Exhibit 10.1


 


THIS  AGREEMENT (this “Agreement”), dated
as of November 3, 2008, is by and among
ISONICS CORPORATION, a California corporation (the “Company”),
and YA GLOBAL INVESTMENTS, L.P. (“YA
Global”)


 


                    WHEREAS, on June 13, 2008 the parties hereto entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”);
 
                    WHEREAS, the Securities  Purchase Agreement provides for a Second Closing and a Third Closing (each as defined in the Securities Purchase Agreement);
 
                    WHEREAS, the conditions to the Second and Third Closing have not been met
 
                    WHEREAS, the Company has requested and YA Global has agreed to consummate the Second and Third Closing in consideration of certain additional agreements as contained herein;
 


NOW, THEREFORE, in consideration
of the foregoing, and the respective agreements, warranties and covenants
contained herein, the parties hereto agree, covenant and warrant as follows:


 


1.               COMPANY ACKNOWLEDGMENTS AND RELEASE.


 


a.               Acknowledgement of Obligations.  The Company hereby acknowledges, confirms and
agrees that as of the date hereof, the Company is indebted to YA Global under
the following:


 


·                  Secured Convertible
Debenture (No. CCP-2) issued  on June 5,
2006, by Isonics Corporation (the “Company”) in the amount of $3,000,000
to YA Global Investments, L.P. (f/k/a Cornell Capital Partners L.P.) (“YA
Global”), which was amended and restated on June 13, 2006, as Secured
Convertible Debenture (No. CCP-4) (“Debenture CCP-4”) and which was
further amended and restated on June 13, 2008 into a term note in the
amount of $3,000,000;


 


·                  Term Note, dated June 13,
2008, issued by the Company in the amount of $602,136.99 to YA Global and representing interest accrued on
Debenture CCP-4;


 


·                  Secured Convertible
Debenture (No. CCP-5) issued on November 16, 2006, by the Company in
the amount of $3,000,000 to YA Global (“Debenture CCP-5”) which was
amended and restated on June 13, 2008 into a term note in the amount of $2,970,000;


 


·                  Term Note, dated June 13,
2008, issued by the Company in the amount of $520,246.85  to YA Global and representing
interest accrued on Debenture CCP-5;


 

















 


·                  Secured Convertible
Debenture (No. CCP-1) issued on May 31, 2006, by the Company in the
amount of Ten Million Dollars ($10,000,000) to YA Global and on June 13,
2006, which was amended and restated as Secured Convertible Debenture (No. CCP-3)
and further amended on June 13, 2008 by Amendment No. 1 thereto;


 


·                  Secured Convertible
Debenture (No. CCP-2007-1) issued on April 11, 2007, by the Company
in the amount of Two Million Dollars ($2,000,000) to YA Global and amended on June 13,
2008 by Amendment No. 1 thereto; and


 


·                  Term Note, dated June 13,
2008, issued by the Company in the amount of $1,175,000 to YA Global (the “Term
Note”).


 


b.              Acknowledgement of Security Interests.  The Company hereby acknowledges, confirms and
agrees that YA Global has and shall continue to have valid, enforceable and
perfected first-priority liens upon and security interests in the Pledged
Property heretofore granted to YA Global pursuant to the following:


 


·                  Security Agreement between
the Company and YA Global dated May 30, 2006;


 


·                  Security Agreement between
Isonics Homeland Security and Defense Corporation, a wholly owned subsidiary of
the Company and YA Global dated May 30, 2006;


 


·                  Security Agreement between
Protection Plus Corporation, a wholly owned subsidiary of the Company, and YA
Global dated May 30, 2006;


 


·                  Security Agreement between
Isonics Vancouver, Inc., a wholly owned subsidiary of the Company, and YA
Global dated May 30, 2006;


 


·                  Security Agreement between
the Company and the subsidiaries of the Company listed therein in favor of YA
Global dated June 13, 2008; and


 


·                  in the Pledged Shares
heretofore granted to YA Global pursuant to the Pledge and Escrow Agreement
among the Company, David Gonzalez, Esq. and YA Global dated April 10,
2007, or otherwise granted to or held by YA Global.


