Document:

Exhibit 4.02

	
  CUSIP NO. 52517P3R0

  	
   

  	
   

  
	
  ISIN NO. US52517P3R05

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  REGISTERED

  	
   

  	
  PRINCIPAL AMOUNT: $5,000,000

  
	
  No. R-1

  	
   

  	
   

  

 

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTE, SERIES I

FX BASKET-LINKED NOTE
 DUE SEPTEMBER 26, 2008

This
Note is a Global Security within the meaning of the Indenture hereinafter
referred to and is registered in the name of the Depository or a nominee of the
Depository.  Unless this certificate is
presented by an authorized representative of The Depository Trust Company (55
Water Street, New York, New York) to the Company (as defined below) or its
agent for registration of transfer, exchange or payment and any certificate
issued is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of The Depository Trust Company and
any payment is made to Cede & Co., any transfer, pledge or other use hereof
for value or otherwise by or to any person is wrongful since the registered
owner hereof, Cede & Co., has an interest herein.

Unless
and until it is exchanged in whole or in part for Notes in certificated form (a
“Certificated Note”), this Global Security may not be transferred except as a
whole by the Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository or by the
Depository or any such nominee to a successor depository or a nominee of such
successor depository.

LEHMAN BROTHERS HOLDINGS
INC., a corporation duly organized and existing under the laws of the State of
Delaware (herein called the “Company,” which term includes any successor
corporation under the Indenture referred to on the reverse hereof), for value
received, hereby promises to pay to CEDE & Co., or registered assigns, on
the Maturity Date, an amount
equal to the Redemption Amount.

The
“Maturity Date” is September 26, 2008, or if such day is not a Business Day, on
the next following Business Day.

The “Redemption Amount” is the amount equal
to the sum of the principal amount of the Notes plus the Additional Amount, if
any.

The “Additional Amount” is a single U.S. dollar amount equal the
principal amount of the Notes multiplied by:

(A) 0.0%, if the Basket Return is less
than or equal to 0.0;

(B) 11.5%, if the Basket Return is
greater than 0.0 but less than 0.115; or

(C) 11.5% plus the product of the
Leverage times the difference of the Basket Return minus 0.115, if the Basket
Return is greater than or equal to 0.115.

The “Leverage” is 150%.

The “Reference Currencies” are the Brazilian Real (BRL), Hungarian
Forint (HUF), Indian Rupee (INR), Indonesian Rupiah (IDR), Mexican Peso (MXN)
and Turkish Lira (TRY).

The “Basket Return” equals
the sum of the Weighted Currency Returns.

The “Weighted
Currency Return” for each Reference Currency is the product of the Weighting
for such Reference Currency times a quotient, the numerator of which is the
difference of the Initial Reference Currency Rate for such Reference Currency
minus the Settlement Rate for such Reference Currency and the denominator of
which is the Initial Reference Currency Rate for such Reference Currency.

The “Weighting”
and “Initial Reference Currency Rate” for each Reference Currency are as
follows:

	
  Reference

  Currency

  	
   

  	
  Weighting

  	
   

  	
  Initial

  Reference

  Currency Rate

  	
   

  
	
  BRL

  	
   

  	
  16.7

  	
  %

  	
  1.8627

  	
   

  
	
  HUF

  	
   

  	
  16.7

  	
  %

  	
  177.93

  	
   

  
	
  IDR

  	
   

  	
  16.7

  	
  %

  	
  9058

  	
   

  
	
  INR

  	
   

  	
  16.7

  	
  %

  	
  40.20

  	
   

  
	
  MXN

  	
   

  	
  16.7

  	
  %

  	
  10.7935

  	
   

  
	
  TRY

  	
   

  	
  16.7

  	
  %

  	
  1.2739

  	
   

  

 

 2
 

The “Settlement Rate” for each Reference Currency is
the Reference Exchange Rate on the Valuation Date, determined in accordance
with the applicable Settlement Rate Option (subject to the occurrence of a
Disruption Event).

The “Reference Exchange Rates” are the spot exchange
rates for each of the Reference Currencies quoted against the U.S. dollar
expressed as number of currency units per USD 1.

The “Valuation Date” is September 22, 2008; provided that, upon the
occurrence of a Disruption Event with respect to a Reference Currency, the
Valuation Date for the affected Reference Currency may be postponed (as
described in “Disruption Events” below).

The “Issue Date” is July 26, 2007.

If the Calculation Agent determines that a
Disruption Event relating to one or more of the Reference Currencies is in
effect on the scheduled Valuation Date, the Calculation Agent will determine
the Basket Return using:

·                                          for each Reference
Currency that did not suffer a Disruption Event on the scheduled Valuation
Date, the Settlement Rate on the scheduled Valuation Date, and

·                                          for each Reference
Currency that did suffer a Disruption Event on the scheduled Valuation Date,
the Settlement Rate on the immediately succeeding scheduled Valuation Business
Day for such Reference Currency on which no Disruption Event occurs or is
continuing with respect to such Reference Currency;

provided, however, that if a
Disruption Event has occurred or is continuing with respect to a Reference
Currency on each of the three scheduled Valuation Business Days following the
scheduled Valuation Date, then (a) such third scheduled Valuation Business Day
shall be deemed the Valuation Date for the affected Reference Currency; and (b)
the Calculation Agent will determine the Settlement Rate for the affected
Reference Currency on such day in accordance with Fallback Rate Observation
Methodology.

For purposes of the above, “scheduled Valuation Business
Day” means a day that is or, in the judgment of the Calculation Agent, should
have been, a Valuation Business Day for the affected Reference Currency.

A “Disruption Event” means any of the following events as determined in
good faith by the Calculation Agent:

(A)                             the occurrence and/or existence of an event on any day that has the
effect of preventing or making impossible (x) the delivery of USD from accounts
inside the country for which a Reference Currency is the lawful currency (such
jurisdiction with respect to such Reference Currency, the “Reference Currency
Jurisdiction”) for that Reference Currency to accounts outside that Reference
Currency Jurisdiction; or (y) for MXN and TRY only, the

 3
 

conversion of the Reference
Currency into USD through customary legal channels;

(B)                              the occurrence of any event causing the Reference
Exchange Rate for the Reference Currency to be split into dual or multiple
currency exchange rates; or

(C)                              the Settlement Rate being unavailable for the Reference Currency, or
the occurrence of an event (i) in the Reference Currency Jurisdiction for that
Reference Currency that materially disrupts the market for the Reference
Currency or (ii) that generally makes it impossible to obtain the Settlement
Rate for the Reference Currency, on the Valuation Date.

