Exhibit 10.7


 


Execution Copy


 


GUARANTY


 


This GUARANTY
AGREEMENT (“Agreement”), dated as of June     ,
2008 is made by each of the undersigned (each a “Guarantor”, and
collectively, the “Guarantors”),
in favor of YA GLOBAL INVESTMENTS, L.P. (the “Secured
Party”).


 


WHEREAS, in
connection with the Securities Purchase Agreement by and among Isonics
Corporation, a California corporation (the “Company”) and the Secured Party of even date herewith (the “Securities Purchase Agreement”),
the Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue to the Secured Party (i) an
aggregate original principal amount of $1,175,000 notes (the “Notes”); and
(ii) warrants (the “Warrants”) to be exercisable to acquire additional
shares of the Company’s common stock (“Common Stock”), no par value per
share (the “Warrants Shares”) initially in that number of shares of
Common Stock set forth in the Securities Purchase Agreement;


 


WHEREAS, each of the Guarantors is
executing and delivering a Security Agreement dated the date hereof (the “Security Agreement”) granting a
lien in all of the Pledged Property (as defined in the Security Agreement) to the
Secured Party;


 


WHEREAS, it is a
condition precedent to the Secured Party purchasing the Notes and Warrants
pursuant to the Securities Purchase Agreement that the Guarantors shall have
executed and delivered to the Secured Party this Agreement guaranteeing all of
the obligations of the Company under the Transaction Documents (as defined in
the Securities Purchase Agreement, the “Transaction Documents”;


 


WHEREAS,
each Guarantor has determined that the execution, delivery and performance of
this Guaranty directly benefits, and is in the best interest of, such
Guarantor;


 


NOW,
THEREFORE, in consideration of the premises and the
agreements herein and in order to induce the Secured Party to perform under the
Securities Purchase Agreement, each Guarantor hereby agrees with the Secured
Party as follows:


 


SECTION 1.     Definitions.  Reference is hereby made to the Securities
Purchase Agreement and the Notes issued pursuant thereto for a statement of the
terms thereof.  All terms used in this
Guaranty, which are defined in the Securities Purchase Agreement or the Notes and
not otherwise defined herein, shall have the same meanings herein as set forth
therein.


 


SECTION 2.     Guaranty.  The Guarantors, jointly and severally, hereby
unconditionally and irrevocably, guaranty the punctual payment, as and when due
and payable, by stated maturity or otherwise, of all Obligations (as defined in
the Security Agreement) of the Company from time to time owing by it to the
Secured Party (such obligations, to the extent not paid by the Company, being
the “Guaranteed Obligations”),
and agrees to pay any and all expenses (including reasonable counsel fees and
expenses) reasonably incurred by the Secured Party in enforcing any rights
under this Guaranty.  Without limiting
the generality of the foregoing, each Guarantor’s liability hereunder shall
extend to all amounts that constitute part of the Guaranteed Obligations and
would be owed by the Company to the Secured Party but for the 


 

















 


fact that they are unenforceable or not allowable due to the existence
of an insolvency proceeding involving any Guarantor or the Company (each, a “Transaction Party”).


 


SECTION 3.     Guaranty Absolute; Continuing Guaranty;
Assignments.


 


(a)           The Guarantors, jointly
and severally, guaranty that the Guaranteed Obligations will be paid strictly
in accordance with the terms of the Transaction Documents, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Secured Party with respect
thereto.  The obligations of each
Guarantor under this Guaranty are independent of the Guaranteed Obligations,
and a separate action or actions may be brought and prosecuted against any
Guarantor to enforce such obligations, irrespective of whether any action is
brought against any Transaction Party or whether any Transaction Party is
joined in any such action or actions. 
The liability of any Guarantor under this Guaranty shall be irrevocable,
absolute and unconditional irrespective of, and each Guarantor hereby
irrevocably waives, to the extent permitted by law, any defenses it may now or
hereafter have in any way relating to, any or all of the following:


 


(i)            any lack of validity
or enforceability of any Transaction Document or any agreement or instrument
relating thereto;


 


(ii)           any change in the time,
manner or place of payment of, or in any other term of, all or any of the
Guaranteed Obligations, or any other amendment or waiver of or any consent to
departure from any Transaction Document, including, without limitation, any
increase in the Guaranteed Obligations resulting from the extension of
additional credit to any Transaction Party or otherwise;


 


(iii)          any taking, exchange,
release or non-perfection of any Pledged Property (as defined in the Security
Documents), or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed
Obligations;


 


(iv)          any change,
restructuring or termination of the corporate, limited liability company or
partnership structure or existence of any Transaction Party; or


 


(v)           any other circumstance
(including any statute of limitations) or any existence of or reliance on any
representation by the Secured Party that might otherwise constitute a defense
available to, or a discharge of, any Transaction Party or any other guarantor
or surety.


