Document:

Exhibit 10.5

WARRANT

THE SECURITIES
REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT.

ISONICS CORPORATION

Amended and Restated Warrant To Purchase Common Stock

	
  Warrant No.: CCP-003

  	
  Number
  of Shares: 3,000,000

  
	
   

  	
   

  
	
   

  	
  Warrant
  Exercise Price: $1.75

  
	
   

  	
   

  
	
   

  	
  Expiration
  Date: May 30, 2009

  

 

Date of
Original Issuance: May 31, 2006

Date of Amendment and Restatement: June 13, 2006

This
Warrant cancels and replaces Warrant No. CCP-001 for the purchase of
3,000,000 shares of common stock of Isonics Corporation, a California
corporation, which warrant is superseded in its entirety hereby.

Isonics Corporation, a California corporation (the “Company”),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Cornell
Capital Partners, LP (the “Holder”), the registered holder
hereof or its permitted assigns, is entitled, subject to the terms set forth
below, to purchase from the Company upon surrender of this Warrant, at any time
or times on or after the date hereof, but not after 11:59 P.M. Eastern
Time on the Expiration Date (as defined herein) Three Million (3,000,000) fully
paid and nonassessable shares of Common Stock (as defined herein) of the
Company (the “Warrant Shares”) at the exercise price per share provided
in Section 1(b) below or as subsequently adjusted; provided, however,
that in no event shall the holder be entitled to exercise this Warrant: (i) until
after the shareholders of the Company have approved the issuance of this
warrant as contemplated in Section 4(l) of the Securities Purchase
Agreement (as defined in Section 1(a), below); or (ii) thereafter,  for a number of Warrant Shares in excess of
that number of Warrant Shares which, upon giving effect to such exercise, would
cause the aggregate number of shares of Common Stock beneficially owned by the
holder and its affiliates to exceed 4.99% of the outstanding shares of the
Common Stock following such exercise, except within sixty (60) 

 1
 

 

days of the Expiration Date (however, such restriction
may be waived by Holder (but only as to itself and not to any other holder)
upon not less than 65 days prior notice to the Company). For purposes of the
foregoing proviso, the aggregate number of shares of Common Stock beneficially
owned by the holder and its affiliates shall include the number of shares of
Common Stock issuable upon exercise of this Warrant with respect to which the
determination of such proviso is being made, but shall exclude shares of Common
Stock which would be issuable upon (i) exercise of the remaining,
unexercised Warrants beneficially owned by the holder and its affiliates and (ii) exercise
or conversion of the unexercised or unconverted portion of any other securities
of the Company beneficially owned by the holder and its affiliates (including,
without limitation, any convertible notes or preferred stock) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein. Except as set forth in the preceding sentence, for purposes of this
paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended. For purposes of this Warrant,
in determining the number of outstanding shares of Common Stock a holder may
rely on the number of outstanding shares of Common Stock as reflected in (1) the
Company’s most recent Form 10-QSB or Form 10-KSB, as the
case may be, (2) a more recent public announcement by the Company or (3) any
other notice by the Company or its transfer agent setting forth the number of
shares of Common Stock outstanding. Upon the written request of any holder, the
Company shall promptly, but in no event later than one (1) Business Day
following the receipt of such notice, confirm in writing to any such holder the
number of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
the exercise of Warrants (as defined below) by such holder and its affiliates
since the date as of which such number of outstanding shares of Common Stock
was reported.

Section 1.

(a)   This Warrant is one (1) of three (3) common stock
purchase warrants (the “Warrant”) issued pursuant to the Securities
Purchase Agreement (“Securities Purchase Agreement”) dated the date
hereof between the Company and the Buyers listed on Schedule I thereto. The
other warrant issued pursuant to the Securities Purchase Agreement is referred
to herein as the “Companion Warrants” and is to be interpreted together
with this Warrant. Convertible debentures were issued to the holder of this
Warrant at the same time as and after this Warrant and the Companion Warrants
as described in the Securities Purchase Agreement and are referred to herein as
the Convertible Debentures.

(b)   Definitions. The following words and terms as used in this
Warrant shall have the following meanings:

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

(ii)           “Business Day” means any day other than Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or required by law to remain closed.

 2
 

 

(iii)          “Closing Bid Price” means the closing bid price of
Common Stock as quoted on the Principal Market (as reported by Bloomberg
Financial Markets (“Bloomberg”) through its “Volume at Price” function).

(iv)          “Common Stock” means (i) the Company’s common
stock, no par value per share, and (ii) any capital stock into which such
Common Stock shall have been changed or any capital stock resulting from a
reclassification of such Common Stock.

(v)           “Event of Default” means an event of default under
the Securities Purchase Agreement, the Convertible Debentures issued in
connection therewith or the Investor’s Registration Rights Agreement dated the
date hereof.

(vi)          “Excluded Securities” means, any of the following:

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

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

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

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

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

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

(vii)         “Expiration Date” means the date three (3) years
from the Issuance Date of this Warrant or, if such date falls on a Saturday,
Sunday or other day on which banks are required or authorized to be closed in
the City of New York or the State of New York or on which trading does not take
place on the Principal Exchange or automated quotation system on which the
Common Stock is traded (a “Holiday”), the next date that is not a
Holiday.

(viii)        “Issuance Date” means the date hereof.

 3
 

 

(ix)           “Options” means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities.

(x)            “Other Securities” means (i) those convertible
debentures, options and warrants of the Company issued prior to, and
outstanding on, the Issuance Date of this Warrant, (ii) the shares of
Common Stock issuable on exercise of such convertible debentures, options and
warrants, provided such convertible debentures, options and warrants are not
amended after the Issuance Date of this Warrant and (iii) the shares of
Common Stock issuable upon exercise of this Warrant the Convertible Debenture
and the Companion Warrants that were issued pursuant to the Securities Purchase
Agreement, and (iv) the 660,000 shares of restricted common stock issued
or to be issued pursuant to the Securities Purchase Agreement, and (v) any
other shares of Common Stock issued or issuable pursuant to this Warrant, the
Companion Warrants, the Convertible Debenture, and the registration rights
agreement entered into between the Company and the initial holder of this
Warrant.

(xi)           “Person” means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.

(xii)          “Principal Market” means the New York Stock
Exchange, the American Stock Exchange, the Nasdaq National Market, the Nasdaq
Capital Market, whichever is at the time the principal trading exchange or
market for such security, or the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg or, if no bid or sale
information is reported for such security by Bloomberg, then the average of the
bid prices of each of the market makers for such security as reported in the “pink
sheets” by the National Quotation Bureau, Inc.

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

(xiv)        “VWAP” means the volume weighted average price per
share of the Company’s Common Stock on the Nasdaq Capital Market or other
Subsequent Market, as quoted by Bloomberg, LP.

(xv)         “Warrant” means this Warrant and all Warrants issued
in exchange, transfer or replacement thereof.

(xvi)        “Warrant Exercise Price” shall be $1.75 or as
subsequently adjusted as provided in Section 8 hereof.

(xvii)       “Warrant Shares” means the shares of Common Stock
issuable at any time upon exercise of this Warrant.

 4
 

 

(c)   Other Definitional Provisions.

(i)            Except as otherwise specified herein, all references
herein (A) to the Company shall be deemed to include the Company’s
successors and (B) to any applicable law defined or referred to herein
shall be deemed references to such applicable law as the same may have been or
may be amended or supplemented from time to time.

(ii)           When used in this Warrant, the words “herein”, “hereof”,
and “hereunder” and words of
similar import, shall refer to this Warrant as a whole and not to any provision
of this Warrant, and the words “Section”, “Schedule”, and “Exhibit”
shall refer to Sections of, and Schedules and Exhibits to, this Warrant unless
otherwise specified.

(iii)          Whenever the context so requires, the neuter gender
includes the masculine or feminine, and the singular number includes the
plural, and vice versa.

Section 2.               Exercise of Warrant.

(a)   Subject to the terms and conditions hereof, this Warrant may be
exercised by the holder hereof then registered on the books of the Company, pro
rata as hereinafter provided, at any time on any Business Day on or after the
opening of business on such Business Day, commencing with the first day after
the date hereof, and prior to 11:59 P.M. Eastern Time on the Expiration
Date (i) by delivery of a written notice, in the form of the subscription
notice attached as Exhibit A hereto (the “Exercise Notice”),
of such holder’s election to exercise this Warrant, which notice shall specify
the number of Warrant Shares to be purchased, payment to the Company of an
amount equal to the Warrant Exercise Price(s) applicable to the Warrant
Shares being purchased, multiplied by the number of Warrant Shares (at the
applicable Warrant Exercise Price) as to which this Warrant is being
exercised (plus any applicable issue or transfer taxes) (the “Aggregate
Exercise Price”) in cash or wire transfer of immediately available funds
and the surrender of this Warrant (or an indemnification undertaking with
respect to this Warrant in the case of its loss, theft or destruction) to a
common carrier for overnight delivery to the Company as soon as practicable
following such date (“Cash Basis”) or (ii) if after January 15,
2007, at the time of exercise, the Warrant Shares are not subject to an
effective registration statement or if an Event of Default has occurred, by
delivering an Exercise Notice and in lieu of making payment of the Aggregate
Exercise Price in cash or wire transfer, elect instead to receive upon such
exercise the “Net Number” of shares of Common Stock determined according to the
following formula (the “Cashless Exercise”):

	
  Net Number =

  	
  (A x B) – (A x
  C)

  	
   

  
	
   

  	
  B

  	
   

  

 

For purposes of the foregoing formula:

A = the total number of Warrant Shares with respect to which this
Warrant is then being exercised.

