Document:

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                                                                     EXHIBIT 4.3

                           INTERNATIONAL ISOTOPES INC.

               Certificate of Designation, Preferences and Rights

                     of Preferred Stock by Resolution of the

                       Board of Directors Providing for an

                       Issue of 14,300 Shares of Preferred

                                Stock Designated

               Series B 7% Convertible Redeemable Preferred Stock

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

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

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

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

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

                                     INTERNATIONAL ISOTOPES INC.

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

                                     Name:  David M. Camp, President

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

                                     Name: Joan H. Gillett, Assistant Secretary

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                                    EXHIBIT A

                                   ARTICLE I

           DESIGNATION, AMOUNT, PAR VALUE, LIQUIDATION VALUE AND RANK

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

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

                                   ARTICLE II

                                    DIVIDENDS

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

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

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

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

                                  ARTICLE III

                                  VOTING RIGHTS

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

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                                   ARTICLE IV

                                   LIQUIDATION

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

                                   ARTICLE V

                                   CONVERSION

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

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

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

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

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

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

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              5.3 ISSUANCE OF SHARES UPON CONVERSION.

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

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

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

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

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

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

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

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

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

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              5.5 MANDATORY REDEMPTION ON MAY 31, 2003.

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

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

                                   ARTICLE VI

                            REGISTRATION REQUIREMENTS

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

                                  ARTICLE VII

                         ADJUSTMENT OF CONVERSION PRICE

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

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

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

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

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

              (d) Adjustment to Conversion Price.

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

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

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

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

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

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

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

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

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

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

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

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

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

              7.2 CERTAIN RECLASSIFICATIONS, MERGERS AND ACQUISITIONS

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

                                       10
<PAGE>   12

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

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

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

                                       11
<PAGE>   13

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

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

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

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

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

                                       12
<PAGE>   14

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

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

                                  ARTICLE VIII

                               OPTIONAL REDEMPTION

              8.1 OPTIONAL REDEMPTION.

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

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

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

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

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

                                       13
<PAGE>   15

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

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

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

              8.4 REDEMPTION UPON TRIGGERING EVENTS.

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

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

                                       14
<PAGE>   16

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

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

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

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

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

                                   ARTICLE IX

                                   DEFINITIONS

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

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

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

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

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

                                       15
<PAGE>   17

              "BSE" means the Boston Stock Exchange.

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

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

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

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

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

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

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

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

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

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

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

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

              "DTC" means the Depositary Trust Corporation.

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

                                       16
<PAGE>   18

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

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

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

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

              "Nasdaq" means the Nasdaq Smallcap Market.

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

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

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

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

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

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

                                       17
<PAGE>   19

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       18
<PAGE>   20

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

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

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

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

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

                                   ARTICLE X

                                  MISCELLANEOUS

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

              10.2 MISCELLANEOUS. This Certificate of Designation shall be
governed by and construed and enforced in accordance with the internal laws of
the State of Texas without regard to the principles of conflicts of law thereof.
Each party hereby irrevocably submits to the nonexclusive jurisdiction of the
state and federal courts sitting in Denton, County, Texas, for the adjudication
of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is improper. The parties hereto, including all guarantors or
endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance and
enforcement of this Certificate of Designation, except as specifically provided
herein, and assent to extensions of the time of payment, or forbearance or other
indulgence without notice. The Holder of Preferred Stock by acceptance of a
share of Preferred Stock agrees to be bound by the provisions of this
Certificate of Designation which are expressly binding on such Holder.

                                       19
<PAGE>   21

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

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

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

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

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

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

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

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

                                       20
<PAGE>   22

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

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

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

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

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

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

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

                                       21
<PAGE>   23

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

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

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

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

                          [SIGNATURE PAGE(S) TO FOLLOW]

                                       22
<PAGE>   24

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

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

                                                      President

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

                                                      Assistant Secretary

                                       23
<PAGE>   25

                                    EXHIBIT A

                              NOTICE OF CONVERSION
                            AT THE ELECTION OF HOLDER

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

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

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

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

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

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

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

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

                                   --------------------------------------------
                                   Address<PAGE>   1
                                                                     EXHIBIT 4.4

================================================================================

                                                                  EXECUTION COPY

                          SECURITIES PURCHASE AGREEMENT

                                      Among

                           INTERNATIONAL ISOTOPES INC.

                                       and

                       THE PURCHASERS LISTED ON SCHEDULE I

                            Dated as of June 1, 2000

================================================================================

<PAGE>   2

                          SECURITIES PURCHASE AGREEMENT

                  THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated
as of June 1, 2000 among International Isotopes Inc., a Texas corporation (the
"Company"), and the various purchasers identified and listed on Schedule I
hereto (each referred to herein as a "Purchaser" and, collectively, the
"Purchasers.")

                  WHEREAS, the Company and the Purchasers are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Rule 506 under Regulation D as promulgated by the
United States Securities and Exchange Commission (the "Commission") under
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act");

                  WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire from the Company, 10,000 shares of the Company's
Series B 7% Convertible Redeemable Preferred Stock, par value $.01 per share,
liquidation value $1,000 per share (the "Preferred Stock"), at an aggregate
purchase price of $10,000,000 issued pursuant to a Certificate of Designation of
Preferences and Rights ("Certificate of Designation") in the form of Exhibit A
annexed hereto, and a stock purchase warrant or warrants (each, a "Warrant"), in
the form of Exhibit B annexed hereto, to purchase an aggregate amount of
2,500,000 shares of the Company's common stock, par value $0.01 per share (the
"Common Stock");

                  WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company is willing to sell on December 1, 2000 to those
Purchasers who elect to purchase additional shares, up to 4,300 additional
shares of Preferred Stock and the number of Warrants equal to 4,300,000 divided
by $4.00;

                  NOW THEREFORE, in consideration of the promises and mutual
covenants and agreements hereinafter, the Company and the Purchasers hereby
agree as follows:

<PAGE>   3

                                   ARTICLE I.

                                PURCHASE AND SALE

         1.1 Purchase and Sale.

                  a. On the First Closing Date (as defined below), subject to
the terms and conditions set forth herein, the Company shall issue and sell to
each Purchaser and each Purchaser, severally and not jointly, shall purchase
from the Company the number of shares of Preferred Stock as set forth on
Schedule I and a Warrant or Warrants exercisable for the amount of Common Stock,
par value $0.01 per share ("Common Stock"), as set forth on Schedule I for such
Purchaser. The aggregate purchase price of the shares of Preferred Stock
purchased by the Purchasers shall be $10,000,000, the aggregate number of shares
Preferred Stock purchased by the Purchasers shall be 10,000, and the aggregate
number of shares of Common Stock for which the Warrant or Warrants will be
exercisable shall be 2,500,000.

                  b. On the Second Closing Date (as defined below), subject to
the terms and conditions set forth herein, the Company shall issue and sell to
the Purchasers (1) up to an additional 4,300 shares of Preferred Stock at an
aggregate purchase price of $4,300,000 and (2) additional Warrants exercisable
for an aggregate number of shares of Common Stock equal to 4,300,000 divided by
$4.00.