 


This Guaranty shall continue to
be effective or be reinstated, as the case may be, if at any time any payment
of any of the Guaranteed Obligations is rescinded or must otherwise be returned
by the Secured Party or any other
Person upon the insolvency, bankruptcy or reorganization of any Transaction
Party or otherwise, all as though such payment had not been made.


 


(b)           This Guaranty is a
continuing guaranty and shall (i) remain in full force and effect until
the indefeasible cash payment in full of the Guaranteed Obligations (other than
inchoate indemnity obligations) and (ii) be binding upon each Guarantor
and its respective successors and assigns. 
This Guaranty shall inure to the benefit of and be enforceable by the Secured Party and its successors, and
permitted pledgees, transferees and assigns. 
Without 


 

















 


limiting the generality of the foregoing
sentence, the Secured Party may pledge, assign or otherwise transfer all or any
portion of its rights and obligations under and subject to the terms of any
Transaction Document to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to the Secured
Party herein or otherwise, in each case as provided in the Securities Purchase
Agreement or such Transaction Document.


 


SECTION 4.     Waivers.  To the extent permitted by applicable law,
each Guarantor hereby waives promptness, diligence, notice of acceptance and
any other notice with respect to any of the Guaranteed Obligations and this
Guaranty and any requirement that the Secured Party exhaust any right or take
any action against any Transaction Party or any other Person or any Pledged
Property.  The Guarantor acknowledges
that it will receive direct and indirect benefits from the financing arrangements
contemplated herein and that the waiver set forth in this Section 4 is
knowingly made in contemplation of such benefits.  The Guarantors hereby waive any right to
revoke this Guaranty, and acknowledges that this Guaranty is continuing in
nature and applies to all Guaranteed Obligations, whether existing now or in
the future.


 


SECTION 5.     Subrogation.  No Guarantor may exercise any rights that it
may now or hereafter acquire against any Transaction Party or any other
guarantor that arise from the existence, payment, performance or enforcement of
any Guarantor’s obligations under this Guaranty, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of the Secured
Party against any Transaction Party or any other guarantor or any Pledged
Property, whether or not such claim, remedy or right arises in equity or under
contract, statute or common law, including, without limitation, the right to
take or receive from any Transaction Party or any other guarantor, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security solely on account of such claim, remedy or right, unless
and until all of the Guaranteed Obligations (other than inchoate indemnity
obligations) and all other amounts payable under this Guaranty (other than
inchoate indemnity obligations) shall have indefeasibly been paid in full in
cash.  If any amount shall be paid to the
Guarantor in violation of the immediately preceding sentence at any time prior
to the later of the payment in full in cash of the Guaranteed Obligations and
all other amounts payable under this Guaranty, such amount shall be held in
trust for the benefit of the Secured Party and shall forthwith be paid to the Secured
Party to be credited and applied to the Guaranteed Obligations and all other
amounts payable under this Guaranty, whether matured or unmatured, in
accordance with the terms of the Transaction Document, or to be held as Pledged
Property for any Guaranteed Obligations or other amounts payable under this
Guaranty thereafter arising.  If (a) any
Guarantor shall make payment to the Secured Party of all or any part of the
Guaranteed Obligations, and (b) all of the Guaranteed Obligations (other
than inchoate indemnity obligations) and all other amounts payable under this
Guaranty (other than inchoate indemnity obligations) shall indefeasibly be paid
in full in cash, the Secured Party will, at such Guarantor’s request and
expense, execute and deliver to such Guarantor appropriate documents, without
recourse and without representation or warranty, necessary to evidence the
transfer by subrogation to such Guarantor of an interest in the Guaranteed
Obligations resulting from such payment by such Guarantor.


 

















 


SECTION 6.     Representations, Warranties and
Covenants.


