissions, if any) for the Common Stock so purchased exceeds (y) the product
of (1) the aggregate number of shares of Common Stock that such Holder
anticipated receiving from the conversion at issue multiplied by (2) the
market price of the Common Stock at the time of the sale giving rise to such
purchase obligation and (B) at the option of the Holder, either reissue a
Debenture in the principal amount equal to the principal amount of the
attempted conversion or deliver to the Holder the number of shares of Common
Stock that would have been issued had the Obligor timely complied with its
delivery requirements under Section 3(a)(i).
For example, if the Holder purchases Common Stock having a total purchase price
of $11,000 to cover a Buy-In with respect to an attempted conversion of
Debentures with respect to which the market price of the Underlying Shares on
the date of conversion was a total of $10,000 under clause (A) of the
immediately preceding sentence, the Obligor shall be required to pay the Holder
$1,000.  The Holder shall provide the
Obligor written notice indicating the amounts payable to the Holder in respect
of the Buy-In.

 

Section 4.                                          Notices.    Any
notices, consents, waivers or other communications required or permitted to be
given under the terms hereof 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

 

13

 

kept on file by the
sending party); or (iii) one (1) Trading 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
  Obligor, to:

  	
  Isonics
  Corporation

  
	
   

  	
  5906 McIntyre
  Street

  
	
   

  	
  Golden, CO 80403

  
	
   

  	
  Attention:

  	
  James E.
  Alexander, President

  
	
   

  	
  Telephone:

  	
  (303) 279-7900

  
	
   

  	
  Facsimile:

  	
  (303) 279-7300

  
	
   

  	
   

  
	
  With a copy
  (which does not

  constitute notice) 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 the
  Holder:

  	
  Cornell Capital
  Partners, LP

  
	
   

  	
  101 Hudson Street, Suite 3700

  
	
   

  	
  Jersey City, NJ 07303

  
	
   

  	
  Attention:

  	
  Mark Angelo

  
	
   

  	
  Telephone:

  	
  (201) 985-8300

  
	
   

  	
   

  
	
  With a copy to:

  	
  David
  Gonzalez, Esq.

  
	
   

  	
  101 Hudson
  Street – Suite 3700

  
	
   

  	
  Jersey City, NJ
  07302

  
	
   

  	
  Telephone:

  	
  (201) 985-8300

  
	
   

  	
  Facsimile:

  	
  (201) 985-8266

  

 

or at 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 three (3) Trading
Days prior to the effectiveness of such change. 
Written confirmation of receipt (i) given by the recipient of such
notice, consent, waiver or other communication, (ii) 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 (iii) provided by a nationally recognized overnight
delivery 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.

 

Section 5.                                          Definitions.  For the purposes hereof, the following terms
shall have the following meanings:

 

14

 

“Approved Stock Plan” means any employee
benefit plan which has been approved or is in the future approved by the Board
of Directors of the Company, pursuant to which the Company’s securities may be
issued to any employee, consultant, officer or director for services provided
to the Company.

 

“Business Day” means any day except Saturday,
Sunday and any day which shall be a federal legal holiday in the United States
or a day on which banking institutions are authorized or required by law or
other government action to close.

 

“Change of Control Transaction” means the
occurrence of (a) an acquisition after the date hereof by an individual or
legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated
under the Exchange Act) of effective control (whether through legal or
beneficial ownership of capital stock of the Obligor, by contract or otherwise)
of in excess of fifty percent (50%) of the voting securities of the Obligor
(except that the acquisition of voting securities by the Holder shall not
constitute a Change of Control Transaction for purposes hereof), (b) a
replacement at one time or over time of more than one-half of the members of
the board of directors of the Obligor which is not approved by a majority of
those individuals who are members of the board of directors on the date hereof
(or by those individuals who are serving as members of the board of directors
on any date whose nomination to the board of directors was approved by a
majority of the members of the board of directors who are members on the date
hereof), (c) the merger, consolidation or sale of fifty percent (50%) or
more of the consolidated assets of the Obligor or any subsidiary of the Obligor
in one or a series of related transactions with or into another entity, or (d) the
execution by the Obligor of an agreement to which the Obligor is a party or by
which it is bound, providing for any of the events set forth above in (a), (b) or
(c).

 

“Closing Bid Price” means the price per share
in the last reported trade of the Common Stock on the Nasdaq Capital Market or
on the exchange which the Common Stock is then listed as quoted by Bloomberg,
LP.

 

“Commission” means the Securities and Exchange
Commission.

 

“Common Stock” means the common stock, no par
value, of the Obligor and stock of any other class into which such shares may
hereafter be changed or reclassified.

 

“Conversion Date” shall mean the date upon which the Holder
gives the Obligor notice of their intention to effectuate a conversion of this
Debenture into shares of the Obligor’s Common Stock as outlined herein.

 

 “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

 

“Excluded Securities” means:

 

(a) any issuance by the Company of securities in
connection with a strategic partnership or a joint venture (the primary purpose
of which is not to raise equity capital),

 

(b) any issuance by the Company of securities as
consideration for a merger or consolidation or the acquisition of a business,
product, license, or other assets of another person or entity,

 

15

 

(c) options to purchase shares of Common Stock,
provided (I) such options are issued after the date of this Debenture to
employees of the Company within thirty (30) days of such employee’s starting
his employment with the Company, and (II) the exercise price of such options is
not less than the Closing Price of the Common Stock on the date of issuance of
such option,

 

(d) securities issued pursuant to an Approved
Stock Plan,

 

(e) up to 1,000,000 without registration rights
and not pursuant to Form S-8 (in the event that such issuance has registration
rights the Obligor shall obtain the prior written approval of the Holder)
shares that may be issued from time to time at a price no less than the VWAP
ending within three (3) Business Days prior to the completion of the
transaction (the primary purpose of which is not to raise equity capital), and

 

(f) any issuance of securities to holders of the
Other Securities provided such transactions are in accordance with the terms of
such instrument (including any anti-dilution protection contained in such
instrument) or are on terms determined by the Board of Directors of the Company
to be no less favorable to the Company than the existing terms.

 

“Original Issue Date” shall mean the date of
the first issuance of this Debenture regardless of the number of transfers and
regardless of the number of instruments, which may be issued to evidence such
Debenture.

 

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

 

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

 

“Trading Day” means a day on which the shares
of Common Stock are quoted on the OTC or quoted or traded on such Subsequent
Market on which the shares of Common Stock are then quoted or listed; provided,
that in the event that the shares of Common Stock are not listed or quoted,
then Trading Day shall mean a Business Day.

 

“Transaction Documents” means the Securities
Purchase Agreement or any other agreement delivered in connection with the
Securities Purchase Agreement, including, without limitation, the Security
Agreement, the Irrevocable Transfer Agent Instructions, and the Registration
Rights Agreement.

 

“Underlying Shares” means the shares of Common
Stock issuable upon conversion of this Debenture or as payment of interest in
accordance with the terms hereof.

 

“Underlying Shares Registration Statement”
means a registration statement meeting the requirements set forth in the
Investor’s Registration Rights Agreement, dated the date hereof by and between
the Obligor and the Holder, covering among other things the resale of the
Underlying Shares and naming the Holder as a “selling stockholder” thereunder.

 

16

 

“VWAP” means the price per share in the volume
weighted average price of the Common Stock on the Nasdaq Capital Market or
other Subsequent Market which the Common Stock is then listed as quoted by
Bloomberg, LP.

 

Section 6.                                          Except
as expressly provided herein, no provision of this Debenture shall alter or
impair the obligations of the Obligor, which are absolute and unconditional, to
pay the principal of, interest and other charges (if any) on, this Debenture at
the time, place, and rate, and in the coin or currency, herein prescribed.  This Debenture is a direct obligation of the
Obligor. This Debenture ranks pari passu with all other 6% Debentures now or
hereafter issued to the Holder under the terms set forth herein. As long as
this Debenture is outstanding, the Obligor shall not and shall cause their
subsidiaries not to, without the consent of the Holder of at least a majority
of the principal amount of the 6% Convertible Debentures then outstanding
(whether or not the Holder consents), (i) amend its certificate of
incorporation, bylaws or other charter documents so as to adversely affect any
rights of the Holder; (ii) repay, repurchase or offer to repay, repurchase
or otherwise acquire shares of its Common Stock or other equity securities
other than as to the Underlying Shares to the extent permitted or required
under the Transaction Documents; or (iii) enter into any agreement with
respect to any of the foregoing.

 

Section 7.                                          This
Debenture shall not entitle the Holder to any of the rights of a stockholder of
the Obligor, including without limitation, the right to vote, to receive
dividends and other distributions, or to receive any notice of, or to attend,
meetings of stockholders or any other proceedings of the Obligor, unless and to
the extent converted into shares of Common Stock in accordance with the terms
hereof.

 

Section 8.                                          If
this Debenture is mutilated, lost, stolen or destroyed, the Obligor shall
execute and deliver, in exchange and substitution for and upon cancellation of
the mutilated Debenture, or in lieu of or in substitution for a lost, stolen or
destroyed Debenture, a new Debenture for the principal amount of this Debenture
so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such
loss, theft or destruction of such Debenture, and of the ownership hereof, and
indemnity, if requested, all reasonably satisfactory to the Obligor.

 

Section 9.                                          Except
as described in the Disclosure Schedule, no indebtedness of the Obligor is
senior to this Debenture in right of payment, whether with respect to interest,
damages or upon liquidation or dissolution or otherwise.  Without the Holder’s consent, the Obligor
will not and will not permit any of their subsidiaries to, directly or
indirectly, enter into, create, incur, assume or suffer to exist any
indebtedness of any kind, on or with respect to any of its property or assets
now owned or hereafter acquired or any interest therein or any income or
profits there from that is senior in any respect to the obligations of the
Obligor under this Debenture except for capital lease financing, in cases where
the security interest is in the nature of a purchase money security interest,
or for funds used for acquisitions by the Obligor or any subsidiary of a business
that has positive earnings before interest, taxes, depreciation, and
amortization expenses or to refinance of the purchase money security interest
initially taken.

 

Section 10.                                   This
Debenture shall be governed by and construed in accordance with the laws of the
State of New Jersey, without giving effect to conflicts of laws thereof.  Each of the parties consents to the
jurisdiction of the U.S. District Court for the District of New Jersey
sitting in Newark, New Jersey in connection with any dispute arising under this
Debenture and

 

17

 

hereby waives, to the maximum extent permitted by law,
any objection, including any objection based on forum  non  conveniens
to the bringing of any such proceeding in such jurisdictions.

