Document:

Exhibit 10.3

 

IRREVOCABLE TRANSFER AGENT INSTRUCTIONS

 

May 30, 2006

 

 

Continental Stock Transfer & Trust Company

17 Battery Place 8th Floor

New York, NY 10004

Attention: William Seegraber

 

RE:                            ISONICS
CORPORATION

 

Ladies and Gentlemen:

 

Reference is
made to that certain Securities Purchase Agreement (the “Securities Purchase
Agreement”) of even date herewith by and between Isonics Corporation, a
California corporation (the “Company”),
and the Buyers set forth on Schedule I attached thereto (collectively
the “Buyers”). Pursuant to the Securities Purchase Agreement, the
Company (and subject to the terms and conditions of the Securities Purchase
Agreement) have sold to the Buyers, and the Buyers have purchased from the
Company, convertible debentures (collectively, the “Debentures”) in the
aggregate principal amount of Sixteen 
Million Dollars ($16,000,000), plus accrued interest, which are
convertible into shares of the Company’s common stock, no par value per share
(the “Common Stock”) in accordance with the terms of the Debentures. The
Company has also issued to the Buyer three (3) warrants to purchase an
aggregate of up to 8,000,000 shares of Common Stock, at the Buyer’s discretion
(the “Warrant”).

 

These
instructions relate to stock issuances or transfers of not more than a total of
6,075,785 (being 8,735,785 less 660,000 Buyer’s Shares, as defined in the
Securities Purchase Agreement and 2,000,000 Warrant Shares) shares of the
Company’s Common Stock unless and until after the Company’s shareholders
approve the issuance of a greater number of shares of Common Stock as
contemplated in Section 4(l) and has increased the Company’s authorized
capitalization as contemplated in Section 4(m) of the Securities Purchase
Agreement thereafter up to:

 

1.                                       64,000,000
shares of Common Stock to be issued to the Buyers upon conversion of the
Debentures (“Conversion Shares”).

 

2.                                       Shares
of Common Stock to be issued to the Buyers upon conversion of accrued interest
and liquidated damages into Common Stock if the Company has elected

 

 

to pay such
accrued interest under the Convertible Debentures (“Interest”) and/or
liquidated damages under the Investor’s Registration Rights Agreement dated the
date hereof by and between the Company and the Buyer (“Liquidated Damages”)
in shares of the Company’s Common Stock as calculated in the Convertible
Debenture and the Investor’s Registration Rights Agreement, respectively (the “Interest
Shares” and the “Liquidated Damages Shares”).

 

3.                                       Up
to 8,000,000 shares of Common Stock to be issued to the Buyers upon exercise of
the Warrant (the “Warrant Shares”) in accordance with the terms of the
Warrants.

 

This letter shall serve as our irrevocable
authorization and direction to Continental Stock Transfer and Trust Company
(the “Transfer Agent”) to do the following (provided that you are acting
as Transfer Agent of the Company at such time):

 

1.               Delivery of Conversion Notice or Exercise Notice and
Exercise Price.

 

a.               Delivery of Conversion Notice. In all
cases where the Buyer intends to convert a portion or all of the principal
amount of the Debentures, the Buyer must deliver to the Company via facsimile
or electronic mail to the Company a properly completed and duly executed
Conversion Notice (the “Conversion Notice”) in the form attached as
Exhibit A to the Debentures.

 

b.              Delivery of an Exercise Notice and Exercise Price.
In all cases where the Buyer intends to exercise a portion or all of the
Warrants, the Buyer must deliver to the Company via facsimile or electronic
mail to the Company a properly completed and duly executed Exercise Notice (the
“Exercise Notice”) in the form attached as Exhibit A to the
Warrants as well the Exercise Price for the Warrants being exercised, if being
exercised on a cash basis, via wire transfer of good and immediately available
funds to such instructions provided by the Company.