A “Valuation
Business Day” means, with respect to each Reference Currency, any day, other
than a Saturday or Sunday, that is neither a legal holiday nor a day on which
commercial banks are authorized or required by law, regulation or executive
order to close (including for dealings in foreign exchange in accordance with
the practice of the foreign exchange market) in the city or jurisdiction
indicated in the table below:

	
  Reference Currency

  	
   

  	
  Screen
  Reference

  	
   

  	
  Valuation
  Business Day

  
	
  BRL

  	
   

  	
  BRFR

  	
   

  	
  Brazilia, Rio de Janiero or São
  Paulo

  
	
  HUF

  	
   

  	
  The EUR/HUF fixing rate on ECB37 divided by the
  EUR/USD fixing rate on ECB37

  	
   

  	
  TARGET

  
	
  INR

  	
   

  	
  RBIB

  	
   

  	
  Mumbai

  
	
  IDR

  	
   

  	
  ABSIRFIX01

  	
   

  	
  Singapore

  
	
  MXN

  	
   

  	
  USDMXNFIX=

  	
   

  	
  Mexico City

  
	
  TRY

  	
   

  	
  The EUR/TRY fixing rate on ECB37 divided by the
  EUR/USD fixing rate on ECB37

  	
   

  	
  TARGET

  

 

The “Settlement Rate Option” for the BRL is the
Brazilian Real/U.S. dollar offered rate for U.S. dollars, expressed as the
amount of Brazilian Reals per one U.S. dollar, for settlement in two Business
Days reported by the Banco Central do Brasil on SISBACEN Data System under
transaction code PTAX-800 (“Consulta de Cambio” or Exchange Rate Inquiry),
Option 5 ( “Cotacoes para Contabilidade” or Rates for Accounting Purposes),
which appears on Reuters Screen BRFR Page under the caption “Dolar PTAX” at
approximately 6:30 pm Sao Paolo time on the Valuation Date or such other
relevant date.  The Settlement Rate Option for the HUF is the
EUR/HUF Fixing Rate divided by the EUR/USD Fixing Rate.  The “EUR/HUF Fixing Rate” is the
Euro/Hungarian Forint fixing rate, expressed as the amount of Euro per one
Hungarian Forint which appears on Reuters Screen ECB37 to the right of the
caption “HUF” at approximately 2:15 p.m., Central European time, on the
Valuation Date or such other relevant date. 
The “EUR/USD Fixing Rate” is the Euro/U.S. dollar fixing rate, expressed
as the amount of Euro per one U.S. dollar which appears on Reuters Screen ECB37
to the right of the caption “USD” at approximately 2:15 p.m., Central European
time, on the Valuation Date or such other relevant date.  The
Settlement Rate Option for the INR is the Indian Rupee/U.S. dollar reference
rate, expressed as the amount of Indian Rupee per one U.S. dollar, for
settlement in two Business

 4
 

Days reported by the Reserve
Bank of India which appears on the Reuters Screen RBIB Page at approximately
2:30 p.m., Mumbai time, or as soon thereafter as practicable on the on
the Valuation Date or such other relevant date.    The Settlement Rate Option
for the IDR is the Indonesian Rupiah/U.S. dollar spot rate at 11:00 a.m.,
Singapore time, expressed as the amount of Indonesian Rupiah per one U.S.
dollar, for settlement in two Business Days reported by the Association of
Banks in Singapore which appears on the Reuters Page ABSIRFIX01 to the right of
the caption “Spot” under the column “IDR” at approximately 11:30 a.m.,
Singapore time, on the on the Valuation Date or such other relevant date.  The
Settlement Rate Option for the MXN Reference Exchange Rate is the Mexican
Peso/U.S. dollar official fixing rate, expressed as the amount of Mexican Pesos
per one U.S. dollar, for settlement in two business days reported by Banco de
Mexico which appears on Reuters Screen MEX01 Page under the heading “USDMXNFIX=“
at the close of business in Mexico City on the Valuation Date or such
other relevant date.  The Settlement Rate Option for the TRY is the
EUR/TRY Fixing Rate divided by the EUR/USD Fixing Rate.  The “EUR/TRY Fixing Rate” is the Euro/Turkish
Lira fixing rate, expressed as the amount of Euro per one Turkish Lira which
appears on Reuters Screen ECB37 to the right of the caption “TRY” at
approximately 2:15 p.m., Central European time, on the Valuation Date or such
other relevant date.  The term “business
day” solely as used in any Settlement Rate Option described above shall mean
any day, other than a Saturday or Sunday, that is neither a legal holiday nor a
day on which commercial banks are authorized or required by law, regulation or
executive order to close (including for dealings in foreign exchange in
accordance with the practice of the foreign exchange market) in the Principal
Financial Center for both (a) the Reference Currency and (b) the
currency against which the Reference Currency is quoted (the “base currency”)
in accordance with the Reference Exchange Rate specified in the applicable
pricing supplement, in each case as specified for the applicable Reference
Currency or base currency in the table below; provided that where the Turkish
Lira or Hungarian Forint is the Reference Currency or the base currency “business
day” for the Turkish Lira or Hungarian Forint as the Reference Currency or the
base currency shall mean any day on which the Trans-European Automated
Real-Time Gross Settlement Express Transfer (TARGET) System is open.

The
screen or time of observation indicated in relation to any Settlement Rate
Option above shall be deemed to refer to such screen or time of observation as
modified or amended from time to time, or to any substitute screen thereto.