         1.2 Closings.

                  a. The First Closing. The closing of the purchase and sale of
the initial 10,000 Shares of Preferred Stock at an aggregate purchase price of
$10,000,000 and Warrants for an aggregate of 2,500,000 shares of Common Stock
(the "First Closing") shall take place at the offices of the Company, or by
transmission by facsimile and overnight courier, immediately following the
execution hereof or such later date or different location as the parties shall
agree, but not prior to the date that the conditions set forth in Section 4.1
have been satisfied or waived by the appropriate party (the "First Closing
Date"). At the First Closing:

         Each Purchaser shall deliver, as directed by the Company, its portion
of the purchase price as set forth next to its name on Schedule I in United
States dollars in immediately available funds to an account or accounts
designated in writing by the Company;

         The Company shall deliver a Preferred Stock certificate(s) representing
the number of shares of Preferred Stock purchased by each Purchaser as set forth
next to such Purchaser's name on Schedule I, registered in the name of such
Purchaser, each in form satisfactory to the Purchaser and issued pursuant to the
Certificate of Designation with an initial Conversion Price (as defined therein)
equal to $4.00;

         The Company shall deliver a Warrant(s), in the form of Exhibit B hereto
and with the Exercise Price (as defined therein) equal to $4.00, representing
the number of shares of Common Stock as set forth next to such Purchaser's name
on the Schedule I, registered in the name of such Purchaser; and

                                       2
<PAGE>   4

         The parties shall execute and deliver each of the documents referred to
in Section 4.1.

                  b. Second Closing. At the sole option of each Purchaser, and
subject to the terms and conditions set forth in Section 4.2 the closing and
sale of up to (as shall be specified by such Purchaser prior to the Second
Closing Date) an additional 4,300 shares of Preferred Stock for an aggregate
purchase price of $4,300,000 and Warrants for an aggregate of up to such number
of shares of Common Stock equal to 4,300,000 divided by $4.00 shall take place
on the later of December 1, 2000 or 30 days after the effectiveness of the
Registration Statement registering for resale the shares of Common Stock
underlying the Preferred Stock from the First Closing, in the same manner as the
First Closing (the "Second Closing Date"); provided that in no case shall the
Second Closing take place unless and until the conditions listed in Section 4.2
have been satisfied or waived by the appropriate party. At the Second Closing:

                           (i) Each Purchaser electing to purchase additional
shares of Preferred Stock shall deliver, as directed by the Company, its portion
of the purchase price as set forth next to its name on a schedule similar to
Schedule I (the "Second Closing Schedule"), to be delivered to the Company by
the Purchasers two days before the Second Closing Date, in United States dollars
in immediately available funds to an account or accounts designated in writing
by the Company;

                           (ii) The Company shall deliver a Preferred Stock
certificate(s) representing the number of shares of Preferred Stock purchased by
each Purchaser as set forth next to such Purchaser's name on the Second Closing
Schedule, registered in the name of such Purchaser, each in form satisfactory to
the Purchaser and issued pursuant to the Certificate of Designation with a
Conversion Price equal to $4.00;

                           (iii) The Company shall deliver a Warrant(s), in the
form of Exhibit B hereto and with the Exercise Price equal to $4.00,
representing the number of shares of Common Stock as set forth next to such
Purchaser's name on the Second Closing Schedule, registered in the name of such
Purchaser; and

                           (iv) The parties shall execute and deliver each of
the documents referred to in Section 4.2(b).

                                  ARTICLE II.

                         REPRESENTATIONS AND WARRANTIES

         2.1 Representations, Warranties and Agreements of the Company. The
Company hereby makes the following representations and warranties to each of the
Purchasers:

                  a. Organization and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Texas, with the requisite corporate power and authority to
own and use its properties and assets and to carry on its business as currently
conducted. Each of the Subsidiaries (which for purposes of this Agreement means
any entity in which the Company, directly or indirectly, owns the majority of
such entity's capital stock or holds an equivalent equity or similar interest)
is a corporation duly

                                       3
<PAGE>   5

incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the full
corporate power and authority to own and use its properties and assets and to
carry on its business as currently conducted. Each of the Company and the
Subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, would not, individually or in the aggregate, (x) adversely
affect the legality, validity or enforceability of any of this Agreement or the
Transaction Documents (as defined in Section 2.1(b)) or any of the transactions
contemplated hereby or thereby, (y) have or result in a material adverse effect
on the results of operations, assets, prospects, or financial condition of the
Company and its Subsidiaries, taken as a whole or (z) impair the Company's
ability to perform fully on a timely basis its obligations under any Transaction
Document (any of (x), (y) or (z), being a "Material Adverse Effect").

                  b. Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement, the Certificate of Designation, the Warrants and
the Registration Rights Agreement (collectively, the "Transaction Documents"),
and otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of each of this Agreement and the Transaction Documents
by the Company and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
and no further action is required by the Company, its Board of Directors or its
stockholders. Each of this Agreement and the Transaction Documents has been duly
executed by the Company and when delivered in accordance with the terms hereof
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application and except that rights to indemnification and contribution may be
limited by Federal or state securities laws or public policy relating thereto.
Neither the Company nor any Subsidiary is in any material violation of any of
the provisions of its respective certificate of incorporation, bylaws or other
charter documents such that any right of a holder of shares of Preferred Stock
would be affected.

                  c. Capitalization. As of the date hereof, the authorized
capital stock of the Company is as set forth in Schedule 2.1(c). All of such
outstanding shares of capital stock have been, or upon issuance will be, validly
authorized and issued, fully paid and nonassessable and were issued in
accordance with the registration or qualification provisions of the Securities
Act, or pursuant to valid exemptions therefrom.

                  d. Authorization and Validity; Issuance of Shares. The shares
of Common Stock issuable upon conversion of the Preferred Stock (collectively,
"Conversion Shares") and exercise of the Warrants (collectively, the "Warrant
Shares," and together with the Conversion Shares, the "Underlying Shares") are
and will at all times hereafter continue to be duly authorized and reserved for
issuance to the Purchasers entitled thereto and the Underlying Shares and the
Shares of Preferred Stock when issued and delivered and will be validly issued,
fully paid and non-assessable, free and clear of all liens, encumbrances and
Company rights of first