 

c.               In the event that
counsel to the Company fails or refuses to render an opinion as required to
issue the Conversion Shares, the Warrant Shares, the Liquidated Damages (if
elected by the Company to be paid in Common Stock), or the Interest Shares (if
elected by the Company to be paid in Common Stock of the Company) (either with
or without restrictive legends, as applicable), then the Company irrevocably
and expressly authorizes David Gonzalez, Esq. as counsel to the Buyer, or
such other counsel to the Buyer chosen by the Buyer and designated by the Buyer
in writing to the Transfer Agent with a copy to the Company, to render such
opinion. The Transfer Agent shall accept and be entitled to rely on such
opinion for the purposes of issuing the Conversion Shares, the Warrant Shares,
the Liquidated Damages, or the Interest Shares.

 

2.               Conversions, Warrant Exercises, and Issuance of Liquidated Damages
Shares or Interest Shares at the Instruction of the Company. The Transfer Agent shall deliver

 

2

 

Conversion Shares, Warrant Shares, Liquidated Damages
Shares or Interest Shares (if the
Company has elected to make such payments by the issuance of Shares of the
Company’s Common Stock) (as the case may be) in accordance with the
instructions given to it by the Company. Since the Transfer Agent participates in
The Depository Trust Company (“DTC”) Fast Automated Securities Transfer
Program, the Transfer Agent shall credit the Conversion Shares, the Warrant
Shares, Liquidated Damages Shares or Interest Shares to the Buyer’s or their
designees’ balance account with DTC through its Deposit Withdrawal At
Custodian (“DWAC”) system provided that the Company is an eligible
security and further provided that the Buyer causes its bank or broker to
initiate the DWAC transaction, unless the Conversion Shares,  the Warrant Shares Liquidated Damages Shares
or Interest Shares to be issued are in physical stock certificate form or
restricted securities’ as that term is defined in Rule 144. When
delivering physical stock certificates or restricted securities, the Transfer
Agent shall issue and deliver via common carrier of overnight delivery to the
address as specified in the Conversion Notice or the Exercise Notice (as the
case may be) a certificate registered in the name of the Buyer or its
designees for the Conversion Shares, the Warrant Shares, Liquidated Damages
Shares or Interest Shares (as the case may be) and if “restricted securities”
shall impose its normal legend on such certificate.

 

3.               Failure to Deliver. If the Buyer has failed to receive the
Conversion Shares, the Warrant Shares, Liquidated Damages Shares or Interest
Shares within three (3) Trading Days of delivery of a Conversion Notice or
Exercise Notice (as the case may be) as required by the Warrants or the
Debentures or within three (3) Trading Days of the Company’s notification
to the Buyer of its election to pay Liquidated Damages and/or Interest in
shares of the Company’s Common Stock or failure to receive notification from
the Company of its election to pay Liquidated Damages or Interest in cash or
shares of the Company’s Common Stock within three (3) Trading Days of such
Liquidated Damages or Interest being due (a “Failure to Timely Deliver”),
the Buyer may provide written notification to the Company and to the
Transfer Agent describing such failure (“Notice of Failure to Timely Deliver”)
as set forth in Exhibit A attached hereto. Upon such notification, the Company
irrevocably appoints David Gonzalez as its agent to instruct the Transfer Agent
for all pending and future deliveries of Conversion Notices, Exercises Notices,
issuances of Liquidated Damages Shares and/or Interest Shares.

 

The Notice of
Failure to Timely Deliver and must set forth at least the following:

 

a.               A certification
that the Buyer delivered the Conversion Notice or the Exercise Notice and
Exercise Price to the Company as contemplated in paragraph 1, above and/or that
the Company has elected to pay Liquidated Damages and/or Interest in shares of
the Company’s Common Stock or has failed to advise the Buyer of its election to
pay Liquidated Damages and/or Interest in cash or shares of the Company’s
Common Stock within three (3) Trading Days of such Liquidated Damages or
Interest being due.