 


(a)           Each Guarantor hereby represents and
warrants as of the date first written above as follows:


 


(i)            The Guarantor (A) is
a corporation, limited liability company or limited partnership duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (B) has all corporate, limited liability company or limited
partnership power and authority to conduct its business as now conducted and as
presently contemplated and to execute and deliver this Guaranty and each other
Transaction Document to which the Guarantor is a party, and to consummate the
transactions contemplated hereby and thereby and (C) is duly qualified to
do business and is in good standing in each jurisdiction in which the character
of the properties owned or leased by it or in which the transaction of its
business makes such qualification necessary except where the failure to be so
qualified would not result in a Material Adverse Effect.


 


(ii)           The execution, delivery
and performance by the Guarantor of this Guaranty and each other Transaction
Document to which the Guarantor is a party (A) have been duly authorized
by all necessary corporate, limited liability company or limited partnership action,
(B) do not and will not contravene its charter or by-laws, its limited
liability company or operating agreement or its certificate of partnership or
partnership agreement, as applicable, or any applicable law or any contractual
restriction binding on the Guarantor or its properties (except where the
contravention of such contractual restriction would not result in a Material
Adverse Effect), (C) do not and will not result in or require the creation
of any lien (other than pursuant to any Transaction Document) upon or with
respect to any of its properties, and (D) do not and will not result in
any default, noncompliance, suspension, revocation, impairment, forfeiture or
nonrenewal of any material permit, license, authorization or approval
applicable to it or its operations or any of its properties.


 


(iii)          No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority is required in connection with the due execution, delivery and
performance by the Guarantor of this Guaranty or any of the other Transaction
Documents to which the Guarantor is a party (other than expressly provided for
in any of the Transaction Documents).


 


(iv)          Each of this Guaranty
and the other Transaction Documents to which the Guarantor is or will be a
party, when delivered, will be, a legal, valid and binding obligation of the
Guarantor, enforceable against the Guarantor in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, suretyship or other similar laws and
equitable principles (regardless of whether enforcement is sought in equity or
at law).


 


(v)           There is no pending or,
to the knowledge of the Guarantor, threatened action, suit or proceeding
against the Guarantor or to which any of the properties of the Guarantor is
subject, before any court or other governmental authority or any arbitrator
that (A) if adversely determined, could reasonably be expected to have a
Material Adverse Effect or 


 

















 


(B) relates to this Guaranty or any of the other Transaction
Documents to which the Guarantor is a party or any transaction contemplated
hereby or thereby.


 


(vi)          The Guarantor (A) has
read and understands the terms and conditions of the Securities Purchase
Agreement and the other Transaction Documents, and (B) now has and will
continue to have independent means of obtaining information concerning the
affairs, financial condition and business of the Company and the other Transaction
Parties, and has no need of, or right to obtain from the Secured Party, any
credit or other information concerning the affairs, financial condition or
business of the Company or the other Transaction Parties that may come under
the control of the Secured Party.


 


SECTION 7.     Right of Set-off.  Upon the occurrence and during the
continuance of any Event of Default, the Secured Party may, and is hereby
authorized to, at any time and from time to time, without notice to the
Guarantors (any such notice being expressly waived by each Guarantor) and to
the fullest extent permitted by law, set-off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Secured Party to or for the credit
or the account of any Guarantor against any and all obligations of the
Guarantors now or hereafter existing under this Guaranty or any other
Transaction Document, irrespective of whether or not the Secured Party shall
have made any demand under this Guaranty or any other Transaction Document and
although such obligations may be contingent or unmatured.  The Secured Party agrees to notify the
relevant Guarantor promptly after any such set-off and application made by the
Secured Party, provided that the failure to give such notice shall not affect
the validity of such set-off and application. 
The rights of the Secured Party under this Section 7 are in
addition to other rights and remedies (including, without limitation, other rights
of set-off) which the Secured Party may have under this Guaranty or any other
Transaction Document in law or otherwise.


 


SECTION 8.     Notices, Etc.  All notices and other communications provided
for hereunder shall be in writing and shall be mailed, telecopied or delivered,
if to any Guarantor, to it at its address set forth on the signature page hereto,
or if to the Secured Party, to it at its respective address set forth in the
Securities Purchase Agreement; or as to either such Person at such other
address as shall be designated by such Person in a written notice to such other
Person complying as to delivery with the terms of this Section 8.  All such notices and other communications
shall be effective (i) if mailed (by certified mail, postage prepaid and
return receipt requested), when received or three Business Days after deposited
in the mails, whichever occurs first; (ii) if telecopied, when transmitted
and confirmation is received, provided same is on a Business Day and, if not,
on the next Business Day; or (iii) if delivered by hand, upon delivery,
provided same is on a Business Day and, if not, on the next Business Day.