 

Section 11.                                   If
the Obligor fails to strictly comply with the terms of this Debenture, then the
Obligor shall reimburse the Holder promptly for all fees, costs and expenses,
including, without limitation, attorneys’ fees and expenses incurred by the
Holder in any action in connection with this Debenture, including, without
limitation, those incurred: (i) during any workout, attempted workout,
and/or in connection with the rendering of legal advice as to the Holder’s
rights, remedies and obligations, (ii) collecting any sums which become
due to the Holder, (iii) defending or prosecuting any proceeding or any
counterclaim to any proceeding or appeal; or (iv) the protection,
preservation or enforcement of any rights or remedies of the Holder.

 

Section 12.                                   Any
waiver by the Holder of a breach of any provision of this Debenture shall not
operate as or be construed to be a waiver of any other breach of such provision
or of any breach of any other provision of this Debenture. The failure of the
Holder to insist upon strict adherence to any term of this Debenture on one or
more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Debenture. Any waiver must be in writing.

 

Section 13.                                   If
any provision of this Debenture is invalid, illegal or unenforceable, the
balance of this Debenture shall remain in effect, and if any provision is
inapplicable to any person or circumstance, it shall nevertheless remain
applicable to all other persons and circumstances. If it shall be found that
any interest or other amount deemed interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Obligor covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law
which would prohibit or forgive the Obligor from paying all or any portion of
the principal of or interest on this Debenture as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Obligor (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted.

 

Section 14.                                   Whenever
any payment or other obligation hereunder shall be due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day.

 

Section 15.                                   THE
PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF
THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON
OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY.  THIS PROVISION

 

18

 

IS A MATERIAL INDUCEMENT FOR THE PARTIES’ ACCEPTANCE
OF THIS AGREEMENT.

 

[REMAINDER
OF PAGE INTENTIONLLY LEFT BLANK]

 

19

 

IN WITNESS WHEREOF,
the Obligor has caused this Secured Convertible Debenture to be duly executed
by a duly authorized officer as of the date set forth above.

 

	
   

  	
  ISONICS
  CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   James E.
  Alexander

  
	
   

  	
  Title:

  	
  President and
  Chief Executive Officer

  
					

 

20

 

EXHIBIT “A”

 

NOTICE OF
CONVERSION

 

(To be executed by the Holder in order to convert the Debenture)

 

 

TO:

 

The undersigned hereby irrevocably elects to
convert $                                                            of
the principal amount of the above Debenture into Shares of Common Stock of
Isonics Corporation, according to the conditions stated therein, as of the
Conversion Date written below.

 

	
  Conversion Date:

  	
   

  	
   

  	
   

  
	
  Applicable Conversion Price:

  	
   

  	
   

  	
   

  
	
  Signature:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  	
   

  
	
  Amount to be converted:

  	
   

  	
  $

  	
   

  
	
  Amount of Debenture unconverted:

  	
   

  	
  $

  	
   

  
	
  Conversion Price per share:

  	
   

  	
  $

  	
   

  
	
  Number of shares of Common Stock to be issued:

  	
   

  	
   

  	
   

  
	
  Please issue the shares of Common Stock in the
  following name and to the following address:

  	
   

  	
   

  	
   

  
	
  Issue to:

  	
   

  	
   

  	
   

  
	
  Authorized Signature:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
  Phone Number:

  	
   

  	
   

  	
   

  
	
  Broker DTC
  Participant Code:

  	
   

  	
   

  	
   

  
	
  Account Number:

  	
   

  	
   

  	
   

  

 

If this name is different
from the name of the Holder, the Holder will have to show compliance for such
transfer with federal and applicable state securities laws or in accordance
with the plan of distribution in the Underlying Shares Registration Statement.

 

 

By submitting this Notice
of Conversion, the undersigned holder represents and warrants to the Obligor
that it is an accredited investor as that term is defined in SEC Rule 501(a),
it is a sophisticated investor as required by SEC Rule 506, that it has
completed such investigation into the Obligor and the securities being acquired
pursuant to this Notice of Conversion as the undersigned (in consultation with
its advisors) has determined appropriate, and that it is submitting this Notice
of Conversion of its own volition and free will.

 

 

	
  By:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Address:

  	
   

  

 

 

Social Security NumberExhibit 10.1

 

ALLOS THERAPEUTICS, INC.

 

2006
Inducement Award Plan

 

Adopted
by the Board of Directors:  June 1, 2006

 

1.             Purposes.

 

(a)           General
Purpose.  The Company, by means of
the Plan, seeks to retain the services of persons not previously an employee or
director of the Company, or following a bona
fide period of non-employment, as an inducement material to the
individual’s entering into employment with the Company within the meaning of
Rule 4350(i)(1)(A)(iv) of the NASD Marketplace Rules, and to provide incentives
for such persons to exert maximum efforts for the success of the Company and
its Affiliates.

 

(b)           Eligible Stock Award Recipients.  The persons eligible to receive Stock Awards
are the Employees of the Company and its Affiliates subject to the limitations
set forth in Section 5.

 

(c)           Available Stock Awards. 
The purpose of the Plan is to provide a means by which eligible
recipients of Stock Awards may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of the following
Stock Awards:  (i) Options, (ii)
Stock Grant Awards, (iii) Stock Purchase Awards, (iv) Stock Unit Awards and
(v) Other Stock Awards.

 

2.             Definitions.

 

(a)           “Affiliate” means any parent corporation or subsidiary
corporation of the Company, whether now or hereafter existing, as those terms
are defined in Sections 424(e) and (f), respectively, of the Code.

 

(b)           “Board” means the Board of Directors of the Company.

 

(c)           “Capitalization
Adjustment” has the meaning ascribed to that term in Section 11(a).

 

(d)            “Code” means the Internal Revenue Code of 1986, as
amended.

 

(e)           “Committee” means a committee of one (1) or more members
of the Board appointed by the Board in accordance with Section 3(c).

 

(f)            “Common Stock” means the common stock of the Company.

 

(g)           “Company” means Allos Therapeutics, Inc. a Delaware
corporation.

 

(h)           “Consultant” means any person, including an advisor, (i)
engaged by the Company or an Affiliate to render consulting or advisory
services and who is compensated for

 

 

such services or (ii)
serving as a member of the Board of Directors of an Affiliate and who is
compensated for such services.  However,
the term “Consultant” shall not include Directors who are not compensated by
the Company for their services as Directors, and the payment of a director’s
fee by the Company solely for services as a Director shall not cause a Director
to be considered a “Consultant” for purposes of the Plan.

 

(i)            “Continuous Service” means that the Participant’s
service with the Company or an Affiliate, whether as an Employee, Director or
Consultant, is not interrupted or terminated. 
A change in the capacity in which the Participant renders service to the
Company or an Affiliate as an Employee, Consultant or Director or a change in
the entity for which the Participant renders such service, provided that there
is no interruption or termination of the Participant’s service with the Company
or an Affiliate, shall not terminate a Participant’s Continuous Service.  For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director shall not
constitute an interruption of Continuous Service.  The Board, in its sole discretion, may
determine whether Continuous Service shall be considered interrupted in the
case of any leave of absence approved by the Board, including sick leave,
military leave or any other personal leave. 
Notwithstanding the foregoing, an approved leave of absence shall be
treated as Continuous Service for purposes of vesting in a Stock Award only to
such extent as may be provided in the Company’s leave of absence policy or in
the written terms of the Participant’s leave of absence.

 

(j)            “Corporate Transaction” means the occurrence, in a
single transaction or in a series of related transactions, of any one or more
of the following events:

 

(i)            a
sale or other disposition of all or
substantially all, as determined by the Board in its discretion, of the
consolidated assets of the Company and its Subsidiaries;

 

(ii)           a
sale or other disposition of at least ninety
percent (90%) of the outstanding securities of the Company;

 

(iii)         a
merger, consolidation or similar transaction following which the Company is not
the surviving corporation; or

 

(iv)          a
merger, consolidation or similar transaction following which the Company is the
surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger, consolidation or similar transaction are converted or
exchanged by virtue of the merger, consolidation or similar transaction into
other property, whether in the form of securities, cash or otherwise.

 

(k)           “Director” means a member of the Board.

 

(l)            “Disability” means, with respect to a Participant, such
Participant’s permanent and total disability within the meaning of the Company’s
long-term disability plan, as it may be amended from time to time, or, if there
is no such plan, as determined by the Board.

 

2

 

(m)          “Employee” means any person employed by the Company or
an Affiliate.  Service as a Director or
as a Consultant shall not be sufficient to constitute “employment” by the
Company or an Affiliate.

 

(n)           “Entity” means a corporation, partnership or other
entity.

 

(o)           “Exchange Act” means the Securities Exchange Act of
1934, as amended.

 

(p)           Fair Market Value” means, as of any date, the value of
the Common Stock determined as follows:

 

(i)            If
the Common Stock is listed on any established stock exchange or traded on the
Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of
a share of Common Stock shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or market
(or the exchange or market with the greatest volume of trading in the Common Stock)
on the day of determination, as reported in The Wall Street Journal or such other source as the Board deems
reliable.

 

(ii)           In
the absence of such markets for the Common Stock, the Fair Market Value shall
be determined in good faith by the Board.

 

(q)           “Non-Employee Director”  means a Director who either (i)
is not a current Employee or Officer of the Company or an Affiliate, does not
receive compensation (directly or indirectly) from the Company or an Affiliate
for services rendered as a Consultant or in any capacity other than as a
Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
(“Regulation S-K”)), does not possess an interest in any other transaction as
to which disclosure would be required under Item 404(a) of Regulation S-K and
is not engaged in a business relationship as to which disclosure would be
required under Item 404(b) of Regulation S-K; or (ii) is otherwise
considered a “non-employee director” for purposes of Rule 16b-3.

 

(r)           “Officer” means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules
and regulations promulgated thereunder.

 

(s)           “Option” means a nonstatutory stock option granted
pursuant to the Plan that is not intended to qualify as an incentive stock
option under Section 422 of the Code and the regulations promulgated
thereunder.

 

(t)            “Option Agreement” means a written agreement between the
Company and an Optionholder evidencing the terms and conditions of an
individual Option grant.  Each Option
Agreement shall be subject to the terms and conditions of the Plan.

 

(u)           “Optionholder” means a person to whom an Option is
granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.

 

3

 

(v)            “Other Stock Award”
means an award based in whole or in part by reference to the Common Stock which
is granted pursuant to the terms and conditions of Section 7(d).