                                       4
<PAGE>   6

refusal, other than liens and encumbrances created by the Purchasers
(collectively, "Liens") and will not be subject to any preemptive or similar
rights.

                  e. No Conflicts. The execution, delivery and performance of
this Agreement and each of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including the issuance of the Underlying Shares) do not and will not (i)
conflict with or violate any provision of the Certificate of Incorporation,
Bylaws or other organizational documents of the Company or any of the
Subsidiaries, (ii) subject to obtaining the consents referred to in Section
2.1(f), conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument (evidencing a Company
or Subsidiary debt or otherwise) to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or any Subsidiary is subject
applicable to the Company or any of its Subsidiaries, or by which any material
property or asset of the Company or any Subsidiary is bound or affected.

                  f. Consents and Approvals. Except as specifically set forth on
Schedule 2.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority, regulatory or self regulatory agency, or other Person in
connection with the execution, delivery and performance by the Company of this
Agreement or the Transaction Documents, other than (i) the filing of one or more
registration statements with the Securities and Exchange Commission (the
"Commission"), which shall be filed in accordance with and in the time periods
set forth in the Registration Rights Agreement, (ii) the application(s) or any
letter(s) acceptable to the Nasdaq SmallCap Market ("Nasdaq") and the Boston
Stock Exchange ("BSE") for the listing of the Underlying Shares with Nasdaq and
the BSE (and with any other national securities exchange or market on which the
Common Stock is then listed), and (iii) any filings, notices or registrations
under applicable state securities laws (together with the consents, waivers,
authorizations, orders, notices and filings referred to on Schedule 2.1(f), the
"Required Approvals").

                  g. SEC Documents; Financial Statements. The Common Stock of
the Company is registered pursuant to Section 12(b) of the Exchange Act. The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the Commission pursuant to the reporting
requirements of the Exchange Act, including pursuant to Section 13, 14 or 15(d)
thereof (the foregoing materials and all exhibits included therein and financial
statements and schedules thereto and documents (other than exhibits to such
documents) incorporated by reference therein being collectively referred to
herein as the "SEC Documents"), on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Documents prior to
the expiration of any such extension. The Company has delivered to each of the
Purchasers or its representatives true, complete and accurate copies of the SEC
Documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated thereunder, and
none of the SEC Documents, when

                                       5
<PAGE>   7

filed, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
Documents comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved ("GAAP"), except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended. Since December
31, 1999, except as specifically disclosed in the SEC Documents or in the
schedules to this Agreement, (a) there has been no event, occurrence or
development that has had or that would reasonably be expected to result in a
Material Adverse Effect, (b) the Company has not incurred any liabilities
(contingent or otherwise) other than (x) liabilities incurred in the ordinary
course of business consistent with past practice and (y) liabilities not
required to be reflected in the Company's financial statements pursuant to GAAP
or required to be disclosed in filings made with the Commission, (c) the Company
has not altered its method of accounting or the identify of its auditors and (d)
the Company has not declared or made any payment or distribution of cash or
other property to its stockholders or officers or directors (other than in
compliance with existing Company stock option plans) with respect to its capital
stock, or purchased, redeemed (or made any agreements to purchase or redeem) any
shares of its capital stock.

                  h. Investment Company. The Company is not, and is not
controlled by or under common control with an affiliate (an "Affiliate") of an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.

                  i. Broker's Fees. No fees or commissions or similar payments
with respect to the transactions contemplated by this Agreement or the
Transaction Documents have been paid or will be payable by the Company to any
broker, financial advisor, finder, investment banker, or bank, other than as set
forth in Schedule 2.1(i). The Purchasers shall have no obligation with respect
to any fees or with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this Section 2.1(i) that may be due in
connection with the transactions contemplated by this Agreement and the
Transaction Documents. The Company shall indemnify and hold harmless the
Purchasers, their employees, officers, directors, agents, and partners, and
their respective Affiliates, from and against all claims, losses, damages, costs
(including the costs of preparation and attorney's fees) and expenses suffered
in respect of any such claimed or existing fees, as such fees and expenses are
incurred.

                  j. Form S-3 Eligibility. The Company is, and at the Closing
Date will be, eligible to register securities (including the Underlying Shares)
for resale with the Commission under Form S-3 (or any successor form)
promulgated under the Securities Act.

                  k. Solicitation Materials. The Company has not (i) distributed
any offering materials in connection with the offering and sale of the Preferred
Stock or the Warrants, other than the SEC Documents, the Schedules to this
Agreement, any amendments and supplements thereto and the materials listed on
Schedule 2.1(k), or (ii) solicited any offer to buy or sell the

                                       6
<PAGE>   8
Preferred Stock or the Warrants by means of any form of general solicitation or
advertising. Neither the Company, nor any of its Affiliates, nor any Person
acting on its or their behalf, has engaged or will engage in any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) in connection with the offer or sale of the Preferred Stock
or Warrants.

                  l. Seniority; Exclusivity. No class of equity securities of
the Company will be senior to the Preferred Stock in right of payment, whether
upon liquidation, dissolution or otherwise, without the consent of a majority in
ownership interest of the Series B Stock. So long as any Preferred Stock issued
hereunder remains outstanding, the Company shall not exchange, redeem or covert
any of the Company's capital stock for indebtedness, including convertible debt,
of the Company. The Company shall not issue and sell any shares of Preferred
Stock, other than to the Purchasers signatory to this Agreement on or prior to
the First Closing Date pursuant to this Agreement, without the prior written
consent of each of the Purchasers.

                  m. Litigation; Proceedings. Except as specifically set forth
on Schedule 2.1(m), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any of their respective
properties before or by any court, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of this Agreement or the Transaction Documents or (ii) could reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect.

                  n. Shareholders' Approval. The Company will use its best
efforts to obtain shareholder approval for an increase in the number of
authorized shares of Common Stock and, in accordance with NASDAQ rules, for the
issuance of Common Stock upon conversion of the Preferred Stock.

                  o. Series A Preferred. The holders of the Company's Series A
Preferred Stock do not have the right, nor will the Company grant such holders
the right, to convert their Series A Preferred Stock to Series B Preferred
Stock.

