Exhibit
10.2


 


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


 


TERM NOTE


 


June 13, 2008


 


	
  Jersey
  City, New Jersey

  	
  $1,175,000

  



 


FOR
VALUE RECEIVED,
the undersigned, ISONICS CORPORATION,
a California corporation (the “Company”), promises to pay YA GLOBAL INVESTMENTS, LP (the “Lender”)
at 101 Hudson Street, Suite 3700, Jersey City, New Jersey 07302 or other
address as the Lender shall specify in writing, the principal sum of One Million One Hundred Seventy-Five Thousand Dollars ($1,175,000) and interest at the annual rate of thirteen
percent (13%) on the unpaid balance pursuant to the following terms of
this Term Note (the “Note”):


 


1.                                       Principal and Interest.  For value received, the Company hereby
promises to pay to the order of the Lender on October 31, 2009 (“Maturity
Date”) in lawful money of the United States of America and in immediately
available funds the principal sum of One Million One Hundred Seventy-Five
Thousand Dollars ($1,175,000), together with interest on the unpaid principal
of this note at the rate of thirteen percent (13%) per year (computed on
the basis of a 365-day year and the actual days elapsed) from the date of this
Note until paid.


 


2.                                       Right of Prepayment.  The Company at its option shall have the
right to prepay, with ten (10) business days advance written notice (a “Prepayment
Notice”), any amount of outstanding principal of the Note (a “Company
Prepayment”).  The Prepayment Notice
must state the portion of the Note (including interest) that the Company wishes
to pay (the “Prepayment Amount”). 
Prepayment Notices are irrevocable. 
If the Company elects a prepayment, on the tenth (10th)
business day following the Lender’s receipt of the Prepayment Notice, the
Company shall pay to the Lender, by wire transfer of immediately available
funds, an amount in cash equal to 120% of the principal portion of the
Prepayment Amount plus accrued and unpaid interest.


 


3.                                       Waiver and Consent.  To the fullest extent permitted by law and
except as otherwise provided herein, the Company waives demand, presentment,
protest, notice of dishonor, suit against or joinder of any other person, and
all other requirements necessary to charge or hold the Company liable with
respect to this Note.


 

















 


4.                                       Costs, Indemnities and Expenses.  In the event of default as described herein,
the Company agrees to pay all reasonable fees and costs incurred by the Lender
in collecting or securing or attempting to collect or secure this Note,
including reasonable attorneys’ fees and expenses, whether or not involving
litigation, collecting upon any judgments and/or appellate or bankruptcy
proceedings.  The Company agrees to pay
any documentary stamp taxes, intangible taxes or other taxes which may now or
hereafter apply to this Note or any payment made in respect of this Note, and
the Company agrees to indemnify and hold the Lender harmless from and against
any liability, costs, attorneys’ fees, penalties, interest or expenses relating
to any such taxes, as and when the same may be incurred.


 


5.                                       Event of Default.  An “Event of Default”, wherever used
herein, means any one of the following events (whatever the reason and whether
it shall be voluntary or involuntary or effected by operation of law or
pursuant to any judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental body):


 


(i)             the Company’s failure
to pay to the Lender any amount of principal, interest, or other amounts when
and as due under this Note (including, without limitation, the Company’s
failure to pay any redemption payments or amounts hereunder) or any other
Transaction Document (as defined in the Securities Purchase Agreement (the “Securities
Purchase Agreement”), dated the date hereof, between Company and Lender);


 


(ii)          The Company shall fail
to observe or perform any other covenant, agreement or warranty contained in,
or otherwise commit any breach or default of any provision of this Note, any of
the other Transaction Documents, or any other note issued, or shall hereinafter
be issued to the Lender or its affiliates which is not cured within the time
prescribed;


 


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


 

















 


the Company or
any subsidiary of the Company for the purpose of effecting any of the
foregoing;


 


(iv)      The Company or any
subsidiary of the Company shall default in any of its obligations under any
other promissory note, or any mortgage, credit agreement or other facility,
indenture agreement, factoring agreement, debenture or other instrument under
which there may be issued, or by which there may be secured or evidenced any
indebtedness for borrowed money or money due under any long term leasing or
factoring arrangement of the Company or any subsidiary of the Company in an
amount exceeding $100,000, whether such indebtedness now exists or shall
hereafter be created and such default shall result in such indebtedness
becoming or being declared due and payable prior to the date on which it would
otherwise become due and payable;


 