 

3

 

b.              The circumstances
surrounding the Failure to Timely Deliver, including the date that the Buyer
delivered the Conversion Notice to the Company (or in the case of a Warrant,
the Exercise Notice and full payment for the Warrant Shares if exercised on a
cash-basis), the date the Company notified or failed to notify the Buyer, the
Buyer of its election to pay Liquidated Damages and/or Interest in shares of
the Company’s Common Stock or and a statement that all of the requirements of
the Debenture (as to a Conversion Notice) or the Warrant (as to an Exercise
Notice) or the payment of Liquidated Damages, or Interest were met,;

 

c.               The date by which
delivery was to have been made in accordance with the terms of the Debenture,
the Investor’s Registration Rights Agreement or the Warrant or the election of
the Company to pay Liquidated Damages or Interest in shares of the Company’s
Common Stock;

 

d.              A certification that
the Conversion Shares, Warrant Shares, Liquidated Damages Shares, or Interest
Shares have not been delivered to the Buyer;

 

e.               A certification
that the Buyer has sent a copy of the Notice of Failure to Timely Deliver to
the Company; and

 

f.                 And be duly executed
by the Buyer’s whose signature shall be notarized.

 

The Transfer
Agent is entitled to rely on the Notice of Failure to Timely Deliver from the
Buyer.

 

4.              Already Delivered
Conversion Notices, Exercises Notices or Elections to Pay Liquidated Damages or
Interest in Shares of the Company’s Common Stock. If the Transfer Agent
receives a Notice of Failure to Deliver for a Conversion Notice or Exercise
Notice that has been delivered to the Company (with full payment of, in the
case of an Exercise Notice on a cash basis), Liquidated Damages Shares or
Interest Shares where the Company has elected to pay Liquidated Damages Shares
or Interest Shares, the Buyer, through David Gonzalez, shall be entitled to
instruct the Transfer Agent to process such Conversion Notice or Exercise
Notice, issue the Liquidated Damages Shares or the Interest Shares, in
accordance with the terms of these instructions, with regard to the relevant
Conversion Notice or Exercise Notice to deliver the Conversion Shares or
Warrant Shares or Liquidated Damages Shares or Interest Shares as set forth in
the Notice of Failure to Timely Deliver within two (2) Trading Days of
such notification from the Buyer. For purposes hereof “Trading Day” shall mean any day on which the Nasdaq
Stock Market is open for customary trading.

 

5.               Future Conversion Notices and/or Exercise Notices or Issuances of
Liquidated Damages Shares or Interest Shares (if elected by the Company).
All such Conversion Notices and/or Exercise Notices or requests for issuances
of Liquidated Damages Shares of Interest Shares following the date that the
Transfer Agent has received a Notice of Failure to Timely Deliver shall be
delivered by David Gonzalez

 

4

 

to the
Transfer Agent and the Company, via facsimile or electronic mail or any
commercially reasonable method, along with an opinion of counsel either from
David Gonzalez, Esq. or such other Buyer’s counsel as may be
designated by the Buyer in writing to the Transfer Agent with a copy to the
Company if applicable, (“Instructions and Opinion”) regarding either the
availability of an exemption from registration for the Conversion Shares,
Warrant Shares, Liquidated Damages Shares or Interest Shares to be delivered,
whether the Conversion Shares, Warrant Shares, the Liquidated Damages Shares or
Interest Shares to be issued should bear a restrictive legend, and that the
issuance of the Conversion Shares, Liquidated Damages Shares, Interest Shares,
or the Warrant Shares is in accordance with the terms of the Debentures or the
Warrants, as appropriate. No later than on the sixth (6th) Trading
Day following the Transfer Agent’s receipt of the Instructions and Opinion (or,
if later, the sixth (6th) Trading Day following the date that Mr. Gonzalez
has sent a copy of the Instructions and Opinion to the Company), the Transfer
Agent shall (i) issue and deliver the Conversion Shares, the Warrant
Shares, Liquidated Damages Shares or Interest Shares (as applicable) as
specified in the Instructions and Opinion. The Transfer Agent shall deliver Conversion Shares, the Liquidated
Damages Shares, Interest Shares or Warrant Shares (as the case may be) in
accordance with the instructions given to it in the Instructions. Since the
Transfer Agent participates in The Depository Trust Company (“DTC”)
Fast Automated Securities Transfer Program, the Transfer Agent shall credit the
Conversion Shares, Liquidated Damages Shares, Interest Shares or the Warrant
Shares to the Buyer’s or their designees’ balance account with DTC through its
Deposit Withdrawal At Custodian (“DWAC”) system provided the Buyer
causes its bank or broker to initiate the DWAC transaction, unless the
Conversion Shares or the Warrant Shares to be issued are ‘restricted securities’
as that term is defined in Rule 144. When delivering restricted
securities, the Transfer Agent shall issue and deliver via common carrier of
overnight delivery to the address as specified in the Conversion Notice or the
Exercise Notice (as the case may be) a certificate registered in the name
of the Buyer or its designees for the Conversion Shares or the Warrant Shares
(as the case may be) and shall impose its normal legend on such
certificate.