         2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:

                  a. Organization; Authority. Such Purchaser is a corporation or
a limited duration company or a limited liability company or limited partnership
duly formed, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation with the requisite power and
authority, corporate or otherwise, to enter into and to consummate the
transactions contemplated hereby and by the Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The purchase by such
Purchaser of the shares of Preferred Stock and the Warrants hereunder has been
duly authorized by all necessary action on the part of such Purchaser. Each of
this Agreement and the Registration Rights Agreement has been duly executed and
delivered by such Purchaser and constitutes the valid and legally binding
obligation of such Purchaser, enforceable against such Purchaser in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar

                                       7
<PAGE>   9

laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity.

                  (b) Investment Intent. Such Purchaser is acquiring the shares
of Preferred Stock and the Warrants for its own account and not with a present
view to or for distributing or reselling the shares of Preferred Stock, the
Warrants, the Conversion Shares or the Warrant Shares or any part thereof or
interest therein in violation of the Securities Act; provided, however, that by
making the representations herein, such Purchaser does not agree to hold any of
the shares of Preferred Stock, the Warrants, the Conversion Shares or the
Warrant Shares for any minimum or other specific term and reserves the right to
dispose of the securities acquired hereunder at any time in accordance with or
pursuant to a registration statement or an exemption under the Securities Act.

                  (c) Purchaser Status. At the time such Purchaser was offered
the Preferred Stock and the Warrants, and at the Closing Date, (i) it was and
will be an "accredited investor" as defined in Rule 501 under the Securities Act
and (ii) such Purchaser, either alone or together with its representatives, had
and will have such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the
prospective investment in the Preferred Stock and the Warrants.

                  (d) Reliance. Such Purchaser understands and acknowledges that
(i) the Preferred Stock, the Warrants and the Underlying Shares are being
offered and sold to such Purchaser without registration under the Securities Act
in a private placement that is exempt from the registration provisions of the
Securities Act under Section 4(2) of the Securities Act or Regulation D
promulgated thereunder and (ii) the availability of such exemption depends in
part on, and the Company will rely upon the accuracy and truthfulness of, the
representations set forth in this Section 2.2 and such Purchaser hereby consents
to such reliance.

                  (e) Information. Such Purchaser and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Preferred Stock and Warrants which have been requested by such Purchaser or its
advisors. Such Purchaser and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigation conducted by any Purchaser or any of its
advisors or representatives shall modify, amend or affect a Purchaser's right to
rely on the Company's representations and warranties contained in this Agreement
or any other Transaction Document. Such Purchaser understands that its
investment in the Preferred Stock and Warrants involves a significant degree of
risk.

                  (f) Governmental Review. Such Purchaser understands that no
United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Preferred Stock or Warrants.

                  (g) Residency. Such Purchaser is a resident of the
jurisdiction set forth immediately below such Purchaser's name on Schedule II
hereto.

                                       8
<PAGE>   10

         The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.

                                  ARTICLE III.

                                OTHER AGREEMENTS

         3.1 Transfer Restrictions.

                  (a) If any Purchaser should decide to dispose of shares of the
Preferred Stock, the Warrants, the Conversion Shares or the Warrant Shares held
by it, such Purchaser understands and agrees that it may do so only pursuant to
an effective registration statement under the Securities Act, to the Company or
pursuant to an available exemption from the registration requirements of the
Securities Act or Rule 144 promulgated under the Securities Act ("Rule 144").
The Company shall announce any material non-public information that it legally
is required to announce on or prior to the Effectiveness Date (as defined in the
Registration Rights Agreement) and shall not enter into any subsequent
non-disclosure agreements that would prevent it from announcing any such
information that otherwise legally could have been announced on or prior to the
Effectiveness Date, unless confidential treatment for such information is
granted by the Commission. In connection with any transfer of any shares of the
Preferred Stock, Warrants, Conversion Shares or Warrant Shares other than
pursuant to an effective registration statement, Rule 144(k) or to the Company,
the Company may require the transferor thereof to provide to the Company a
written opinion of counsel experienced in the area of United States securities
laws selected by the transferor, the form and substance of which opinion shall
be customary for opinions of counsel in comparable transactions, to the effect
that such transfer does not require registration of such transferred securities
under the Securities Act. Notwithstanding the foregoing, the Company hereby
consents to and agrees to register any transfer by any Purchaser to an Affiliate
of such Purchaser or an investment fund or account under common management with
such Purchaser, provided that the transferee certifies to the Company that it is
an "accredited investor" as defined in Rule 501(a) under the Securities Act. Any
such transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights of a Purchaser under this Agreement and the
Transaction Documents. If a Purchaser provides the Company with an opinion of
counsel, the form and substance of which opinion shall be customary for opinions
of counsel in comparable transactions, to the effect that a public sale,
assignment or transfer of the Preferred Stock, the Conversion Shares, the
Warrants and the Warrant Shares may be made without registration under the
Securities Act or the Purchaser provides the Company with reasonable assurances
that the Preferred Stock, the Warrants, the Conversion Shares and the Warrant
Shares can be sold pursuant to Rule 144 without any restriction as to the number
of securities acquired as of a particular date that can then be immediately
sold, the Company shall permit the transfer, and, in the case of the Conversion
Shares and the Warrant Shares, promptly instruct its transfer agent to issue one
or more certificates in such name and in such denominations as specified by such
Purchaser and without any restrictive legend. Notwithstanding the foregoing or
anything else contained herein to the contrary, the Preferred Stock, the
Warrants, the Conversion Shares and the Warrant Shares may be pledged as
collateral in connection with a bona fide margin account or other lending
arrangement.

                                       9
<PAGE>   11

                  b. Each Purchaser agrees to the imprinting, so long as is
required by this Section 3.1(b), of the following legend (or a legend
substantially similar) on the Preferred Stock certificates, the Warrants, the
Conversion Shares and the Warrant Shares:

                           THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
                  REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN
                  RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
                  SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
                  AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
                  TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
                  ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
                  TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
                  THE SECURITIES ACT.

                  The Underlying Shares shall not contain the legend set forth
above (or any other legend) (i) at any time while a registration statement is
effective under the Securities Act covering the resale of such security, (ii) if
in the written opinion of counsel to the Company experienced in the area of
United States securities laws such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission) or (iii) if such shares
may be sold pursuant to Rule 144(k). The Company agrees that it will provide
each Purchaser, upon request, with a certificate or certificates representing
Conversion Shares or Warrant Shares, free from all legends at such time as such
legend is no longer required under this Section 3.1(b). If such certificate or
certificates had previously been issued with such a legend or any other legend,
the Company shall, upon request, receive such certificate or certificates free
of any legend.