 


c.               Confirmation and Release. YA Global
hereby represents and warrants to the Company that to the best of its knowledge
it has complied with its obligations under all prior agreements (including, without
limitation, debentures, warrants, securities purchase agreements and security
agreements) between YA Global and the Company and, in connection therewith, has
made no misrepresentation to the Company and has complied with all of its legal
requirements (the “Confirmation”). In consideration thereof, the Company
does hereby agree to, on behalf of itself and its agents, representatives,
attorneys, assigns, heirs, subsidiaries, executors and administrators
(collectively, “Company Parties”) RELEASE AND FOREVER DISCHARGE YA
Global and its subsidiaries and its respective affiliates, parents, joint
ventures, 


 

















 


officers, directors, shareholders, interest
holders, members, managers, employees, consultants, representatives, successors
and assigns, heirs, executors and administrators (collectively, “Buyer
Parties”) from all causes of action, suits, debts, claims and demands
whatsoever known or unknown, at law, in equity or otherwise, which the Company
Parties ever had or now has, and any claims for reasonable attorneys’ fees and
costs, and including, without limitation, any claims relating to fees,
penalties, liquidated damages, and indemnification for losses, liabilities and
expenses.  Based upon and subject to the
Confirmation, the release contained in this Section is effective without
regard to the legal nature of the claims raised and without regard to whether
any such claims are based upon tort, equity, or implied or express
contract.  It is expressly understood and
agreed that this release shall operate as a clear and unequivocal waiver by the
Company Parties of any such claim whatsoever.


 


2.               COMPANY COVENANTS.


 


a.               Liquidation of Assets. In
consultation with YA Global and its representatives, the Company will
investigate the possibility of liquidating certain of its assets and divisions
to provide working capital to the Company and to pay down a portion of the
Company’s indebtedness to YA Global.


 


b.              Synergistic Business Opportunities. In
consultation with and with the assistance of YA Global, Isonics agrees that it
will pursue a strategy directed toward the acquisition of other businesses
compatible and synergistic with its subsidiary Protection Plus Security
Corporation.


 


c.               Use of Proceeds. The Company
will use the proceeds from Second and Third Closing for working capital
purposes, which, for the avoidance of doubt, will not include the payments of
bonuses, severance, accrued but unused paid time off or deferred compensation
to any current or former officers of directors of the Company or its
subsidiaries.


 


d.              Bonuses, Accrued and Unused Paid Time Off,
Severance, Deferred Compensation.  With regard to any current or former officers
or directors of the Company and its subsidiaries, the Company will not (i) pay
bonuses, pay severance, reimburse for deferred compensation or reimburse for
accrued and unused paid time off unless YA Global consents and (ii) enter
into any agreements to distribute bonuses, pay severance, reimburse for
deferred compensation or reimburse for accrued and unused paid time off unless
such agreement states that any such payments and reimbursements are subject to
the Buyer(s) consent.


 


e.               Director Vacancies.  The Company will cause any vacancies on the
Company’s Board of Directors, including, without limitation, the vacancy
created by the resignation of John Sakys tendered to the Company on October     ,
2008, to be filled by a person acceptable to YA Global in its sole discretion.


 

















 


3.               YA GLOBAL COVENANTS.


 


a.               To the extent the Company directly or
indirectly sells any assets (whether as a sale or a transfer in lieu of
foreclosure or other business combination) (individually or as a group) for a
total resulting in cash proceeds of more than $3,000,000 or otherwise obtains
cash assets of more than $3,000,000, YA Global will release its security
interest to the extent necessary to permit a portion of the net proceeds to be
paid as follows:


 


i.                   To John Sakys as Severance
(as defined in the Amended and Restated Employment Agreement, dated the date
hereof, between the Company and John Sakys (the “Sakys Agreement”)) and
as PTO (as defined in the Sakys Agreement) pursuant to the terms of the Sakys
Agreement.


 


ii.                To Gregory Meadows as
Severance (as defined in the Amended and Restated Employment Agreement, dated
the date hereof, between the Company and Gregory Meadows (the “Meadows
Agreement”)) and as PTO (as defined in the Meadows Agreement) pursuant to
the terms of the Meadows Agreement.


 


iii.             To Nick Tsimenakis as
Severance (as defined in the Amended and Restated Employment Agreement, dated
the date hereof, between the Company and Nick Tsimenakis (the “Tsimenakis
Agreement”)) and as PTO (as defined in the Tsimenakis Agreement).


 


iv.            To Peter Christiansen as
deferred compensation pursuant to the terms of the letter agreement, dated the
date hereof, from the Company to Peter Christiansen (the “Christiansen
Letter”).