B = the VWAP of the Common Stock on the date of exercise of the
Warrant.

 5
 

 

C = the Warrant Exercise Price then in effect for the applicable
Warrant Shares at the time of such exercise.

In the event of any exercise of the rights
represented by this Warrant in compliance with this Section 2, the Company
shall on or before the fifth (5th) Business Day following the date of
receipt of the Exercise Notice, the Aggregate Exercise Price and this Warrant
(or an indemnification undertaking with respect to this Warrant in the case of
its loss, theft or destruction) and the receipt of the representations of the
holder specified in Section 6 hereof, if requested by the Company (the “Exercise
Delivery Documents”), and if the Common Stock is DTC eligible, credit such
aggregate number of shares of Common Stock to which the holder shall be
entitled to the holder’s or its designee’s balance account with The Depository
Trust Company; provided, however, if the holder who submitted the Exercise
Notice requested physical delivery of any or all of the Warrant Shares, or, if
the Common Stock is not DTC eligible 
then the Company shall, on or before the fifth (5th) Business Day following
receipt of the Exercise Delivery Documents, issue and surrender to a common
carrier for overnight delivery to the address specified in the Exercise Notice,
a certificate, registered in the name of the holder, for the number of shares
of Common Stock to which the holder shall be entitled pursuant to such request.
Upon delivery of the Exercise Notice and Aggregate Exercise Price referred to
in clause (i) or (ii) above the holder of this Warrant shall be
deemed for all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been exercised. In the
case of a dispute as to the determination of the Warrant Exercise Price, the
VWAP or the arithmetic calculation of the Warrant Shares, the Company shall
promptly issue to the holder the number of Warrant Shares that is not disputed
and shall submit the disputed determinations or arithmetic calculations to the
holder via facsimile within one (1) Business Day of receipt of the holder’s
Exercise Notice.

(b)   If the holder and the Company are unable to agree upon the
determination of the Warrant Exercise Price or arithmetic calculation of the
Warrant Shares within one (1) day of such disputed determination or
arithmetic calculation being submitted to the holder, then the Company shall
immediately submit via facsimile or other form of electronic communication
(including without limitation e-mail) (i) the disputed determination of
the Warrant Exercise Price or the VWAP to an independent, reputable investment
banking firm or (ii) the disputed arithmetic calculation of the Warrant
Shares to its independent, outside accountant. The Company shall cause the
investment banking firm or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the holder of the
results no later than forty-eight (48) hours from the time it receives the
disputed determinations or calculations. Such investment banking firm’s or
accountant’s determination or calculation, as the case may be, shall be deemed
conclusive absent manifest error.

(c)   Unless the rights represented by this Warrant shall have expired
or shall have been fully exercised, the Company shall, as soon as practicable
and in no event later than five (5) Business Days after any exercise and
at its own expense, issue a new Warrant identical in all respects to this
Warrant exercised except it shall represent rights to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under this
Warrant exercised, less the number of Warrant Shares with respect to which such
Warrant is exercised.

 6
 

 

(d)   No fractional Warrant Shares are to be issued upon any pro rata
exercise of this Warrant, but rather the number of Warrant Shares issued upon
such exercise of this Warrant shall be rounded up or down to the nearest whole
number.

(e)   If the Company or its Transfer Agent shall fail for any reason or
for no reason to issue to the holder within ten (10) days of receipt
of the Exercise Delivery Documents, a certificate for the number of Warrant
Shares to which the holder is entitled or to credit the holder’s balance
account with The Depository Trust Company for such number of Warrant Shares to
which the holder is entitled upon the holder’s exercise of this Warrant, the
Company shall, in addition to any other remedies under this Warrant or
otherwise available to such holder, pay as additional damages in cash to such
holder on each day the issuance of such certificate for Warrant Shares is not
timely effected an amount equal to 0.025% of the product of (A) the sum of
the number of Warrant Shares not issued to the holder on a timely basis and to
which the holder is entitled, and (B) the VWAP of the Common Stock for the
trading day immediately preceding the last possible date which the Company
could have issued such Common Stock to the holder without violating this Section 2.

(f)    If within ten (10) days after the Company’s receipt of the
Exercise Delivery Documents, the Company fails to deliver a new Warrant to the
holder for the number of Warrant Shares to which such holder is entitled
pursuant to Section 2 hereof, then, in addition to any other available
remedies under this Warrant, or otherwise available to such holder, the Company
shall pay as additional damages in cash to such holder on each day after such
tenth (10th)
day that such delivery of such new Warrant is not timely effected in an amount
equal to 0.25% of the product of (A) the number of Warrant Shares
represented by the portion of this Warrant which is not being exercised and (B) the
VWAP of the Common Stock for the trading day immediately preceding the last
possible date which the Company could have issued such Warrant to the holder
without violating this Section 2.

Section 3.               Covenants as to Common Stock. The Company
hereby covenants and agrees as follows:

(a)   This Warrant is, and any Warrants issued in substitution for or
replacement of this Warrant will upon issuance be, duly authorized and validly
issued.

(b)   Subject to the availability of sufficient authorized shares, all
Warrant Shares which may be issued upon the exercise of the rights represented
by this Warrant will, upon issuance, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof.

(c)   During the period within which the rights represented by this
Warrant may be exercised, and subject to the availability of sufficient authorized
shares the Company will at all times have authorized and reserved at least one
hundred percent (100%) of the number of shares of Common Stock needed to
provide for the exercise of the rights then represented by this Warrant and the
par value of said shares will at all times be less than or equal to the
applicable Warrant Exercise Price. If at any time after December 31, 2006
the Company does not have a sufficient number of shares of Common Stock
authorized and available, then the Company shall 

 7
 

 

call and hold a
special meeting of its stockholders within sixty (60) days of that time
for the sole purpose of increasing the number of authorized shares of Common
Stock.

(d)   The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the holder
of this Warrant in order to protect the exercise privilege of the holder of
this Warrant against dilution or other impairment, consistent with the tenor
and purpose of this Warrant. The Company will not increase the par value of any
shares of Common Stock receivable upon the exercise of this Warrant above the
Warrant Exercise Price then in effect, and (ii) will take all such actions
as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant assuming that there is an exemption available from the
registration requirements of the Securities Act of 1933 and applicable state
law for such exercise.

(e)   This Warrant will be binding upon any entity succeeding to the
Company by merger, consolidation or acquisition of all or substantially all of
the Company’s assets.

Section 4.               Taxes. The Company shall pay any and all taxes,
except any applicable withholding, which may be payable with respect to the
issuance and delivery of Warrant Shares upon exercise of this Warrant.

Section 5.               Warrant Holder Not Deemed a Stockholder. Except
as otherwise specifically provided herein, no holder, as such, of this Warrant
shall be entitled to vote or receive dividends or be deemed the holder of
shares of capital stock of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the holder hereof, as
such, any of the rights of a stockholder of the Company or any right to vote,
give or withhold consent to any corporate action (whether any reorganization,
issue of stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the holder of this Warrant of
the Warrant Shares which he or she is then entitled to receive upon the due
exercise of this Warrant. In addition, nothing contained in this Warrant shall
be construed as imposing any liabilities on such holder to purchase any
securities (upon exercise of this Warrant or otherwise) or as a stockholder of
the Company, whether such liabilities are asserted by the Company or by
creditors of the Company. Notwithstanding this Section 5, the Company will
provide the holder of this Warrant with copies of the same notices and other
information given to the stockholders of the Company generally,
contemporaneously with the giving thereof to the stockholders.

Section 6.               Representations of Holder. The holder of this
Warrant, by the acceptance hereof, represents that it is acquiring this Warrant
and the Warrant Shares for its own account for investment only and not with a
view towards, or for resale in connection with, the public sale or distribution
of this Warrant or the Warrant Shares, except pursuant to sales registered or
exempted under the Securities Act; provided, however, that by making the
representations herein, the holder does not agree to hold this Warrant or any
of the Warrant Shares for any 

 8
 

 

minimum or other
specific term and reserves the right to dispose of this Warrant and the Warrant
Shares at any time in accordance with or pursuant to a registration statement
or an exemption under the Securities Act. The holder of this Warrant further
represents, by acceptance hereof, that, as of this date, such holder is an “accredited
investor” as such term is defined in Rule 501(a)(1) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
(an “Accredited Investor”). Upon exercise of this Warrant  the holder shall, if requested by the
Company, confirm in writing, in a form satisfactory to the Company, that the
Warrant Shares so purchased are being acquired solely for the holder’s own
account and not as a nominee for any other party, for investment, and not with
a view toward distribution or resale and that such holder is an Accredited
Investor. If such holder cannot make such representations because they would be
factually incorrect, it shall be a condition to such holder’s exercise of this
Warrant that the Company receive such other representations as the Company considers
reasonably necessary to assure the Company that the issuance of its securities
upon exercise of this Warrant shall not violate any United States or state
securities laws.

Section 7.               Ownership and Transfer.

(a)   The Company shall maintain at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to the
holder hereof), a register for this Warrant, in which the Company shall record
the name and address of the person in whose name this Warrant has been issued,
as well as the name and address of each transferee. The Company may treat the
person in whose name any Warrant is registered on the register as the owner and
holder thereof for all purposes, notwithstanding any notice to the contrary,
but in all events recognizing any transfers made in accordance with the terms
of this Warrant.