 

(w)           “Other Stock Award Agreement” means a written agreement
between the Company and a holder of an Other Stock Award evidencing the terms
and conditions of an individual Other Stock Award grant.  Each Other Stock Award Agreement shall be
subject to the terms and conditions of the Plan.

 

(x)           “Own,” “Owned,” “Owner,” “Ownership”  A person or Entity shall be deemed to
“Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership”
of securities if such person or Entity, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise, has or shares
voting power, which includes the power to vote or to direct the voting, with
respect to such securities.

 

(y)           “Participant” means a person to whom a Stock Award is
granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.

 

(z)           “Plan” means this Allos Therapeutics, Inc. 2006
Inducement Award Plan.

 

(aa)         “Rule 16b-3” means Rule 16b-3 promulgated under the
Exchange Act or any successor to Rule 16b-3, as in effect from time to time.

 

(bb)         “Securities Act” means the Securities Act of 1933, as
amended.

 

(cc)          “Stock Award” means any right granted under the Plan,
including an Option,  Stock Purchase
Award, Stock Grant Award, Stock Unit Award, and an Other Stock Award.

 

(dd)         “Stock Award Agreement” means a written agreement
between the Company and a Participant evidencing the terms and conditions of an
individual Stock Award grant.  Each Stock
Award Agreement shall be subject to the terms and conditions of the Plan.

 

(ee)         “Stock Grant Award”
means an award of shares of Common Stock which is granted pursuant to the terms
and conditions of Section 7(a).

 

(ff)           “Stock Grant Award Agreement” means a written agreement
between the Company and a holder of a Stock Grant Award evidencing the terms
and conditions of an individual Stock Grant Award grant.  Each Stock Grant Award Agreement shall be
subject to the terms and conditions of the Plan.

 

(gg)         “Stock Purchase Award” means an award of shares of
Common Stock which is granted pursuant to the terms and conditions of Section
7(b).

 

(hh)         “Stock Purchase Award Agreement” means a written
agreement between the Company and a holder of a Stock Purchase Award evidencing
the terms and conditions of an individual Stock Purchase Award grant.  Each Stock Purchase Award Agreement shall be
subject to the terms and conditions of the Plan.

 

4

 

(ii)           “Stock Unit Award” means a right to receive shares of
Common Stock which is granted pursuant to the terms and conditions of Section
7(c).

 

(jj)           “Stock Unit Award Agreement” means a written agreement
between the Company and a holder of a Stock Unit Award evidencing the terms and
conditions of an individual Stock Unit Award grant.  Each Stock Unit Award Agreement shall be
subject to the terms and conditions of the Plan.

 

(kk)        “Subsidiary” means, with respect to the Company, (i) any
corporation of which more than fifty percent (50%) of the outstanding capital
stock having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether, at the time, stock of
any other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time, directly
or indirectly, Owned by the Company, and (ii) any partnership in which the
Company has a direct or indirect interest (whether in the form of voting or
participation in profits or capital contribution) of more than fifty percent
(50%).

 

3.             Administration.

 

(a)           Administration
by Board.  The Board shall administer
the Plan unless and until the Board delegates administration of the Plan to a
committee, as provided in Section 3(c).

 

(b)           Powers
of Board.  The Board shall have the
power, subject to, and within the limitations of, the express provisions of the
Plan:

 

(i)            Subject
to Section 5 herein, to determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; what type or combination of types of Stock Award shall
be granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive Common Stock pursuant to a Stock Award; and the number of shares of
Common Stock with respect to which a Stock Award shall be granted to each such
person.

 

(ii)           To
construe and interpret the Plan and Stock Awards granted under it, and to
establish, amend and revoke rules and regulations for its administration.  The Board, in the exercise of this power, may
correct any defect, omission or inconsistency in the Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or expedient
to make the Plan fully effective.

 

(iii)         To
amend the Plan or a Stock Award as provided in Section 12.

 

(iv)          To
terminate or suspend the Plan as provided in Section 13.

 

(v)            Generally,
to exercise such powers and to perform such acts as the Board deems necessary
or expedient to promote the best interests of the Company and that are not in
conflict with the provisions of the Plan.

 

5

 

(vi)          To
adopt such procedures and sub-plans as are necessary or appropriate to permit participation
in the Plan by employees who are foreign nationals or employed outside the
United States.

 

(c)           Delegation to
Committee.

 

(i)            General.  The Board may delegate some or all of the
administration of the Plan to a Committee or Committees of one (1) or more
members of the Board, and the term “Committee” shall apply to any person or
persons to whom such authority has been delegated.  If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board that have been
delegated to the Committee, including the power to delegate to a subcommittee
any of the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board.  The Board may retain the authority to
concurrently administer the Plan with the Committee and may, at any time,
revest in the Board the administration of the Plan.

 

(ii)           Rule
16b-3 Compliance.  In the discretion
of the Board, the Committee may consist solely of two (2) or more Non-Employee
Directors, in accordance with Rule 16b-3.

 

(d)           Effect of Board’s Decision. All determinations, interpretations and
constructions made by the Board in good faith shall not be subject to review by
any person and shall be final, binding and conclusive on all persons.

 

4.             Shares Subject to
the Plan. 

 

(a)           Share
Reserve.  Subject to the provisions
of Section 11(a) relating to Capitalization Adjustments, the shares of Common
Stock that may be issued pursuant to Stock Awards shall not exceed in the
aggregate one million five hundred thousand (1,500,000) shares of Common Stock.

 

(b)           Reversion
of Shares to the Share Reserve.  If
any Stock Award shall for any reason expire or otherwise terminate, in whole or
in part, without having been exercised in full, or if any shares of Common
Stock issued to a Participant pursuant to a Stock Award are forfeited back to
or repurchased by the Company, including, but not limited to, any repurchase or
forfeiture caused by the failure to meet a contingency or condition required
for the vesting of such shares, then the shares of Common Stock not acquired
under such Stock Award shall revert to and again become available for issuance
under the Plan.  If any shares subject to
a Stock Award are not delivered to a Participant because such shares are
withheld for taxes or the Stock Award is exercised through a reduction of
shares subject to the Stock Award (i.e., “net exercised”), then the shares that
are not delivered shall revert to and again become available for issuance under
the Plan.  If the exercise price of any
Stock Award is satisfied by tendering shares of Common Stock held by the
Participant (either by actual delivery or attestation), then the number of such
tendered shares shall revert to and again become available for issuance under
the Plan.

 

6

 

(c)           Source
of Shares.  The shares of Common
Stock subject to the Plan may be unissued shares or reacquired shares, bought
on the market or otherwise.

 

5.             Eligibility.  Persons eligible for Stock Awards
shall consist of Employees whose potential contribution, in the judgment of the
Board, will benefit the future success of the Company and/or an Affiliate.   Stock Awards may be granted only to persons
not previously an Employee or Director of the Company, or following a bona fide period of non-employment, as an
inducement material to the individual’s entering into employment with the
Company within the meaning of Rule 4350(i)(1)(A)(iv) of the NASD Marketplace
Rules.  In addition, notwithstanding any
other provision of the Plan to the contrary, all Stock Awards must be granted
either by a majority of the Company’s independent directors or a committee
comprised of a majority of independent directors.

 

6.             Option
Provisions. 

 

Each Option Agreement shall be in such form and shall
contain such terms and conditions as the Board shall deem appropriate.  All Options shall be designated as
nonstatutory stock options at the time of grant.  The provisions of separate Option Agreements
need not be identical, but each Option Agreement shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:

 

(a)           Term.  The Board shall determine the term of an
Option.

 

(b)           Exercise
Price of an Option.  The exercise
price of each Option shall be not less than one hundred percent (100%) of the
Fair Market Value of the Common Stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Option may be granted with
an exercise price lower than one hundred percent (100%) of the Fair Market
Value of the Common Stock if such Option is granted pursuant to an assumption
or substitution for another option in a manner consistent with the provisions
of Section 424(a) of the Code.

 

(c)           Consideration.  The purchase price of Common Stock acquired
pursuant to an Option shall be paid, to the extent permitted by applicable law,
either (i) in cash at the time the Option is exercised or (ii) at the
discretion of the Board (1) by delivery to the Company of other Common Stock,
(2) by a “net exercise” of the Option (as further described below), (3)
pursuant to a program developed under Regulation T as promulgated by the
Federal Reserve Board that, prior to the issuance of Common Stock, results in
either the receipt of cash (or check) by the Company or the receipt of
irrevocable instructions to pay the aggregate exercise price to the Company
from the sales proceeds, or (4) in any other form of legal consideration that
may be acceptable to the Board.  Unless
otherwise specifically provided in the Option, the purchase price of Common
Stock acquired pursuant to an Option that is paid by delivery to the Company of
other Common Stock acquired, directly or indirectly from the Company, shall be
paid only by shares of the Common Stock of the Company that have been held for
more than six (6) months (or such longer or shorter period of time required to
avoid a charge to earnings for financial accounting purposes).

 

7

 

In the case of a “net exercise” of an Option, the Company will not
require a payment of the exercise price of the Option from the Participant but
will reduce the number of shares of Common Stock issued upon the exercise by
the largest number of whole shares that has a Fair Market Value that does not
exceed the aggregate exercise price. 
With respect to any remaining balance of the aggregate exercise price,
the Company shall accept a cash payment from the Participant.  The shares of Common Stock so used to pay the
exercise price of an Option under a “net exercise” and any shares withheld for
taxes will be considered to have been withheld from the exercise of the
Option.  Accordingly, the Option will not
again be exercisable with respect to the shares deemed withheld to satisfy the
exercise price, the shares actually delivered to the Participant or any shares
withheld for purposes of tax withholding.

 

(d)           Transferability
of an Option.  An Option shall be
transferable to the extent provided in the Option Agreement.  If the Option does not provide for
transferability, then the Option shall not be transferable except by (i) will,
(ii) the laws of descent and distribution, or (iii) upon dissolution of the
Optionholder’s marriage pursuant to a domestic relations order, and during the
Optionholder’s lifetime, only the Optionholder will be entitled to exercise his
or her Option.  Notwithstanding the
foregoing, by delivering written notice to the Company, in a form satisfactory
to the Company, an Optionholder may designate a third party who, in the event
of such Optionholder’s death, shall thereafter be entitled to exercise the
Option.

 

(e)           Vesting
Generally.  The total number of
shares of Common Stock subject to an Option may, but need not, vest and
therefore become exercisable in periodic installments that may, but need not,
be equal.  The Option may be subject to
such other terms and conditions on the time or times when it may be exercised
(which may be based on performance or other criteria) as the Board may deem
appropriate.  The vesting provisions of
individual Options may vary.  The
provisions of this Section 6(e) are subject to any Option provisions governing
the minimum number of shares of Common Stock as to which an Option may be
exercised.