         3.2 Stop Transfer Instruction. The Company may not make any notation on
its records or give instructions to any transfer agent of the Company which
enlarge the restrictions on transfer set forth in Section 3.1.

         3.3 Furnishing of Information. As long as any Purchaser owns shares of
the Preferred Stock, the Warrants, the Conversion Shares or the Warrant Shares,
the Company will cause the Common Stock to continue at all times to be
registered under Section 12(g) of the Exchange Act, will timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
Section 13, 14 or 15(d) of the Exchange. The Company further covenants that it
will take such further action as any holder of the shares of Preferred Stock,
the Warrants, the Conversion Shares or the Warrant Shares may reasonably
request, all to the extent required from time to time to enable such Person to
sell the shares of Preferred Stock, the Warrants, the Conversion Shares, or the
Warrant Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated under the
Securities Act, including the legal opinion referenced above in Section 3.1(b).

                                       10
<PAGE>   12

         3.4 Listing and Reservation of Conversion Shares and Warrant Shares.

                  a. The Company shall (i) not later than ten (10) business days
after the Closing Date prepare and file with Nasdaq and the BSE (as well as any
other national securities exchange or market on which the Common Stock is then
listed) additional shares listing applications or letters acceptable to Nasdaq
and the BSE covering and listing a number of shares of Common Stock which is at
least equal to 120% the maximum number of Underlying Shares then issuable,
assuming that the payment of all future dividends on such shares then
outstanding were made in shares of Common Stock and, for Conversion Shares, a
conversion price equal to 100% of the original conversion price, (ii) take all
steps necessary to cause the Underlying Shares to be approved for listing on
Nasdaq and the BSE (as well as on any other national securities exchange or
market on which the Common Stock is then listed) as soon as possible thereafter,
(iii) maintain, so long as any other shares of Common Stock shall be so listed,
such listing of all such Underlying Shares, and (iv) provide to the Purchasers
evidence of such listing. Neither the Company nor any of its Subsidiaries shall
take any action that may result in the delisting or suspension of the Common
Stock on Nasdaq or the BSE. The Company shall promptly provide to each Purchaser
copies of any notices it receives from Nasdaq or BSE regarding the continued
eligibility of the Common Stock for listing on such automated quotation system,
so long as such notice does not include material, nonpublic information. The
Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 3.4(a).

                  b. The Company at all times shall reserve a sufficient number
of shares of its authorized but unissued Common Stock to provide for the full
conversion of the outstanding shares of Preferred Stock (including the payment
of all dividends thereon) assuming a conversion price equal to 100% of the
initial conversion price and exercise of the outstanding Warrants. Shares of
Common Stock reserved for issuance upon conversion of the shares of Preferred
Stock and the exercise of the Warrants shall be allocated pro rata to each of
the Purchasers in accordance with the number of shares of Preferred Stock and
Warrants issued and delivered to such Purchaser at the Closing. If at any time
the number of shares of Common Stock authorized and reserved for issuance is
insufficient to cover 100% of the number of Conversion Shares and Warrant Shares
issued and issuable upon conversion of the shares of Preferred Stock and
exercise of the Warrants (based on the Conversion Price (as defined in the
Certificate of Designation) of the shares of Preferred Stock in effect from time
to time and the Exercise Price (as defined in the Warrants) of the Warrants in
effect from time to time) without regard to any limitation on conversions or
exercises, the Company will promptly take all corporate action necessary to
authorize and reserve 100% of such shares pursuant to Section 3(b) of the
Registration Rights Agreement, including, without limitation, calling a special
meeting of stockholders to authorize additional shares to meet the Company's
obligations under this Section 3.4(b), in the case of an insufficient number of
authorized shares, and using best efforts to obtain stockholder approval of an
increase in such authorized number of shares.

                                       11
<PAGE>   13

         3.5 Notice of Breaches.

                  a. The Company and each Purchaser shall give prompt written
notice to the other of any breach by it of any representation, warranty or other
agreement contained in this Agreement or in the Transaction Documents, as well
as any events or occurrences arising after the date hereof and prior to the
Closing Date, which would reasonably be likely to cause any representation or
warranty or other agreement of such party, as the case may be, contained herein
to be incorrect or breached as of the Closing Date provided such notice will not
constitute material non-public information. However, no disclosure by either
party pursuant to this Section 3.5 shall be deemed to cure any breach of any
representation, warranty or other agreement contained herein or in the
Transaction Documents.

                  b. The default by any Purchaser of any of its obligations,
representations or warranties under this Agreement or the Transaction Documents
shall not be imputed to, and shall have no effect upon, any other Purchaser or
affect the Company's obligations under this Agreement or any Transaction
Document to any non-defaulting Purchaser.

         3.6 Form D. The Company agrees to file a Form D with respect to the
Preferred Stock and Warrants as required by Rule 506 under Regulation D.

         3.7 Use of Proceeds. The Company shall use the proceeds from the sale
of the Preferred Stock and the exercise of the Warrants to acquire assets,
reduce debt and for working capital.

         3.8 Transfer Agent Instructions. At each Closing the Company shall
issue irrevocable instructions to its transfer agent (and shall issue to any
subsequent transfer agent as required), to issue certificates, registered in the
name of each such Purchaser or its respective nominee(s), for the Conversion
Shares and/or the Warrant Shares in such amounts as specified from time to time
by each Purchaser to the Company in a form acceptable to such Purchasers (the
"Irrevocable Transfer Agent Instructions"). So long as required pursuant to
Section 3.1(b), all such certificates shall bear the restrictive legend
specified in Section 3.1(b) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 3.10, and stop transfer instructions to give effect to Section
3.1 (in the case of the Conversion Shares and the Warrant Shares, prior to
registration of the Conversion Shares under the Securities Act) will be given by
the Company to its transfer agent and that the Preferred Stock, the Warrants,
the Conversion Shares and the Warrant Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Transaction Documents. If a Purchaser
provides the Company with an opinion of counsel, the form and substance of which
opinion shall be customary for opinions of counsel in comparable transactions,
to the effect that a public sale, assignment or transfer of the Preferred Stock,
the Conversion Shares, the Warrants and the Warrant Shares may be made without
registration under the Securities Act or the Purchaser provides the Company with
reasonable assurances that the Warrants, the Conversion Shares and the Warrant
Shares can be sold pursuant to Rule 144 without any restriction as to the number
of securities acquired as of a particular date that can then be immediately
sold, the Company shall permit the transfer, and, in the case of the Conversion
Shares and the Warrant Shares, promptly instruct its transfer agent to issue one
or more certificates in such name and in such denominations as specified by such
Purchaser and without any restrictive legend.