The “Fallback Rate Observation Methodology” means that the reference exchange rate, Settlement
Rate or other rate, as specified in the applicable pricing supplement, in
respect of a reference currency will equal the noon buying rate in New York for
cable transfers in foreign currencies as announced by the Federal Reserve Bank
of New York for customs purposes (the “Noon Buying Rate”) on the relevant
Valuation Date or such other date specified in the applicable pricing
supplement. If the Noon Buying Rate is not announced on that date, the
Reference Exchange Rate, Settlement Rate or other rate for such Reference
Currency will be calculated on the basis of the arithmetic mean of the
applicable spot quotations received by the Calculation Agent at approximately
10:00 a.m., New York City time, on the Valuation Business Day next
succeeding the Valuation Date or such other date specified in the applicable
pricing supplement, for the purchase or sale for deposits in the reference
currency by the New York offices of three leading banks engaged in the
interbank market (selected in the sole discretion of the Calculation Agent)
(the “Reference Banks”). If fewer than three Reference Banks provide spot
quotations, then the Reference Exchange Rate, Settlement Rate or other rate, as
applicable, will be calculated on the basis of the arithmetic mean of the
applicable spot quotations received

 5
 

by the Calculation Agent at
approximately 10:00 a.m., New York City time, on the relevant date from
two Reference Banks (selected in the sole discretion of the Calculation Agent),
for the purchase or sale for deposits in the Reference Currency. If these spot
quotations are available from only one Reference Bank, then the Calculation
Agent, in its sole discretion, will determine whether that quotation is
reasonable to be used. If no spot quotation is available, then the Reference
Exchange Rate, Settlement Rate or other rate, as applicable, for such Reference
Currency will be determined by the Calculation Agent in good faith and in a commercially
reasonable manner.

A “Business Day”,
notwithstanding any provision in the Indenture, is any day that is not is not a
Saturday or Sunday and that is not a day on which banking institutions in New
York City generally are authorized or obligated by law or executive order to be
closed.

The “Calculation Agent” means
Lehman Brothers Inc.

Except as provided below,
the Redemption Amount may, at the option of the Company, be made by check
mailed to the person entitled thereto at such person’s address as it appears on
the registry books of the Company.

Payment of the Redemption
Amount will be made in immediately available funds in accordance with the
normal procedures of the Trustee (or any duly appointed Paying Agent).

The Company will pay any
administrative costs imposed by banks in making payments in immediately
available funds, but any tax, assessment or governmental charge imposed upon
payments hereunder, including, without limitation, any withholding tax, will be
borne by the Holder hereof.

References herein to “U.S. dollars” or “U.S.$” or “$”
or “USD” are to the coin or currency of the United States as at the time of
payment is legal tender for the payment of public and private debts.

Reference is hereby made to
the further provisions of this Note set forth on the reverse hereof.  Such further provisions shall for all
purposes have the same effect as if set forth at this place.

This Note shall not be valid or become obligatory for
any purpose until the certificate of authentication hereon shall have been
signed by the Trustee under the Indenture.

 6
 

IN WITNESS WHEREOF, Lehman Brothers Holdings Inc. has
caused this instrument to be signed by its Chairman of the Board, its
President, its Vice Chairman, its Chief Financial Officer, one of its Vice
Presidents or its Treasurer, by manual or facsimile signature under its
corporate seal, attested by its Secretary or one of its Assistant Secretaries
by manual or facsimile signature.

	
  Dated: July 26, 2007

  	
   

  
	
   

  	
   

  
	
  [SEAL] 

  	
  LEHMAN BROTHERS HOLDINGS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
              
  Name: Andrew Yeung

  
	
   

  	
              
  Title:   Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
              
  Name: Cindy Buckholz

  
	
   

  	
              
  Title:   Assistant Secretary

  

 

TRUSTEE’S
CERTIFICATE OF AUTHENTICATION

This is one of the
Securities of the series designated herein referred to in the within-mentioned
Indenture.

	
  CITIBANK, N.A.

  
	
   as Trustee

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized Officer

  

 

 7

[REVERSE OF NOTE]

LEHMAN BROTHERS
HOLDINGS INC.

MEDIUM-TERM NOTES,
SERIES I

FX BASKET-LINKED NOTE
 DUE SEPTEMBER 26, 2008

Section
1.  General.  This Note
is one of a duly authorized series of Notes of the Company designated as the
Medium-Term Notes, Series I, FX
Basket-Linked Note (herein called the “Notes”).  The Notes are one of an
indefinite number of series of debt securities of the Company (collectively,
the “Securities”) issued or issuable under and pursuant to an indenture dated
as of September 1, 1987, as amended and supplemented (the “Indenture”), duly
executed and delivered by the Company and Citibank, N.A., as Trustee (herein
called the “Trustee”), to which Indenture and all indentures supplemental
thereto reference is hereby made for a description of the rights, limitations
of rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the holders of the Securities. 
The separate series of Securities may be issued in various aggregate
principal amounts, may mature at different times, may bear interest (if any) at
different rates, may be subject to different redemption provisions or
repurchase rights (if any), may be subject to different sinking, purchase or
analogous funds (if any), may be subject to different covenants and Events of
Default and may otherwise vary as in the Indenture provided.

Section
2.  Principal Amount for Indenture Purposes.  For the purpose of determining whether
Holders of the requisite amount of Notes of this series outstanding under the
Indenture have made a demand, given a notice or waiver or taken any other
action, the principal amount of this Note will be deemed to be the principal
amount of this Note then outstanding.

Section
3.  Modification and Waivers. 
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than 66-2/3% in aggregate
principal amount of each series of the Securities at the time Outstanding to be
affected, evidenced as in the Indenture provided, to execute supplemental
indentures adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of any supplemental indenture or
modifying in any manner the rights of the holders of the Securities of all such
series; provided, however, that no such supplemental indenture shall, among
other things, (i) change the fixed maturity of any Security, or reduce the
Additional Amount or the principal amount thereof, or reduce the rate or extend
the time of payment of interest thereon or reduce any premium or other amount
payable on redemption, or make the Additional Amount or the principal amount
thereof, premium or other amount payable, if any, or interest thereon payable
in any coin or currency other than that herein above provided, without the
consent of the Holder of each Security so affected, or (ii) change the place of
payment on any Security, or impair the right to institute suit for payment on
any Security, or reduce the aforesaid percentage of Securities, the holders of
which are required to consent to any such supplemental indenture, without the
consent of the holders of each Security so affected.  It is also provided in the Indenture that,
prior to any declaration accelerating the maturity of any series of Securities,
the holders of a majority in aggregate principal amount of the Securities of
such series

Outstanding may on
behalf of the holders of all the Securities of such series waive any past
default or Event of Default under the Indenture with respect to such series and
its consequences, except a default in the payment of interest, if any, on the
Additional Amount or the principal amount, or premium, if any, on any of the
Securities of such series, or in the payment of any sinking fund installment or
analogous obligation with respect to Securities of such series.  Any such consent or waiver by the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
holders and owners of this Note and any Notes of this series which may be
issued in exchange or substitution herefor, irrespective of whether or not any
notation thereof is made upon this Note or such other Notes of this series.