 

(f)            Termination
of Continuous Service.  In the event
that an Optionholder’s Continuous Service terminates (other than upon the
Optionholder’s death or Disability), the Optionholder may exercise his or her
Option (to the extent that the Optionholder was entitled to exercise such Option
as of the date of termination of Continuous Service) but only within such
period of time ending on the earlier of (i) the date three (3) months following
the termination of the Optionholder’s Continuous Service (or such longer or
shorter period specified in the Option Agreement) or (ii) the expiration
of the term of the Option as set forth in the Option Agreement.  If, after termination of Continuous Service,
the Optionholder does not exercise his or her Option within the time specified
in the Option Agreement, the Option shall terminate.

 

(g)           Extension
of Termination Date.  An
Optionholder’s Option Agreement may (but need not) provide that if the exercise
of the Option following the termination of the Optionholder’s Continuous
Service (other than upon the Optionholder’s death or Disability) would be
prohibited at any time solely because the issuance of shares of Common Stock
would violate the registration requirements under the Securities Act, then the
Option shall terminate on the earlier of (i) the expiration of the term of the
Option set forth in the Option Agreement or (ii) the expiration of a period of
three (3) months after the termination of the Optionholder’s

 

8

 

Continuous Service during
which the exercise of the Option would not be in violation of such registration
requirements.

 

(h)           Disability
of Optionholder.  In the event that
an Optionholder’s Continuous Service terminates as a result of the
Optionholder’s Disability, the Optionholder may exercise his or her Option (to
the extent that the Optionholder was entitled to exercise such Option as of the
date of termination of Continuous Service), but only within such period of time
ending on the earlier of (i) the date twelve (12) months following such
termination of Continuous Service (or such longer or shorter period specified
in the Option Agreement) or (ii) the expiration of the term of the Option as
set forth in the Option Agreement.  If,
after termination of Continuous Service, the Optionholder does not exercise his
or her Option within the time specified herein, the Option shall terminate.

 

(i)            Death
of Optionholder.  In the event that
(i) an Optionholder’s Continuous Service terminates as a result of the
Optionholder’s death or (ii) the Optionholder dies within the period (if any)
specified in the Option Agreement after the termination of the Optionholder’s
Continuous Service for a reason other than death, then the Option may be
exercised (to the extent the Optionholder was entitled to exercise such Option
as of the date of death) by the Optionholder’s estate, by a person who acquired
the right to exercise the Option by bequest or inheritance or by a person
designated to exercise the Option upon the Optionholder’s death pursuant to
Section 6(d), but only within the period ending on the earlier of (1) the date
twelve (12) months following the date of death (or such longer or shorter
period specified in the Option Agreement) or (2) the expiration of the term of
such Option as set forth in the Option Agreement.  If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.

 

(j)            Early
Exercise.  The Option may, but need
not, include a provision whereby the Optionholder may elect at any time before
the Optionholder’s Continuous Service terminates to exercise the Option as to
any part or all of the shares of Common Stock subject to the Option prior to
the full vesting of the Option.  Any
unvested shares of Common Stock so purchased may be subject to a repurchase
option in favor of the Company or to any other restriction the Board determines
to be appropriate.  The Company shall not
be required to exercise its repurchase option until at least six (6) months (or
such longer or shorter period of time required to avoid a charge to earnings
for financial accounting purposes) have elapsed following exercise of the
Option unless the Board otherwise specifically provides in the Option.

 

7.             Provisions
of Stock Awards other than Options. 

 

(a)           Stock
Grant Awards.  Each Stock Grant Award
Agreement shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate.  At the
Board’s election, shares of Common Stock may be (i) held in book entry form
subject to the Company’s instructions until any restrictions relating to the
Stock Grant Award lapse; or (ii) evidenced by a certificate, which certificate
shall be held in such form and manner as determined by the Board.  The terms and conditions of Stock Grant Award
Agreements may change from time to time, and the terms and conditions of
separate Stock Grant Award Agreements need not be identical, but

 

9

 

each Stock Grant Award
Agreement shall include (through incorporation of provisions hereof by reference
in the agreement or otherwise) the substance of each of the following
provisions:

 

(i)            Consideration.  A Stock Grant Award may be awarded in
consideration for any form of legal consideration that may be acceptable to the
Board in its discretion, including the future performance of services.

 

(ii)           Vesting.  Shares of Common Stock awarded under the
Stock Grant Award Agreement may, but need not, be subject to forfeiture to the
Company or a share repurchase option in favor of the Company in accordance with
a vesting schedule to be determined by the Board.

 

(iii)         Termination
of Participant’s Continuous Service. 
In the event a Participant’s Continuous Service terminates, the Company
may reacquire (or receive via a forfeiture condition) any or all of the shares
of Common Stock held by the Participant which have not vested as of the date of
termination of Continuous Service under the terms of the Stock Grant Award
Agreement.

 

(iv)          Transferability.  Rights to acquire shares of Common Stock
under the Stock Grant Award Agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth in the Stock Grant Award
Agreement, as the Board shall determine in its discretion, so long as Common
Stock awarded under the Stock Grant Award Agreement remains subject to the
terms of the Stock Grant Award Agreement.

 

(b)           Stock
Purchase Awards.  Each Stock Purchase
Award Agreement shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. 
At the Board’s election, shares of Common Stock may be (i) held in book
entry form subject to the Company’s instructions until any restrictions
relating to the Stock Purchase Award lapse; or (ii) evidenced by a certificate,
which certificate shall be held in such form and manner as determined by the
Board.  The terms and conditions of Stock
Purchase Award Agreements may change from time to time, and the terms and
conditions of separate Stock Purchase Award Agreements need not be identical, provided, however, that each Stock
Purchase Award Agreement shall include (through incorporation of the provisions
hereof by reference in the agreement or otherwise) the substance of each of the
following provisions:

 

(i)            Purchase
Price.  At the time of the grant of a
Stock Purchase Award, the Board will determine the price to be paid by the
Participant for each share subject to the Stock Purchase Award.

 

(ii)           Consideration.  At the time of the grant of a Stock Purchase
Award, the Board will determine the consideration permissible for the payment
of the purchase price of the Stock Purchase Award.  The purchase price of Common Stock acquired
pursuant to the Stock Purchase Award shall be paid either: (i) in cash at the
time of purchase or (ii) in any other form of legal consideration that may be
acceptable to the Board in its discretion.

 

10

 

(iii)         Vesting.
Shares of Common Stock acquired under a Stock Purchase Award may, but need not,
be subject to forfeiture to the Company or a share repurchase option in favor
of the Company in accordance with a vesting schedule to be determined by the
Board.

 

(iv)          Termination
of Participant’s Continuous Service. In the event that a Participant’s
Continuous Service terminates, the Company shall have the right, but not the
obligation, to repurchase or otherwise reacquire, any or all of the shares of
Common Stock held by the Participant that have not vested as of the date of
termination under the terms of the Stock Purchase Award Agreement.  At the Board’s election, the repurchase
price, if any, paid by the Company may be at the lower of: (i) the Fair Market
Value on the relevant date; or (ii) the Participant’s original cost.  The Company shall not be required to exercise
its repurchase option until at least six (6) months (or such longer or shorter
period of time required to avoid a charge to earnings for financial accounting
purposes) have elapsed following the purchase of the restricted stock unless
otherwise determined by the Board or provided in the Stock Purchase Award
Agreement.

 

(v)            Transferability.
Rights to purchase or receive shares of Common Stock granted under a Stock
Purchase Award shall be transferable by the Participant only upon such terms
and conditions as are set forth in the Stock Purchase Award Agreement, as the
Board shall determine in its discretion, and so long as Common Stock awarded
under the Stock Purchase Award remains subject to the terms of the Stock
Purchase Award Agreement.

 

(c)           Stock Unit Awards.  Each Stock Unit Award Agreement shall be
in such form and shall contain such terms and conditions as the Board shall
deem appropriate.  The terms and
conditions of Stock Unit Award Agreements may change from time to time, and the
terms and conditions of separate Stock Unit Award Agreements need not be
identical, provided, however, that
each Stock Unit Award Agreement shall include (through incorporation of the
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:

 

(i)            Consideration. At the time of grant of a Stock Unit
Award, the Board will determine the consideration, if any, to be paid by the
Participant upon delivery of each share of Common Stock subject to the Stock
Unit Award. To the extent required by applicable law, the consideration to be
paid by the Participant for each share of Common Stock subject to a Stock Unit
Award will not be less than the par value of a share of Common Stock.  The consideration may be paid in any form
permitted under applicable law.

 

(ii)           Vesting.  At the time of the grant of a Stock Unit
Award, the Board may impose such restrictions or conditions to the vesting of
the Stock Unit Award as it, in its absolute discretion, deems appropriate.

 

(iii)         Additional
Restrictions.  At the time of the
grant of Stock Unit, the Board may impose such restrictions or conditions that
delay the delivery of the consideration after its vesting as the Board, in its
absolute discretion, deems appropriate, with such terms to be contained in the
Stock Unit agreement.

 

11

 

(iv)          Payment.  Stock Unit Awards may be settled in Common
Stock or in cash or any combination of the two, or in any other form of
consideration as determined by the Board and contained in the Stock Unit Award
Agreement.

 

(v)            Dividend
Equivalents.  Dividend equivalents
may be credited in respect of shares covered by a Stock Unit Award, as
determined by the Board and contained in the Stock Unit Award Agreement.  At the discretion of the Board, such dividend
equivalents may be converted into additional shares covered by the Stock Unit
Award in such manner as determined by the Board.  Any additional shares covered by the Stock
Unit Award credited by reason of such dividend equivalents will be subject to
all the terms and conditions of the underlying Stock Unit Award Agreement to
which they relate.

 

(vi)          Termination
of Participant’s Continuous Service.  Except
as otherwise provided in the applicable Stock Unit Award Agreement, such
portion of the Stock Unit Award that has not vested will be forfeited upon the
Participant’s termination of Continuous Service for any reason.

 

(d)           Other Stock Awards.  Other forms of Stock Awards valued in whole
or in part by reference to, or otherwise based on, Common Stock may be granted
either alone or in addition to Stock Awards provided for under Section 6 and
the preceding provisions of this Section 7. 
Subject to the provisions of the Plan, the Board shall have sole and
complete authority to determine the persons to whom and the time or times at
which such Other Stock Awards will be granted, the number of shares of Common
Stock (or the cash equivalent thereof) to be granted pursuant to such Awards
and all other terms and conditions of such Awards.