                                       12
<PAGE>   14

         3.9 Best Efforts. Each of the parties hereto shall use its best efforts
to satisfy each of the conditions to be satisfied by it as provided in Article
IV of this Agreement.

                                  ARTICLE IV.

                                   CONDITIONS

         4.1 First Closing.

                  a. Conditions Precedent to the Obligation of the Company to
Sell the Shares of Preferred Stock and Warrants. The obligation of the Company
to sell the shares of Preferred Stock and Warrants is subject to the
satisfaction or waiver (with prior written notice to each Purchaser) by the
Company, at or before the First Closing Date of each of the following
conditions:

                           (i) Accuracy of the Purchasers' Representations and
Warranties. The representations and warranties of each Purchaser in this
Agreement shall be true and correct in all material respects as of the date when
made and as of the First Closing;

                           (ii) Performance by the Purchasers. Each Purchaser
shall have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Purchaser at or before the First Closing; and

                           (iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Transaction Documents.

                  b. Conditions Precedent to the Obligation of the Purchasers to
Purchase the Shares of Preferred Stock and Warrants at the First Closing. The
obligation of each Purchaser hereunder to acquire and pay for the shares of
Preferred Stock and Warrants at the First Closing is subject to the satisfaction
or waiver by such Purchaser, at or before the First Closing Date, of each of the
following conditions:

                           (i) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company set forth in this
Agreement and in the Registration Rights Agreement shall be true and correct in
all respects as of the date when made and as of the First Closing Date;

                           (ii) Performance by the Company. The Company shall
have performed, satisfied and complied in all respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or before the First Closing Date;

                                       13
<PAGE>   15

                           (iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement and the Transaction Documents;

                           (iv) No Suspensions of Trading in Common Stock. The
trading in the Common Stock shall not have been suspended by the Commission, on
Nasdaq or on the BSE (except for any suspension of trading of limited duration
solely to permit dissemination of material information regarding the Company);

                           (v) Listing of Common Stock. The Common Stock shall
have been at all times since the date of this Agreement and on the Closing Date
listed for trading on the Nasdaq and the BSE;

                           (vi) Required Approvals. All Required Approvals,
other than those relating solely to Closing Dates other than the First Closing
Date, shall have been obtained and copies thereof delivered to the Purchasers
other than those relating solely to Closing Dates other than the First Closing
Date;

                           (vii) Shares of Common Stock. The Company shall have
duly reserved the number of Underlying Shares required by this Agreement and the
Transaction Documents to be reserved upon the exercise of the Warrants or the
conversion of the shares of Preferred Stock acquired by the Purchaser on the
First Closing Date;

                  c. Documents and Certificates. At the First Closing, the
Company shall have delivered to the Purchasers, the following in form and
substance reasonably satisfactory to the Purchasers:

                           (i) Preferred Stock Certificate. A Preferred Stock
certificate(s) representing the number of shares of Preferred Stock purchased by
each Purchaser as set forth next to such Purchaser's name on Schedule I,
registered in the name of such Purchaser, each in form satisfactory to the
Purchaser and issued pursuant to the Certificate of Designation with a
Conversion Price equal to $4.00.

                           (ii) Warrant. A Warrant(s), in the form of Exhibit B
hereto and with the Exercise Price equal to $4.00 representing the Warrant(s)
being purchased by each Purchaser as set forth next to such Purchaser's name on
the Schedule I, registered in the name of such Purchaser;

                           (iii) Registration Rights. The Company shall have
executed and delivered the Registration Rights Agreement;

                           (iv) Legal Opinion. Legal Counsel for the Company
shall have rendered a legal opinion to the effect that the Transaction Documents
are legally valid and enforceable and that the shares of Preferred Stock have
been duly and validly issued.

                                       14
<PAGE>   16

                           (v) Certificate of Designation. A certified copy of
the Certificate of Designation with respect to the Series B Preferred Stock, as
filed with the Texas Secretary of State.

         4.2 Second Closing.

                  a. Conditions Precedent to the Obligation of the Company to
Sell the shares of Preferred Stock and Warrants. The obligation of the Company
to sell the shares of Preferred Stock and Warrants at the Second Closing is
subject to the satisfaction or waiver (with prior written notice to each
Purchaser) by the Company, at or before the Second Closing Date of each of the
following conditions:

                           (i) Accuracy of the Purchasers' Representations and
Warranties. The representations and warranties of each Purchaser in this
Agreement shall be true and correct in all material respects as of the date when
made and as of the Second Closing;

                           (ii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Transaction Documents.

                  b. Documents and Certificates. On the Second Closing Date, the
Company shall deliver to each Purchaser electing to acquire shares of Preferred
Stock and Warrants in accordance with Section 1.2(b), the following in form and
substance reasonably satisfactory to such Purchasers:

                           (i) Registration Rights Agreement. An executed
Registration Rights Agreement substantially in the form of Exhibit C attached
hereto pursuant to which the Company shall agree to provide certain registration
rights under the Securities Act and the rules and regulations promulgated
thereunder and applicable state laws with respect to the shares of Common Stock
issuable upon the conversion of the shares of Preferred Stock, and upon the
exercise of the Warrants, to be issued at the Second Closing;

                           (ii) Preferred Stock Certificate. A Preferred Stock
certificate(s) representing the number of shares of Preferred Stock purchased by
such Purchaser as set forth next to such Purchaser's name on the Second Closing
Schedule, registered in the name of such Purchaser, each in form satisfactory to
the Purchaser and issued pursuant to the Certificate of Designation with a
Conversion Price equal to $4.00;

                           (iii) Warrant. A Warrant(s), in the form of Exhibit B
hereto and with the Exercise Price equal to $4.00 representing the Warrant(s)
being purchased by each Purchaser as set forth next to such Purchaser's name on
the Second Closing Schedule, registered in the name of such Purchaser;

                           (iv) Legal Opinion. Legal Counsel for the Company
shall have rendered a legal opinion in form and substance similar to the legal
opinion delivered at the First Closing.

                                       15
<PAGE>   17

                           (v) Officers Certificate. The Company shall have
delivered a Certificate of an executive officer certifying that the
representations and warranties contained herein continue to be true as of the
Second Closing Date.

                                   ARTICLE V.

                                  MISCELLANEOUS

         5.1 Entire Agreement. This Agreement, together with the Exhibits and
Schedules hereto and the Transaction Documents contain the entire understanding
of the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters.