 


SECTION 9.     Governing Law.  This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New Jersey without
regard to the principles of conflict of laws. 
The parties further agree that any action between them shall be heard in
Hudson County, New Jersey, and expressly consent to the jurisdiction and venue
of the Superior Court of New Jersey, sitting in Hudson County and the United
States District Court for the District of New Jersey sitting in Newark, New
Jersey for the adjudication of any civil action asserted pursuant to this
Paragraph.


 

















 


SECTION 10.     WAIVER OF JURY TRIAL, ETC.  EACH GUARANTOR HEREBY WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS
UNDER THIS GUARANTY OR THE OTHER TRANSACTION DOCUMENTS, OR UNDER ANY AMENDMENT,
WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN
THE FUTURE MAY BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR
ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS
GUARANTY OR THE OTHER TRANSACTION DOCUMENTS, AND AGREES THAT ANY SUCH ACTION,
PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY.  EACH GUARANTOR CERTIFIES THAT NO
OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF THE SECURED PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE SECURED PARTY WOULD NOT, IN THE
EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING
WAIVERS.  EACH GUARANTOR HEREBY
ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE SECURED PARTY
ENTERING INTO THIS AGREEMENT.


 


SECTION 11.     Miscellaneous.


 


(a)           Each Guarantor will
make each payment hereunder in lawful money of the United States of America and
in immediately available funds to the Secured Party, at such address specified
by the Secured Party from time to time by notice to the Guarantors.


 


(b)           No amendment or waiver
of any provision of this Guaranty and no consent to any departure by any
Guarantor therefrom shall in any event be effective unless the same shall be in
writing and signed by each Guarantor and the Secured Party, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.


 


(c)           No failure on the part
of the Secured Party to exercise, and no delay in exercising, any right
hereunder or under any other Transaction Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any right hereunder or
under any Transaction Document preclude any other or further exercise thereof
or the exercise of any other right.  The
rights and remedies of the Secured Party provided herein and in the other
Transaction Documents are cumulative and are in addition to, and not exclusive
of, any rights or remedies provided by law. 
The rights of the Secured Party under any Transaction Document against
any party thereto are not conditional or contingent on any attempt by the Secured
Party to exercise any of their respective rights under any other Transaction
Document against such party or against any other Person.


 


(d)           Any provision of this
Guaranty that is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.


 

















 


(e)           This Guaranty shall (i) be
binding on each Guarantor and its respective successors and assigns, and (ii) inure,
together with all rights and remedies of the Secured Party hereunder, to the
benefit of the Secured Party and their respective successors, transferees and
assigns.  Without limiting the generality
of clause (ii) of the immediately preceding sentence, the Secured Party may
assign or otherwise transfer its rights and obligations under the Securities
Purchase Agreement or any other Transaction Document to any other Person in
accordance with the terms thereof, and such other Person shall thereupon become
vested with all of the benefits in respect thereof granted to the Secured Party,
as the case may be, herein or otherwise. 
None of the rights or obligations of any Guarantor hereunder may be
assigned or otherwise transferred without the prior written consent of Secured
Party.


 


(f)            This Guaranty reflects the entire understanding of
the transaction contemplated hereby and shall not be contradicted or qualified
by any other agreement, oral or written, entered into before the date hereof.


 


(g)           Section headings herein are included for convenience of reference
only and shall not constitute a part of this Agreement for any other purpose.


 


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IN WITNESS
WHEREOF, each Guarantor has caused this Guaranty to be
executed by its respective duly authorized officer, as of the date first above
written.


 


	
   

  	
  ISONICS VANCOUVER, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  c/o Isonics Corporation

  
	
   

  	
  5906 McIntyre Street

  
	
   

  	
  Golden, CO 80403

  
	
   

  	
  Attn: Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
  ISONICS HOMELAND SECURITY AND DEFENSE

  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  c/o Isonics Corporation

  
	
   

  	
  5906 McIntyre Street

  
	
   

  	
  Golden, CO 80403

  
	
   

  	
  Attn: Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
  PROTECTION PLUS SECURITY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  c/o Isonics Corporation

  
	
   

  	
  5906 McIntyre Street

  
	
   

  	
  Golden, CO 80403

  
	
   

  	
  Attn: Chief
  Executive Officer