 

8.             Securities
Law Compliance. 

 

The Company shall seek to
obtain from each regulatory commission or agency having jurisdiction over the
Plan such authority as may be required to grant Stock Awards and to issue and
sell shares of Common Stock upon exercise of the Stock Awards; provided, however, that this undertaking shall not require
the Company to register under the Securities Act the Plan, any Stock Award or
any Common Stock issued or issuable pursuant to any such Stock Award.  If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of Common Stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell Common Stock upon exercise of such
Stock Awards unless and until such authority is obtained.

 

9.             Use
of Proceeds from Stock. 

 

Proceeds from the sale of Common Stock pursuant to
Stock Awards shall constitute general funds of the Company.

 

12

 

10.          Miscellaneous.

 

(a)           Acceleration
of Exercisability and Vesting.  The
Board shall have the power to accelerate the time at which a Stock Award may
first be exercised or the time during which a Stock Award or any part thereof
will vest in accordance with the Plan, notwithstanding the provisions in the
Stock Award stating the time at which it may first be exercised or the time
during which it will vest.

 

(b)           Shareholder
Rights.  No Participant shall be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares of Common Stock subject to such Stock Award unless and
until such Participant has satisfied all requirements for exercise of the Stock
Award pursuant to its terms.

 

(c)           No
Employment or other Service Rights. 
Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Participant any right to continue to
serve the Company or an Affiliate in the capacity in effect at the time the
Stock Award was granted or shall affect the right of the Company or an
Affiliate to terminate (i) the employment of an Employee with or without notice
and with or without cause, (ii) the service of a Consultant pursuant to the
terms of such Consultant’s agreement with the Company or an Affiliate or (iii)
the service of a Director pursuant to the Bylaws of the Company or an
Affiliate, and any applicable provisions of the corporate law of the state in
which the Company or the Affiliate is incorporated, as the case may be.

 

(d)           Investment
Assurances.  The Company may require
a Participant, as a condition of exercising or acquiring Common Stock under any
Stock Award, (i) to give written assurances satisfactory to the Company as to
the Participant’s knowledge and experience in financial and business matters
and/or to employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and business matters
and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Stock Award;
and (ii) to give written assurances satisfactory to the Company stating that
the Participant is acquiring Common Stock subject to the Stock Award for the
Participant’s own account and not with any present intention of selling or
otherwise distributing the Common Stock. 
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (1) the issuance of the shares of Common
Stock upon the exercise or acquisition of Common Stock under the Stock Award
has been registered under a then currently effective registration statement
under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws.  The Company may, upon advice of counsel to
the Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the
transfer of the Common Stock.

 

(e)           Withholding
Obligations.  To the extent provided
by the terms of a Stock Award Agreement, the Participant shall, as may be
determined by the Company in its sole discretion, satisfy any federal, state or
local tax withholding obligation relating to a Stock Award by any of the
following means (in addition to the Company’s right to withhold from any
compensation

 

13

 

paid to the Participant
by the Company) or by a combination of such means:  (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares of Common Stock from the shares of
Common Stock issued or otherwise issuable to the Participant in connection with
the Stock Award; or (iii) such other consideration as may be set forth in the
Stock Award Agreement.

 

(f)            Electronic
Delivery.  Any reference herein to a
“written” agreement or document shall include any agreement or document
delivered electronically or posted on the Company’s intranet.

 

(g)           Deferrals.  To the extent permitted by applicable law,
the Board, in its sole discretion, may determine that the delivery of Common
Stock or the payment of cash, upon the exercise, vesting or settlement of all
or a portion of any Stock Award may be deferred and may establish programs and
procedures for deferral elections to be made by Participants.  Deferrals by Participants will be made in
accordance with Section 409A of the Code. Consistent with Section 409A of the
Code, the Board may provide for distributions while a Participant is still an
employee.  The Board is authorized to
make deferrals of Stock Awards and determine when, and in what annual percentages,
Participants may receive payments, including lump sum payments, following the
Participant’s termination of employment or retirement, and implement such other
terms and conditions consistent with the provisions of the Plan and in
accordance with applicable law.

 

(h)           Compliance
with 409A.  To the extent that the
Board determines that any Stock Award granted under the Plan is subject to
Section 409A of the Code, the Stock Award Agreement evidencing such Stock Award
shall incorporate the terms and conditions necessary to avoid the consequences
described in Section 409A(a)(1) of the Code. 
To the extent applicable, the Plan and Stock Award Agreements shall be
interpreted in accordance with Section 409A of the Code and Department of
Treasury regulations and other interpretive guidance issued thereunder,
including without limitation any such regulations or other guidance that may be
issued or amended after the date upon which the Plan is adopted by the
Board.  Notwithstanding any provision of
the Plan to the contrary, in the event that the Board determines that any Stock
Award may be subject to Section 409A of the Code and related Department of
Treasury guidance (including such Department of Treasury guidance as may be
issued after the date upon which the Plan is adopted by the Board), the Board
may adopt such amendments to the Plan and the applicable Stock Award Agreement
or adopt other policies and procedures (including amendments, policies and
procedures with retroactive effect), or take any other actions, that the Board
determines are necessary or appropriate to (1) exempt the Stock Award from
Section 409A of the Code and/or preserve the intended tax treatment of the
benefits provided with respect to the Stock Award, or (2) comply with the
requirements of Section 409A of the Code and related Department of Treasury
guidance.

 

11.          Adjustments
upon Changes in Stock. 

 

(a)           Capitalization
Adjustments.  If any change is made
in, or other event occurs with respect to, the Common Stock subject to the Plan
or subject to any Stock Award without the receipt of consideration by the
Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split,

 

14

 

liquidating dividend,
combination of shares, exchange of shares, change in corporate structure or
other transaction not involving the receipt of consideration by the Company
(each a “Capitalization Adjustment”), the Plan will be appropriately adjusted
in the class(es) and maximum number of securities subject to the Plan pursuant
to Section 4(a) and the outstanding Stock Awards will be appropriately adjusted
in the class(es) and number of securities and price per share of Common Stock subject
to such outstanding Stock Awards.  The
Board shall make such adjustments, and its determination shall be final,
binding and conclusive.  (The conversion
of any convertible securities of the Company shall not be treated as a
transaction “without receipt of consideration” by the Company.)

 

(b)           Dissolution
or Liquidation.  In the event of a
dissolution or liquidation of the Company, then all outstanding Stock Awards
shall terminate immediately prior to the completion of such dissolution or
liquidation

 

(c)           Corporate Transaction.   The following provisions shall apply to Stock
Awards in the event of a Corporate Transaction unless otherwise provided in the
instrument evidencing the Stock Award or any other written agreement between
the Company or any Affiliate and the holder of the Stock Award or unless
otherwise expressly provided by the Board at the time of grant of a Stock
Award.

 

(i)            Stock Awards May Be Assumed.  Except as otherwise stated in the Stock Award
Agreement, in the event of a Corporate Transaction, any surviving corporation
or acquiring corporation (or the surviving or acquiring corporation’s parent
company) may assume or continue any or all Stock Awards outstanding under the
Plan or may substitute similar stock awards for Stock Awards outstanding under
the Plan (including but not limited to, awards to acquire the same
consideration paid to the stockholders of the Company pursuant to the Corporate
Transaction), and any reacquisition or repurchase rights held by the Company in
respect of Common Stock issued pursuant to Stock Awards may be assigned by the
Company to the successor of the Company (or the successor’s parent company, if
any), in connection with such Corporate Transaction.  A surviving corporation or acquiring
corporation (or its parent) may choose to assume or continue only a portion of
a Stock Award or substitute a similar stock award for only a portion of a Stock
Award.  The terms of any assumption,
continuation or substitution shall be set by the Board in accordance with the
provisions of Section 3.

 

(ii)           Stock Awards Held by Current Participants.  Except as otherwise stated in the Stock Award
Agreement, in the event of a Corporate Transaction in which the surviving
corporation or acquiring corporation (or its parent company) does not assume or
continue such outstanding Stock Awards or substitute similar stock awards for
such outstanding Stock Awards, then with respect to Stock Awards that have not
been assumed, continued or substituted and that are held by Participants whose
Continuous Service has not terminated prior to the effective time of the
Corporate Transaction (referred to as the “Current Participants”), the vesting of such
Stock Awards (and, if applicable, the time at which such Stock Awards may be
exercised) shall (contingent upon the effectiveness of the Corporate
Transaction) be accelerated in full to a date prior to the effective time of
such Corporate Transaction as the Board shall determine (or, if the Board shall
not determine such a date, to the date that is five (5) days prior

 

15

 

to the effective time of
the Corporate Transaction), and such Stock Awards shall terminate if not
exercised (if applicable) at or prior to the effective time of the Corporate
Transaction, and any reacquisition or repurchase rights held by the Company
with respect to such Stock Awards shall lapse (contingent upon the
effectiveness of the Corporate Transaction).

 

(iii)         Stock Awards Held by Persons other than
Current Participants.  Except
as otherwise stated in the Stock Award Agreement, in the event of a Corporate
Transaction in which the surviving corporation or acquiring corporation (or its
parent company) does not assume or continue such outstanding Stock Awards or
substitute similar stock awards for such outstanding Stock Awards, then with
respect to Stock Awards that have not been assumed, continued or substituted
and that are held by persons other than Current Participants, the vesting of
such Stock Awards (and, if applicable, the time at which such Stock Award may
be exercised) shall not be accelerated and such Stock Awards (other than a
Stock Award consisting of vested and outstanding shares of Common Stock not
subject to the Company’s right of repurchase) shall terminate if not exercised
(if applicable) prior to the effective time of the Corporate Transaction; provided, however, that any reacquisition
or repurchase rights held by the Company with respect to such Stock Awards
shall not terminate and may continue to be exercised notwithstanding the
Corporate Transaction.

 

(iv)          Payment for Stock Awards in Lieu of Exercise.  Notwithstanding the foregoing, in the event a
Stock Award will terminate if not exercised prior to the effective time of a
Corporate Transaction, the Board may provide, in its sole discretion, that the
holder of any such Stock Award that is not exercised prior to such effective
time will receive a payment, in such form as may be determined by the
Board, equal in value to the excess, if any, of (A) the value of the property
the holder of the Stock Award would have received upon the exercise of the
Stock Award, over (B) any exercise price payable by such holder in connection
with such exercise.

 

(d)           Change in Control.  A
Stock Award may be subject to additional acceleration of vesting and
exercisability upon or after a change in control of the Company, as may be
provided in any written agreement between the Company or any Affiliate and the
Participant, but in the absence of such provision, no such acceleration shall
occur.