Section
4.  Obligations Unconditional. 
No reference herein to the Indenture and no provisions of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the Additional Amount or the principal
amount on this Note at the place, at the respective times, at the rate, and in
the coin or currency herein prescribed.

Section
5.  Defeasance.  The
Indenture contains provisions for the discharge of the Indenture and defeasance
at any time of the indebtedness on this Note upon compliance by the Company
with certain conditions set forth therein, which provisions apply to this Note.

Section
6.  Authorized Form and Denominations.  The Notes of this series are issuable in
registered form, without coupons.  Each
Note will be issued initially as either a Global Security or a Certificated
Note, at the option of the Company, in denominations of $1,000 or whole
multiples of $1,000, either at the office or agency to be designated and
maintained by the Company for such purpose in the Borough of Manhattan, New
York City, pursuant to the provisions of the Indenture or at any of such other
offices or agencies as may be designated and maintained by the Company for such
purpose pursuant to the provisions of the Indenture, and in the manner and
subject to the limitations provided in the Indenture, but without the payment
of any service charge, except for any tax or other governmental charges imposed
in connection therewith.  Notes of this
series are exchangeable for a like aggregate principal amount of Notes of this
series of a different authorized denomination, except that Global Securities
will not be exchangeable for Certificated Notes of this series.

Section
7.  Registration of Transfer. 
As provided in the Indenture and subject to certain limitations as
therein set forth, the transfer of this Note is registrable in the Security
Register, upon surrender of this Note for registration of transfer, at the
Corporate Trust Office or agency in a Place of Payment for this Note, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar requiring such written
instrument of transfer duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Notes of this series, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.

If at
any time the Depository notifies the Company that it is unwilling or unable to
continue as Depository or if at any time the Depository shall no longer be
eligible under the Indenture, the Company shall appoint a successor
Depository.  If a successor Depository
for the Notes of this series is not appointed by the Company within 90 days
after the Company receives such notice or becomes aware of such ineligibility,
the Company will issue, and the Trustee will

authenticate and
deliver, Notes of this series in definitive form in an aggregate principal
amount equal to the principal amount of this Note.

No
service charge shall be made for any such registration of transfer or exchange,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection therewith.

Prior
to due presentment of this Note for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee may treat the person in
whose name this Note is registered as the owner hereof for all purposes, and
neither the Company nor the Trustee nor any agent of the Company or of the
Trustee shall be affected by any notice to the contrary.

Section
8.  Events of Default. 
If an Event of Default with respect to Notes of this series shall occur
and be continuing, the amount that may be declared due and payable upon any
acceleration of the notes will be determined by the Calculation Agent for the period
from and including the Issue Date to but excluding the date of early repayment
and will equal, for each note, the Redemption Amount, calculated as the date of
early repayment were the Maturity Date. If a bankruptcy proceeding is commenced
in respect of Lehman Brothers Holdings, the claim of the beneficial owner of a
note for the period from and including the Issue Date to but excluding the date
of early repayment will be capped at the Redemption Amount, calculated as
though the date of the commencement of the proceeding were the Maturity Date.

Section
9.  No Recourse Against Certain Persons.  No recourse for the payment of the Additional
Amount or for any claim based hereon or otherwise in respect hereof, and no
recourse under or upon any obligation, covenant or agreement of the Company in
the Indenture or any Indenture supplemental thereto or in any Note, or because
of the creation of any indebtedness represented thereby, shall be had against
any incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
part of the consideration for the issue hereof, expressly waived and released.

Section
10.  Defined Terms.  All
terms used but not defined in this Note are used herein as defined in the
Indenture.

Section
11.  GOVERNING LAW.  THIS
NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.Exhibit 10.44

ISONICS CORPORATION

2007 NON-EMPLOYEE DIRECTORS STOCK
OPTION PLAN

1.             Purposes of and Benefits Under the Plan.  This
2007 Non-Employee Directors Stock Option Plan (the “Plan”) is intended to
provide a means by which each director of Isonics Corporation (the “Company”)
who is not otherwise an employee of the Company (“Non-Employee Director”) will
be given an opportunity to purchase Company stock and to encourage their
continued service on the Board, and this Plan replaces the 1998 Directors’ Plan
commencing immediately upon approval by the shareholders for directors elected
or appointed at or after the meeting at which this Plan is approved by the
shareholders.

2.             Definitions.  As used in this Plan, the following words and
phrases shall have the meanings indicated:

(a)           “Board” shall mean the
Board of Directors of the Company.

(b)           “Committee” shall mean
any committee appointed by the Board to administer this Plan, if one has been
appointed.  If no Committee has been
appointed, the term “Committee” shall mean the Board.

(c)           “Common Stock” shall
mean the Company’s no par value common stock.

(d)           “Disability” shall mean
a Recipient’s inability to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment that can be
expected to result in death or that has lasted or can be expected to last for a
continuous period of not less than 12 months. 
If the Recipient has a disability insurance policy, the term “Disability”
shall be as defined therein.

(e)           “Fair Market Value” per
share as of a particular date shall mean the last sale price of the Company’s
Common Stock as reported on a national securities exchange or by NASDAQ, or if
the quotation for the last sale reported is not available for the Company’s
Common Stock, the average of the closing bid and asked prices of the Company’s
Common Stock as so reported or, if such quotations are unavailable, the value
determined by the Committee in accordance with its discretion in making a bona
fide, good faith determination of fair market value.  Fair Market Value shall be determined without
regard to any restriction other than a restriction which, by its terms, never
will lapse.

(f)            “Option” shall mean a
non-qualified stock option granted under this Plan.

(g)           “Recipient” means any
person granted an Option hereunder.

(h)           “Internal Revenue Code”
shall mean the United States Internal Revenue Code of 1986, as amended from
time to time.

3.             Administration.

(a)           The Plan shall be
administered by the Committee.  The
Committee shall have the authority in its discretion, subject to and not
inconsistent with the express provisions of the Plan, to administer the Plan
and to exercise all the powers and authorities either specifically conferred
under the Plan or necessary or advisable in the administration of the
Plan.  The Committee may delegate to one
or more of its members or to one or more agents such administrative duties as
it may deem advisable, and the Committee or any person to whom it has delegated
duties as aforesaid may employ one or more persons to render advice with
respect to any responsibility the Committee or such person may have under the
Plan.