Section 8.               Adjustment of Warrant Exercise Price and Number of
Shares. The Warrant Exercise Price and the number of shares of Common Stock
issuable upon exercise of this Warrant shall be adjusted from time to time as
follows:

(a)   Adjustment of Warrant Exercise Price and Number of Shares upon
Issuance of Common Stock. If and whenever on or after the Issuance Date of
this Warrant, the Company issues or sells, or is deemed to have issued or sold,
any shares of Common Stock (other than (i) Excluded Securities, (ii) shares
of Common Stock which are issued or deemed to have been issued by the Company
in connection with an Approved Stock Plan, or (iii) the Other Securities)
(the New Shares) for a consideration per share less than a price (the “Applicable
Price”) equal to the Warrant Exercise Price in effect immediately prior to
such issuance or sale, then immediately after such issue or sale the Warrant
Exercise Price then in effect shall be adjusted (the “Weighted Adjustment”)
to a price determined by multiplying such exercise price by a fraction,

the numerator
of which shall be the number of shares of Common Stock outstanding immediately
before such issuance plus the number of shares of common stock that the
aggregate consideration received by the Company for such issuance would
purchase at the Warrant Exercise Price then in effect; and

the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance plus the number of New Shares.

 9
 

 

For the purposes of this Section 8(a), the term “Common Stock
outstanding” includes all shares of Common Stock then outstanding calculated in
accordance with generally accepted accounting principles consistently applied.

Upon each such adjustment of the Warrant Exercise Price hereunder, the
number of Warrant Shares issuable upon exercise of this Warrant shall be
adjusted to the number of shares determined by multiplying the Warrant Exercise
Price in effect immediately prior to such adjustment by the number of Warrant
Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Warrant Exercise Price
resulting from such adjustment.

(b)   Effect on Warrant Exercise Price of Certain Events. For
purposes of determining the adjusted Warrant Exercise Price under Section 8(a) above,
the following shall be applicable:

(i)            Issuance of Options. If after the date hereof, the
Company in any manner grants any Options and the lowest price per share for
which one share of Common Stock is issuable upon the exercise of any such
Option or upon conversion or exchange of any convertible securities issuable
upon exercise of any such Option is less than the Applicable Price (not
including Excluded Securities), then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company at the time
of the granting or sale of such Option for such price per share and shall be
subject to the Weighted Adjustment. For purposes of this Section 8(b)(i),
the lowest price per share for which one share of Common Stock is issuable upon
exercise of such Options or upon conversion or exchange of such Convertible
Securities shall be equal to the sum of the lowest amounts of consideration (if
any) received or receivable by the Company with respect to any one share of
Common Stock upon the granting or sale of the Option, upon exercise of the
Option or upon conversion or exchange of any convertible security issuable upon
exercise of such Option. No further adjustment of the Warrant Exercise Price
shall be made upon the actual issuance of such Common Stock or of such
convertible securities upon the exercise of such Options or upon the actual
issuance of such Common Stock upon conversion or exchange of such convertible
securities.

(ii)           Issuance of Convertible Securities. If the Company
in any manner issues or sells any convertible securities and the lowest price
per share for which one share of Common Stock is issuable upon the conversion
or exchange thereof is less than the Applicable Price (not including Excluded
Securities), then such share of Common Stock shall be deemed to be outstanding
and to have been issued and sold by the Company at the time of the issuance or
sale of such convertible securities for such price per share and shall be
subject to the Weighted Adjustment. For the purposes of this Section 8(b)(ii),
the lowest price per share for which one share of Common Stock is issuable upon
such conversion or exchange shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to
one share of Common Stock upon the issuance or sale of the convertible security
and upon conversion or exchange of such convertible security. No further
adjustment of the Warrant Exercise Price shall be made upon the actual issuance
of such Common Stock upon conversion or exchange of such convertible
securities, and if any such issue or sale of such convertible securities is
made upon exercise of any Options for which adjustment of the Warrant Exercise

 

 10

 

Price had been or
are to be made pursuant to other provisions of this Section 8(b), no
further adjustment of the Warrant Exercise Price shall be made by reason of
such issue or sale.

(iii)          Change in Option Price or Rate of Conversion. If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion or exchange of any convertible
securities, or the rate at which any convertible securities are convertible
into or exchangeable for Common Stock changes at any time, the Warrant Exercise
Price in effect at the time of such change shall be adjusted and shall be
subject to the Weighted Adjustment to the Warrant Exercise Price which would
have been in effect at such time had such Options or convertible securities
provided for such changed purchase price, additional consideration or changed
conversion rate, as the case may be, at the time initially granted, issued or
sold and the number of Warrant Shares issuable upon exercise of this Warrant
shall be correspondingly readjusted. For purposes of this Section 8(b)(iii),
if the terms of any Option or convertible security that was outstanding as of
the Issuance Date of this Warrant are changed in the manner described in the
immediately preceding sentence, then such Option or convertible security and
the Common Stock deemed issuable upon exercise, conversion or exchange thereof
shall be deemed to have been issued as of the date of such change. No
adjustment pursuant to this Section 8(b) shall be made if such
adjustment would result in an increase of the Warrant Exercise Price then in
effect.

(c)   Effect on Warrant Exercise Price of Certain Events. For
purposes of determining the adjusted Warrant Exercise Price under
Sections 8(a) and 8(b), the following shall be applicable:

(i)            Calculation of Consideration Received. If any
Common Stock, Options or convertible securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received therefore will be
deemed to be the gross amount received by the Company therefore. If any Common
Stock, Options or convertible securities are issued or sold for a consideration
other than cash, the amount of such consideration received by the Company will
be the fair value of such consideration, except where such consideration
consists of marketable securities, in which case the amount of consideration
received by the Company will be the market price of such securities on the date
of receipt of such securities. If any Common Stock, Options or convertible
securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Company is the surviving entity, the amount of
consideration therefore will be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Common Stock, Options or convertible securities, as the case may be. The
fair value of any consideration other than cash or securities will be
determined jointly by the Company and the holders of Warrants representing at
least a majority of the Warrant Shares issuable upon exercise of the Warrants
and Companion Warrants then outstanding. If such parties are unable to reach
agreement within ten (10) days after the occurrence of an event
requiring valuation (the “Valuation Event”), the fair value of such
consideration will be determined within five (5) Business Days after the
tenth (10th)
day following the Valuation Event by an independent, reputable appraiser
jointly selected by the Company and the holders of Warrants representing at
least a majority  of the Warrant Shares
issuable upon exercise of the Warrants (including the Companion Warrants) then
outstanding. The determination of such appraiser shall be final and binding
upon all parties and the fees and expenses of such appraiser shall be borne
equally  by the Company and the holders
of Warrants.

 11
 

 

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

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

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

(d)   Adjustment of Warrant Exercise Price upon Subdivision or
Combination of Common Stock. If the Company at any time after the date of
issuance of this Warrant subdivides (by any stock split, stock dividend, recapitalization
or otherwise) one or more classes of its outstanding shares of Common Stock
into a greater number of shares, any Warrant Exercise Price in effect
immediately prior to such subdivision will be proportionately reduced and the
number of shares of Common Stock obtainable upon exercise of this Warrant will
be proportionately increased. If the Company at any time after the date of
issuance of this Warrant combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, any Warrant Exercise Price in effect immediately
prior to such combination will be proportionately increased and the number of
Warrant Shares issuable upon exercise of this Warrant will be proportionately
decreased. Any adjustment under this Section 8(d) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.

(e)   Distribution of Assets. If the Company shall declare or
make any dividend or other distribution of its assets (or rights to acquire its
assets) to holders of Common Stock, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, stock or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement or other similar transaction) (a “Distribution”),
at any time after the issuance of this Warrant, then, in each such case:

(i)            any Warrant Exercise Price in effect immediately prior to
the close of business on the record date fixed for the determination of holders
of Common Stock entitled to receive the Distribution shall be reduced,
effective as of the close of business on such record date, to a price
determined by multiplying such Warrant Exercise Price by a fraction of which (A) the
numerator shall be the Closing Sale Price of the Common Stock on the trading
day immediately preceding such record date minus the value of the Distribution
(as determined in good faith by the Company’s Board of Directors) applicable to
one share of Common Stock, and 

 12
 

 

(B) the
denominator shall be the Closing Sale Price of the Common Stock on the trading
day immediately preceding such record date; and

(ii)           either (A) the number of Warrant Shares obtainable
upon exercise of this Warrant shall be increased to a number of shares equal to
the number of shares of Common Stock obtainable immediately prior to the close
of business on the record date fixed for the determination of holders of Common
Stock entitled to receive the Distribution multiplied by the reciprocal of the
fraction set forth in the immediately preceding clause (i), or (B) in the
event that the Distribution is of common stock of a company whose common stock
is traded on a national securities exchange or a national automated quotation
system, then the holder of this Warrant shall receive an additional warrant to
purchase Common Stock, the terms of which shall be identical to those of this
Warrant, except that such warrant shall be exercisable into the amount of the
assets that would have been payable to the holder of this Warrant pursuant to
the Distribution had the holder exercised this Warrant immediately prior to
such record date and with an exercise price equal to the amount by which the
exercise price of this Warrant was decreased with respect to the Distribution
pursuant to the terms of the immediately preceding clause (i).

(f)    Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 8 but not expressly
provided for by such provisions (including, without limitation, the granting of
stock appreciation rights, phantom stock rights or other rights with equity
features), then the Company’s Board of Directors will make an appropriate
adjustment in the Warrant Exercise Price and the number of shares of Common
Stock obtainable upon exercise of this Warrant so as to protect the rights of
the holders of the Warrants; provided, except as set forth in section 8(d),that
no such adjustment pursuant to this Section 8(f) will increase the
Warrant Exercise Price or decrease the number of shares of Common Stock
obtainable as otherwise determined pursuant to this Section 8.

(g)   Notices.

(i)            Immediately upon any adjustment of the Warrant Exercise
Price, the Company will give written notice thereof to the holder of this
Warrant, setting forth in reasonable detail, and certifying, the calculation of
such adjustment.