         5.2 Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) on date of delivery, when sent by facsimile, provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party (if delivered by 8:00 p.m. CST where such
notice is delivered) or the first business day following such delivery (if
delivered after 8:00 p.m. CST where such notice is delivered); 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 the Company:

                           International Isotopes Inc.
                           1500 Spencer Road
                           Denton, Texas  76205
                           Telephone: (940) 323-2612
                           Facsimile: (940) 483-0431
                           Attention: David M. Camp, President

                  With a copy to:

                           Locke Liddell & Sapp LLC
                           100 Congress, Suite 300
                           Austin, Texas  78701
                           Telephone: (512) 305-4716
                           Facsimile: (512) 305-4800
                           Attention: Curtis R. Ashmos
                           e-mail: cashmos@lockeliddell.com

                                       16
<PAGE>   18

                  If to the Transfer Agent:

                           American Stock Transfer & Trust Company
                           40 Wall Street
                           New York, New York 10005
                           Telephone: (718) 921-8256
                           Facsimile: (718) 921-8327
                           Attention: Joseph Comito

                  If to Purchaser, to the address listed on Schedule II hereto.
Any person may modify its address for notice by delivery to each other party of
a notice in the manner set forth in this Section.

         5.3 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by both the Company and at a majority in ownership interest of the Purchasers
except conversion and exercise price which requires consent of Purchaser
impacted or, in the case of a waiver, by the party against whom enforcement of
any such waiver is sought. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter. Notwithstanding the foregoing, no such amendment shall be
effective to the extent that it applies to less than all of the holders of the
shares of Preferred Stock outstanding. The Company shall not offer or pay any
consideration to a Purchaser for consenting to such an amendment or waiver
unless the same consideration is offered to each Purchaser and the same
consideration is paid to each Purchaser which consents to such amendment or
waiver.

         5.4 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

         5.5 References. References herein to Sections are to Sections of this
Agreement, unless otherwise expressly provided.

         5.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of a majority in ownership interest of the
Purchasers. The Purchasers may assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Company,
provided, that any assignees must make the representations and warranties set
forth in Section 2.2 and otherwise comply with the terms of this Agreement
otherwise applicable to its assignor. This provision shall not limit a
Purchaser's right to transfer securities in accordance with all of the terms of
this Agreement or the Transaction Documents.

         5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.

                                       17
<PAGE>   19

         5.8 Governing Law. The corporate laws of the State of Texas 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 and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. 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. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

         5.9 Survival. The representations and warranties of the Company and the
Purchasers contained in this Agreement, and the agreements and covenants set
forth in Section 3, and the indemnification provisions set forth in Section 5,
shall survive the Closing and any conversion of the shares of Preferred Stock or
exercise of the Warrants regardless of any investigation made by or on behalf of
the such Purchaser or by or on behalf of the Company, except that, in the case
of representations and warranties such survival shall be limited to the period
of one year following the Closing Date on which they were made or deemed to have
been made (other than with respect to any claim by a third party against the
party to this Agreement who seeks to assert a claim based on such
representations and warranties). This section shall have no effect on the
survival of the indemnification provisions of the Registration Rights Agreement.

         5.10 Counterparts. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.

         5.11 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.

                                       18
<PAGE>   20

         5.12 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.

         5.13 Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

                                       19
<PAGE>   21

         IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.

                                        INTERNATIONAL ISOTOPES INC.

                                        By:
                                           -------------------------------------
                                        Name:  David M. Camp
                                        Title: President and CEO

                                       20
<PAGE>   22

                                        Purchasers:

                                        AIG SoundShore Holdings Ltd.

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

                                        AIG SoundShore Opportunity Holding Fund
                                        Ltd.

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

                                        AIG SoundShore Strategic Holding Fund
                                        Ltd.

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

                                       21

<PAGE>   23

                                        ----------------------------------------
                                        Robert A. Belfer

                                        ----------------------------------------
                                        Laurence D. Belfer

                                        ----------------------------------------
                                        Renee E. Belfer "Special"

                                        Belfer Investments, L.P.

                                        By:
                                           -------------------------------------
                                             Name:
                                                  ------------------------------
                                             Title:
                                                   -----------------------------

                                        ----------------------------------------
                                        Christopher Grosso

                                        ----------------------------------------
                                        Diane Grosso

                                        ----------------------------------------
                                        Ralph Richart

                                        ----------------------------------------
                                        Ralph Richart, Jr., Benefit Trust

                                        ----------------------------------------
                                        Thomas Kershner

                                        ----------------------------------------
                                        J. Mitchell Hull

                                        ----------------------------------------
                                        J.D. Woodward

                                       22
<PAGE>   24

                                        ----------------------------------------
                                        Walter D. O'Hearn, Jr.

                                        ----------------------------------------
                                        James B. Clark, Jr.

                                        ----------------------------------------
                                        William Soyars

                                        ----------------------------------------
                                        John M. McCormack

                                        ----------------------------------------
                                        Patrick J. Mackin

                                        Elkhorn Partners Limited

                                        By:
                                           -------------------------------------
                                             Name:
                                                  ------------------------------
                                             Title:
                                                   -----------------------------

                                        Himalaya Capital Partners

                                        By:
                                           -------------------------------------
                                             Name:
                                                  ------------------------------
                                             Title:
                                                   -----------------------------

                                        PW Family Associates LLC

                                        By:
                                           -------------------------------------
                                             Name: Samuel A. Plum
                                                  ------------------------------
                                             Title:
                                                   -----------------------------

                                        ----------------------------------------
                                        Douglas B. Benedict

                                       23
<PAGE>   25

                                        ----------------------------------------
                                        Meghan Benedict

                                        Futurtec LP

                                        By:
                                           -------------------------------------
                                             Name: Ido Klear
                                                  ------------------------------
                                             Title:
                                                   -----------------------------

                                        ----------------------------------------
                                        Thierry de Vergnes

                                        ----------------------------------------
                                        James J. Keane

                                        ----------------------------------------
                                        Marie Keane

                                        ----------------------------------------
                                        Luther King

                                        Luther King Capital

                                        By:
                                           -------------------------------------
                                             Name: Luther King
                                                  ------------------------------
                                             Title:
                                                   -----------------------------

                                        ----------------------------------------
                                        LeRoy Landhuis

                                        ----------------------------------------
                                        Michael Hamblitt

                                       24
<PAGE>   26

                                   SCHEDULE I

<TABLE>
<CAPTION>

                                Number of Shares of
                                Preferred Stock at                           Number of shares
Name of Purchaser               First Closing            Purchase Price      underlying Warrant
-----------------               -------------------      --------------      ------------------

<S>                             <C>                      <C>                 <C>
AIG SoundShore Holdings Ltd.                  2,032        $  2,032,000                 508,000

AIG SoundShore Opportunity                      778        $    778,000                 194,500
Holding Fund Ltd.