 

The Company
hereby irrevocably and expressly authorizes David Gonzalez, Esq. as
counsel to the Buyer, or such other counsel to the Buyer chosen by the Buyer,
to render such Instructions and Opinion and the Transfer Agent shall accept and
be entitled to rely on such Instructions and Opinion for the purposes of
issuing the Conversion Shares, Liquidated Damages Shares, Interest Shares and
Warrant Shares.

 

Any Conversion
Notice, Exercise Notice or instruction to issue Liquidated Damages Shares or
Interest Shares delivered hereunder shall constitute an irrevocable instruction
to the Transfer Agent to process such notice or notices in accordance with the
terms thereof.

 

6.               All Shares.

 

a.               The Transfer Agent
shall reserve for issuance to the Buyers a minimum of 6,075,785 Conversion
Shares, 660,000 Buyer Shares (as defined in the

 

5

 

Securities
Purchase Agreement, and 2,000,000 Warrant Shares. Following the increase of the
authorized shares of the Company’s Common Stock to at least 175,000,000 shares
of Common Stock and approval by the shareholders of the issuance of shares of
the Company’s Common Stock in excess of 19.99% of the Company’s outstanding
shares of Common Stock upon conversion of the Debentures and exercise of the
Warrants (to be authorized by the shareholders of the Company no later than October 31,
2006), the Transfer Agent shall, upon direction by the Company, reserve for
issuance to the Buyers a minimum of 64,000,000 Conversion Shares and 8,000,000
Warrant Shares. All such shares shall remain in reserve with the Transfer Agent
until the Company and the Buyers provides the Transfer Agent instructions that
the shares or any part of them shall be taken out of reserve and shall no
longer be subject to the terms of these instructions.

 

b.              The Company hereby
confirms to the Transfer Agent and the Buyers that no instructions other than
as contemplated herein will be given to Transfer Agent by the Company with
respect to the matters referenced herein. The Company hereby authorizes the
Transfer Agent, and the Transfer Agent shall be obligated, to disregard any
contrary instructions received by or on behalf of the Company.

 

The Company
hereby confirm to the Transfer Agent and the Buyers that certificates
representing the Conversion Shares and Warrant Shares shall not bear any legend
restricting transfer and should not be subject to any stop-transfer
restrictions and shall otherwise be freely transferable on the books and
records of the Company; provided that
such shares are registered pursuant to an effective Registration Statement and
counsel to the Company has delivered a notice of effectiveness and opinion of
effectiveness to the Transfer Agent. Should the Conversion Shares, Warrant
Shares, Liquidated Damages Shares, Interest SAhres not be registered or
otherwise “restricted securities” Counsel to the Company will provide an
opinion to the Transfer Agent that the issuance is an exempt transaction under
the Securities Act of 1933, as amended. In the event that Counsel to the
Company fails or refuses to deliver a notice of effectiveness, opinion of
effectiveness, or opinion as to the exemption of transaction under the
Securities Act of 1933, as amended, the Company irrevocably and expressly
authorizes David Gonzalez as counsel to the Buyer, or such other counsel as may be
designated by the Buyer in writing to the Transfer Agent with a copy to the
Company, to deliver and the Transfer Agent shall accept and be authorized to
rely on such notice of effectiveness, 
opinion of effectiveness, or  such
opinion of exemption delivered by David Gonzalez or such other counsel.

 

The Company
hereby agrees that it shall not replace the Transfer Agent as the Company’s
transfer agent without the prior written consent of the Buyers.

 

In the event
that the Transfer Agent resigns as transfer agent to the Company, the Company
shall use its best efforts to obtain a suitable replacement transfer agent,
within thirty (30) calendar days of the Transfer Agent’s resignation, which
agent shall have agreed to serve as transfer agent and to be bound by the terms
and conditions of these Transfer Agent Instructions within the Notice Period
referenced above. The Company’s obligation to obtain a suitable replacement
transfer agent shall not affect the Transfer Agent’s  ability to resign

 

6

 

The Company
hereby acknowledges and confirms that complying with the terms of this
Agreement does not and shall not prohibit the Transfer Agent from satisfying
any and all fiduciary responsibilities and duties it may owe to the
Company.

 

The Company
acknowledges that the Buyers is relying on the representations and covenants
made by the Company hereunder and are a material inducement to the Buyers
purchasing convertible debentures under the Securities Purchase Agreement. The
Company further acknowledges that without such representations and covenants of
the Company made hereunder, the Buyers would not purchase the Debentures.

 

Each party
hereto specifically acknowledges and agrees that in the event of a breach or
threatened breach by a party hereto of any provision hereof, the Buyers will be
irreparably damaged and that damages at law would be an inadequate remedy if
these Irrevocable Transfer Agent Instructions were not specifically enforced. Therefore,
in the event of a breach or threatened breach by a party hereto, including,
without limitation, the attempted termination of the agency relationship
created by this instrument, the Buyers shall be entitled, in addition to all
other rights or remedies, to an injunction restraining such breach, without
being required to show any actual damage or to post any bond or other security,
and/or to a decree for specific performance of the provisions of these
Irrevocable Transfer Agent Instructions.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

7

 

IN
WITNESS WHEREOF, the parties have caused this letter
agreement regarding Irrevocable Transfer Agent Instructions to be duly executed
and delivered as of the date first written above.

 

	
   

  	
   

  	
  COMPANY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ISONICS CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  James E. Alexander

  
	
   

  	
   

  	
  Title:

  	
  President & Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  David Gonzalez, Esq.

  
	
   

  	
   

  	
   

  
	
  Continental Stock Transfer and Trust
  Company

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  William Seegraber

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
   

  
									

 

8

 

SCHEDULE I

 

SCHEDULE OF
BUYERS 

 

	
  Name

  	
   

  	
  Signature

  	
   

  	
  Address/Facsimile

  Number of Buyers

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cornell Capital Partners, LP

  	
   

  	
  By:

  	
  Yorkville Advisors, LLC

  	
   

  	
  101 Hudson Street – Suite 3700

  
	
   

  	
   

  	
  Its:

  	
  General Partner

  	
   

  	
  Jersey City, NJ 07303

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Facsimile:       (201) 985-8266

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Mark Angelo

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Portfolio Manager

  	
   

  	
   

  
							

 

I-1

 

EXHIBIT A

 

Notice of Failure to Timely Deliver

 

Continental Stock Transfer and Trust Company

17 Battery Place 8th Floor

New York, NY 10004

Attention: William Seegraber

 

Dear Mr. Seegraber,

 

Please accept this notification of Cornell’s Notice of Failure to
Timely Deliver pursuant to the Irrevocable Transfer Agent Instructions dated May     ,
2006 (the “Irrevocable transfer Agent Instructions”).

 

Pursuant to the Irrevocable Transfer Agent Instructions we the Buyer
delivered [the Conversion Notice or the Exercise Notice and Exercise Price] to
the Company as contemplated Irrevocable Transfer Agent Instructions or [the
Company elected to pay Liquidated Damages and/or outstanding and accrued
interest in shares of the Company’s Common Stock or has failed to advise the
Buyer of its election to pay Liquidated Damages and/or Interest in cash or
shares of the Company’s Common Stock by             
which is three (3) Trading Days from the date such Liquidated Damages or
Interest was due and owed].

 

We delivered the Conversion Notice to the Company (or in the case of a
Warrant, the Exercise Notice and full payment for the Warrant Shares if
exercised on a cash-basis), on                 .

 

[The Company notified or failed to notify the Buyer, the Buyer of its
election to pay Liquidated Damages and/or Interest in shares of the Company’s
Common Stock by                 .
]

 

We certify that all of the requirements of the Debenture and/or the
Warrant (as to an Exercise Notice) or the payment of Liquidated Damages, or
Interest have been were met.

 

The [Conversion Shares, Liquidated Damages Shares, Interest Shares or
the Warrant Shares  were due to be
delivered by                     .

 

The Company has failed to elect to pay Liquidated Damages or Interest
in shares of the Company’s Common Stock by                        ;

 

A certification that the Conversion Shares, Warrant Shares, Liquidated
Damages Shares, or Interest Shares have not been delivered to the Buyer;

 

Therefore we irrevocably direct you to deliver the [Conversion Shares,
Liquidated Damages Shares, Interest Shares, Warrant Shares] to us via
[Depository Trust Company (“DTC”) Fast

 

 

Automated Securities Transfer Program, the Transfer Agent to the our
balance account with DTC through its Deposit Withdrawal At Custodian (“DWAC”)
or issue and deliver via common carrier of overnight delivery to the address as
specified in the Conversion Notice or the Exercise Notice (as the case may be)
a certificate along with restrictive legends registered in the name of the
Buyer or its designees for the Conversion Shares, Liquidated Damages Shares,
Interest Shares  or the Warrant Shares
(as the case may be).

 

We are hereby simultaneously delivering this Notice of Failure to
Timely Deliver to the Company.

 

	
   

  	
  CORNELL CAPITAL PARTNERS, LP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Yorkville Advisors, LLC

  
	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Mark Angelo

  
	
   

  	
  Title:

  	
  Portfolio Manager

  
	
   

  	
   

  	
   

  
	
  State of New Jersey

  	
   

  	
   

  
	
  County of Hudson

  	
   

  
	
   

  	
   

  
	
  On this      day
  of                     ,
  2006 appeared before me

  	
   

  
	
                           who
  is personally known to me and executed the foregoing document.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:Exhibit 10.4

 

IRREVOCABLE VOTING PROXY 

 

THIS VOTING AGREEMENT (the “Agreement”) as of May 30, 2006 is
made by and among Cornell Capital Partners, LP (“Cornell”) and the other
persons or entities named on signature pages hereto (individually as “Shareholder”
and collectively as the “Shareholders” and with the Cornell, the “Parties”).

 

RECITALS

 

WHEREAS, the
Shareholders are shareholders of Isonics Company, a California Company (the “Company”)
as well as holding the position of president, senior vice president, vice
president and chief financial officer;

 

WHEREAS, as
additional consideration to Cornell for entering into the Securities Purchase
Agreement dated May 30, 2006 and the transaction documents related thereto with
the Company, the Shareholders desire to enter into this Agreement for the
purpose of granting an irrevocable proxy to exercise certain voting rights of
shares of stock of the Company at the shareholder’s meeting to be held no later
than October 31, 2006.

 

NOW, THEREFORE, in
consideration of the foregoing and the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:

 

ARTICLE I

SHARES SUBJECT TO AGREEMENT

 

1.1           Shares Subject to
Agreement.  The shares subject to the irrevocable proxy
provided in Section 2 are such shares of common stock of the Company (the “Shares”)
that are:

 

(a)          As of the date hereof, held in the names of the
Shareholders in the amounts set forth opposite each Shareholder’s name on
Schedule 1 attached hereto;

 

(b)         Any future
issuance of voting shares of Capital Stock of the Company to the Shareholders, provided however, that this Agreement is in effect at the
time of such issuance.

 

1.2           Adjustment of Shares.  In the event that the number of outstanding
shares of common stock is increased by a stock dividend, stock split, or
similar recapitalization of the Company, any additional shares issued to either
Shareholder shall be deemed Shares within the meaning of this Agreement.  

 

1

 

ARTICLE
II

GRANT
OF PROXY

 

2.1           Grant of Proxy.  Upon the execution of this Agreement and
Exhibit A hereto, the shareholders grant to David Gonzalez their Proxy to vote
for the matters described in Sections 4(l) and 4(m) of the Securities Purchase
Agreement at the meeting of the Company’s Shareholders to be held on or before
October 31, 2006.

 

2.2           Revocation of Prior
Proxies.  The Shareholders hereby revoke and cancel any
and all proxies in respect of the Shares existing prior to the date of this
Agreement.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS

 

Each Shareholder represents and warrants to
Cornell and the other Shareholders, the following:

 

3.1           Requisite
Power and Authority.  Shareholder has all
the necessary power and authority under all applicable provisions of law to
execute and deliver this Agreement and to carry out its provisions. All action
on Shareholder’s part required for the lawful execution and delivery of this
Agreement has been taken.  Upon execution
and delivery, this Agreement will be valid and binding obligation of
Shareholder, enforceable in accordance with their terms, except (a) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application affecting enforcement of creditors’ rights, and (b)
general principles of equity that restrict the availability of equitable
remedies.

 

3.2           Ownership of Shares.  Each Shareholder is the beneficial owner of
the Shares specified in Schedule 1 hereto opposite his name and that he does
not own directly or indirectly, any other shares of common stock of the Company
as of the date hereof.  There are no
outstanding subscriptions, options, warrants, rights, calls, commitments,
conversion rights, rights of exchange, plans or other agreements providing for
the purchase, issuance or sale of the voting shares, other than as contemplated
by this Agreement.

 

ARTICLE IV

TERMINATION OF AGREEMENT

 

4.1           Termination.  This Agreement shall terminate upon casting
of all of the proxy votes as contemplated by Section 2.1 above.

 

ARTICLE V

MISCELLANEOUS

 

5.1           Governing Law/Venue. This Agreement
shall be deemed to be made in, governed by, interpreted under and construed in
all respects in accordance with the laws of the State of California ,
irrespective of the place of domicile or residence of any Party, and without
giving effect to any

 

2

 

choice or conflict of laws provision or rule (whether of the State of
California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California.  In the event of controversy arising out of
the interpretation, construction, performance or breach of this Agreement, the
Parties hereby agree and consent to the jurisdiction and venue of the Superior
Court of Los Angeles Cointy or the United States District Court of for Central
District of California.

 

5.2           Remedies.  The Parties shall have all the remedies
available to them for breach of this Agreement by law or in equity.  The Parties further agree that in addition to
all other remedies available at law or in equity, the Parties will be entitled
to specific performance of the obligations of each party to this Agreement and
immediate injunctive relief.  The Parties
also agree that if an action is brought in equity to enforce a party’s
obligations, no Shareholder will assert as a defense that there is an adequate
remedy at law.

 

5.3           Successors and Assigns.  Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the Parties hereto.

 

5.4           Entire Agreement.  This Agreement, the Exhibits and Schedules
hereto, constitute the full and entire understanding and agreement between the
Parties with regard to the subject matter hereof and no Party shall be liable
or bound to any other in any manner by any representations, warranties,
covenants and agreements except as specifically set forth herein.

 

5.2           Amendment and Waiver. 
This Agreement may not be amended or modified.

 

4.6           Notices.  Any
notices or other communications required or permitted hereunder shall be deemed
sufficiently given if personally delivered to it or sent by registered mail or
certified mail, postage prepaid, or by prepaid telegram addressed as follows:

 

	
  If to
  Cornell , to:

  	
   

  	
  Cornell
  Capital Partners, LP

  
	
   

  	
   

  	
  101 Hudson
  Street – Suite 3700

  
	
   

  	
   

  	
  Jersey City,
  New Jersey 07030

  
	
   

  	
   

  	
  Attention:Mark
  Angelo & David Gonzalez, Esq.

  
	
   

  	
   

  	
  Telephone:

  	
  (201)
  985-8300

  
	
   

  	
   

  	
  Facsimile:

  	
  (201) 985-8266

  
	
   

  	
   

  	
   

  
	
  If to Shareholder:

  	
   

  	
  At such address on the
  Company’s stockholder ledger

  

 

or such other addresses as shall be furnished
in writing by any party in the manner for giving notices hereunder, and any
such notice or communication shall be deemed to have given as of the date so
delivered, mailed or telegraphed.

 

5.7           Attorneys’ Fees. In the event that any dispute among
the Parties to this Agreement should result in litigation, the prevailing party
in such dispute shall be entitled to recover from the

 

3

 

losing party all fees, costs and expenses of
enforcing any right of such prevailing party under or with respect to this
Agreement.

 

5.8           Titles and Subtitles. The titles
of the sections and subsections of the Agreement are for convenience of
reference only and are not to be considered in construing this Agreement.