(ii)           The Company will give written notice to the holder of this
Warrant at least ten (10) days prior to the date on which the Company
closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock or (C) for determining
rights to vote with respect to any Organic Change (as defined below),
dissolution or liquidation, provided that such information shall be made known
to the public prior to or in conjunction with such notice being provided to
such holder.

(iii)          The Company will also give written notice to the holder of
this Warrant at least ten (10) days prior to the date on which any Organic
Change, dissolution or liquidation will take place, provided that such
information shall be made known to the public prior to or in conjunction with
such notice being provided to such holder.

 13
 

 

(h)   Limitations. Notwithstanding the above provisions of this Section 8,
the Company may not issue any shares of Common Stock upon exercise of this
Warrant until the Company’s shareholders approve (without the vote of any
shares acquired in this transaction and related transactions) the issuance of
the Total Transaction Shares as defined in Section 4(l) of the
Securities Purchase Agreement.

Section 9.               Purchase Rights; Reorganization, Reclassification,
Consolidation, Merger or Sale.

(a)   In addition to any adjustments pursuant to Section 8 above,
if at any time the Company grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of Common Stock (the “Purchase
Rights”), then the holder of this Warrant will be entitled to acquire, upon
the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such holder could have acquired if such holder had held the number of
shares of Common Stock acquirable upon complete exercise of this Warrant
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.

(b)   Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company’s assets
to another Person or other transaction in each case which is effected in such a
way that holders of Common Stock are entitled to receive (either directly or
upon subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as an “Organic Change.”  Prior to the consummation of any (i) sale
of all or substantially all of the Company’s assets to an acquiring Person or (ii) other
Organic Change following which the Company is not a surviving entity, the
Company will secure from the Person purchasing such assets or the successor
resulting from such Organic Change (in each case, the “Acquiring Entity”)
a written agreement (in form and substance satisfactory to the holders of
Warrants representing at least a majority  of the Warrant Shares issuable
upon exercise of the Warrants then outstanding) to deliver to each holder of
Warrants in exchange for such Warrants, a security of the Acquiring Entity
evidenced by a written instrument substantially similar in form and substance
to this Warrant and satisfactory to the holders of the Warrants (including an
adjusted warrant exercise price equal to the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, and exercisable
for a corresponding number of shares of Common Stock acquirable and receivable
upon exercise of the Warrants without regard to any limitations on exercise, if
the value so reflected is less than any Applicable Warrant Exercise Price
immediately prior to such consolidation, merger or sale). Prior to the
consummation of any other Organic Change, the Company shall make appropriate
provision (in form and substance satisfactory to the holders of Warrants
representing a majority of
the Warrant Shares issuable upon exercise of the Warrants then outstanding) to
insure that each of the holders of the Warrants will thereafter have the right
to acquire and receive in lieu of or in addition to (as the case may be) the
Warrant Shares immediately theretofore issuable and receivable upon the
exercise of such holder’s Warrants (without regard to any limitations on
exercise), such shares of stock, securities or assets that would have been
issued or payable in such Organic Change with respect to or in exchange for the
number of Warrant Shares which would have been issuable and receivable upon the
exercise of such holder’s Warrant as of the 

 14
 

 

date of such
Organic Change (without taking into account any limitations or restrictions on
the exercisability of this Warrant).

Section 10.             Lost, Stolen, Mutilated or Destroyed Warrant. If
this Warrant is lost, stolen, mutilated or destroyed, the Company shall
promptly, on receipt of an indemnification undertaking (or, in the case of a
mutilated Warrant, the Warrant), issue a new Warrant of like denomination and
tenor as this Warrant so lost, stolen, mutilated or destroyed.

Section 11.             Notice. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Warrant must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of receipt is received by the sending party transmission is
mechanically or electronically generated and kept on file by the sending
party); or (iii) one Business Day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:

	
  If to Holder:

  	
  Cornell Capital Partners, LP

  
	
   

  	
  101 Hudson Street — Suite 3700

  
	
   

  	
  Jersey City, NJ 07302

  
	
   

  	
  Attention: Mark A. Angelo

  
	
   

  	
  Telephone: (201) 985-8300

  
	
   

  	
  Facsimile: (201) 985-8266

  
	
   

  	
   

  
	
  With Copy to:

  	
  David Gonzalez, Esq.

  
	
   

  	
  101 Hudson Street — Suite 3700

  
	
   

  	
  Jersey City, NJ 07302

  
	
   

  	
  Telephone: (201) 985-8300

  
	
   

  	
  Facsimile: (201) 985-8266

  
	
   

  	
   

  
	
  If to the
  Company, to:

  	
  Isonics Corporation

  
	
   

  	
  5906 McIntyre Street

  
	
   

  	
  Golden, CO 80403

  
	
   

  	
  Attention: James E. Alexander, President

  
	
   

  	
  Telephone: (303) 279-7900

  
	
   

  	
  Facsimile: (303) 279-7300

  
	
   

  	
   

  
	
  With a copy
  (which does not constitute notice) to:

  	
  Burns, Figa & Will, P.C.

  
	
   

  	
  6400 South Fiddler’s Green Circle — Suite 1000

  
	
   

  	
  Greenwood Village, CO 80111

  
	
   

  	
  Attention: Herrick K. Lidstone, Jr., Esq.

  
	
   

  	
  Telephone: (303) 796-2626

  
	
   

  	
  Facsimile: (303) 796-2777

  

 

If to a holder of this Warrant, to it at the address
and facsimile number set forth on Exhibit C hereto, with copies to
such holder’s representatives as set forth on Exhibit C, or at such
other 

 15
 

 

address and facsimile as shall be delivered to the
Company upon the issuance or transfer of this Warrant. Each party shall provide
five days’ prior written notice to the other party of any change in address or
facsimile number. Written confirmation of receipt (A) given by the
recipient of such notice, consent, facsimile, waiver or other communication,
(or (B) provided by a nationally recognized overnight delivery service
shall be rebuttable evidence of personal service, receipt by facsimile or
receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.

Section 12.             Date. The date of this Warrant is set forth on page 1
hereof. This Warrant, in all events, shall be wholly void and of no effect
after the close of business on the Expiration Date, except that notwithstanding
any other provisions hereof, the provisions of Section 8(b) shall
continue in full force and effect after such date as to any Warrant Shares or
other securities issued upon the exercise of this Warrant.

Section 13.             Amendment and Waiver. Except as otherwise
provided herein, the provisions of the Warrants may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the written consent
of the holders of Warrants representing at a majority  of the Warrant Shares issuable upon exercise
of the Warrants then outstanding; provided that, except for Section 8(d),
no such action may increase the Warrant Exercise Price or decrease the number
of shares or class of stock obtainable upon exercise of any Warrant without the
written consent of the holder of such Warrant.

Section 14.             Descriptive Headings; Governing Law. The
descriptive headings of the several sections and paragraphs of this Warrant are
inserted for convenience only and do not constitute a part of this Warrant. The
corporate laws of the State of New Jersey shall govern all issues concerning
the relative rights of the Company and its stockholders. All other questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New Jersey,
without giving effect to any choice of law or conflict of law provision or rule (whether
of the State of New Jersey or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of New Jersey.
Each party hereby irrevocably submits to the exclusive jurisdiction of United
States District Court for the District of New Jersey sitting in Newark New
Jersey, for the adjudication of any dispute hereunder or in connection herewith
or therewith, or with any transaction contemplated hereby or discussed herein,
and hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.

 16
 

 

Section 15.            Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS
WARRANT, THE PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE
OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION.

REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

 17
 

 

IN WITNESS WHEREOF,
the Company has caused this Warrant to be signed as of the date first set forth
above.

 

	
  

  	
  ISONICS CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  James E. Alexander

  
	
   

  	
  Title:

  	
  President and Chief Executive Officer

  

 

 18

 

EXHIBIT A TO WARRANT

EXERCISE NOTICE

TO
BE EXECUTED 

BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT

ISONICS
CORPORATION

The undersigned holder
hereby exercises the right to purchase                       
of the shares of Common Stock (“Warrant Shares”) of Isonics Corporation
(the “Company”), evidenced by the attached Warrant (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.

Specify Method of
exercise by check mark:

1. ___     Cash Exercise

(a) Payment of Warrant Exercise Price. The holder shall pay
the Aggregate Exercise Price of $              
to the Company in accordance with the terms of the Warrant.

(b) Delivery of Warrant Shares. The Company shall deliver
to the holder               
Warrant Shares in accordance with the terms of the Warrant.

2. ___     Cashless Exercise

(a) Payment of Warrant Exercise Price. In lieu of making
payment of the Aggregate Exercise Price, the holder elects to receive upon such
exercise the Net Number of shares of Common Stock determined in accordance with
the terms of the Warrant.

(b) Delivery of Warrant Shares. The Company shall deliver
to the holder               
Warrant Shares in accordance with the terms of the Warrant.

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

Date: _______________ __,
______

Name of Registered Holder

 1
 

 

 

	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  

 

 

 2

 

EXHIBIT B TO WARRANT

FORM OF WARRANT
POWER

FOR
VALUE RECEIVED, the undersigned does hereby assign and
transfer to                ,
Federal Identification No.               ,
a warrant to purchase                
shares of the capital stock of Isonics Corporation represented by warrant
certificate no.       , standing in the name
of the undersigned on the books of said corporation. The undersigned does
hereby irrevocably constitute and appoint                ,
attorney to transfer the warrants of said corporation, with full power of
substitution in the premises.