(v)         If the Common Stock is
quoted or listed for trading on any of the following and it ceases to be so
quoted or listed for trading and shall not again be quoted or listed for
trading on any Primary Market within five (5) Trading Days of such
delisting: (a) the American Stock Exchange, (b) New York Stock
Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq Capital
Market, or (e) the Nasdaq OTC Bulletin Board (“OTCBB”) (each, a “Primary
Market”);


 


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


 


(vii)   To
the extent that the Company is eligible to file a Registration Statement, the
Company shall fail to file the Registration Statement with the Commission, or
the Registration Statement shall not have been declared effective by the
Commission, in each case within thirty (30) days of the periods set forth in
the Registration Rights Agreement (“Registration Rights Agreement”)
dated June 13, 2008 among the Company and each Buyer listed on Schedule I
attached thereto, or, while the Registration Statement is required to be
maintained effective pursuant to the terms of the Registration Rights
Agreement, the effectiveness of the Registration Statement lapses for any
reason (including, without limitation, the issuance of a stop order) or is
unavailable to the Lender for sale of all of the Lender’s Registrable
Securities (as defined in the 


 

















 


Registration
Rights Agreement) in accordance with the terms of the Registration Rights
Agreement, and such lapse or unavailability continues for a period of more than
ten (10) consecutive Trading Days or for more than an aggregate of twenty
(20) days in any 365-day period (which need not be consecutive);  and


 


(viii)        The Company shall fail to
observe or perform any other covenant, agreement or warranty contained in, or
otherwise commit any breach or default of any provision of this Note (except as
may be covered by Section 5(i) through 5(vi) hereof) or any
Transaction Document which is not cured within the time prescribed.


 


6.                                       Remedies.                           During the time that any
portion of this Note is outstanding, if any Event of Default has occurred, the
full unpaid principal amount of this Note, together with interest and other
amounts owing in respect thereof, to the date of acceleration shall become at
the Lender’s election, immediately due and payable in cash.  If an Event of Default (after giving effect
to any specified cure period) occurs and for so long as such Event of Default
remains uncured, the interest rate on this Note shall immediately become
twenty-four percent (24%) per annum and shall remain at such increased interest
rate until the applicable Event of Default is cured.  Furthermore, in addition to any other
remedies, the Lender shall have the right (but not the obligation) to appoint a
majority of the Company’s board of directors provided the Lender does so in
compliance with the requirements of the Securities Exchange Act of 1934, as
amended.  The Lender need not provide and
the Company hereby waives any presentment, demand, protest or other notice of
any kind, (other than required notice of conversion) and the Lender may
immediately and without expiration of any grace period enforce any and all of
its rights and remedies hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and annulled by Lender at any
time prior to payment hereunder. No such rescission or annulment shall affect
any subsequent Event of Default or impair any right consequent thereon.


 


7.                                       Maximum Interest Rate.  In no event shall any agreed to or actual
interest charged, reserved or taken by the Lender as consideration for this
Note exceed the limits imposed by New Jersey law.  In the event that the interest provisions of
this Note shall result at any time or for any reason in an effective rate of
interest that exceeds the maximum interest rate permitted by applicable law,
then without further agreement or notice the obligation to be fulfilled shall
be automatically reduced to such limit and all sums received by the Lender in
excess of those lawfully collectible as interest shall be applied against the
principal of this Note immediately upon the Lender’s receipt thereof, with the
same force and effect as though the Company had specifically designated such
extra sums to be so applied to principal and the Lender had agreed to accept
such extra payment(s) as a premium-free prepayment or prepayments.


 


8.                                       Cancellation of Note. Upon the
repayment by the Company of all of its obligations hereunder to the Lender,
including, without limitation, the principal amount of this Note, plus accrued
but unpaid interest, the indebtedness evidenced hereby shall be deemed canceled
and paid in full.  Except as otherwise
required by law or by the provisions of this Note, payments received by the
Lender hereunder shall be applied first against expenses and indemnities, next
against interest accrued on this Note, and next in reduction of the outstanding
principal balance of this Note.


 





















 


9.                                       Severability.  If any provision of this Note is, for any
reason, invalid or unenforceable, the remaining provisions of this Note will
nevertheless be valid and enforceable and will remain in full force and
effect.  Any provision of this Note that
is held invalid or unenforceable by a court of competent jurisdiction will be
deemed modified to the extent necessary to make it valid and enforceable and as
so modified will remain in full force and effect.