 

12.          Amendment
of the Plan and Stock Awards. 

 

(a)           Amendment
of Plan.  Subject to the limitations,
if any, of applicable law, the Board at any time, and from time to time, may
amend the Plan.  The Board may, in its
discretion, provide that any such amendment is effective upon obtaining the
approval of the stockholders of the Company.

 

(b)           No
Impairment of Rights.  Rights under
any Stock Award granted before amendment of the Plan shall not be impaired by
any amendment of the Plan unless (i) the Company requests the consent of the
Participant and (ii) the Participant consents in writing.

 

(c)           Amendment
of Stock Awards.  The Board at any
time, and from time to time, may amend the terms of any one or more Stock
Awards; provided, however, that the rights under

 

16

 

any Stock Award shall not
be impaired by any such amendment unless (i) the Company requests the consent
of the Participant and (ii) the Participant consents in writing.

 

13.          Termination
or Suspension of the Plan. 

 

(a)           Plan
Term.  The Board may suspend or
terminate the Plan at any time.  No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.

 

(b)           No
Impairment of Rights.  Suspension or
termination of the Plan shall not impair rights and obligations under any Stock
Award granted while the Plan is in effect except with the consent of the
Participant.

 

14.          Effective
Date of Plan. 

 

The Plan shall become effective as determined by the Board.

 

15.          Choice
of Law. 

 

The law of the State of Delaware shall govern all questions concerning
the construction, validity and interpretation of this Plan, without regard to
such state’s conflict of laws rules.

 

17

 

ALLOS THERAPEUTICS, INC.

 

FORM OF STOCK OPTION GRANT NOTICE

2006 INDUCEMENT AWARD PLAN

 

Allos Therapeutics,
Inc. (the “Company”), pursuant to its 2006 Inducement
Award Plan (the “Plan”), hereby grants to
Optionholder, as an inducement to enter into employment, an option to purchase
the number of shares of the Company’s Common Stock set forth below. This option
is subject to all of the terms and conditions as set forth herein and in the
Stock Option Agreement, the Plan and the Notice of Exercise, all of which are
attached hereto and incorporated herein in their entirety. Capitalized terms
not otherwise defined herein shall have the meanings set forth in the Plan or
the Stock Option Agreement. 

 

	
  Optionholder:

  	
   

  
	
  Date of Grant:

  	
   

  
	
  Vesting Commencement Date:

  	
   

  
	
  Number of Shares Subject
  to Option:

  	
   

  
	
  Exercise Price (Per
  Share):

  	
   

  
	
  Total Exercise Price:

  	
   

  
	
  Expiration Date:

  	
   

  

 

	
  Type of Grant:

  	
   

  	
  Nonstatutory Stock Option

  
	
   

  	
   

  	
   

  
	
  Exercise Schedule:

  	
   

  	
  Same as Vesting Schedule

  
	
   

  	
   

  	
   

  
	
  Vesting Schedule:

  	
   

  	
  1/4th of the shares vest one year after the Vesting
  Commencement Date.

  
	
   

  	
   

  	
  1/48th of the shares vest monthly thereafter over the next
  three years.

  
	
   

  	
   

  	
   

  
	
  Payment:

  	
   

  	
  By one or a combination of the following methods of payment
  (described in the Agreement):

  
	
   

  	
   

  	
   

  
	
  Stock Option

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   ̈

  	
   

  	
  Cash or check

  
	
   

  	
   

  	
   ̈

  	
   

  	
  Pursuant to a Regulation T
  Program if the Shares are publicly traded

  
	
   

  	
   

  	
   ̈

  	
   

  	
  By delivery of
  already-owned shares if the Shares are publicly traded

  

 

Additional
Terms/Acknowledgements:
The undersigned Optionholder acknowledges receipt of, and understands and
agrees to, this Stock Option Grant Notice, the Stock Option Agreement and the
Plan. Optionholder further acknowledges that as of the Date of Grant, this
Stock Option Grant Notice, the Stock Option Agreement and the Plan set forth
the entire understanding between Optionholder and the Company regarding the
acquisition of stock in the Company and supersede all prior oral and written
agreements on that subject with the exception of (i) options previously granted
and delivered to Optionholder under the Plan, and (ii) the following
agreements only:

 

OTHER AGREEMENTS:

 

	
  OPTIONHOLDER:

  	
   

  	
   

  	
  ALLOS THERAPEUTICS, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Signature

  	
   

  	
   

  	
  Signature

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
										

 

ATTACHMENTS:  Stock Option Agreement, 2006
Inducement Award Plan and Notice of
Exercise

 

1

 

ATTACHMENT I

 

FORM OF STOCK OPTION AGREEMENT

2006 INDUCEMENT AWARD PLAN

 

Pursuant to your Stock Option
Grant Notice (“Grant Notice”) and this Stock Option Agreement, as an inducement
to enter into employment, Allos Therapeutics, Inc. (the “Company”) has granted you an Option under
its 2006 Inducement Award Plan (the “Plan”)
to purchase the number of shares of the Company’s Common Stock indicated in
your Grant Notice at the exercise price indicated in your Grant Notice. Defined
terms not explicitly defined in this Stock Option Agreement but defined in the
Plan shall have the same definitions as in the Plan.

 

The details of your option are
as follows:

 

1.                                      VESTING. Subject to the limitations and exceptions contained herein, or in any
other written agreement between the Company or any Affiliate and you, your option will vest as provided in your
Grant Notice, provided that vesting will cease upon the termination of your
Continuous Service.

 

2.                                      NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common Stock subject to
your option and your exercise price per share referenced in your Grant Notice
may be adjusted from time to time for Capitalization Adjustments, as provided
in the Plan.

 

3.                                      METHOD OF PAYMENT. Payment of the exercise price is due in full
upon exercise of all or any part of your option. You may elect to make payment
of the exercise price in cash or by check or in any other manner permitted by your Grant Notice,
which may include one or more of the following:

 

(a)                                  In the Company’s sole discretion at the time your
option is exercised and provided that at the time of exercise the Common Stock
is publicly traded and quoted regularly in The Wall Street Journal,
pursuant to a program developed under Regulation T as promulgated by the
Federal Reserve Board that, prior to the issuance of Common Stock, results in
either the receipt of cash (or check) by the Company or the receipt of
irrevocable instructions to pay the aggregate exercise price to the Company
from the sales proceeds.

 

(b)                                  Provided that at the time of exercise the Common
Stock is publicly traded and quoted regularly in The Wall
Street Journal, by delivery of already-owned shares of Common Stock
either that you have held for the period required to avoid a charge to the
Company’s reported earnings (generally six months) or that you did not acquire,
directly or indirectly from the Company, that are owned free and clear of any
liens, claims, encumbrances or security interests, and that are valued at Fair
Market Value on the date of exercise. “Delivery” for these purposes, in the
sole discretion of the Company at the time you exercise your option, shall
include delivery to the Company of your attestation of ownership of such shares
of Common Stock in a form approved by the Company. Notwithstanding the
foregoing, you may not exercise your option by tender to the Company of Common
Stock to the extent such tender would violate the provisions of any law,
regulation or agreement restricting the redemption of the Company’s stock.

 

 

4.                                      WHOLE SHARES. You may exercise your option only for whole shares of Common Stock.

 

5.                                      SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, you may not exercise your option unless the shares of Common
Stock issuable upon such exercise are then registered under the Securities Act
or, if such shares of Common Stock are not then so registered, the Company has
determined that such exercise and issuance would be exempt from the registration
requirements of the Securities Act. The exercise of your option must also
comply with other applicable laws and regulations governing your option, and
you may not exercise your option if the Company determines that such exercise
would not be in material compliance with such laws and regulations.

 

6.                                      TERM. You may not exercise your option before the commencement of its term or
after its term expires. The term of your option commences on the Date of Grant
indicated in your Grant Notice and expires upon the earliest
of the following:

 

(a)                                  three (3) months after the termination of your
Continuous Service for any reason other than your Disability or death, provided
that if during any part of such three- (3-) month period your option is not
exercisable solely because of the condition set forth in the preceding
paragraph relating to “Securities Law Compliance,” your option shall not expire
until the earlier of the Expiration Date indicated in your grant notice or
until it shall have been exercisable for an aggregate period of three (3)
months after the termination of your Continuous Service;

 

(b)                                  twelve (12) months after the termination of your
Continuous Service due to your Disability;

 

(c)                                  twelve (12) months after your death if you die
either during your Continuous Service or within three (3) months after your
Continuous Service terminates;

 

(d)                                  the Expiration Date indicated in your Grant
Notice; or

 

(e)                                  the day before the tenth (10th)
anniversary of the Date of Grant.

 

7.                                      EXERCISE.

 

(a)                                  You may exercise the vested portion of your
option (and the unvested portion of your option if your Grant Notice so
permits) during its term by delivering a Notice of Exercise (in a form
designated by the Company) together with the exercise price to the Secretary of
the Company, or to such other person as the Company may designate, during
regular business hours, together with such additional documents as the Company
may then require.

 

(b)                                  By exercising your option you agree that, as a
condition to any exercise of your option, the Company may require you to enter
into an arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
your option, (2) the lapse of any substantial risk of forfeiture to which the
shares of Common Stock are subject at the time of exercise, or (3) the
disposition of shares of Common Stock acquired upon such exercise.

 

2

 

8.                                      TRANSFERABILITY. Your option is not transferable, except by will or by the laws of
descent and distribution, and is exercisable during your life only by you. Notwithstanding
the foregoing, by delivering written notice to the Company, in a form
satisfactory to the Company, you may designate a third party who, in the event
of your death, shall thereafter be entitled to exercise your option.

 

9.                                      OPTION NOT A SERVICE CONTRACT. Your option is not an employment or service
contract, and nothing in your option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company
or an Affiliate, or of the Company or an Affiliate to continue your employment.
In addition, nothing in your option shall obligate the Company or an Affiliate,
their respective shareholders, Boards of Directors, Officers or Employees to
continue any relationship that you might have as a Director or Consultant for
the Company or an Affiliate.

 

10.                               WITHHOLDING OBLIGATIONS.

 

(a)                                  At the time you exercise your option, in whole or
in part, or at any time thereafter as requested by the Company, you hereby
authorize withholding from payroll and any other amounts payable to you, and
otherwise agree to make adequate provision for (including by means of a “cashless
exercise” pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Company or an Affiliate, if any, which arise in connection
with your option.