In submitting this
Warrant Power, the undersigned represents and warrants to Isonics Corporation
that it has not offered the Warrant through any means of general advertising or
public solicitation, and that it will provide Isonics Corporation such other
information and representations of the undersigned or of the transferee
necessary or appropriate to permit Isonics Corporation to determine whether
there is an exemption available for the transfer of this Warrant.

 

	
  Dated:

  	
   

  	
   

  	
  

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  

 

 B-1Exhibit 10.6

WARRANT

THE SECURITIES
REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT.

ISONICS CORPORATION

Amended and Restated Warrant To Purchase Common Stock

	
  Warrant No.: CCP-004

  	
  Number
  of Shares: 3,000,000

  
	
   

  	
   

  
	
   

  	
  Warrant
  Exercise Price: $2.00

  
	
   

  	
   

  
	
   

  	
  Expiration
  Date: May 30, 2009

  

 

Date of
Original Issuance: May 31, 2006

Date of Amendment and Restatement: June 13, 2007

This Warrant cancels and replaces
Warrant No. CCP-001 for the purchase of 3,000,000 shares of common
stock of Isonics Corporation, a California corporation, which warrant is
superseded in its entirety hereby.

Isonics Corporation, a
California corporation (the “Company”), hereby certifies that, for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Cornell Capital Partners, LP
(the “Holder”), the registered holder hereof or its permitted assigns,
is entitled, subject to the terms set forth below, to purchase from the Company
upon surrender of this Warrant, at any time or times on or after the date
hereof, but not after 11:59 P.M. Eastern Time on the Expiration Date (as
defined herein) Three Million (3,000,000) fully paid and nonassessable shares
of Common Stock (as defined herein) of the Company (the “Warrant Shares”)
at the exercise price per share provided in Section 1(b) below or as
subsequently adjusted; provided, however, that in no event shall the holder be
entitled to exercise this Warrant: (i) until after the shareholders of the
Company have approved the issuance of this warrant as contemplated in Section 4(l) of
the Securities Purchase Agreement (as defined in Section 1(a), below); or (ii) thereafter,  for a number of Warrant Shares in excess of
that number of Warrant Shares which, upon giving effect to such exercise, would
cause the aggregate number of shares of Common Stock beneficially owned by the
holder and its affiliates to exceed 4.99% of the outstanding shares of the
Common Stock following such exercise, except within sixty (60) 

 1
 

 

days of the Expiration
Date (however, such restriction may be waived by Holder (but only as to itself
and not to any other holder) upon not less than 65 days prior notice to the
Company). For purposes of the foregoing proviso, the aggregate number of shares
of Common Stock beneficially owned by the holder and its affiliates shall
include the number of shares of Common Stock issuable upon exercise of this
Warrant with respect to which the determination of such proviso is being made,
but shall exclude shares of Common Stock which would be issuable upon (i) exercise
of the remaining, unexercised Warrants beneficially owned by the holder and its
affiliates and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company beneficially owned
by the holder and its affiliates (including, without limitation, any
convertible notes or preferred stock) subject to a limitation on conversion or
exercise analogous to the limitation contained herein. Except as set forth in
the preceding sentence, for purposes of this paragraph, beneficial ownership
shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended. For purposes of this Warrant, in
determining the number of outstanding shares of Common Stock a holder may rely
on the number of outstanding shares of Common Stock as reflected in (1) the
Company’s most recent Form 10-QSB or Form 10-KSB, as the
case may be, (2) a more recent public announcement by the Company or (3) any
other notice by the Company or its transfer agent setting forth the number of
shares of Common Stock outstanding. Upon the written request of any holder, the
Company shall promptly, but in no event later than one (1) Business Day
following the receipt of such notice, confirm in writing to any such holder the
number of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
the exercise of Warrants (as defined below) by such holder and its affiliates
since the date as of which such number of outstanding shares of Common Stock
was reported.

Section 1.

(a)   This Warrant is one (1) of three (3) common stock
purchase warrants (the “Warrant”) issued pursuant to the Securities
Purchase Agreement (“Securities Purchase Agreement”) dated the date
hereof between the Company and the Buyers listed on Schedule I thereto. The
other warrant issued pursuant to the Securities Purchase Agreement is referred
to herein as the “Companion Warrants” and is to be interpreted together
with this Warrant. Convertible debentures were issued to the holder of this
Warrant at the same time as and after this Warrant and the Companion Warrants
as described in the Securities Purchase Agreement and are referred to herein as
the Convertible Debentures.

(b)   Definitions. The following words and terms as used in this
Warrant shall have the following meanings:

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

(ii)           “Business Day” means any day other than Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or required by law to remain closed.

 2
 

 

(iii)          “Closing Bid Price” means the closing bid price of
Common Stock as quoted on the Principal Market (as reported by Bloomberg
Financial Markets (“Bloomberg”) through its “Volume at Price” function).

(iv)          “Common Stock” means (i) the Company’s common
stock, no par value per share, and (ii) any capital stock into which such
Common Stock shall have been changed or any capital stock resulting from a
reclassification of such Common Stock.

(v)           “Event of Default” means an event of default under
the Securities Purchase Agreement, the Convertible Debentures issued in
connection therewith or the Investor’s Registration Rights Agreement dated the
date hereof.

(vi)          “Excluded Securities” means, any of the following:

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

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

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

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

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

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

(vii)         “Expiration Date” means the date three (3) years
from the Issuance Date of this Warrant or, if such date falls on a Saturday,
Sunday or other day on which banks are required or authorized to be closed in
the City of New York or the State of New York or on which trading does not take
place on the Principal Exchange or automated quotation system on which the
Common Stock is traded (a “Holiday”), the next date that is not a
Holiday.

(viii)        “Issuance Date” means the date hereof.

 3
 

 

(ix)           “Options” means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities.

(x)            “Other Securities” means (i) those convertible
debentures, options and warrants of the Company issued prior to, and
outstanding on, the Issuance Date of this Warrant, (ii) the shares of
Common Stock issuable on exercise of such convertible debentures, options and
warrants, provided such convertible debentures, options and warrants are not
amended after the Issuance Date of this Warrant and (iii) the shares of
Common Stock issuable upon exercise of this Warrant the Convertible Debenture
and the Companion Warrants that were issued pursuant to the Securities Purchase
Agreement, and (iv) the 660,000 shares of restricted common stock issued
or to be issued pursuant to the Securities Purchase Agreement, and (v) any
other shares of Common Stock issued or issuable pursuant to this Warrant, the
Companion Warrants, the Convertible Debenture, and the registration rights
agreement entered into between the Company and the initial holder of this
Warrant.

(xi)           “Person” means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.

(xii)          “Principal Market” means the New York Stock
Exchange, the American Stock Exchange, the Nasdaq National Market, the Nasdaq
Capital Market, whichever is at the time the principal trading exchange or
market for such security, or the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg or, if no bid or sale
information is reported for such security by Bloomberg, then the average of the
bid prices of each of the market makers for such security as reported in the “pink
sheets” by the National Quotation Bureau, Inc.

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

(xiv)        “VWAP” means the volume weighted average price per
share of the Company’s Common Stock on the Nasdaq Capital Market or other
Subsequent Market, as quoted by Bloomberg, LP.

(xv)         “Warrant” means this Warrant and all Warrants issued
in exchange, transfer or replacement thereof.

(xvi)        “Warrant Exercise Price” shall be $2.00 or as
subsequently adjusted as provided in Section 8 hereof.

(xvii)       “Warrant Shares” means the shares of Common Stock
issuable at any time upon exercise of this Warrant.

(c)   Other Definitional Provisions.

(i)            Except as otherwise specified herein, all references
herein (A) to the Company shall be deemed to include the Company’s
successors and (B) to any applicable 

 4
 

 

law defined or
referred to herein shall be deemed references to such applicable law as the
same may have been or may be amended or supplemented from time to time.

(ii)           When used in this Warrant, the words “herein”, “hereof”,
and “hereunder” and words of
similar import, shall refer to this Warrant as a whole and not to any provision
of this Warrant, and the words “Section”, “Schedule”, and “Exhibit”
shall refer to Sections of, and Schedules and Exhibits to, this Warrant unless
otherwise specified.

(iii)          Whenever the context so requires, the neuter gender
includes the masculine or feminine, and the singular number includes the
plural, and vice versa.

Section 2.               Exercise of Warrant.

(a)   Subject to the terms and conditions hereof, this Warrant may be
exercised by the holder hereof then registered on the books of the Company, pro
rata as hereinafter provided, at any time on any Business Day on or after the
opening of business on such Business Day, commencing with the first day after
the date hereof, and prior to 11:59 P.M. Eastern Time on the Expiration
Date (i) by delivery of a written notice, in the form of the subscription
notice attached as Exhibit A hereto (the “Exercise Notice”),
of such holder’s election to exercise this Warrant, which notice shall specify
the number of Warrant Shares to be purchased, payment to the Company of an
amount equal to the Warrant Exercise Price(s) applicable to the Warrant
Shares being purchased, multiplied by the number of Warrant Shares (at the
applicable Warrant Exercise Price) as to which this Warrant is being
exercised (plus any applicable issue or transfer taxes) (the “Aggregate
Exercise Price”) in cash or wire transfer of immediately available funds
and the surrender of this Warrant (or an indemnification undertaking with
respect to this Warrant in the case of its loss, theft or destruction) to a
common carrier for overnight delivery to the Company as soon as practicable
following such date (“Cash Basis”) or (ii) if after January 15,
2007, at the time of exercise, the Warrant Shares are not subject to an
effective registration statement or if an Event of Default has occurred, by
delivering an Exercise Notice and in lieu of making payment of the Aggregate
Exercise Price in cash or wire transfer, elect instead to receive upon such
exercise the “Net Number” of shares of Common Stock determined according to the
following formula (the “Cashless Exercise”):

	
  Net Number =

  	
  (A x B) – (A x
  C)

  	
   

  
	
   

  	
  B

  	
   

  

 

For purposes of the foregoing formula:

A = the total number of Warrant Shares with respect to which this
Warrant is then being exercised.