 


10.                                 Amendment and Waiver.  This Note may be amended, or any provision of
this Note may be waived, provided that any such amendment or waiver will be
binding on a party hereto only if such amendment or waiver is set forth in a
writing executed by the parties hereto. 
The waiver by any such party hereto of a breach of any provision of this
Note shall not operate or be construed as a waiver of any other breach.


 


11.                                 Successors.  Except as otherwise provided herein, this
Note shall bind and inure to the benefit of and be enforceable by the parties
hereto and their permitted successors and assigns.


 


12.                                 Assignment.  This Note shall not be directly or indirectly
assignable or delegable by the Company. 
The Lender may assign this Note as long as such assignment complies with
the Securities Act of 1933, as amended.


 


13.                                 Reissuance of this Note.


 


(i)             Transfer.  If this Note is to be transferred any such
transfer must be made in accordance with applicable securities laws, and the
Lender shall surrender this Note to the Company, whereupon the Company will,
subject to the satisfaction of the transfer provisions of the Securities
Purchase Agreement, forthwith issue and deliver upon the order of the Lender a
new Note (in accordance with Section 6(d)), registered in the name of the
registered transferee or assignee, representing the outstanding Principal being
transferred by the Holder and, if less then the entire outstanding Principal is
being transferred, a new Note (in accordance with Section 13(iv)) to the
Lender representing the outstanding principal not being transferred.


 


(ii)          Lost, Stolen or
Mutilated Note.  Upon receipt by the
Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Lender to the Company in
customary form and, in the case of mutilation, upon surrender and cancellation
of this Note, the Company shall execute and deliver to the Lender a new Note
(in accordance with Section 13(iv)) representing the outstanding
principal.


 


(iii)       Note Exchangeable for
Different Denominations.  This Note
is exchangeable, upon the surrender hereof by the Lender at the principal
office of the Company, for a new Note or Notes (in accordance with Section 13(iv))
representing in the aggregate the outstanding principal of this Note, and each
such new Note will represent such portion of such outstanding principal as is
designated by the Lender at the time of such surrender.


 


(iv)      Issuance of New Notes.  Whenever the Company is required to issue a
new Note pursuant to the terms of this Note, such new Note (i) shall be of
like tenor with this Note,


 

















 


(ii) shall
represent, as indicated on the face of such new Note, the principal remaining
outstanding (or in the case of a new Note being issued pursuant to Section 13(i) or
Section 13(iii), the principal designated by the Lender which, when added
to the principal represented by the other new Notes issued in connection with
such issuance, does not exceed the principal remaining outstanding under this
Note immediately prior to such issuance of new Notes), (iii) shall have an
date, as indicated on the face of such new Note, which is the same as the date
of this Note, (iv) shall have the same rights and conditions as this Note,
and (v) shall represent accrued and unpaid interest from the date of this
Note.


 


14.                                 No Strict Construction.  The language used in this Note will be deemed
to be the language chosen by the parties hereto to express their mutual intent,
and no rule of strict construction will be applied against any party.


 


15.                                 Further Assurances.  Each party hereto will execute all documents
and take such other actions as the other party may reasonably request in order
to consummate the transactions provided for herein and to accomplish the
purposes of this Note.


 


16.                                 Notices, Consents, etc.  Any
notices, consents, waivers or other communications required or permitted to be
given under the terms hereof must be in writing and will be deemed to have been
delivered:  (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) trading day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same.  The addresses and facsimile numbers for such
communications shall be:


 


	
  If to Company:

  	
   

  	
  Isonics Corporation

  
	
   

  	
   

  	
  5906 McIntyre Street

  
	
   

  	
   

  	
  Golden, CO 80403

  
	
   

  	
   

  	
  Attn: Chairman

  
	
   

  	
   

  	
  Telephone: (303) 279-7900

  
	
   

  	
   

  	
  Facsimile: (303) 279-7300

  
	
   

  	
   

  	
   

  
	
  With
  a Copy to:

  	
   

  	
  Burns,
  Figa & Will, P.C.