 

(b)                                  Upon your request and subject to approval by the
Company, in its sole discretion, and compliance with any applicable conditions
or restrictions of law, the Company may withhold from fully vested shares of
Common Stock otherwise issuable to you upon the exercise of your option a
number of whole shares of Common Stock having a Fair Market Value, determined
by the Company as of the date of exercise, not in excess of the minimum amount
of tax required to be withheld by law. If the date of determination of any tax
withholding obligation is deferred to a date later than the date of exercise of
your option, share withholding pursuant to the preceding sentence shall not be
permitted unless you make a proper and timely election under Section 83(b)
of the Code, covering the aggregate number of shares of Common Stock acquired
upon such exercise with respect to which such determination is otherwise
deferred, to accelerate the determination of such tax withholding obligation to
the date of exercise of your option. Notwithstanding the filing of such
election, shares of Common Stock shall be withheld solely from fully vested
shares of Common Stock determined as of the date of exercise of your option
that are otherwise issuable to you upon such exercise. Any adverse consequences
to you arising in connection with such share withholding procedure shall be
your sole responsibility.

 

(c)                                  You may not exercise your option unless the tax
withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly,
you may not be able to exercise your option when desired even though your
option is vested, and the Company shall have no obligation to issue a
certificate for such shares of Common Stock or release such shares of Common
Stock from any escrow provided for herein.

 

3

 

11.                               NOTICES. Any notices provided for in your option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by mail by the Company to you, five (5) days after deposit in
the United States mail, postage prepaid, addressed to you at the last address
you provided to the Company.

 

12.                               GOVERNING PLAN DOCUMENT. Your option is subject to all the provisions of
the Plan, the provisions of which are hereby made a part of your option, and is
further subject to all interpretations, amendments, rules and regulations which
may from time to time be promulgated and adopted pursuant to the Plan. In the
event of any conflict between the provisions of your option and those of the
Plan, the provisions of the Plan shall control.

 

4

 

ATTACHMENT II

 

2006 INDUCEMENT AWARD PLAN

 

[provided
separately]

 

 

ATTACHMENT III

 

FORM OF NOTICE OF EXERCISE

2006 INDUCEMENT AWARD PLAN

 

Allos Therapeutics, Inc.

11080 CirclePoint
Road, Suite 200

Westminster,
Colorado 80020

 

Date of Exercise:                       

 

Ladies and Gentlemen:

 

This constitutes notice
under my stock option that I elect to purchase the number of shares for the
price set forth below. 

 

	
  Stock option grant date:

  	
   

  	
                                     

  
	
   

  	
   

  	
   

  
	
  Number of shares as to
  which option is exercised:

  	
   

  	
                                     

  
	
   

  	
   

  	
   

  
	
  Certificates to be issued
  in name of:

  	
   

  	
                                               

  
	
   

  	
   

  	
   

  
	
  Exercise price per share:

  	
   

  	
  $                                   

  
	
   

  	
   

  	
   

  
	
  Total exercise price:

  	
   

  	
  $                                   

  
	
   

  	
   

  	
   

  
	
  Payment delivered
  herewith:

  	
   

  	
  $                                   

  
	
   

  	
   

  	
   

  
	
  Form of payment:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   ̈

  	
   

  	
  Cash or check

  
	
   

  	
   

  	
   ̈

  	
   

  	
  Pursuant to a Regulation T
  Program if the Shares are publicly traded

  
	
   

  	
   

  	
   ̈

  	
   

  	
  By delivery of
  already-owned shares if the Shares are publicly traded

  
	
   

  	
   

  	
   ̈

  	
   

  	
  By full-recourse
  promissory note

  

 

By this exercise, I agree
(i) to provide such additional documents as you may require pursuant to
the terms of the 2006 Inducement Award Plan and (ii) to provide for the
payment by me to you (in the manner designated by you) of your withholding
obligation, if any, relating to the exercise of this option.

 

	
  SUBMITTED BY:

  	
   

  	
   

  	
  ACCEPTED BY:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  ALLOS THERAPEUTICS, INC.

  	
   

  
	
  Printed Name

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Signature

  	
   

  
	
  Signature

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
								

 

 

ALLOS
THERAPEUTICS, INC.

 

FORM OF RESTRICTED STOCK GRANT
NOTICE

2006 INDUCEMENT AWARD PLAN

 

Allos Therapeutics, Inc. (the “Company”), pursuant to its 2006 Inducement Award Plan (the “Plan”), hereby awards to Participant the number of shares of
the Company’s Common Stock set forth below (“Award”).
This Award is subject to all of the terms and conditions as set forth herein
and in the Restricted Stock Grant Agreement, the Plan, the form of Assignment
Separate from Certificate and the form of Joint Escrow Instructions, all of
which are attached hereto and incorporated herein in their entirety.

 

Participant:

Date of Grant:

Vesting Commencement Date:

Number of Shares Subject to Award:

 

	
  Vesting Schedule:

  	
   

  	
  The Award shall vest in
  equal installments on each of the first four anniversaries of the Vesting
  Commencement Date.

  

 

Additional
Terms/Acknowledgements:  The undersigned Participant acknowledges
receipt of, and understands and agrees to, this Restricted Stock Grant Notice,
the Restricted Stock Grant Agreement and the Plan. Participant further
acknowledges that as of the Date of Grant, this Restricted Stock Grant Notice,
the Restricted Stock Grant Agreement and the Plan set forth the entire
understanding between Participant and the Company regarding the acquisition of
stock in the Company and supersede all prior oral and written agreements on
that subject with the exception of (i) Awards previously granted and delivered
to Participant under the Plan, and (ii) the following agreements only:

 

OTHER AGREEMENTS:

 

	
  ALLOS THERAPEUTICS, INC.

  	
  PARTICIPANT:

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
  Signature

  	
  Signature

  
	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
							

 

	
  ATTACHMENTS:

  	
   

  	
  Restricted Stock Grant
  Agreement, 2006 Inducement Award Plan, form of Assignment Separate from
  Certificate and form of Joint Escrow Instructions

  

 

 

ATTACHMENT I

 

FORM OF RESTRICTED STOCK GRANT
AGREEMENT

2006 INDUCEMENT AWARD PLAN

 

Pursuant
to your Restricted Stock Grant Notice (“Grant Notice”)
and this Restricted Stock Grant Agreement (collectively, the “Award”), as an inducement to enter into employment, Allos Therapeutics, Inc. (the “Company”) has
awarded you a Stock Grant Award under its 2006 Inducement Award Plan (the “Plan”) for the
number of shares of the Company’s Common Stock subject to the Award as
indicated in your Grant Notice. Defined terms not explicitly defined in this
Restricted Stock Grant Agreement but defined in the Plan shall have the same
definitions as in the Plan.

 

The
details of your Award are as follows:

 

1.                                      VESTING. Subject to the
limitations and exceptions contained herein, or in any other written agreement between the Company or any Affiliate and you, your Award will vest as provided in the
Grant Notice, provided that vesting will cease upon the termination of your
Continuous Service.

 

2.                                      NUMBER OF
SHARES.
The number of shares subject to your Award may be adjusted from time to time
for Capitalization Adjustments, as provided in the Plan.

 

3.                                      SECURITIES
LAW COMPLIANCE. You may not be issued any shares under your Award unless the shares are
either (i) then registered under the Securities Act or (ii) the Company has
determined that such issuance would be exempt from the registration
requirements of the Securities Act. Your Award must also comply with other
applicable laws and regulations governing the Award, and you will not receive
such shares if the Company determines that such receipt would not be in
material compliance with such laws and regulations.

 

4.                                      RIGHT OF
REACQUISITION.

 

(a)                                  The Company shall have a right to reacquire
all or any part of the shares received pursuant to your Award (a “Reacquisition Right”) that have not as yet vested in
accordance with the Vesting Schedule on the Grant Notice (“Unvested
Shares”) on the following terms and conditions:

 

(i)                                    The Company shall simultaneously with
termination of your Continuous Service (as defined in the Plan) automatically
reacquire for no consideration all of the Unvested Shares, unless the Company agrees to waive its reacquisition right as to some
or all of the Unvested Shares. Any such waiver shall be exercised by the
Company by written notice to you or your representative (with a copy to the
Escrow Holder as defined below) within ninety (90) days after the termination
of your Continuous Service, and the Escrow Holder may then release to you the
number of Unvested Shares not being reacquired by the Company. If the Company
does not waive its reacquisition right as to all of the Unvested Shares, then
upon such termination of your Continuous Service, the Escrow Holder shall
transfer to the Company the number of shares the Company is reacquiring.

 

(ii)                                The shares issued under your Award shall be
held in escrow pursuant to the terms of the Joint Escrow Instructions attached
to the Grant Notice as Attachment IV. You agree to execute two (2) Assignment
Separate From Certificate forms (with date and number of shares blank)
substantially in the form attached to the Grant Notice as Attachment III and
deliver the same, along with the certificate or certificates evidencing the
shares, for use by the escrow agent pursuant to the terms of the Joint Escrow
Instructions.

 

 

(iii)                            Subject to the provisions of your Award, you
shall, during the term of your Award, exercise all rights and privileges of a
shareholder of the Company with respect to the shares deposited in escrow. You
shall be deemed to be the holder of the shares for purposes of receiving any
dividends which may be paid with respect to such shares and for purposes of
exercising any voting rights relating to such shares, even if some or all of
such shares have not yet vested and been released from the Company’s
Reacquisition Right.

 

(iv)                               If, from time to time, there is any stock
dividend, stock split or other change in the character or amount of any of the
outstanding stock of the corporation the stock of which is subject to the
provisions of your Award, then in such event any and all new, substituted or
additional securities to which you is entitled by reason of your ownership of
the shares acquired under your Award shall be immediately subject to the
Reacquisition Right with the same force and effect as the shares subject to
this Reacquisition Right immediately before such event.

 

5.                                      RESTRICTIVE LEGENDS. The shares issued under your Award shall be
endorsed with appropriate legends determined by the Company.

 

6.                                      AWARD NOT A
SERVICE CONTRACT. Your Award is not an employment or service contract, and nothing in
your Award shall be deemed to create in any way whatsoever any obligation on
your part to continue in the employ of the Company or an Affiliate, or on the
part of the Company or an Affiliate to continue your employment. In addition,
nothing in your Award shall obligate the Company or an Affiliate, their
respective shareholders, boards of directors, Officers or Employees to continue
any relationship that you might have as a Director or Consultant for the
Company or an Affiliate.