B = the VWAP of the Common Stock on the date of exercise of the
Warrant.

C = the Warrant Exercise Price then in effect for the applicable
Warrant Shares at the time of such exercise.

 5
 

 

In the event of any exercise of the rights
represented by this Warrant in compliance with this Section 2, the Company
shall on or before the fifth (5th) Business Day following the date of
receipt of the Exercise Notice, the Aggregate Exercise Price and this Warrant
(or an indemnification undertaking with respect to this Warrant in the case of
its loss, theft or destruction) and the receipt of the representations of the
holder specified in Section 6 hereof, if requested by the Company (the “Exercise
Delivery Documents”), and if the Common Stock is DTC eligible, credit such
aggregate number of shares of Common Stock to which the holder shall be
entitled to the holder’s or its designee’s balance account with The Depository
Trust Company; provided, however, if the holder who submitted the Exercise
Notice requested physical delivery of any or all of the Warrant Shares, or, if
the Common Stock is not DTC eligible 
then the Company shall, on or before the fifth (5th) Business Day following
receipt of the Exercise Delivery Documents, issue and surrender to a common
carrier for overnight delivery to the address specified in the Exercise Notice,
a certificate, registered in the name of the holder, for the number of shares
of Common Stock to which the holder shall be entitled pursuant to such request.
Upon delivery of the Exercise Notice and Aggregate Exercise Price referred to
in clause (i) or (ii) above the holder of this Warrant shall be
deemed for all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been exercised. In the
case of a dispute as to the determination of the Warrant Exercise Price, the
VWAP or the arithmetic calculation of the Warrant Shares, the Company shall
promptly issue to the holder the number of Warrant Shares that is not disputed
and shall submit the disputed determinations or arithmetic calculations to the
holder via facsimile within one (1) Business Day of receipt of the holder’s
Exercise Notice.

(b)   If the holder and the Company are unable to agree upon the
determination of the Warrant Exercise Price or arithmetic calculation of the
Warrant Shares within one (1) day of such disputed determination or
arithmetic calculation being submitted to the holder, then the Company shall
immediately submit via facsimile or other form of electronic communication
(including without limitation e-mail) (i) the disputed determination of
the Warrant Exercise Price or the VWAP to an independent, reputable investment
banking firm or (ii) the disputed arithmetic calculation of the Warrant
Shares to its independent, outside accountant. The Company shall cause the
investment banking firm or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the holder of the
results no later than forty-eight (48) hours from the time it receives the
disputed determinations or calculations. Such investment banking firm’s or
accountant’s determination or calculation, as the case may be, shall be deemed
conclusive absent manifest error.

(c)   Unless the rights represented by this Warrant shall have expired
or shall have been fully exercised, the Company shall, as soon as practicable
and in no event later than five (5) Business Days after any exercise and
at its own expense, issue a new Warrant identical in all respects to this
Warrant exercised except it shall represent rights to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under this
Warrant exercised, less the number of Warrant Shares with respect to which such
Warrant is exercised.

(d)   No fractional Warrant Shares are to be issued upon any pro rata
exercise of this Warrant, but rather the number of Warrant Shares issued upon
such exercise of this Warrant shall be rounded up or down to the nearest whole
number.

 6
 

 

(e)   If the Company or its Transfer Agent shall fail for any reason or
for no reason to issue to the holder within ten (10) days of receipt
of the Exercise Delivery Documents, a certificate for the number of Warrant
Shares to which the holder is entitled or to credit the holder’s balance
account with The Depository Trust Company for such number of Warrant Shares to
which the holder is entitled upon the holder’s exercise of this Warrant, the
Company shall, in addition to any other remedies under this Warrant or
otherwise available to such holder, pay as additional damages in cash to such
holder on each day the issuance of such certificate for Warrant Shares is not
timely effected an amount equal to 0.025% of the product of (A) the sum of
the number of Warrant Shares not issued to the holder on a timely basis and to
which the holder is entitled, and (B) the VWAP of the Common Stock for the
trading day immediately preceding the last possible date which the Company
could have issued such Common Stock to the holder without violating this Section 2.

(f)    If within ten (10) days after the Company’s receipt of the
Exercise Delivery Documents, the Company fails to deliver a new Warrant to the
holder for the number of Warrant Shares to which such holder is entitled
pursuant to Section 2 hereof, then, in addition to any other available
remedies under this Warrant, or otherwise available to such holder, the Company
shall pay as additional damages in cash to such holder on each day after such
tenth (10th)
day that such delivery of such new Warrant is not timely effected in an amount
equal to 0.25% of the product of (A) the number of Warrant Shares
represented by the portion of this Warrant which is not being exercised and (B) the
VWAP of the Common Stock for the trading day immediately preceding the last
possible date which the Company could have issued such Warrant to the holder
without violating this Section 2.

Section 3.               Covenants as to Common Stock. The Company
hereby covenants and agrees as follows:

(a)   This Warrant is, and any Warrants issued in substitution for or
replacement of this Warrant will upon issuance be, duly authorized and validly
issued.

(b)   Subject to the availability of sufficient authorized shares, all
Warrant Shares which may be issued upon the exercise of the rights represented
by this Warrant will, upon issuance, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof.

(c)   During the period within which the rights represented by this
Warrant may be exercised, and subject to the availability of sufficient authorized
shares the Company will at all times have authorized and reserved at least one
hundred percent (100%) of the number of shares of Common Stock needed to
provide for the exercise of the rights then represented by this Warrant and the
par value of said shares will at all times be less than or equal to the
applicable Warrant Exercise Price. If at any time after December 31, 2006
the Company does not have a sufficient number of shares of Common Stock
authorized and available, then the Company shall call and hold a special
meeting of its stockholders within sixty (60) days of that time for the
sole purpose of increasing the number of authorized shares of Common Stock.

(d)   The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of 

 7
 

 

securities, or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed by it hereunder, but will at all
times in good faith assist in the carrying out of all the provisions of this
Warrant and in the taking of all such action as may reasonably be requested by
the holder of this Warrant in order to protect the exercise privilege of the
holder of this Warrant against dilution or other impairment, consistent with
the tenor and purpose of this Warrant. The Company will not increase the par
value of any shares of Common Stock receivable upon the exercise of this
Warrant above the Warrant Exercise Price then in effect, and (ii) will
take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant assuming that there is an exemption
available from the registration requirements of the Securities Act of 1933 and
applicable state law for such exercise.

(e)   This Warrant will be binding upon any entity succeeding to the
Company by merger, consolidation or acquisition of all or substantially all of
the Company’s assets.

Section 4.               Taxes. The Company shall pay any and all taxes,
except any applicable withholding, which may be payable with respect to the
issuance and delivery of Warrant Shares upon exercise of this Warrant.

Section 5.               Warrant Holder Not Deemed a Stockholder. Except
as otherwise specifically provided herein, no holder, as such, of this Warrant
shall be entitled to vote or receive dividends or be deemed the holder of
shares of capital stock of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the holder hereof, as
such, any of the rights of a stockholder of the Company or any right to vote,
give or withhold consent to any corporate action (whether any reorganization,
issue of stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the holder of this Warrant of
the Warrant Shares which he or she is then entitled to receive upon the due
exercise of this Warrant. In addition, nothing contained in this Warrant shall
be construed as imposing any liabilities on such holder to purchase any
securities (upon exercise of this Warrant or otherwise) or as a stockholder of
the Company, whether such liabilities are asserted by the Company or by
creditors of the Company. Notwithstanding this Section 5, the Company will
provide the holder of this Warrant with copies of the same notices and other
information given to the stockholders of the Company generally,
contemporaneously with the giving thereof to the stockholders.

Section 6.               Representations of Holder. The holder of this
Warrant, by the acceptance hereof, represents that it is acquiring this Warrant
and the Warrant Shares for its own account for investment only and not with a
view towards, or for resale in connection with, the public sale or distribution
of this Warrant or the Warrant Shares, except pursuant to sales registered or
exempted under the Securities Act; provided, however, that by making the
representations herein, the holder does not agree to hold this Warrant or any
of the Warrant Shares for any minimum or other specific term and reserves the
right to dispose of this Warrant and the Warrant Shares at any time in
accordance with or pursuant to a registration statement or an exemption under
the Securities Act. The holder of this Warrant further represents, by
acceptance hereof, that, as of this date, such holder is an “accredited
investor” as such term is defined in Rule 501(a)(1) of Regulation D
promulgated by the Securities and Exchange Commission under 

 8
 

 

the Securities Act
(an “Accredited Investor”). Upon exercise of this Warrant the holder
shall, if requested by the Company, confirm in writing, in a form satisfactory
to the Company, that the Warrant Shares so purchased are being acquired solely
for the holder’s own account and not as a nominee for any other party, for
investment, and not with a view toward distribution or resale and that such holder
is an Accredited Investor. If such holder cannot make such representations
because they would be factually incorrect, it shall be a condition to such
holder’s exercise of this Warrant that the Company receive such other
representations as the Company considers reasonably necessary to assure the
Company that the issuance of its securities upon exercise of this Warrant shall
not violate any United States or state securities laws.

Section 7.               Ownership and Transfer.

(a)   The Company shall maintain at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to the
holder hereof), a register for this Warrant, in which the Company shall record
the name and address of the person in whose name this Warrant has been issued,
as well as the name and address of each transferee. The Company may treat the
person in whose name any Warrant is registered on the register as the owner and
holder thereof for all purposes, notwithstanding any notice to the contrary,
but in all events recognizing any transfers made in accordance with the terms
of this Warrant.

Section 8.               Adjustment of Warrant Exercise Price and Number of
Shares. The Warrant Exercise Price and the number of shares of Common Stock
issuable upon exercise of this Warrant shall be adjusted from time to time as
follows:

(a)   Adjustment of Warrant Exercise Price and Number of Shares upon
Issuance of Common Stock.  If and
whenever on or after the Issuance Date of this Warrant, the Company issues or
sells, or is deemed to have issued or sold, any shares of Common
Stock (other than (i) Excluded Securities, (ii) shares of Common
Stock which are issued or deemed to have been issued by the Company in
connection with an Approved Stock Plan, or (iii) the Other Securities) for
a consideration per share less than a price equal to the Warrant Exercise Price
in effect immediately prior to such issuance or sale (the “Applicable Price”),
then immediately after such issue or sale the Warrant Exercise Price then in
effect shall be reduced to the Applicable Price.

(b)   Effect on Warrant Exercise Price of Certain Events. For
purposes of determining the adjusted Warrant Exercise Price under Section 8(a) above,
the following shall be applicable:

(i)            Issuance of Options. If after the date hereof, the
Company in any manner grants any Options and the lowest price per share for
which one share of Common Stock is issuable upon the exercise of any such
Option or upon conversion or exchange of any convertible securities issuable
upon exercise of any such Option is less than the Applicable Price (not
including Excluded Securities), then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company at the time
of the granting or sale of such Option for such price per share. For purposes
of this Section 8(b)(i), the lowest price per share for which one share of
Common Stock is issuable upon exercise of such Options or upon conversion or
exchange of such Convertible Securities shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the Company with
respect to any one 

 9
 

 

share of Common
Stock upon the granting or sale of the Option, upon exercise of the Option or
upon conversion or exchange of any convertible security issuable upon exercise
of such Option. No further adjustment of the Warrant Exercise Price shall be
made upon the actual issuance of such Common Stock or of such convertible
securities upon the exercise of such Options or upon the actual issuance of
such Common Stock upon conversion or exchange of such convertible securities.

(ii)           Issuance of Convertible Securities. If the Company
in any manner issues or sells any convertible securities and the lowest price
per share for which one share of Common Stock is issuable upon the conversion
or exchange thereof is less than the Applicable Price (not including Excluded
Securities), then such share of Common Stock shall be deemed to be outstanding
and to have been issued and sold by the Company at the time of the issuance or
sale of such convertible securities for such price per share. For the purposes
of this Section 8(b)(ii), the lowest price per share for which one share
of Common Stock is issuable upon such conversion or exchange shall be equal to
the sum of the lowest amounts of consideration (if any) received or receivable
by the Company with respect to one share of Common Stock upon the issuance or
sale of the convertible security and upon conversion or exchange of such
convertible security. No further adjustment of the Warrant Exercise Price shall
be made upon the actual issuance of such Common Stock upon conversion or
exchange of such convertible securities, and if any such issue or sale of such
convertible securities is made upon exercise of any Options for which
adjustment of the Warrant Exercise Price had been or are to be made pursuant to
other provisions of this Section 8(b), no further adjustment of the
Warrant Exercise Price shall be made by reason of such issue or sale.

(iii)          Change in Option Price or Rate of Conversion. If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion or exchange of any convertible
securities, or the rate at which any convertible securities are convertible
into or exchangeable for Common Stock changes at any time, the Warrant Exercise
Price in effect at the time of such change shall be adjusted to the Warrant
Exercise Price which would have been in effect at such time had such Options or
convertible securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold and the number of Warrant Shares issuable
upon exercise of this Warrant shall be correspondingly readjusted. For purposes
of this Section 8(b)(iii), if the terms of any Option or convertible
security that was outstanding as of the Issuance Date of this Warrant are
changed in the manner described in the immediately preceding sentence, then
such Option or convertible security and the Common Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued as
of the date of such change. No adjustment pursuant to this Section 8(b) shall
be made if such adjustment would result in an increase of the Warrant Exercise
Price then in effect.

(c)   Effect on Warrant Exercise Price of Certain Events. For
purposes of determining the adjusted Warrant Exercise Price under
Sections 8(a) and 8(b), the following shall be applicable:

(i)            Calculation of Consideration Received. If any
Common Stock, Options or convertible securities are issued or sold or deemed to
have been issued or sold for

 

 10

 

cash, the
consideration received therefore will be deemed to be the gross amount received
by the Company therefore. If any Common Stock, Options or convertible
securities are issued or sold for a consideration other than cash, the amount
of such consideration received by the Company will be the fair value of such
consideration, except where such consideration consists of marketable
securities, in which case the amount of consideration received by the Company
will be the market price of such securities on the date of receipt of such
securities. If any Common Stock, Options or convertible securities are issued
to the owners of the non-surviving entity in connection with any merger in
which the Company is the surviving entity, the amount of consideration therefore
will be deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such Common Stock,
Options or convertible securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined jointly by the
Company and the holders of Warrants representing at least a majority of the
Warrant Shares issuable upon exercise of the Warrants and Companion Warrants
then outstanding. If such parties are unable to reach agreement within
ten (10) days after the occurrence of an event requiring valuation
(the “Valuation Event”), the fair value of such consideration will be
determined within five (5) Business Days after the tenth (10th) day following the Valuation
Event by an independent, reputable appraiser jointly selected by the Company
and the holders of Warrants representing at least a majority  of the Warrant Shares issuable upon exercise
of the Warrants (including the Companion Warrants) then outstanding. The determination
of such appraiser shall be final and binding upon all parties and the fees and
expenses of such appraiser shall be borne equally  by the Company and the holders of Warrants.

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

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

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

(d)   Adjustment
of Warrant Exercise Price upon Subdivision or Combination of Common Stock. If
the Company at any time after the date of issuance of this Warrant subdivides
(by any stock split, stock dividend, recapitalization or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater number of
shares, any Warrant Exercise Price in effect immediately prior to such
subdivision will be proportionately reduced and the number of shares of Common
Stock obtainable upon exercise of this Warrant will be 

 11
 

 

proportionately
increased. If the Company at any time after the date of issuance of this
Warrant combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of
shares, any Warrant Exercise Price in effect immediately prior to such
combination will be proportionately increased and the number of Warrant Shares
issuable upon exercise of this Warrant will be proportionately decreased. Any
adjustment under this Section 8(d) shall become effective at the
close of business on the date the subdivision or combination becomes effective.

(e)   Distribution
of Assets. If the Company shall declare or make any dividend or other
distribution of its assets (or rights to acquire its assets) to holders of
Common Stock, by way of return of capital or otherwise (including, without
limitation, any distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement or other similar transaction) (a “Distribution”), at any
time after the issuance of this Warrant, then, in each such case:

(i)            any
Warrant Exercise Price in effect immediately prior to the close of business on
the record date fixed for the determination of holders of Common Stock entitled to receive the Distribution shall be reduced, effective as of the close of
business on such record date, to a price determined by multiplying such Warrant
Exercise Price by a fraction of which (A) the numerator shall be the
Closing Sale Price of the Common Stock on the trading day immediately preceding
such record date minus the value of the Distribution (as determined in good
faith by the Company’s Board of Directors) applicable to one share of Common
Stock, and (B) the denominator shall be the Closing Sale Price of the
Common Stock on the trading day immediately preceding such record date; and

(ii)           either
(A) the number of Warrant Shares obtainable upon exercise of this Warrant
shall be increased to a number of shares equal to the number of shares of
Common Stock obtainable immediately prior to the close of business on the
record date fixed for the determination of holders of Common Stock entitled to
receive the Distribution multiplied by the reciprocal of the fraction set forth
in the immediately preceding clause (i), or (B) in the event that the
Distribution is of common stock of a company whose common stock is traded on a
national securities exchange or a national automated quotation system, then the
holder of this Warrant shall receive an additional warrant to purchase Common
Stock, the terms of which shall be identical to those of this Warrant, except
that such warrant shall be exercisable into the amount of the assets that would
have been payable to the holder of this Warrant pursuant to the Distribution
had the holder exercised this Warrant immediately prior to such record date and
with an exercise price equal to the amount by which the exercise price of this
Warrant was decreased with respect to the Distribution pursuant to the terms of
the immediately preceding clause (i).

(f)    Certain
Events. If any event occurs of the type contemplated by the provisions of
this Section 8 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the Company’s
Board of Directors will make an appropriate adjustment in the Warrant Exercise
Price and the number of shares of Common Stock obtainable upon exercise of this
Warrant so as to protect the rights of the holders of the Warrants; provided,
except as set forth in section 8(d),that no such adjustment pursuant to this Section 8(f) will
increase the 

 12
 

 

Warrant Exercise
Price or decrease the number of shares of Common Stock obtainable as otherwise
determined pursuant to this Section 8.

(g)   Notices.

(i)            Immediately
upon any adjustment of the Warrant Exercise Price, the Company will give
written notice thereof to the holder of this Warrant, setting forth in
reasonable detail, and certifying, the calculation of such adjustment.

(ii)           The
Company will give written notice to the holder of this Warrant at least ten (10) days
prior to the date on which the Company closes its books or takes a record (A) with
respect to any dividend or distribution upon the Common Stock, (B) with
respect to any pro rata subscription offer to holders of Common Stock or (C) for
determining rights to vote with respect to any Organic Change (as defined
below), dissolution or liquidation, provided that such information shall be
made known to the public prior to or in conjunction with such notice being provided
to such holder.