  
	
   

  	
   

  	
  Suite 1000,
  6400 South Fiddlers Green Circle

  
	
   

  	
   

  	
  Greenwood
  Village, CO 80112

  
	
   

  	
   

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

  
	
   

  	
   

  	
  Telephone:
  (303) 796-2626

  
	
   

  	
   

  	
  Facsimile:
  (303) 796-2777

  
	
   

  	
   

  	
   

  
	
  If
  to the Lender:

  	
   

  	
  YA
  Global Investments, LP

  
	
   

  	
   

  	
  101
  Hudson Street, Suite 3700

  
	
   

  	
   

  	
  Jersey
  City, NJ 07302

  
	
   

  	
   

  	
  Attention:
  Mark A. Angelo

  
	
   

  	
   

  	
  Telephone:
  (201) 985-8300

  
	
   

  	
   

  	
  Facsimile:
  (201) 985-8744

  



 

















 


or at such other address
and/or facsimile number and/or to the attention of such other person as the
recipient party has specified by written notice given to each other party three
(3) trading days prior to the effectiveness of such change.  Written confirmation of receipt (A) given
by the recipient of such notice, consent, waiver or other communication, (B) mechanically
or electronically generated by the sender’s facsimile machine containing the
time, date, recipient facsimile number and an image of the first page of
such transmission or (C) provided by a nationally recognized overnight
delivery service, shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.


 


17.                                 Remedies, Other Obligations, Breaches and Injunctive
Relief.  The Lender’s
remedies provided in this Note shall be cumulative and in addition to all other
remedies available to the Lender under this Note, at law or in equity
(including a decree of specific performance and/or other injunctive relief), no
remedy of the Lender contained herein shall be deemed a waiver of compliance
with the provisions giving rise to such remedy and nothing herein shall limit
the Lender’s right to pursue actual damages for any failure by the Company to
comply with the terms of this Note.  No
remedy conferred under this Note upon the Lender is intended to be exclusive of
any other remedy available to the Lender, pursuant to the terms of this Note or
otherwise.  No single or partial exercise
by the Lender of any right, power or remedy hereunder shall preclude any other
or further exercise thereof.  The failure
of the Lender to exercise any right or remedy under this Note or otherwise, or
delay in exercising such right or remedy, shall not operate as a waiver
thereof.  Every right and remedy of the
Lender under any document executed in connection with this transaction may be
exercised from time to time and as often as may be deemed expedient by the
Lender.  The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Lender and that the remedy at law for any such breach may be inadequate.  The Company therefore agrees that, in the
event of any such breach or threatened breach, the Lender shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach, and specific performance without the necessity of showing economic loss
and without any bond or other security being required.


 


18.                                 Governing Law; Jurisdiction. All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
Jersey, without giving effect to any choice of law or conflict of law provision
or rule (whether of the State of New Jersey or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than
the State of New Jersey.  Each party
hereby irrevocably submits to the exclusive jurisdiction of the Superior Court
of the State of New Jersey sitting in Hudson County, New Jersey and the United
States Federal District Court for the District of New Jersey sitting in Newark,
New Jersey, for the adjudication of any dispute hereunder or in connection
herewith or therewith, or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding
is improper.  Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a 


 

















 


copy thereof to such party at the address for
such notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by law.


 


19.                                 No Inconsistent Agreements.  None of the parties hereto will hereafter
enter into any agreement, which is inconsistent with the rights granted to the
parties in this Note.


 


20.                                 Third Parties.  Nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any person or entity,
other than the parties to this Note and their respective permitted successor
and assigns, any rights or remedies under or by reason of this Note.


 


21.                                 Waiver of Jury Trial.  AS A
MATERIAL INDUCEMENT FOR THE LENDER TO LOAN TO THE COMPANY THE MONIES HEREUNDER,
THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS
ASSOCIATED WITH THIS TRANSACTION.


 


22.                                 Entire Agreement.  This
Note (including any recitals hereto) set forth the entire understanding of the
parties with respect to the subject matter hereof, and shall not be modified or
affected by any offer, proposal, statement or representation, oral or written,
made by or for any party in connection with the negotiation of the terms
hereof, and may be modified only by instruments signed by all of the parties
hereto.


 


[REMAINDER OF PAGE INTENTIONALY
LEFT BLANK]


 

















 


IN
WITNESS WHEREOF, this Promissory Note is executed by the
undersigned as of the date hereof.


 


	
   

  	
   

  	
  YA
  GLOBAL INVESTMENTS, LP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:
  Yorkville Advisors, LLC

  
	
   

  	
   

  	
  Its:
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Mark
  Angelo

  
	
   

  	
   

  	
  Its:

  	
  Portfolio
  Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ISONICS
  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: Gregory A.
  Meadows

  
	
   

  	
   

  	
  Title:   Vice
  President/Assistant Secretary