 

5.9           Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.  The
execution of this Agreement may be transmitted by facsimile signatures.

 

5.10         Definitions.  All capitalized terms not
otherwise defined herein are defined as set forth in that certain Securities
Purchase Agreement among the Company and Cornell of even date herewith or
documents referred to therein.

 

 

[SIGNATURE PAGE FOLLOWS]

 

4

 

[SIGNATURE PAGE TO VOTING AGREEMENT]

 

IN WITNESS WHEREOF, the
parties hereto have executed this Agreement as of the date first above written.

 

 

	
  COMPANY:

  
	
  CORNELL CAPITAL PARTNERS, LP

  
	
  By:       Yorkville
  Advisors, LLC

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
  Mark Angelo

  	
   

  
	
  Title:

  	
  President
  and Portfolio Manager

  	
   

  
	
   

  
	
  SHAREHOLDERS

  
	
   

  
	
   

  
	
   

  	
   

  
	
  James E. Alexander

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Boris Rubizhevsky

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Lindsay A. Gardner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  James Sakys

  	
   

  
				

 

5

 

SCHEDULE 1

 

CURRENT SHARE OWNERSHIP

 

	
  SHAREHOLDER

  	
   

  	
  CERTIFICATE
  NO.

  	
   

  	
  SHARES
  OF COMMON STOCK

  
	
  James E.
  Alexander

  	
   

  	
   

  	
   

  	
   

  
	
  Boris Rubizhevsky

  	
   

  	
   

  	
   

  	
   

  
	
  Lindsay A. Gardner

  	
   

  	
   

  	
   

  	
   

  
	
  John Sakys

  	
   

  	
   

  	
   

  	
   

  

 

6

 

EXHIBIT A

 

IRREVOCABLE PROXY

 

In consideration for Cornell Capital
Partners, LP, a Delaware limited partnerhip (“Cornell”), entering into
the transactions pursuant to the Securities Purchase Agreement and related
documents all of which are dated May 30, 2006 with Isonic Coproration, a
California corporation (the “Company”)
the undersigned shareholders, holders of the Shares set forth with
their names below do hereby irrevocably appoint David Gonzalez, Esq., as
nominee for Cornell, with full power of substitution,  as proxy to vote and otherwise represent the
Shares for the following matters:

 

1.                                       The approval of
an amendment to the Company’s amended and restated articles of in Company to
increase the number of shares of authorized Common Stock from to at least
175,000,000 and the filing of a preliminary and definitive Schedule 14A to be
followed by the appropriate filings with the California Secretary of State and
which shall be effective as soon thereafter as possible, but no later than
December 31, 2006 and

 

2.                                       The issuance of
a maximum 57,924,215 shares as Conversion Shares (being 64,000,000 maximum
shares to be issued less 6,075,785 Conversion Shares (as defined in the Securities
Purchase Agreement dated May 30, 2006 by and between the Company and the
Buyer), which will registered in the Initial Registration Statement, as defined
in the Investor’s Registration Rights Agreement dated May 30, 2006 by and
between the Company and the Buyer, within the 19.99% requirement), (ii) shares
issuable in payment of interest on the Debentures; (iii) shares issuable as
liquidated damages pursuant to the Investor Registration Rights Agreement; and
(iv) the Warrant Shares (the “Total Transaction Shares”).  The term
“Total Transaction Shares” does not include 6,075,785 Conversion Shares, the
Buyers Shares, and the shares of the Company’s Common Stock issuable upon
exercise of the 2,000,000 warrants with an exercise price of $1.25 all of which
have previously been issued to the Buyers.

 

Capitalized terms not otherwise defined herein are defined as set forth
in that certain Securities Purchase Agreement among the Company and Cornell of
even date herewith or documents referred to therein

 

The
proxy holder named herein shall represent the undersigned for the purpose of
determining a quorum at any shareholders’ meeting that he attends.

 

SHAREHOLDERS

 

James E. Alexander

1,801,167

 

7

 

	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Boris Rubizhevsky

  	
   

  
	
  1,067,372

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Lindsay A.
  Gardner

  	
   

  
	
  250,548

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  John Sakys

  	
   

  
	
  4,024

  	
   

  

 

8

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