(iii)          The
Company will also give written notice to the holder of this Warrant at least
ten (10) days prior to the date on which any Organic Change, dissolution
or liquidation will take place, provided that such information shall be made
known to the public prior to or in conjunction with such notice being provided
to such holder.

(h)   Limitations.
Notwithstanding the above provisions of this Section 8, the Company may
not issue any shares of Common Stock upon exercise of this Warrant until the
Company’s shareholders approve (without the vote of any shares acquired in this
transaction and related transactions) the issuance of the Total Transaction
Shares as defined in Section 4(l) of the Securities Purchase
Agreement.

Section 9.               Purchase
Rights; Reorganization, Reclassification, Consolidation, Merger or Sale.

(a)   In
addition to any adjustments pursuant to Section 8 above, if at any time
the Company grants, issues or sells any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property pro rata to
the record holders of any class of Common Stock (the “Purchase Rights”),
then the holder of this Warrant will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
holder could have acquired if such holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights.

(b)   Any
recapitalization, reorganization, reclassification, consolidation, merger, sale
of all or substantially all of the Company’s assets to another Person or other
transaction in each case which is effected in such a way that holders of Common
Stock are entitled to receive 

 13
 

 

(either directly
or upon subsequent liquidation) stock, securities or assets with respect to or
in exchange for Common Stock is referred to herein as an “Organic Change.”  Prior to the consummation of any (i) sale
of all or substantially all of the Company’s assets to an acquiring Person or (ii) other
Organic Change following which the Company is not a surviving entity, the
Company will secure from the Person purchasing such assets or the successor
resulting from such Organic Change (in each case, the “Acquiring Entity”)
a written agreement (in form and substance satisfactory to the holders of
Warrants representing at least a majority  of the Warrant Shares issuable
upon exercise of the Warrants then outstanding) to deliver to each holder of
Warrants in exchange for such Warrants, a security of the Acquiring Entity evidenced
by a written instrument substantially similar in form and substance to this
Warrant and satisfactory to the holders of the Warrants (including an adjusted
warrant exercise price equal to the value for the Common Stock reflected by the
terms of such consolidation, merger or sale, and exercisable for a
corresponding number of shares of Common Stock acquirable and receivable upon
exercise of the Warrants without regard to any limitations on exercise, if the
value so reflected is less than any Applicable Warrant Exercise Price
immediately prior to such consolidation, merger or sale). Prior to the
consummation of any other Organic Change, the Company shall make appropriate
provision (in form and substance satisfactory to the holders of Warrants
representing a majority of the
Warrant Shares issuable upon exercise of the Warrants then outstanding) to
insure that each of the holders of the Warrants will thereafter have the right
to acquire and receive in lieu of or in addition to (as the case may be) the Warrant
Shares immediately theretofore issuable and receivable upon the exercise of
such holder’s Warrants (without regard to any limitations on exercise),
such shares of stock, securities or assets that would have been issued or
payable in such Organic Change with respect to or in exchange for the number of
Warrant Shares which would have been issuable and receivable upon the exercise
of such holder’s Warrant as of the date of such Organic Change (without taking
into account any limitations or restrictions on the exercisability of this
Warrant).

Section 10.             Lost,
Stolen, Mutilated or Destroyed Warrant. If this Warrant is lost, stolen,
mutilated or destroyed, the Company shall promptly, on receipt of an
indemnification undertaking (or, in the case of a mutilated Warrant, the
Warrant), issue a new Warrant of like denomination and tenor as this Warrant so
lost, stolen, mutilated or destroyed.

Section 11.             Notice.
Any notices, consents, waivers or other communications required or permitted to
be given under the terms of this Warrant must be in writing and will be deemed
to have been delivered:  (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of receipt is received by the sending party
transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one Business Day after deposit with a
nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:

 14
 

 

 

	
  If to Holder:

  	
  Cornell Capital Partners, LP

  
	
   

  	
  101 Hudson Street — Suite 3700

  
	
   

  	
  Jersey City, NJ 07302

  
	
   

  	
  Attention: Mark A. Angelo

  
	
   

  	
  Telephone: (201) 985-8300

  
	
   

  	
  Facsimile: (201) 985-8266

  
	
   

  	
   

  
	
  With Copy to:

  	
  David Gonzalez, Esq.

  
	
   

  	
  101 Hudson Street — Suite 3700

  
	
   

  	
  Jersey City, NJ 07302

  
	
   

  	
  Telephone: (201) 985-8300

  
	
   

  	
  Facsimile: (201) 985-8266

  
	
   

  	
   

  
	
  If to the
  Company, to:

  	
  Isonics Corporation

  
	
   

  	
  5906 McIntyre Street — Suite 220

  
	
   

  	
  Golden, CO 80403

  
	
   

  	
  Attention: James E. Alexander, President

  
	
   

  	
  Telephone: (303) 279-7900

  
	
   

  	
  Facsimile: (303) 279-7300

  
	
   

  	
   

  
	
  With a copy
  (which does not constitute notice) to:

  	
  Burns, Figa & Will, P.C.

  
	
   

  	
  6400 South Fiddler’s Green Circle — Suite 1000

  
	
   

  	
  Greenwood Village, CO 80111

  
	
   

  	
  Attention: Herrick K. Lidstone, Jr., Esq.

  
	
   

  	
  Telephone: (303) 796-2626

  
	
   

  	
  Facsimile: (303) 796-2777

  

 

If to a holder of this Warrant, to it at the address
and facsimile number set forth on Exhibit C hereto, with copies to
such holder’s representatives as set forth on Exhibit C, or at such
other address and facsimile as shall be delivered to the Company upon the
issuance or transfer of this Warrant. Each party shall provide five days’ prior
written notice to the other party of any change in address or facsimile number.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, facsimile, waiver or other communication, (or (B) provided by a
nationally recognized overnight delivery service shall be rebuttable evidence
of personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.

Section 12.             Date.
The date of this Warrant is set forth on page 1 hereof. This Warrant,
in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 8(b) shall continue in
full force and effect after such date as to any Warrant Shares or other
securities issued upon the exercise of this Warrant.

 15
 

 

Section 13.             Amendment and Waiver. Except as otherwise
provided herein, the provisions of the Warrants may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the written
consent of the holders of Warrants representing at a majority  of the Warrant Shares issuable upon exercise
of the Warrants then outstanding; provided that, except for Section 8(d),
no such action may increase the Warrant Exercise Price or decrease the number
of shares or class of stock obtainable upon exercise of any Warrant without the
written consent of the holder of such Warrant.

Section 14.             Descriptive
Headings; Governing Law. The descriptive headings of the several sections
and paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The corporate laws of the State of New
Jersey shall govern all issues concerning the relative rights of the Company
and its stockholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New Jersey, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State
of New Jersey or any other jurisdictions) that would cause the application of
the laws of any jurisdictions other than the State of New Jersey. Each party
hereby irrevocably submits to the exclusive jurisdiction of the United States
District Court for the District of New Jersey sitting in Newark, New Jersey,
for the adjudication of any dispute hereunder or in connection herewith or
therewith, or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.

Section 15.            Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS
WARRANT, THE PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE
OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION.

REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

 16
 

 

IN WITNESS WHEREOF,
the Company has caused this Warrant to be signed as of the date first set forth
above.

 

	
  

  	
  ISONICS CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  James E. Alexander

  
	
   

  	
  Title:

  	
  President and Chief Executive Officer

  

 

 17

 

EXHIBIT A TO WARRANT

EXERCISE NOTICE

TO
BE EXECUTED 

BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT

ISONICS
CORPORATION

The undersigned holder
hereby exercises the right to purchase                       
of the shares of Common Stock (“Warrant Shares”) of Isonics Corporation
(the “Company”), evidenced by the attached Warrant (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.

Specify Method of
exercise by check mark:

1. ___     Cash Exercise

(a) Payment of Warrant Exercise Price. The holder shall pay
the Aggregate Exercise Price of $                      
to the Company in accordance with the terms of the Warrant.

(b) Delivery of Warrant Shares. The Company shall deliver
to the holder                       
Warrant Shares in accordance with the terms of the Warrant.

2. ___     Cashless Exercise

(a) Payment of Warrant Exercise Price. In lieu of making
payment of the Aggregate Exercise Price, the holder elects to receive upon such
exercise the Net Number of shares of Common Stock determined in accordance with
the terms of the Warrant.

(b) Delivery of Warrant Shares. The Company shall deliver
to the holder                       
Warrant Shares in accordance with the terms of the Warrant.

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

Date: _______________ __,
______

Name of Registered Holder

 1
 

 

 

	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  

 

 

 2

 

EXHIBIT B TO WARRANT

FORM OF WARRANT
POWER

FOR
VALUE RECEIVED, the undersigned does hereby assign and
transfer to                ,
Federal Identification No.                ,
a warrant to purchase                
shares of the capital stock of Isonics Corporation represented by warrant
certificate no.       , standing in the name
of the undersigned on the books of said corporation. The undersigned does
hereby irrevocably constitute and appoint                ,
attorney to transfer the warrants of said corporation, with full power of
substitution in the premises.

In submitting this
Warrant Power, the undersigned represents and warrants to Isonics Corporation
that it has not offered the Warrant through any means of general advertising or
public solicitation, and that it will provide Isonics Corporation such other
information and representations of the undersigned or of the transferee
necessary or appropriate to permit Isonics Corporation to determine whether
there is an exemption available for the transfer of this Warrant.

 

	
  Dated:

  	
   

  	
   

  	
  

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  

 

 B-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00105-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00105-of-00352.parquet"}]]