(b)           Options granted under
the Plan shall be evidenced by duly adopted resolutions of the Committee and
included in the minutes of the meeting at which they are adopted or in a
unanimous written consent.

(c)           The Committee shall
endeavor to administer the Plan and grant Options hereunder in a manner that is
compatible with the obligations of persons subject to Section 16 of the U.S.
Securities Exchange Act of 1934 (the “1934 Act”), although compliance with
Section 16 is the obligation of the Recipient, not the Company.  Neither the Committee, the Board nor the
Company can assume any legal responsibility for a Recipient’s compliance with
his obligations under Section 16 of the 1934 Act.

(d)           No member of the
Committee or the Board shall be liable for any action taken or determination
made in good faith with respect to the Plan or any Option granted hereunder.

4.             Eligibility.

(a)           Options shall only be
granted to Non-Employee Directors of the Company.

(b)           The Plan shall not
confer upon any Recipient any right with respect to continuation of service as
a Non-Employee Director or nomination to serve as a Non-Employee Director, nor
shall it interfere in any way with any rights which the Non-Employee Director
or the Company may have to terminate his or her directorship at any time.

5.             Stock Reserved.

(a)           The stock subject to
Options hereunder shall be shares of Common Stock. Such shares, in whole or in
part, may be authorized but unissued shares or shares that shall have been or
that may be reacquired by the Company. 
The aggregate number of shares of Common Stock as to which Options may
be granted from time to time under the Plan shall not exceed  1,500,000 shares subject to adjustment as
provided in Section 7(h) hereof.

(b)           If any Option
outstanding under the Plan for any reason expires or is terminated without
having been exercised in full, the shares of Common Stock allocable to the
unexercised portion of such Option shall become available for subsequent grants
of Options under the Plan.

 2
 

6.             Non-Discretionary
Grants

(a)           Each Non-Employee
Director shall automatically be granted an option to purchase 50,000 shares of
Company Common Stock on the date on which the person first becomes a
Non-Employee Director whether through an election by the Company’s shareholders
or by appointment by the Board to fill a vacancy.

(b)           Thereafter, each
Non-Employee Director shall automatically be granted an Option to purchase
50,000 shares of Common Stock at each annual shareholder’s meeting at which
such person is re-elected to serve as a Non-Employee Director.

(c)           Each Non-Employee
Director who serves as chair of the compensation committee or the audit
committee of the Board of Directors shall automatically be granted an option to
purchase 10,000 shares of Company Common Stock on the date on which the person
becomes chair of such committee and expresses his or her intention to serve in
that capacity for at least one year following such appointment.

(d)           Each Non-Employee
Director who serves as chair of the Board of Directors shall automatically be
granted an option to purchase 50,000 shares of Company Common Stock on the date
on which the person becomes chair of the Board of Directors and expresses his
or her intention to serve in that capacity for at least one year following such
appointment.

(e)           Each Option shall
become fully vested immediately upon grant.

7.             Terms and
Conditions of Options.  Each Option
granted pursuant to the Plan shall be evidenced by a written Option agreement
between the Company and the Recipient, which agreement shall, unless otherwise
determined by the Committee, be substantially in the form of Exhibit A
hereto as modified from time to time by the Committee in its discretion, and
which shall, unless otherwise determined by the Committee, comply with and be
subject to the following terms and conditions:

(a)           Option Price.  Subject to adjustment as provided in Section
7(h) hereof, each Option agreement shall state the Option Price, which shall be
100% of the Fair Market Value per share on the effective date of grant of the
Option.

(b)           Term of Option.  Each Option Agreement shall state the period
during and times at which the Option shall be exercis­able for five years from
the date of grant of the Option.  The
exercise period shall be subject to earlier termination as provided in Sections
7(d) and 7(e) hereof, and, furthermore, shall be terminated upon surrender of
the Option by the holder thereof if such surrender has been authorized in
advance by the Committee.

 3
 

(c)           Method of Exercise
and Medium and Time of Payment.

(1)           An Option may be
exercised as to any or all whole shares of Common Stock as to which it then is
exercisable; provided, however, that no Option
may be exercised as to less than 100 shares (or such number of shares as to
which the Option is then exercisable if such number of shares is less than
100).

(2)           Each exercise of an
Option granted hereunder, whether in whole or in part, shall be effected by
written notice to the Secretary of the Company designating the number of shares
as to which the Option is being exercised, and shall be accompanied by payment
in full of the Option Price for the number of shares so designated, together
with any written statements required by, or deemed by the Company’s counsel to
be advisable pursuant to, any applicable securities laws.

(3)           The Option Price shall
be paid in cash, or in shares of Common Stock having a Fair Market Value, as of
the effective date of such exercise equal to such Option Price, or in property
or in a combination of cash, shares and property and, subject to approval of
the Committee, may be effected in whole or in part with funds received from the
Company at the time of exercise as a compensatory cash payment for services
previously rendered.

(4)           The Committee shall
have the sole and absolute discretion to determine whether or not property
other than cash or Common Stock may be used to purchase the shares of Common
Stock hereunder and, if so, to determine the value of the property received.

(5)           The Recipient shall
make provision for the withholding of taxes as required by Section 8 hereof.

(d)           Termination of
Relationship With Company.  Unless
otherwise provided in the Option agreement by and between the Company and the
Recipient, if the Recipient ceases to be a Non-Employee Director of the Company
(other than by reason of death, Disability or retirement), all Options
theretofore granted to such Recipient but not theretofore exercised shall
terminate three months following the date the Recipient ceased to be a
Non-Employee Director of the Company.

(e)           Death, Disability or
Retirement of Recipient.  Unless
otherwise provided in the Option agreement by and between the Company and the
Recipient:

(1) if a Recipient shall die: (A) while a Non-Employee
Director of the Company; or (B) within three months after the termination of
such Recipient as a Non-Employee Director; or

(2) if the Recipient’s relationship with the Company
shall terminate by reason of Disability or retirement;

 4
 

then (in both cases) all Options theretofore granted
to such Recipient (whether or not otherwise exercisable) unless earlier
terminated in accordance with their terms, may be exercised at any time within
one year after the date of death, Disability or retirement of the Recipient by
the Recipient or by the Recipient’s estate or by a person who acquired the
right to exercise such Options by bequest or inheritance.

(f)            Transferability
Restriction.

(1)           Options granted under
the Plan shall not be transferable other than by will or by the laws of descent
and distribution or pursuant to a qualified domestic relations order as defined
by the Internal Revenue Code or Title I of the Employee Retirement Income
Security Act of 1974, or the rules thereunder. 
Options may be exercised during the lifetime of the Recipient only by
the Recipient and thereafter only by Recipient’s legal representative.

(2)           Any attempted sale,
pledge, assignment, hypothecation or other transfer of an Option contrary to
the provisions hereof and/or the levy of any execution, attachment or similar
process upon an Option, shall be null and void and without force or effect and
shall result in a termination of the Option.

(3)           (A)  As a condition to the transfer of any shares
of Common Stock issued upon exercise of an Option granted under this Plan, the
Company may require (x) an opinion of counsel, reasonably satisfactory to the
Company, to the effect that such transfer will not be in violation of the U.S.
Securities Act of 1933, as amended (the “1933 Act”) or any other applicable
securities laws or (y) that transfer of such shares has been registered under
federal and all applicable state securities laws.  (B) The Company shall be authorized to
refrain from delivering or transferring shares of Common Stock issued under
this Plan until the Committee determines that such delivery or transfer will
not violate applicable securities laws and the Recipient has tendered to the
Company any federal, state or local tax owed by the Recipient as a result of
exercising the Option or disposing of any Common Stock when the Company has a
legal liability to satisfy such tax. 
(C)  The Company shall not be liable
for damages due to delay in the delivery or issuance of any stock certificate
for any reason whatsoever, including, but not limited to, a delay caused by
listing requirements of any securities exchange or any registration
requirements under the 1933 Act, the 1934 Act, or under any other state,
federal or provincial law, rule or regulation, except where such delay is due
to the Company’s failure to act in good faith. 
(D)  The Company is under no
obligation to take any action or incur any expense in order to register or
qualify the delivery or transfer of shares of Common Stock under applicable
securities laws or to perfect any exemption from such registration or
qualification.  (E) The Company will not
be liable to any Recipient for failure to deliver or transfer shares of Common
Stock if such failure is based upon the provisions of this Paragraph 7(i)(3).

 5
 

(h)           Effect of Certain
Changes

(1)           If there is any change
in the number of shares of outstanding Common Stock through the declaration of
stock dividends, or through a recapitalization resulting in stock splits or
combinations or exchanges of such shares, the number of shares of Common Stock
available for Options and the number of such shares covered by outstanding
Options, and the exercise price per share of the outstanding Options, shall be
proportionately adjusted by the Committee to reflect any increase or decrease
in the number of issued shares of Common Stock; provided,
however, that any fractional shares resulting from such adjustment
shall be eliminated.

(2)           In the event of the
proposed dissolution or liquidation of the Company, or any corporate separation
or division, including, but not limited to, split-up, split-off or spin-off, or
a merger or consolidation of the Company with another corporation, the
Committee may provide that the holder of each Option then exercisable shall
have the right to exercise such Option (at its then current Option Price)
solely for the kind and amount of shares of stock and other securities,
property, cash or any combination thereof receivable upon such dissolution,
liquidation, corporate separation or division, or merger or consolidation by a
holder of the number of shares of Common Stock for which such Option might have
been exercised immediately prior to such dissolution, liquidation, corporate
separation or division, or merger or consolidation; or, in the alternative the
Committee may provide that each Option granted under the Plan shall terminate
as of a date fixed by the Committee; provided, however,
that not less than 30 days’ written notice of the date so fixed shall be given
to each Recipient, who shall have the right, during the period of 30 days
preceding such termination, to exercise the Option as to all or any part of the
shares of Common Stock covered thereby, including shares as to which such
Option would not otherwise be exercisable.

(3)           Paragraph 2 of this
Section 7 (h) shall not apply to a merger or consolidation in which the Company
is the surviving corporation and shares of Common Stock are not converted into
or exchanged for stock, securities of any other corporation, cash or any other
thing of value.  Notwithstanding the
preceding sentence, in case of any consolidation or merger of another
corporation into the Company in which the Company is the surviving corporation
and in which there is a reclassification or change (including a change to the
right to receive cash or other property) of the shares of Common Stock
(excluding a change in par value, or from no par value to par value, or any
change as a result of a subdivision or combination, but including any change in
such shares into two or more classes or series of shares) or the holders of all
of the outstanding voting securities of the Company immediately prior to such
consolidation or merger do not constitute the holders of a majority of the
outstanding voting securities of the Company immediately following such
consolidation or merger, the Committee may provide that the holder of each
Option then exercisable shall have the right to exercise such Option solely for
the kind and amount of shares of stock and other securities (including those of
any new direct or indirect parent of the Company), property, cash or any
combination thereof receivable upon such reclassification, change,
consolidation or merger by the holder of the number of shares of Common Stock
for which such Option might have been exercised.

 6
 

(4)           In the event of a
change in the Common Stock of the Company as presently constituted into the
same number of shares with a different  par value, the
shares resulting from any such change shall be deemed to be the Common Stock of
the Company within the meaning of the Plan.

(5)           To the extent that the
foregoing adjustments relate to stock or securities of the Company, such
adjustments shall be made by the Committee, whose determination in that respect
shall, in absence of bad faith or mathematical error, be final, binding and
conclusive.

(6)           Except as expressly
provided in this Section 7(h) or the applicable Option agreement, the Recipient
shall have no rights by reason of any subdivision or consolidation of shares of
stock of any class, or the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class, or by reason of any
dissolution, liquidation, merger, or consolidation or spin-off of assets or
stock of another corporation; and any issue by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class,
shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an
Option.  The grant of an Option pursuant
to the Plan shall not affect in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structures, or to merge or consolidate, or to dissolve, liquidate,
or sell or transfer all or any part of its business or assets.

(i)            No Rights as
Shareholder - Non-Distributive Intent.

(1)           Neither a Recipient of
an Option nor such Recipient’s legal representative or heir shall be deemed to
be the holder of, or to have any rights of a holder with respect to, any shares
subject to such Option until after the Option is exercised and the shares are
issued.

(2)           No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Section 8(i) hereof.

(3)           Upon exercise of an
Option at a time when there is no registration statement in effect under the
1933 Act relating to the shares issuable upon exercise, shares may be issued to
the Recipient only if the Recipient represents and warrants in writing to the
Company that the shares purchased are being acquired for investment and not
with a view to the distribution thereof and provides the Company with
sufficient information to establish an exemption from the registration
requirements of the 1933 Act.  A form of
subscription agreement containing representations and warranties deemed
sufficient as of the date of adoption of this Plan is attached hereto as Exhibit
B.

 7
 

(4)           No shares shall be
issued upon the exercise of an Option unless and until there shall have been
compliance with any then applicable requirements of the U.S. Securities and
Exchange Commission or any other regulatory agencies having jurisdiction over
the Company.

(j)            Other Provisions.  Option agreements authorized under the Plan
may contain such other provisions, including, without limitation, the
imposition of restrictions upon the exercise.

8.             Agreement by
Recipient Regarding Taxes.

(a)           By accepting an Option,
each Recipient agrees that the Company, to the extent permitted or required by
law, shall have the right to deduct a sufficient number of shares due to the
Recipient upon exercise of the Option to allow the Company to pay federal,
provincial, state and local taxes of any kind required by law to be withheld
upon the exercise of such Option from any payment of any kind otherwise due to
the Recipient.  The Company shall not be
obligated to advise any Recipient of the existence of any tax or the amount
which the Company will be so required to withhold.

(b)           By accepting an Option,
each Recipient acknowledges that the Company has advised such Recipient to
discuss the grant of such Option with Recipient’s tax, legal, investment, and
other advisors as Recipient and such advisors determine to be appropriate, and
that such consultation shall include (to the extent determined by the Recipient
and such advisors to be appropriate or necessary) a discussion of the
advisability of making an election under Section 83 of the Internal Revenue
Code.

(c)           In connection with any
Option, the Company may require Recipient to affirm as correct the matters set
forth in Sections 8(a) and 8(b).

9.             Term of Plan.  Options may be granted under this Plan from
time to time within a period of ten years from the date the Plan is adopted by
the Board.

10.           Amendment and
Termination of the Plan.

(a)           Subject to the
policies, rules and regulations of any lawful authority having jurisdiction
(including any exchange with which the shares of the Company are listed for
trading), the Board may at any time, without further action by the
shareholders, amend the Plan or any Option granted hereunder in such respects
as it may consider advisable and, without limiting the generality of the
foregoing, it may do so to ensure that Options granted hereunder will comply
with any provisions respecting stock options in the income tax and other laws
in force in any country or jurisdiction of which any Option holders may from
time to time be a resident or citizen, or it may at any time without action by
shareholders terminate the Plan; provided, however,
that any amendment that would require shareholder approval under applicable
state law, the rules and regulations of any national securities exchange on
which the Company’s securities then may be listed, the Internal Revenue Code or
any other applicable law, shall be subject to the approval of the 

 8
 

shareholders of
the Company as provided in Section 11 hereof; further,
provided, however, that any such modification that may result from
adjustments authorized by Section 9(i) hereof or which are required for
compliance with the 1934 Act, the Internal Revenue Code, their rules or other
laws or judicial order, shall not require such approval of the shareholders.

(b)           Except as provided in
Section 7 hereof, no suspension, termination, modification or amendment of the
Plan may adversely affect any Option previously granted, unless the written
consent of the Recipient is obtained.

11.           Approval of
Shareholders.  The Plan shall take
effect upon its adoption by the Board but shall be subject to approval at a
duly called and held meeting of stockholders in conformance with the vote
required by the Company’s governing documents, resolution of the Board, any
other applicable law and the rules and regulations thereunder, or the rules and
regulations of any national securities exchange upon which the Company’s Common
Stock is listed and traded, each to the extent applicable.  To the extent that any Options have been
granted and the shareholders do not approve this Plan on or before the first
anniversary of the date of the Plan’s adoption by the Board, such Options shall
be deemed void ab initio.

12.           Termination of Right
of Action.  Every right of action
arising out of or in connection with the Plan by or on behalf of the Company,
or by any shareholder of the Company against any past, present or future member
of the Board, or against any employee, or by an employee (past, present or
future) against the Company will, irrespective of the place where an action may
be brought and irrespective of the place of residence of any such shareholder,
director or employee, cease and be barred by the expiration of three years from
the date of the act or omission in respect of which such right of action is
alleged to have risen.

13.           Tax Litigation.  The Company shall have the right, but not the
obligation, to contest, at its expense, any tax ruling or decision, administrative
or judicial, on any issue which is related to the Plan and which the Board
believes to be important to holders of Options and Bonuses issued under the
Plan and to conduct any such contest or any litigation arising therefrom to a
final decision.

14.           Adoption.   This Plan was approved by resolution of the
Compensation Committee of the Company on                         
and by the Board of Directors of the Company on July 19, 2007, with the
adoption of the Plan contingent on obtaining shareholder approval of the Plan
at the next meeting of shareholders of the Company.

[End of Plan]

 9
 

Exhibit A

FORM OF STOCK
OPTION AGREEMENT

STOCK OPTION
AGREEMENT

STOCK OPTION AGREEMENT
made as of this          day of                 ,             ,
by and between Isonics Corporation, a California corporation (the “Company”),
and                    
                               
(the “Recipient”).

In accordance with the
Company’s 2007 Non-Employee Director Stock Option Plan (the “Plan”), the
provisions of which are incorporated herein by reference, the Company desires,
in connection with the services of the Recipient, to provide the Recipient with
an opportunity to acquire shares of the Company’s no par value common stock (“Common
Stock”) on favorable terms and thereby increase the Recipient’s proprietary
interest in the Company and incentive to put forth maximum efforts for the
success of the business of the Company. 
Capitalized terms used but not defined herein are used as defined in the
Plan.

NOW, THEREFORE, in
consideration of the premises and mutual covenants herein set forth and other
good and valuable consideration, the Company and the Recipient agree as
follows:

1.             Confirmation of
Grant of Option.  Pursuant to a
determination of the Committee or, in the absence of a Committee, by the Board
of Directors of the Company made on                  ,
                 
(the “Date of Grant”), the Company, subject to the terms of the Plan and of
this Agreement, confirms that the Recipient has been irrevocably granted on the
Date of Grant, as a matter of separate inducement and agreement, and in
addition to and not in lieu of salary or other compensation for services, a
Stock Option (the “Option”) exercisable to purchase                    shares
of Common Stock on the terms and conditions herein set forth, subject to
adjustment as provided in Paragraph 8 hereof.

2.             Option Price.  The Option Price of shares of Common Stock
covered by the Option will be $              
per share (the “Option Price”) subject to adjustment as provided in Paragraph 8
hereof.

3.             Vesting and
Exercise of Option.

a.             The Option shall vest
and become exercisable immediately upon acceptance by the Optionee executing
the signature page to this Stock Option Agreement and returning it to the
Company (which must occur no later than                         ).

 10
 

b.             The Option may not be
exercised at any one time as to fewer than 100 shares (or such number of shares
as to which the Option is then exercisable if such number of shares is less
than 100).

c.             The Option may be
exercised by written notice to the Secretary of the Company accompanied by
payment in full of the Option Price as provided in Section 7 of the Plan.

4.             Term of Option.  The term of the Option for a period of five
years from the Date of Grant, subject to earlier termination or cancellation as
provided in this Agreement or in the Plan. 
The holder of the Option will not have any rights to dividends or any
other rights of a shareholder with respect to any shares of Common Stock
subject to the Option until such shares shall have been issued (as evidenced by
the appropriate transfer agent of the Company) upon purchase of such shares
through exercise of the Option.

5.             Transferability
Restriction.  The Option may not be
assigned, transferred or otherwise disposed of, or pledged or hypothecated in
any way (whether by operation of law or otherwise) except in strict compliance
with Section 9 of the Plan.  Any
assignment, transfer, pledge, hypothecation or other disposition of the Option
or any attempt to make any levy of execution, attachment or other process will
cause the Option to terminate immediately upon the happening of any such event;
provided, however, that any such
termination of the Option under the provisions of this Paragraph 5 will not
prejudice any rights or remedies which the Company may have under this
Agreement or otherwise.

6.             Exercise Upon
Termination.  The Recipient’s rights
to exercise this Option upon ceasing to be a Non-Employee Director of the
Company shall be as set forth in Section 9(f) of the Plan.

7.             Death, Disability
or Retirement of Recipient.  The
exercisability of this Option upon the death, Disability or retirement of the
Recipient shall be as set forth in Section 9(g) of the Plan.

8.             Adjustments.  The Option shall be subject to adjustment
upon the occurrence of certain events as set forth in Section 9(i) of the Plan.

9.             No Registration
Obligation.  The Recipient
understands that the Option is not registered under the 1933 Act and, unless by
separate written agreement, the Company has no obligation to so register the
Option or any of the shares of Common Stock subject to and issuable upon the
exercise of the Option, although it may from time to time register under the
1933 Act the shares issuable upon exercise of Options granted pursuant to the
Plan.  The Recipient represents that the
Option is being acquired for the Recipient’s own account and that unless
registered by the Company, the shares of Common Stock issued on exercise of the
Option will be acquired by the Recipient for investment.  The Recipient understands that the Option is,
and the underlying securities may be, issued to the Recipient in reliance upon
exemptions from the 1933 Act, and acknowledges and agrees that all certificates
for the shares issued upon exercise of the 

 11
 

Option may bear the following legend unless such
shares are registered under the 1933 Act prior to their issuance:

The shares represented by this
Certificate have not been registered under the Securities Act of 1933 (the “1933
Act”), and are “restricted securities” as that term is defined in Rule 144
under the 1933 Act.  The shares may not
be offered for sale, sold or otherwise transferred except pursuant to an
effective registration statement under the 1933 Act or pursuant to an exemption
from registration under the 1933 Act, the availability of which is to be
established to the satisfaction of the Company.

The Recipient further
understands and agrees that the Option may be exercised only if at the time of
such exercise the underlying shares are registered and/or the Recipient and the
Company are able to establish the existence of an exemption from registra­tion
under the 1933 Act and applicable state or other laws.

10.           Notices.  Each notice relating to this Agreement will
be in writing and delivered in person or by certified mail to the proper
address.  Notices to the Company shall be
addressed to the Company, attention: 
President, at 5906 McIntyre Street, Golden, CO 80403, or at such other
address as may constitute the Company’s principal place of business at the
time, with a copy to: Burns, Figa & Will, P.C., Suite 1000, 6400 South
Fiddler’s Green Circle, Greenwood Village, CO 80111; attn: Herrick K. Lidstone,
Jr., Esq.  Notices to the Recipient or
other person or persons then entitled to exercise the Option shall be addressed
to the Recipient or such other person or persons at the Recipient’s address
below specified.  Anyone to whom a notice
may be given under this Agreement may designate a new address by notice to that
effect given pursuant to this Paragraph 10.

11.           Approval of Counsel.  The exercise of the Option and the issuance
and delivery of shares of Common Stock pursuant thereto shall be subject to the
reasonable approval by the Company’s counsel of all legal matters in connection
therewith, including compliance with the registration and reporting
requirements of the 1933 Act, the Securities Exchange Act of 1934, as amended,
applicable state and other securities laws, the rules and regulations
thereunder, and the requirements of any national securities exchange(s) upon
which the Common Stock then may be listed.

12.           Benefits of
Agreement.  This Agreement will inure
to the benefit of and be binding upon each successor and assignee of the
Company.  All obligations imposed upon
the Recipient and all rights granted to the Company under this Agreement will
be binding upon the Recipient’s heirs, legal representatives and successors.

13.           Effect of
Governmental and Other Regulations. 
The exercise of the Option and the Company’s obligation to sell and
deliver shares upon the exercise of the Option are subject to all applicable
federal and state laws, rules and regulations, and to such approvals by any 

 12
 

regulatory or governmental agency which may, in the
opinion of counsel for the Company, be required.

14.           Plan Governs.  In the event that any provision in this
Agreement conflicts with a provision in the Plan, the provision of the Plan
shall govern.

Executed in the name and
on behalf of the Company by one of its duly authorized officers and by the
Recipient all as of the date first above written.

	
  

  	
   

  	
  ISONICS CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date                                ,                

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					

 

The undersigned Recipient
has read and understands the terms of this Option Agreement and the attached
Plan and hereby agrees to comply therewith.

	
  Date                                ,                

  	
   

  
	
   

  	
  Signature of
  Recipient

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID Number:                                                                        

  
	
   

  	
   

  
	
   

  	
  Address:                                                                                    

  
	
   

  	
   

  
	
   

  	
                                                                                                     

  

 

 13

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