AIG SoundShore                                  690        $    690,000                 172,500
Holding Fund Ltd.

Robert A. Belfer                              1,000        $  1,000,000                 250,000

Laurence D. Belfer

Renee E. Belfer
"Special"

Belfer Investments, L.P.

Christopher Grosso                               75        $     75,000                  18,750

Diane Grosso                                     75        $     75,000                  18,750

Ralph Richart                                   400        $    400,000                 100,000

Ralph Richart, Jr                                50        $     50,000                  12,500
Benefit Trust

Marian Richart                                   50        $     50,000                  12,500
Benefit Trust

Thomas Kershner                                 100        $    100,000                  25,000

J. Mitchell Hull                                250        $    250,000                  62,500

J.D. Woodward                                   150        $    150,000                  37,500

Walter D. O'Hearn, Jr.                          100        $    100,000                  25,000

James B. Clark, Jr.                             100        $    100,000                  25,000
</TABLE>

<PAGE>   27

<TABLE>
<CAPTION>

                                Number of Shares of
                                Preferred Stock at                           Number of shares
Name of Purchaser               First Closing            Purchase Price      underlying Warrant
-----------------               -------------------      --------------      ------------------

<S>                             <C>                      <C>                 <C>
William Soyars                                 100         $    100,000                  25,000

John M. McCormack                              300         $    300,000                  75,000

Patrick J. Mackin                              100         $    100,000                  25,000

Elkhorn Partners Limited                       125         $    125,000                  31,250

Himalaya Capital                             1,000         $  1,000,000                 250,000
Partners

PW Family Associates                           100         $    100,000                  25,000
LLC

Douglas B. Benedict                             25         $     25,000                   6,250
and Meghan Benedict
JTWROS

Futurtec LP (Ido Klear)                        100         $    100,000                  25,000

Thierry de Vergnes                             100         $    100,000                  25,000

James J. Keane and                             100         $    100,000                  25,000
Marie Keane JTWROS

Luther King                                    400         $    400,000                 100,000
Luther King Capital

LeRoy Landhuis                                 100         $    100,000                  25,000

Michael Hamblitt                                25         $     25,000                   6,250
</TABLE>

                                       2
<PAGE>   28

                                   SCHEDULE II

<TABLE>
<CAPTION>
Name of Purchaser                                            Address
-----------------                                            -------

<S>                                                          <C>
AIG SoundShore Holdings Ltd.                                 c/o AIG International Management Company, Inc.
                                                             1281 East Main Street
                                                             Stamford, CT  06902
                                                             (203) 324-8400
                                                             Fax (203) 324-8488

AIG SoundShore Opportunity Holding Fund Ltd.                 c/o AIG International Management Company, Inc.
                                                             1281 East Main Street
                                                             Stamford, CT  06902
                                                             (203) 324-8400
                                                             Fax (203) 324-8488

AIG SoundShore Strategic Holding Fund Ltd.                   c/o AIG International Management Company, Inc.
                                                             1281 East Main Street
                                                             Stamford, CT  06902
                                                             (203) 324-8400
                                                             Fax (203) 324-8488

Robert A. Belfer                                             Belco Oil &Gas Corp.
                                                             767 5th Ave., 46th Fl.
                                                             New York, NY  10153

Laurence D. Belfer                                           Family 1997 Trust

Renee E. Belfer "Special"

Belfer Investments, L.P.

Christopher Grosso                                           766 N. Broadway
                                                             Saratoga Springs, NY  12866

Diane Grosso                                                 3395 Elmwood Ave.
                                                             Rochester, NY  14610

Ralph Richart                                                350 Shore Dr.
                                                             Oakdale, NY  11769

Ralph Richart, Jr.                                           1602 Tacoma Way
Benefit Trust                                                Redwood City, CA  94063

Marian Richart,                                              1602 Tacoma Way
Benefit Trust                                                Redwood City, CA  94063
</TABLE>

<PAGE>   29

<TABLE>
<CAPTION>
Name of Purchaser                                            Address
-----------------                                            -------

<S>                                                          <C>
Thomas Kershner                                              258 East Seaford St.
                                                             Glen Falls, NY  12801

J. Mitchell Hull                                             Hull Capital
                                                             152 W. 51st St., 11th Fl.
                                                             New York, NY  10019

J.D. Woodward                                                1125 Northwest Freeway
                                                             Ste. 400
                                                             Houston, TX  77092

Walter D. O'Hearn, Jr.                                       1115 Fifth Avenue
                                                             New York, NY  10128

James B. Clark, Jr.                                          22 Current Drive
                                                             Newton, NJ  07860

William Soyars                                               4110 Old Bastrop Hwy.
                                                             San Marcos, TX  78666

John M. McCormack                                            1303 Campbell Road
                                                             Houston, TX  77055

Patrick J. Mackin                                            1508 Baker's Place
                                                             Manasquan, NJ  08736

Elkhorn Partners Limited                                     2222 Skyline Drive
                                                             Elkhorn, NE  68022

Himalaya Capital Partners                                    10 East 53rd St., 20th Fl.
                                                             New York, NY  10022

PW Family Associates LLC                                     436 Devon Park Dr., Bldg. 300
(Samuel A. Plum)                                             Wayne, PA  19087

Douglas B. Benedict and                                      919 Bellemore Road
Meghan Benedict JTWROS                                       Baltimore, MD  21210

Futurtec LP (Ido Klear)                                      18 Briarfield Drive
                                                             Great Neck, NY  11020

Thierry de Vergnes                                           16 Summit Avenue
                                                             Larchmont, NY  10538
</TABLE>

                                       2
<PAGE>   30

<TABLE>
<CAPTION>
Name of Purchaser                                            Address
-----------------                                            -------

<S>                                                          <C>
James J. Keane and                                           Herron Road
Marie Keane JTWROS                                           Edison, NJ  08820

Luther King                                                  301 Commerce, Ste. 1000
Luther King Capital                                          Fort Worth, TX  76102

LeRoy Landhuis                                               212 N. Wahsatch
                                                             Colorado Springs, CO  80903

Michael Hamblitt                                             5 McKinnel Crt.
                                                             Branford, CT  06405
</TABLE>

                                       3
<PAGE>   31

                                                                       EXHIBIT A

                      [Form of Certificate of Designation]

<PAGE>   32

                                                                       EXHIBIT B

                                [Form of Warrant]

<PAGE>   33

                                                                       EXHIBIT C

                         [Registration Rights Agreement]

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