 

7.                                      WITHHOLDING
OBLIGATIONS.

 

(a)                                  At the time your Award
is made, or at any time thereafter as requested by the Company, you hereby
authorize withholding from payroll and any other amounts payable to you, and
otherwise agree to make adequate provision for any sums required to satisfy the
federal, state, local and foreign tax withholding obligations of the Company or
an Affiliate, if any, which arise in connection with your Award.

 

(b)                                  Upon your request and
subject to approval by the Company, in its sole discretion, and compliance with
any applicable conditions or restrictions of law, the Company may withhold a
number of whole shares of Common Stock subject to this Award having a Fair
Market Value, determined by the Company as of the date of withholding, not in
excess of the minimum amount of tax required to be withheld by law. Any adverse
consequences to you arising in connection with such share withholding procedure
shall be your sole responsibility.

 

(c)                                  Unless the tax
withholding obligations of the Company and/or any Affiliate are satisfied, the
Company shall have no obligation to issue a certificate for such shares or
release such shares from any escrow provided for herein.

 

8.                                      TAX CONSEQUENCES. The acquisition and vesting of the shares may
have adverse tax consequences to you that may avoided or mitigated by filing an
election under Section 83(b) of the Internal Revenue Code, as amended (the “Code”). Such election must be filed within thirty (30) days after
the date of your Award. YOU ACKNOWLEDGE THAT IT IS YOUR OWN RESPONSIBILITY, AND
NOT THE COMPANY’S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN IF
YOU REQUEST THE COMPANY TO MAKE THE FILING ON YOUR BEHALF.

 

2

 

9.                                      NOTICES. Any notices provided
for in your Award or the Plan shall be given in writing and shall be deemed
effectively given upon receipt or, in the case of notices delivered by the
Company to you, five (5) days after deposit in the United States mail, postage
prepaid, addressed to you at the last address you provided to the Company.

 

10.                               MISCELLANEOUS.

 

(a)                                  The rights and obligations of the Company
under your Award shall be transferable to any one or more persons or entities,
and all covenants and agreements hereunder shall inure to the benefit of, and
be enforceable by the Company’s successors and assigns. Your rights and
obligations under your Award may only be assigned with the prior written
consent of the Company.

 

(b)                                  You agree upon request to execute any further
documents or instruments necessary or desirable in the sole determination of
the Company to carry out the purposes or intent of your Award.

 

(c)                                  You
acknowledge and agree that you have reviewed your Award in its entirety, have
had an opportunity to obtain the advice of counsel prior to executing and
accepting your Award and fully understand all provisions of your Award.

 

11.                               GOVERNING PLAN DOCUMENT. Your Award is subject to all the provisions of
the Plan, the provisions of which are hereby made a part of your Award, and is
further subject to all interpretations, amendments, rules and regulations which
may from time to time be promulgated and adopted pursuant to the Plan. In the
event of any conflict between the provisions of your Award and those of the
Plan, the provisions of the Plan shall control.

 

3

 

ATTACHMENT II

 

2006 INDUCEMENT AWARD PLAN

 

[Provided Separately]

 

 

ATTACHMENT III

 

FORM OF ASSIGNMENT SEPARATE FROM
CERTIFICATE

2006 INDUCEMENT AWARD PLAN

 

FOR VALUE RECEIVED and pursuant to that certain Restricted
Stock Grant Notice and Restricted Stock Grant Agreement (the “Award”), [Participant’s Name]
hereby sells, assigns and transfers unto Allos Therapeutics, Inc., a Delaware
corporation (“Assignee”)                                                     
(            )
shares of the common stock of the Assignee, standing in the undersigned’s name
on the books of said corporation represented by Certificate No.          
herewith and do hereby irrevocably constitute and appoint                                           
as attorney-in-fact to transfer the said stock on the books of the within named
Company with full power of substitution in the premises. This Assignment may be
used only in accordance with and
subject to the terms and conditions of the Award, in connection with the
reacquisition of shares of Common Stock of the Corporation issued to the
undersigned pursuant to the Award, and only to the extent that such shares remain
subject to the Corporation’s reacquisition right under the Award.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature:

  	
   

  	
   

  
	
   

  	
  [Participant’s Name], Recipient

  
	
   

  	
   

  

 

[INSTRUCTION: 
Please do not fill in any blanks other than the signature line. The
purpose of this Assignment is to enable the Company to exercise its
reacquisition right set forth in the Award without requiring additional
signatures on your part.]

 

 

ATTACHMENT IV

 

FORM OF JOINT ESCROW INSTRUCTIONS

2006 INDUCEMENT AWARD PLAN

 

[date]

 

Corporate Secretary

Allos Therapeutics, Inc.

11080 CirclePoint
Road, Suite 200

Westminster,
Colorado 80020

 

Dear Sir/Madam:

 

As Escrow Agent for both
Allos Therapeutics, Inc., a Delaware corporation (the “Company”),
and the undersigned recipient of stock of the Company (“Recipient”),
you are hereby authorized and directed to hold the documents delivered to you
pursuant to the terms of that certain Restricted Stock Grant Notice (the “Grant Notice”), dated                         
to which a copy of these Joint Escrow Instructions is attached as Attachment
IV, and pursuant to the terms of that
certain Restricted Stock Grant Agreement (“Agreement”),
which is Attachment I to the Grant Notice, 
in accordance with the following instructions:

 

1.                                       In the event Recipient ceases to render
services to the Company or an affiliate of the Company during the vesting
period set forth in the Grant Notice, the Company or its assignee will give to
Recipient and you a written notice specifying that the shares of stock shall be
transferred to the Company. Recipient and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice
in accordance with the terms of said notice.

 

2.                                       At the closing you are directed (a) to
date any stock assignments necessary for the transfer in question, (b) to
fill in the number of shares being transferred, and (c) to deliver same,
together with the certificate evidencing the shares of stock to be transferred,
to the Company.

 

3.                                       Recipient irrevocably authorizes the Company
to deposit with you any certificates evidencing shares of stock to be held by
you hereunder and any additions and substitutions to said shares as specified
in the Grant Notice. Recipient does hereby irrevocably constitute and appoint
you as Recipient’s attorney-in-fact and agent for the term of this escrow to
execute with respect to such securities and other property all documents of
assignment and/or transfer and all stock certificates necessary or appropriate
to make all securities negotiable and complete any transaction herein
contemplated.

 

4.                                       This escrow shall terminate upon vesting of
the shares or upon the earlier return of the shares to the Company.

 

5.                                       If at the time of termination of this escrow
you should have in your possession any documents, securities, or other property
belonging to Recipient, you shall deliver all of same to any pledgee entitled
thereto or, if none, to Recipient and shall be discharged of all further
obligations hereunder.

 

6.                                       Your duties hereunder may be altered,
amended, modified or revoked only by a writing signed by all of the parties
hereto.

 

 

7.                                       You shall be obligated only for the
performance of such duties as are specifically set forth herein and may rely
and shall be protected in relying or refraining from acting on any instrument
reasonably believed by you to be genuine and to have been signed or presented
by the proper party or parties or their assignees. You shall not be personally
liable for any act you may do or omit to do hereunder as Escrow Agent or as
attorney-in-fact for Recipient while acting in good faith and any act done or
omitted by you pursuant to the advice of your own attorneys shall be conclusive
evidence of such good faith.

 

8.                                       You are hereby expressly authorized to
disregard any and all warnings given by any of the parties hereto or by any
other person or corporation, excepting only orders or process of courts of law,
and are hereby expressly authorized to comply with and obey orders, judgments
or decrees of any court. In case you obey or comply with any such order,
judgment or decree of any court, you shall not be liable to any of the parties
hereto or to any other person, firm or corporation by reason of such
compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.

 

9.                                       You shall not be liable in any respect on
account of the identity, authority or rights of the parties executing or
delivering or purporting to execute or deliver the Grant Notice or any
documents or papers deposited or called for hereunder.

 

10.                                 You shall not be liable for the outlawing of
any rights under any statute of limitations with respect to these Joint Escrow
Instructions or any documents deposited with you.

 

11.                                 You shall be entitled to employ such legal
counsel, including but not limited to Cooley Godward LLP, and other experts as
you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.

 

12.                                 Your responsibilities as Escrow Agent
hereunder shall terminate if you shall cease to be Secretary of the Company or
if you shall resign by written notice to each party. In the event of any such termination,
the Company may appoint any officer or assistant officer of the Company as
successor Escrow Agent and Recipient hereby confirms the appointment of such
successor or successors as his attorney-in-fact and agent to the full extent of
your appointment.

 

13.                                 If you reasonably require other or further
instruments in connection with these Joint Escrow Instructions or obligations
in respect hereto, the necessary parties hereto shall join in furnishing such
instruments.

 

14.                                 It is understood and agreed that should any
dispute arise with respect to the delivery and/or ownership or right of
possession of the securities, you may (but are not obligated to) retain in your
possession without liability to anyone all or any part of said securities until
such dispute shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or
defend any such proceedings.

 

15.                                 Any notice required or permitted hereunder
shall be given in writing and shall be deemed effectively given upon personal
delivery or upon deposit in any United States Post Box, by registered or
certified mail with postage and fees prepaid, addressed to each of the other
parties hereunto entitled at the following addresses, or at such other
addresses as a party may designate by ten (10) days’ written notice to each of
the other parties hereto:

 

2

 

	
  COMPANY:

  	
   

  	
  Allos Therapeutics, Inc.

  
	
   

  	
   

  	
  11080
  CirclePoint Road, Suite 200

  
	
   

  	
   

  	
  Westminster,
  Colorado 80020

  
	
   

  	
   

  	
  Attn: General Counsel /
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
  RECIPIENT:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ESCROW AGENT:

  	
   

  	
  Allos Therapeutics, Inc.

  
	
   

  	
   

  	
  11080
  CirclePoint Road, Suite 200

  
	
   

  	
   

  	
  Westminster,
  Colorado 80020

  
	
   

  	
   

  	
  Attn: Corporate Secretary

  

 

16.                                 By signing these Joint Escrow Instructions
you become a party hereto only for the purpose of said Joint Escrow Instructions;
you do not become a party to the Grant Notice.

 

17.                                 This instrument shall be binding upon and
inure to the benefit of the parties hereto, and their respective successors and
permitted assigns. It is understood and agreed that references to “you” or “your”
herein refer to the original Escrow Agent and to any and all successor Escrow
Agents. It is understood and agreed that the Company may at any time or from
time to time assign its rights under the Grant Notice and these Joint Escrow
Instructions in whole or in part.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  ALLOS THERAPEUTICS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RECIPIENT

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [Participant’s Name]

  
	
   

  	
   

  
	
   

  	
   

  
	
  ESCROW AGENT:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
					

 

3

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