 


b.              To the extent the Company directly or indirectly
sells any assets (whether as a sale or a transfer in lieu of foreclosure or
other business combination) (individually or as a group) for a total resulting
in cash proceeds of more than $5,000,000 or otherwise obtains cash assets of
more than $5,000,000, YA Global will release its security interest to the
extent necessary to permit a portion of the net proceeds to be paid to Chris
Toffales as Severance (as defined in the Amendment and Restated Executive
Employment Agreement, dated the date hereof, between the Company and Chris
Toffales (the “Toffales Agreement” and together with the Sakys
Agreement, the Meadows Agreement, the Tsimenakis Agreement and the Christiansen
Letter, the “Employment Agreements”)) pursuant to the terms of the
Toffales Agreement.  To the extent the
Company directly or indirectly sells any assets (whether as a sale or a
transfer in lieu of foreclosure or other business combination) (individually or
as a group) for a total resulting in net cash proceeds of more than $3,000,000,
YA Global will release its security interest in proceeds to the extent
necessary to permit a portion of the net proceeds to be paid to Chris Toffales
as PTO (as defined in the Toffales Agreement) and Deferred Compensation
pursuant to the terms of the Toffales Agreement.


 

















 


4.               COMPANY REPRESENTATIONS AND WARRANTIES.


 


a.               The representations and warranties of the
Company set forth in the Securities Purchase Agreement are hereby incorporate
by reference.  The Company hereby
represents and warrants that except as otherwise disclosed on a disclosure
schedule attached hereto or as set forth in the SEC Documents (as defined in
the Securities Purchase Agreement), such representations and warranties are
true and correct on the date hereof (except for representations and warranties
that speak as of a specific date).


 


b.              The Company represents and warrants to YA Global
that the Company has provided YA Global with true and correct copies of each of
the Employment Agreements and all information contained therein (including
without limitation, the amount of accrued PTO) is true and correct.


 


5.               YA GLOBAL REPRESENTATIONS AND
WARRANTIES.  The
representations and warranties of YA Global set forth in the Securities
Purchase Agreement are hereby incorporate by reference.  YA Global hereby represents and warrants that
except as otherwise disclosed on a disclosure schedule attached hereto, such
representations and warranties are true and correct on the date hereof (except
for representations and warranties that speak as of a specific date).


 


6.               EVENT OF DEFAULT. The parties
hereto acknowledge and agree that this Agreement shall be considered a
Transaction Document (as defined in the Securities Purchase Agreement) and,
among other things, a breach of this Agreement will constitute an Event of
Default (as defined in the Term Note).


 


7.               FEES AND EXPENSES. Upon the
consummation of the Second and Third Closing, the Company shall place into
escrow $22,500 (the “Monitoring Fees”), directly from the proceeds of the
Second and Third Closing.  Such
Monitoring Fees shall be Escrow Funds and be treated pursuant to the Escrow
Agreement (each as defined in the Securities Purchase Agreement).


 


8.               DISCLOSURE.  The Company shall disclose the contents of
this Agreement on a Form 8-K or such other form as may be applicable
within four business days of the date hereof.


 


9.               PROVISIONS OF GENERAL APPLICATION


 


a.               Counterparts.  This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, and all
of which shall constitute one and the same instrument. This letter shall be
accepted, effective and binding, for all purposes, when the parties shall have
signed and transmitted to each other, by telecopier or otherwise, copies of
this letter.


 


b.              Effect of this Agreement. 
Except as modified pursuant hereto, no other changes or modifications to
the Transaction Documents are intended or implied and in all other respects the
Transaction Documents are hereby specifically ratified, restated and confirmed
by all parties hereto as of the effective date hereof.  To the extent of conflict between the terms of this
Agreement and the other Transaction Documents, the terms of this Agreement
shall control.  The Transaction Documents
and this Agreement shall be read and construed as one agreement.


 

















 


c.               Governing Law.  This
Agreement shall be interpreted according to the laws of the State of New Jersey
and shall inure to the benefit of and be binding upon the parties hereto and
their respective successors and assigns. 
Any notices, demands, consents, other writings or communications
permitted or required by this Agreement shall be given in the manner and to the
address as set forth in the Transaction Documents.


 


d.              Mutual Waiver of Jury Trial. 
BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF
THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE
ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE BETWEEN FACTOR AND
CLIENT ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
OF THE OTHER FACTORING DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.


 


e.               Successors and Assigns. This letter
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, executors, legal representatives, trustees, successors
and assigns.


 


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


 




	
   

  	
   

  	
  ISONICS CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
  Name:

  	
  Chris Toffales

  
	
   

  	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  YA GLOBAL INVESTMENTS,
  LP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Yorkville Advisors, LLC

  
	
   

  	
   

  	
  Its:

  	
  Investment Manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title: