Document:

Exhibit 10.3
SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE
This Settlement Agreement and Mutual General Release (hereinafter, this “Agreement”) is made and entered into as of the 13th day of February 2007, by and between Isonics Corporation (“Isonics”) and Boris Rubizhevsky (“Mr. Rubizhevsky”).  Isonics and Mr. Rubizhevsky are referred to jointly herein as “the Parties.”
RECITALS
A.                Mr. Rubizhevsky had been an officer, director, and employee of Isonics for more than the past ten years.
B.                 By this agreement, Isonics and Mr. Rubizhevsky have determined that it is in their best interests to resolve all disagreements and issues between them and to provide for the resolution of all issues relating to Mr. Rubizhevsky’s employment with Isonics, service as an officer and director thereof, and the resignation as an officer and director (collectively the “Issues”) in exchange for the consideration set forth herein.
AGREEMENT
NOW THEREFORE, in consideration of the following covenants and promises and for other valuable consideration as described below, and without admitting any fault or liability on the part of any of the Parties, their officers, directors, or affiliates, the Parties hereby terminate the employment agreement between Mr. Rubizhevsky and Isonics dated September 22, 1997, and further enter into this Agreement.

1.             Mr. Rubizhevsky’s
Acknowledgements, Representations, and Agreement.

a.             Mr.
Rubizhevsky hereby submits his resignation as an officer and director of
Isonics and acknowledges that he has no authority to act or to make
representations on behalf of Isonics or any affiliate or subsidiary thereof.

b.             Mr.
Rubizhevsky represents that he has returned all of the property of and
information pertaining to Isonics, its subsidiaries and its affiliates, in his
possession and control.  Mr. Rubizhevsky
further represents to Isonics that he does not have any complete or partial
copies of any of this property, either written or on tape, disk, diskette or
other storage media.  Mr. Rubizhevsky
acknowledges that if he later learns that he has any property that belongs to
Isonics, he is obliged to notify Isonics and to make arrangements to return all
such property.

c.             Mr.
Rubizhevsky agrees that he will not disparage Isonics or any of its officers,
directors, employees, affiliates, or agents. 
Mr. Rubizhevsky further acknowledges that (to the extent he has received
confidential or non-public information regarding Isonics) he will comply with
his legal obligations with respect thereto. 
Failure 

to comply with the provisions of this paragraph may, in addition to any
other remedies available under applicable law and at Isonics’ option, result in
a termination of any payments and benefits which have not been made as of the
first day of the month following such failure.

d.             Mr.
Rubizhevsky agrees that during the period of his continuing employment with
Isonics and thereafter, he will assist Isonics’ executive chairman, chief
executive officer and chief financial officer with transition matters and the
litigation against Grant Thornton LLP.

e.             Mr.
Rubizhevsky hereby grants the enclosed proxy by which the named proxy holder
can vote all shares of Isonics common stock held in his name, in the name of
Nancy Rubizhevsky, and any other beneficial ownership controlled by him for
approval of Isonics’ 2007 Restructuring Equity Plan and any amendment to the
Isonics 2005 Stock Option Plan that may be proposed at the next meeting of
shareholders of Isonics.

f.              Mr.
Rubizhevsky agrees that, at all times from the date of this Agreement and for a
period of one years thereafter, he will not either directly or indirectly
solicit, induce, recruit or encourage (or attempt to solicit, induce, recruit
or encourage) any of Isonics’ employees to leave their employment.  Failure to comply with the provisions of this
paragraph may, in addition to any other remedies available under applicable law
and at Isonics’ option, result in a termination of any payments and benefits
which have not been made as of the first day of the month following such
failure.

2.             Settlement Consideration.

a.             Isonics
will pay Mr. Rubizhevsky compensation for continuing employment of $186,750, in
the form of three payments of $20,750 each payment, commencing February 28,
2007 (for the pay period from February 16, 2007 through March 15, 2007) and on
or before the last day of the two months thereafter, and then twelve payments
of $10,375 thereafter.  Isonics will make
this payment directly into Mr. Rubizhevsky’s account and will deduct all normal
withholdings from that payment in accordance with its normal payroll practices,
and such payments made be made semi-monthly in accordance with Isonics’ normal
payroll practices.

b.             Mr.
Rubizhevsky hereby surrenders all options issued to him under the 2005 Stock
Option Plan and the 1996 Executive’s Plan for cancellation.

c.             Mr.
Rubizhevsky will continue to be an employee of Isonics during the period ending
on the last day of the month that payments are being made to him pursuant to
Section 2(a) hereof (the “Employment Period”), and will be entitled to
participate in Isonics normal employee benefits except the accrual of personal
time off (“PTO”) which ceases on the date hereof.  Mr. Rubizhevsky will respond to reasonable
requests, spending such time as he deems necessary, for information and
assistance during the Employment Period. 
Isonics will use its best efforts to avoid exposing Mr. Rubizhevsky to
any material non-public information without advising Mr. Rubizhevsky in advance
that the information it is providing with respect to a project is material
non-public information. Further, Isonics understands that Mr. Rubizhevsky will
pursue significant outside interests during the 

Employment Period and understands that any requests for information and
assistance will be subordinate to his outside interests.  Isonics does not expect Mr. Rubizhevsky to
report to Isonics’ offices or deal with Isonics personnel except upon written
or oral request of the chairman of the audit committee, the executive chairman
of Isonics, or the chief executive officer of Isonics.

d.             Isonics
will issue to Mr. Rubizhevsky 200,000 shares of common stock from Isonics’ 2005
Stock Option Plan (such number of shares being calculated after the
effectiveness of the reverse stock split scheduled to be completed on February
13, 2007), such issuance being subject to: (i) Mr. Rubizhevsky executing and
returning an acceptable subscription agreement for those shares; and (ii)
either Mr. Rubizhevsky providing evidence to Isonics that he owes no income tax
liability on that amount, or that he has made adequate provision for such
liability.  If the parties are unable to
achieve a method of satisfying the requirements of the Internal Revenue Service
and state taxing authorities for the payment of any withholding necessary with
respect to the issuance of the shares, the parties will negotiate in good faith
an issuance of shares or other compensation to Mr. Rubizhevsky with a equal
economic benefit to Mr. Rubizhevsky but which will not materially adversely
impact Isonics’ cash position or other financial obligations.  In connection with the issuance of the shares
of common stock referenced in this Section 2(d), Mr. Rubizhevsky represents and
warrants to Isonics:

·                                          He
is an accredited investors as that term is defined in §2(a)(15) of the
Securities Act of 1933 (the “1933 Act”);

·                                          He
has received such information about Isonics as is, in his opinion, reasonably
necessary for him to make his decision whether to accept such shares;

·                                          He
has discussed the acceptance of such shares with his legal, financial, tax,
investment and other advisors to the extent that he has determined such
consultation to be appropriate or necessary;

·                                          He
understands the risks associated with receiving and holding shares of Isonics
common stock.

e.             Reports. 
The Parties agree to make all necessary and usual reports to the
Internal Revenue Service, state taxing authorities and any similar agencies and
to perform all withholdings normally applicable to the types and amounts of
payments and other consideration Mr. Rubizhevsky is to receive as a result of
this Agreement.

f.              No Other Payment or Employee Benefit.  Isonics will make only the payments expressly
stated in this Agreement and will provide no other payments or benefits to Mr.
Rubizhevsky.  Notwithstanding the
foregoing, Isonics will pay full 

amounts accrued by Mr. Rubizhevsky in each qualified
retirement plan maintained by Isonics in which he participates.

3.             General Release by Isonics.  In consideration for Mr. Rubizhevsky’s
releases and agreements contained in this Agreement and upon its receipt of a
fully executed and notarized copy of this Agreement, Isonics and each of
Isonics’ officers, directors, employees, and agents, and for anyone who has or
obtains rights or claims from Isonics, forever releases and discharges Mr.
Rubizhevsky and each of Mr. Rubizhevsky’s heirs, beneficiaries, successors,
assigns, agents, employees, executors, administrators, and representatives from
any and all claims and causes of action arising before the effective date of
this Agreement, whether known or unknown and including, but not limited to, all
claims arising out of Mr. Rubizhevsky’s employment with Isonics or arising out
of any act or omission of Mr. Rubizhevsky made in good faith as Isonics’
employee; provided, however, Isonics’ release does not include a release for
any liability or obligation arising under this Agreement, or arising from any
fraud or willful misconduct by Mr. Rubizhevsky or a breach of this Agreement.

4.             General Release by Mr.
Rubizhevsky.

a.             In
consideration for Isonics’ releases and agreements contained in this Agreement,
the payment of the settlement consideration described herein and upon his
receipt of a fully executed and notarized copy of this Agreement, Mr.
Rubizhevsky, for himself, for his heirs, beneficiaries, successors, assigns,
agents, employees, executors, administrators, and representatives, and for
anyone who has or obtains rights or claims from him, forever releases and
discharges Isonics, and each of Isonics’ affiliates, directors, officers,  successors, assigns, agents, employees, and
representatives from any and all claims and causes of action arising before the
effective date of this Agreement, whether known or unknown and including, but
not limited to, all claims arising out of Mr. Rubizhevsky’s employment with
Isonics or arising out of any act or omission of Isonics or any of its officers
and directors and any PTO accrued through the date hereof; provided, however,
Mr. Rubizhevsky’s release does not include a release for any liability or
obligation arising under this Agreement, or arising from any fraud or willful
misconduct by Isonics, or any of its officers and directors, and further does
not apply to any rights that Mr. Rubizhevsky might have as a shareholder of
Isonics or as a holder of options or warrants issued by Isonics.

b.             To
the extent permitted by law, Mr. Rubizhevsky specifically releases Isonics from
all claims arising under or in connection with the following federal and state
laws, as amended, and all related regulations, the: Age Discrimination in
Employment Act of 1967; Americans with Disabilities Act of 1990; Title VII of
the Civil Rights Act of 1964; Civil Rights Act of 1991; Civil Rights Acts of
1866 and 1871; Equal Pay Act of 1963; Family and Medical Leave Act of 1993;
National Labor Relations Act; Occupation Safety and Health Act of 1970; Older
Workers Benefit Protection Act of 1990; Pregnancy Disability Act of 1978; the
Rehabilitation Act of 1973; Executive Order 11246; Colorado Anti-Discrimination
Act of 1957; Colorado’s Minimum Wages of Workers Act; Colorado Wage Equality
Regardless of Sex Act; Colorado Labor Peace 

Act; and the common law of the State of Colorado for compensation,
damages, tort, breach of express or implied employment contract, breach of duty
of good faith, discrimination, harassment, sexual harassment, wrongful
discharge, infliction of emotional distress, defamation and for any other
damages or injuries incurred on the job, in relation to Mr. Rubizhevsky’s
employment or incurred as a result of loss of employment.

5.             Reference.  Isonics and its officers, directors,
employees, agents and assigns, agree to advise persons who may ask for a
reference no more than the following: that Mr. Rubizhevsky was employed by
Isonics, the capacities in which he was employed, and the dates that Mr.
Rubizhevsky was employed, and that such employment was satisfactory.

6.             Entire Agreement; Amendment;
Enforceability; Interpretation.  This
Agreement expresses our entire understanding about its subject matter and is
the only agreement, promise or understanding on which we are relying in
performing the duties this Agreement describes. 
The only way this Agreement may be amended, changed or waived will be
through a written document we both sign. 
This Agreement is enforceable by and against each Party and anyone else
who has or who obtains rights under this Agreement from either Party.  This Agreement will be interpreted and
enforced under Colorado law.  No part of
this Agreement should be construed against either Party on the basis of
authorship.  Any unenforceable provision
of this Agreement will be modified to the extent necessary to make it
enforceable or, if that is not possible, will be severed from this Agreement,
and the remainder of this Agreement will be enforced to the fullest extent possible.  Any claims arising under this Agreement shall
be subject to binding arbitration pursuant to the rules of the Uniform
Arbitration Act as enacted in the State of Colorado, with one arbitrator to be
selected from the Judicial Arbiter Group as agreed upon by both parties, or in
the absence of agreement, by the Judicial Arbiter Group.  The site of arbitration shall be Denver,
Colorado.  Further, should any party be
forced to bring an action to enforce any provision of this Agreement, the
prevailing party, in addition to all other applicable remedies, shall be
awarded all reasonable cost and attorneys’ fees.

7.             Notices; Process.  Any notice this Agreement required must be in
writing and will be effective only if hand-delivered or sent by certified U.S.
mail, return receipt requested, to the Party entitled to receive the notice at
the Party’s address stated below, or at such other address as that Party may
later provide to the other Party.  We
each agree to waive service of process in any action or arbitration brought to
enforce or to interpret this Agreement, and we agree that service of this
complaint and any other pleading, discovery, order or service of the complaint
and any other pleading, discovery, order or documents in any such action that
would otherwise have to be served by personal service will be deemed served
three days after being sent to the other Party and that Party’s attorney as
provided below:

	
  to Mr. Rubizhevsky at:

  	
   

  	
  10 Blackledge Court

  
	
   

  	
   

  	
  Closter, NJ 07624

  
	
   

  	
   

  	
   

  
	
  to Isonics at:

  	
   

  	
  Isonics Corporation

  
	
   

  	
   

  	
  5906 McIntyre Street

  
	
   

  	
   

  	
  Golden, Colorado 80403

  
					

 

 

	
  with a copy to:

  	
   

  	
  Herrick K. Lidstone, Jr., Esq.

  
	
   

  	
   

  	
  Burns Figa & Will, P.C.

  
	
   

  	
   

  	
  Suite 1000

  
	
   

  	
   

  	
  6400 South Fiddler’s Green Circle

  
	
   

  	
   

  	
  Greenwood Village, Colorado 80111

  

 

8.             Signatory’s Authority; All
Necessary Consents.  Each Party
expressly represents that such Party does not require any third party’s consent
to enter into this Agreement, including the consent of any spouse, insurer,
assignee, licensee, secured lender, or regulatory agency.  Each Party has read and considered this
Agreement carefully, believes that Party understands each provision, and has
conferred or has had the opportunity to confer with the Party’s own attorney
before executing this Agreement.

9.             SPECIFIC ACKNOWLEDGEMENTS.  MR. RUBIZHEVSKY ACKNOWLDEGES THAT HE HAS READ
THIS AGREEMENT, THAT HE HAS BEEN ADVISED THAT HE SHOULD CONSULT WITH AN
ATTORNEY BEFORE HE EXECUTES THIS AGREEMENT, AND THAT HE UNDERSTANDS ALL OF ITS
TERMS AND EXECUTES IT VOLUNTARILY WITH FULL KNOWLEDGE OF ITS SIGNIFICANCE AND
THE CONSEQUENCES THEREOF.

10.           No Admission.  This Agreement, and compliance with this
Agreement, shall not be construed as an admission of liability on the part of
the Parties, such liability being hereby expressly denied.  The Parties’ intent in this Agreement is to
provide the other Party with a complete, total, irrevocable and binding release
of all matters arising before the date of this Agreement (except those matters
reserved herein), which might result in a dispute and avoid any further
differences or conflicts. The Parties hereby represent that they have neither
filed nor caused to be filed any pending charges, suits, claims, grievances or
other action (hereinafter referred to as “Claims”) which in any way arise from
or relate to the Issues.  Each Party
further represents to each other that such Party has not directly or indirectly
assigned any claim related to the Issues or released hereby to any other
person.

11.           No Knowledge of Securities or
Disclosure Violations.  Each of
Isonics and Mr. Rubizhevsky affirmatively states and represents to the other
that it has no knowledge that the other has violated the requirements of the
Securities Act of 1933, the Securities Exchange Act of 1934 (the “1934 Act”),
the reporting requirements of the 1934 Act, the requirements for disclosure
controls and financial controls imposed by the 1934 Act, or other provisions of
the federal or applicable state securities laws.

12.           Full and Complete Defense.  This Agreement and the releases contained
herein, may be pleaded as a full and complete defense, counterclaim or
cross-claim to, and may be used as a basis for an injunction against, any
action, suit, or other proceeding which may be instituted, prosecuted or attempted
in breach of this Agreement or the releases contained herein.  In the event of any action by any Party
hereto to enforce this Agreement, the releases contained herein, 

or any other agreement
delivered pursuant hereto, the prevailing party shall be entitled to recover
reasonable attorneys’ fees and costs.

13.           Attorneys’ Fees.  Each of the Parties shall each be responsible
to pay his or its respective attorneys’ fees incurred in connection with the
negotiation and drafting of this Agreement. 
Each Party shall release and forever hold the other harmless from any
liability to their attorneys for payment of such fees pursuant to any agreement
or understanding between each Party and his or its attorneys.

14.           No Reliance.  The Parties warrant to each other that in
agreeing to the terms of this Agreement, they have not relied in any way upon
any representations or statements of the other party regarding the subject
matter hereof for the basis or effect of this Agreement other than those
representations or statements contained herein. 
In entering into this
Agreement,   each Party represents that
in entering into this Agreement and completing the transactions hereunder, he
or it has done so after completing such investigation as he or it has determined
to be necessary or appropriate in the circumstances, and after having consulted
with and taken advice from such Party’s legal, financial, tax, investment, and
other advisors to the extent such Party has determined such consultation to be
necessary or appropriate in the circumstances.

15.           No Mistake; Final Settlement.  In connection with this Agreement, the
Parties hereby acknowledge that they are aware that they may hereafter discover
facts in addition to or different from those which they now know or believe to
be true with respect to this Agreement, but that it is their intention hereby
to settle, fully, finally and forever, and to release all matters, Issues and
differences, known or unknown, suspected or unsuspected, which now exist, which
may exist, or which heretofore have existed against any and all Parties under
this Agreement.

16.           Severability.  If any part of this Agreement shall be
determined to be illegal, invalid or unenforceable, the remaining part shall
not be affected thereby, and the illegal, unenforceable or invalid parts shall
be deemed not to be a part of this Agreement, although this Agreement will be
rewritten by the court or person making such finding to reflect the intention
of the Parties to the maximum extent permitted by law. Each Party represents
and warrants that he or it has full capacity and authority to settle,
compromise, and release his or its claims and to enter into this Agreement and
that no other person or entity has acquired, or will in the future acquire or
have any right to assert, against any person or entity released by this
Agreement any portion of that Party’s claims released herein.

17.           Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

18.           Notices.  All written notices required by this
Agreement or any document delivered pursuant hereto or as contemplated herein,
must be delivered to the addresses set forth in the first paragraph above (or
to such other address as may be specified by a Party) by a means evidenced by a
delivery receipt and will be effective upon receipt.

19.           Survival.  The Parties agree that the obligations,
representations and warranties contained herein shall indefinitely survive the
execution of this Agreement, the delivery of all documents hereunder.

IN
WITNESS WHEREOF, the Parties have caused this Agreement to be
duly executed as of the date first mentioned above.

THE UNDERSIGNED
HAVE CAREFULLY READ THE FOREGOING SETTLEMENT AGREEMENT AND GENERAL RELEASE OF
ALL CLAIMS, KNOW THE CONTENTS THEREOF, FULLY UNDERSTAND IT, AND SIGN THE SAME
AS HIS OR ITS OWN FREE ACT.

 

	
  ·

  	
  CAUTION! READ BEFORE SIGNING

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Boris Rubizhevsky

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  STATE OF

  	
  )

  
	
   

  	
   

  	
  ) ss.

  
	
   

  	
  COUNTY OF

  	
  )

  
	
   

  	
   

  	
   

  
	
   

  	
  Subscribed, sworn to, and acknowledged before me by
  Boris Rubizhevsky on this         day of
  February 2007.

  
	
   

  	
   

  
	
   

  	
  Witness my hand and official seal.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  My commission expires:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notary Public

  
						

 

 

	
  ·

  	
  CAUTION! READ BEFORE SIGNING

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Isonics Corporation

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  John Sakys, Chief Financial Officer

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  STATE OF COLORADO

  	
  )

  	
   

  
	
   

  	
   

  	
  ) ss

  	
   

  
	
   

  	
  COUNTY OF JEFFERSON

  	
  )

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Subscribed, sworn to, and acknowledged before me by
  John Sakys, on this       day of February 2007.

  
	
   

  	
   

  
	
   

  	
  Witness my hand and official seal.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  My commission expires:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notary PublicExhibit
10.4

EMPLOYMENT
AGREEMENT

This Employment  Agreement, dated as of February 16, 2007 (this “Agreement”),
is by and between Isonics Corporation,
a California corporation whose address is 5906 McIntyre Street, Golden, CO
80403 (the “Company”), and Christopher
Toffales, an individual residing at 21 Motts Hollow Road, Port
Jefferson, New York  11777 (“Executive”).

WHEREAS, the Board
of Directors of the Company (the “Board of Directors”) has determined that it
is in the best interests of the Company and the Company’s shareholders that the
Company undertake a restructuring of management of the Company; and

WHEREAS, as an
integral part of said restructuring, the Board of Directors desires to retain
the services of Executive, and Executive is willing to provide such services,
upon the terms and conditions as set forth below.

NOW,
THEREFORE, in consideration of the mutual premises,
covenants, representations and warranties herein contained, and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:

1.             Retention of Services; Term.  Effective as of the date hereof (the “Effective
Date”), the Company retains the services of Executive, and Executive agrees to
furnish such services, upon the terms and conditions set forth in this
Agreement.  Subject to earlier
termination on the terms and conditions provided in section 7 of this
Agreement, and subject to certain provisions of this Agreement which shall
survive any termination of the employment of Executive, the term (the “Employment
Period”) of the employment of Executive under this Agreement is to commence
upon satisfaction or waiver of each of the conditions precedent set forth in
Section 14 and terminate on April 30, 2009. 
The Company shall give Executive written notice that the Company shall
not continue to employ executive after the expiration of the Employment Period
at least three months prior to the last day of the Employment Period; absent
the giving of such notice, this Agreement and the Employment Period shall be
deemed to be extended for an additional one year period.

2.             Duties and
Extent of Services During Employment Period.

(a)           During the
Employment Period, Executive shall (i) serve as the Chairman of the Board of
Directors of the Company on the terms and conditions set forth in this
Agreement, (ii) report directly to the Board of Directors and (iii) exercise
such authority, perform such executive duties and functions and discharge such
executive responsibilities as are reasonably associated with Executive’s
position, consistent with the responsibilities of a chairman of the board of
directors of a company comparable to the Company, commensurate with the
authority vested in the Executive pursuant to this Agreement and consistent
with the Bylaws of the Company.

(b)           Notwithstanding anything to the
contrary contained in this Agreement, in his capacity as the Chairman of the
Board of Directors of the Company, Executive may act on behalf of the Company
to the fullest extent permissible for a person acting in such capacity under
applicable

law, subject to the
direction and supervision of the Board of Directors and the requirements of
California law.

(c)           Executive shall be required to devote
sufficient time to the business of the Company to achieve the purposes of the
Company’s business, expected to be approximately one-half (50%) of his business
time.

(d)           Notwithstanding anything to the
contrary contained in this Agreement, during the Employment Period, Executive
may (i) engage, directly or indirectly, in any other businesses and ventures,
including providing services and otherwise being affiliated with (A) Irvine
Sensors Corporation,  (B) SenseIt Corp.,
a Delaware corporation in which the Company is a stockholder “SenseIt”),  (C) CTC Aero, LLC, a New York limited
liability company in which Executive (in his individual capacity and not in his
capacity as an officer, director and/or employee of the Company) is the sole
member (“CTC Aero”), and (D) other persons or entities (and their respective
affiliates) with whom Executive or CTC Aero, has any equity interest or any
other business or financial relationship or arrangement as of the date of the
commencement of the Employment Period, (ii) become an employee, officer or
director of, or provide consulting or other services for, any other person or
entity that is not directly competitive with the Company and (iii) devote time,
attention and energies to reasonable community activities and public affairs,
provided such community activities and public affairs efforts shall not
conflict with the amount of time required to be devoted to the Company under
this Agreement.  Neither the Company nor
any of the Company’s officers, directors, employees and stockholders shall have
any right, title or interest, by virtue of this Agreement or otherwise, to
share in any of the businesses, ventures, equity interests, business or
financial relationships or arrangements, investments or activities to which
Executive may engage or participate in pursuant to the preceding sentence or in
any income or revenues derived from any of such businesses, ventures, equity
interests, business or financial relationships or arrangements, investments or
activities.

(e)           Effective as of the Effective Date
and thereafter throughout the Employment Term, the Company shall take all steps
reasonably necessary (including, but not limited to, solicitation of proxies or
written consents) to cause Executive to be elected as a director of the
Company.

3.             Remuneration.

(a)            During the Employment Period, the
Company shall pay to Executive as compensation for his services performed under
this Agreement an amount equal to $10,000.00 per calendar month (the “Base
Salary”), which amount shall be paid in a manner consistent with the Company’s
payroll practices for executive officers. 
To the extent that the first and/or last months of the Employment Period
consist of less than a full calendar month, the compensation shall be pro-rated
accordingly for such first and last months.

(b)           (i) 
The Company shall seek and use its best efforts to obtain shareholder
approval of the Company’s 2007 Restructuring Equity Plan (the “Plan”) at a
shareholders’ meeting which shall be held within 70 days after receiving at
least $1,000,000 in new debt or equity capital following the date hereof.  If the Company does not receive new debt or
equity capital before June 30, 2007, approval will be sought and the Company
will use its best efforts to obtain shareholder

 2
 

approval of the Plan at
the Company’s 2007 annual meeting of shareholders, currently contemplated to be
held in October 2007.

(ii)           At the meeting of the Board of
Directors of the Company at which this contract is approved, the Board of
Directors will grant Executive a non-qualified stock option (the “Option”) to
purchase 2,250,000 shares of the common stock, no par value (the “Common Stock”),
of the Company under the Plan, exercisable at fair market value (as defined in
the Plan) on such date, with a term of five years, and exercisable as follows:

(A)          500,000 shares shall become
exercisable immediately upon shareholder approval of the Plan;

(B)           750,000 shares shall become
exercisable on April 30, 2008;

(C)           83,333 shares shall become
exercisable on May 31, 2008;

(D)          83,333
shares shall become exercisable on June 30, 2008;

(E)           83,334
shares shall become exercisable on July 31, 2008;

(F)           83,333
shares shall become exercisable on August 31, 2008;

(G)           83,333
shares shall become exercisable on September 30, 2008;

(H)          83,334
shares shall become exercisable on October 31, 2008;

(I)            83,333
shares shall become exercisable on November 30, 2008;

(J)            83,333
shares shall become exercisable on December 31, 2008;

(K)          83,334
shares shall become exercisable on January 31, 2009;

(L)           83,333
shares shall become exercisable on February 28, 2009;

(M)         83,333
shares shall become exercisable on March 31, 2009; and

(N)          83,334 shares shall
become exercisable on April 30, 2009.

(iii)          The option agreement evidencing the
Option will provide that:

(A)          If
this Agreement or Executive’s employment by the Company is terminated (1) by
the Company without cause or (2) by a failure to renew this Agreement or to
enter into a new employment agreement following the expiration of the
Employment Period, one-half of the shares underlying the Option that are not
exercisable as provided in paragraph 3(b)(ii) will immediately become
exercisable and the Option, to the extent then exercisable pursuant to
paragraph 3(b)(ii) and this clause (A), will remain exercisable for the
remaining term thereof.

(B)           If
Executive terminates this Agreement and his employment hereunder for any
reason, no further portion of the Option will become exercisable and the
Option, to the extent then exercisable pursuant to paragraph 3(b)(ii) and this
clause (B), will (1) remain exercisable for three months after such
termination, if the termination occurs prior to the first anniversary of the
date of this Agreement, or (2) remain exercisable for the remainder of the term
of the Option, if the termination occurs on or after the first anniversary of this
Agreement.

(C)           If
this Agreement or Executive’s employment by the Company is terminated by the
Company for cause (as defined below), the portion of the Option then

 3
 

exercisable shall, to the extent exercisable pursuant to paragraph
3(b)(ii), remain exercisable for the three months following such termination.

(D)          The
Option shall become exercisable in full, notwithstanding the schedule of
exercisability set forth in paragraph 3(b)(ii), for the duration of the stated
term thereof upon any (A) change in control of the Company, (B) merger of the
Company as a result of which the shareholders of the Company immediately
preceding such merger shall own less than a majority of the voting securities
of the surviving corporation in the merger, (C) any sale of all or
substantially all of the assets of the Company (for purposes of this clause
(C), the sale of Protection Plus Security Corporation and Isonics Vancouver,
Inc., or such entities’ assets, shall not constitute the sale of all or
substantially all of the assets of the Company), or (D) any dissolution,
liquidation or winding up of the Company.

(E)           The
option agreement will provide that broker cashless-exercise will be permitted.

(iv)          The Company shall take all steps
reasonably necessary (including, but not limited to, solicitation of proxies or
written consents) to cause shareholder approval of the Plan to be obtained.

(c)           (i)            With
respect to the Company’s fiscal year ending April 30, 2008, the Company will
pay Executive a cash bonus (from which will be deducted normal withholding)
equal in value to $250,000 if he accomplishes the following events to the
reasonable satisfaction of the Company’s compensation committee:

(A)          Executive,
with the assistance of other members of management and employees of the
Company, will assess the Company’s ion-mobility spectroscopy (“IMS”) technology
and products and provide a recommendation to the Board of Directors for the
continuation of that division, discontinuance of that division, or other
recommendation by March 15, 2007, understanding that this will not be a
detailed plan or forecast by that date, but Executive will be available to the
Board of Directors to discuss his recommendation and the basis therefor.  If Executive concludes that the Company
should continue to pursue the IMS technology and products, then he, with the
assistance of other members of management and employees of the Company, shall
present to the Board of Directors a more complete plan for presentation to the
Board of Directors by April 15, 2007. 
When completed, Executive will have earned 25% of the bonus, which
portion of the bonus, if and when so earned, shall be paid to Executive no
later than the earlier of (1) the date on which the Company has received
$2,000,000 in gross proceeds from the C-D Offering (as such term is defined in
subparagraph 14(a)(i)) or (2) June 30, 2007.

(B)           Executive,
with the assistance of other members of management and employees of the
Company, will create a three-year strategic plan for the Company for
presentation to the board of directors not later than October 2007.  This is expected to be a reasonably detailed
plan, including appropriate forecasts and other information.  When completed, Executive will have earned
25% of the bonus, which portion of the bonus

 4
 

shall be paid to Executive no later than fifteen calendar days
following the date on which such portion of the bonus is earned.

(C)           Executive
will identify and negotiate a significant strategic acquisition for Isonics by
April 30, 2008, and (by that date) obtain a letter of intent or other
documentation indicating the other party’s desire and intention to complete
such transaction with a reasonable likelihood that the acquisition can and will
be completed in accordance with legal requirements before November 1,
2008.  When such letter of intent is
obtained, Executive will have earned 50% of the bonus, which portion of the
bonus shall be paid to Executive no later than fifteen calendar days following
the date on which such portion of the bonus is earned.

(ii)           On or before March 31, 2008, the
compensation committee will negotiate a reasonable, appropriate, market-based
bonus program for Mr. Toffales’ continuing employment for the Company’s fiscal
year ending April 30, 2009, which will be based on EBITDA and other reasonable
performance criteria.

(iii)          The bonus described in subparagraphs
3(c)(i) and (ii) are hereinafter referred to as the “Bonus.”

(d)           All compensation and employee
benefits to be provided Executive under this Agreement shall be exclusive of
any compensation and employee benefit to which Executive may be entitled to
receive from SenseIt or any other entity as contemplated by paragraph 3(d) of
this Agreement.

(e)           Notwithstanding anything to the
contrary contained in this Agreement, in the event that employee benefits are
no longer provided to Executive under his employment agreement with SenseIt,
the Company shall provide to the Employee all other benefits and perquisites
previously provided to the Executive by SenseIt to the extent comparable
benefits do not already exist at Isonics; provided, that the time Executive
shall be required to devote to the business of the company and its subsidiaries
shall be increased to approximately 60% of the Executive’s business time.

4.             Employee Benefits; Expenses.

(a)           During
the term of this Agreement, the Company shall provide to Executive the right to
participate in the Company’s then existing medical and dental insurance, life
insurance, disability insurance, retirement plans, profit-sharing plans,
savings plans, stock option plans and other employee benefit plans and policies
as currently provided by Administaff (or its successor) on the same terms as
are then generally available to the Company’s senior executive officers.

(b)           The
Company shall reimburse Executive for all reasonable and necessary expenses,
and other disbursements incurred by Executive for or on behalf of the Company
in the performance of Executive’s duties under this Agreement, upon submission
of appropriate documentation therefor, consistent with the Company’s expense
reimbursement policies.  Reasonable and
necessary expenses includes full refundable (upgradeable) coach fare, or if not
available business or other class fare, for air travel when traveling on behalf
of the Company.  When Executive’s

 5
 

travel for the Company is combined with travel for
other activities of Executive, Executive will fairly allocate the costs between
the Company and Executive’s other activities.

(c)           During the term of this Agreement and
for a three year period thereafter, the Company shall have in effect at all
times, at its expense and no cost to Executive, one or more directors and
officers liability indemnification insurance policies (the “D&O Policies”)
covering liabilities which may have accrued or that will be incurred by the
performance of Executive’s services on behalf of the Company in the minimum
benefit amount of amounts to be determined in good faith by the board of
directors, and provided that all officers and directors are treated alike.

(d)           No amounts paid to or on behalf of Executive
under any plan or arrangement in accordance with paragraphs 5(a), (b), and (c),
shall be deemed to be paid in lieu of other compensation to which Executive is
entitled to receive or benefit from under this Agreement.

5.             Confidential
Information; Proprietary Rights.

(a)           In the course of Executive’s
employment by the Company, Executive will have access to and possession of
valuable and important confidential or proprietary data or information of the
Company and/or its affiliates and their operations.  Executive will not, during Executive’s
employment by the Company or at any time thereafter, divulge or communicate to
any person, nor shall Executive direct any employee, representative or agent of
the Company or any of its affiliates to divulge or communicate to any person or
entity (other than to a person or entity bound by confidentiality obligations
similar to those contained in this section 6 and other than as necessary in
performing Executive’s duties under this Agreement) or use, to the detriment of
the Company, or any of the Company’s affiliates or for the benefit of any other
person or entity, including, but not limited to, any competitor, supplier,
licensor, licensee or customer of the Company, any of such confidential or
proprietary data or information or make or remove any copies thereof, whether
or not marked or otherwise identified as “confidential” or “secret.”  Executive shall take all reasonable
precautions in handling the confidential or proprietary data or information
within the Company to a strict need-to-know basis and shall comply with any and
all security systems and measures adopted from time to time by the Company to
protect the confidentiality of confidential or proprietary data or information.

(b)           The term “confidential or proprietary
data or information” as used in this Agreement shall mean information not
generally available to the public, including, but not limited to, all customer
information, database information, personnel information, financial
information, account lists or other account information, names, telephone
numbers or addresses, supplier or vendor lists, trade secrets, patented or
other proprietary information, forms, information regarding operations,
systems, methods, processes, financing, services, know how, computer and any
other processed or collated data, computer programs, pricing, marketing and
advertising data; provided, however, confidential or proprietary
information shall not include information that is (i) generally available to
the public or becomes publicly known through no wrongful act of Executive, (ii)
independently developed by a third party and disclosed to Executive through no
wrongful act of Executive or the other party or (iii) is required to be
disclosed by law.  Notwithstanding
anything to the contrary in the immediately preceding sentence, Executive will

 6
 

not knowingly
propagate the spread of information which is proprietary to the Company or any
shareholder of the Company.

(c)           Executive will, at all times,
promptly disclose to the Company in such form and manner as the Company may
reasonably require, any inventions, improvements or procedural or
methodological innovations, programs, methods, forms, systems, services,
designs, marketing ideas, products or processes (whether or not capable of being
trademarked, copyrighted or patented) conceived or developed or created by
Executive solely in connection with Executive’s employment under this Agreement
and which solely relate to the business of the Company (the “Work Product”).  Executive agrees that all Work Product shall
be the sole property of the Company. 
Executive hereby assigns all of his right, title and interest to the
Work Product to the Company.  Executive
further agrees that Executive, without charge, will execute such instruments
and perform such acts as may reasonably be requested by the Company to transfer
to and perfect in the Company all legally protectable rights in the Work
Product.  To the extent any moral rights
or other Work Product rights are not legally transferable to the Company,
Executive hereby waives and agrees to never assert any such rights against the
Company or any of its affiliates, even after termination of employment.

(d)           All written materials, books, records
and documents made by Executive or coming into Executive’s possession during
Executive’s employment by the Company concerning any products, processes or
systems used, developed, investigated, purchased, sold or considered by the
Company or any of its affiliates or otherwise concerning the business or
affairs of the Company or any of its affiliates, including, but not limited to,
any files, customer records such as names, telephone numbers and addresses,
lists, firm records, brochures and literature, shall be the sole property of
the Company and, upon termination of Executive’s employment by the Company or
upon request of the Company during Executive’s employment by the Company,
Executive shall promptly deliver the same to the Company.  In addition, upon termination of Executive’s
employment by the Company, Executive will deliver to the Company all other
Company property in Executive’s possession or under Executive’s control,
including, but not limited to, financial statements, marketing and sales data,
customer and supplier lists and information, account lists and other account
information, database information, plans, designs and other documents.

6.             Remedies.

(a)           Executive
acknowledges that the covenants contained in section 6 are fair and reasonable
in order to protect the Company’s business and were a material and necessary
inducement for the Company to agree to the terms of this Agreement.  Executive further acknowledges that any
remedy at law for any breach or threatened or attempted breach of the covenants
contained in section 6 may be inadequate and that the violation of any of the
covenants contained in section 6 will cause irreparable and continuing damage
to the Company.  Accordingly, the Company
shall be entitled to specific performance or any other mode of injunctive and/or
other equitable relief to enforce its rights under section 6, including, but
not limited to, an order restraining any further violation of such covenants,
or any other relief a court might award, without the necessity of the posting
of any bond or furnishing of other security, and that such injunctive relief
shall be cumulative and in addition to any other rights or remedies to which
the Company may be

 7
 

entitled.  The
covenants in sections 6 shall run in favor of the Company and its successors
and assigns.  The provisions of section 6
and this section 7 shall survive the termination of the Employment Period.

(b)           It is the desire and intent of the
parties hereto that the provisions of this Agreement shall be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. 
Accordingly, to the extent that a restriction contained in this
Agreement is more restrictive than permitted by the laws of any jurisdiction
where this Agreement may be subject to review and interpretation, the terms of
such restriction, for the purpose only of the operation of such restriction in
such jurisdiction, shall be the maximum restriction allowed by the laws of such
jurisdiction and such restriction shall be deemed to have been revised accordingly
herein.

7.             Termination.

(a)           The
Board of Directors may terminate Executive’s employment by the Company “for
cause” by delivering to Executive, not less than ten days prior to the date on
which the termination is to be effective, a written notice of termination for
cause specifying the act, acts or failure to act that constitute the
cause.  For the purposes of this
agreement, the term “for cause” shall mean:

(i)            any act of fraud or embezzlement
materially adversely affecting the financial, market, reputation or other
interests of the Company;

(ii)           in the event of a conviction of
Executive of, or a plea of nolo
contendere to, (A) any violent felony or misdemeanor resulting in a
jail sentence, (B) any felony involving moral turpitude or (C) a criminal violation
of federal or state securities laws;

(iii)          any material failure to perform
Executive’s duties as set forth in this Agreement which results in material
harm to the Company, after reasonable notice and the opportunity to cure; or

(iv)          the death of Executive.

(b)           Executive shall not be entitled to
receive any further compensation (other than his compensation through the
effective date of such termination for cause) under this Agreement in his
capacity as an employee of the Company, in the event that the Company
terminates Executive’s employment by the Company for cause.

(c)           The Company may also terminate this
Agreement and the employment of Executive by the Company other than for
cause.  If the Company shall terminate
this Agreement and the employment of Executive by the Company without cause or
if the Company shall fail to enter into a new employment agreement with
Executive for the period commencing immediately following the termination of
the Employment Period, the Company shall pay Executive, within three months of
the date of such termination or the termination of the Employment Period, as
the case may be, an amount equal to the sum of (i) one year’s Base Salary plus
(ii) the greater of (A) the Bonus received by Executive or otherwise accrued
for the benefit of Executive under this Agreement for the one year period
immediately preceding such termination or (B) the pro-rated portion (based on
the number of days in the Company’s fiscal year ending April 30, 2009 (“FY 2009”)
prior to the effective date of such termination of Executive by the Company
without

 8
 

cause and a
365-day fiscal year) of any Bonus for FY 2009 that has not been paid to
Executive assuming, for the purposes of this subclause (B), that all of the
criteria for such Bonus for FY 2009 have been met and earned as of the date of
termination.

8.             Indemnification.

(a)           The
Company agrees to indemnify Executive and hold Executive harmless against any
and all losses, claims, damages, liabilities and costs (and all actions in
respect thereof and any legal or other expenses in giving testimony or
furnishing documents in response to a subpoena or otherwise), including,
without limitation, the costs of investigating, preparing or defending any such
action or claim, whether or not in connection with litigation in which
Executive is a party, as and when incurred, directly or indirectly caused by,
relating to, based upon or arising out of any work performed by Executive in
connection with this Agreement to the full extent permitted by the California
Corporation Code, and by the Articles of Incorporation and Bylaws of the
Company, as may be amended from time to time, and pursuant to any
indemnification agreement between Executive and the Company.

(b)           The indemnification provision of this
section 9 shall be in addition to any liability which the Company may otherwise
have to Executive.

(c)           If any action, proceeding or
investigation is commenced as to which Executive proposes to demand such
indemnification, Executive shall notify the Company with reasonable promptness.  Executive shall have the right to retain
counsel of Executive’s own choice to represent Executive and the Company shall
pay all reasonable fees and expenses of such counsel; and such counsel shall,
to the fullest extent consistent with such counsel’s professional
responsibilities, cooperate with the Company and any counsel designated by the
Company.  The Company shall be liable for
any settlement of any claim against Executive made with the Company’s written
consent, which consent shall not be unreasonably withheld or delayed, to the
fullest extent permitted by the Delaware General Corporation Law and the
Certificate of Incorporation and Bylaws of the Corporation, as may be amended
from time to time.

9.             Notices.  All notices and other communications required
or permitted hereunder shall be in writing. 
Notices shall be delivered personally, against written receipt therefor,
via a recognized overnight courier (such as Federal Express, DHL, Airborne
Express or U.S.P.S. Express Mail) or via certified or registered mail.  Notices may be delivered via facsimile or
e-mail, provided that by no later than two days thereafter such notice is
confirmed in writing and sent via one of the methods described in the previous
sentence.  Notices shall be addressed as
follows:

	
  

  	
  If to Executive,
  to:

  	
  Christopher Toffales

  
	
   

  	
  21 Motts Hollow Road

  
	
   

  	
  Port Jefferson, New York 11777

  
	
   

  	
  Facsimile: (631) 331-3371

  
	
   

  	
  E-Mail: Toffales21@aol.com

  

 

 9
 

 

	
  

  	
  with a copy to:

  	
  Neil M. Kaufman, Esq.

  
	
   

  	
  Davidoff Malito & Hutcher LLP

  
	
   

  	
  200 Garden City Plaza, Suite 315

  
	
   

  	
  Garden City, New York 11530

  
	
   

  	
  Facsimile: (516) 248-6422

  
	
   

  	
  E-Mail: nmk@dmlegal.com

  
	
   

  	
   

  
	
   

  	
  If to the
  Company, to:

  	
  Isonics Corporation

  
	
   

  	
  5906 McIntyre Street

  
	
   

  	
  Golden, CO 80403

  
	
   

  	
  Attn: President

  
	
   

  	
  Facsimile: 303-279-7300

  
	
   

  	
  E-Mail: Jsakys@isonics.com

  
	
   

  	
   

  
	
   

  	
  with a copy to:

  	
  Herrick K. Lidstone, Jr.

  
	
   

  	
  Burns, Figa & Will, P.C.

  
	
   

  	
  Suite 1000

  
	
   

  	
  6400 South Fiddler’s Green Circle

  
	
   

  	
  Greenwood Village, CO 80112

  
	
   

  	
  Facsimile: 303-796-2777

  
	
   

  	
  E-Mail: hklidstone@bfw-law.com

  

 

or, in the case of any of
the parties hereto, at such other address as such party shall have furnished to
each of the other parties hereto in accordance with this section 10.  Each such notice, demand, request or other
communication shall be deemed given (i) on the date of such delivery by hand,
(ii) on the first business day following the date of such delivery to the
overnight delivery service or facsimile transmission, or (iii) three business
days following such mailing.

10.           Company Representations and
Warranties.  The Company represents
and warrants to Executive as follows:

(a)           The Company is duly organized,
validly existing and in good standing under the laws of California and has the
requisite power and authority to own, lease and operate its assets, properties
and business and to carry on its business as it is now being conducted or
proposed to be conducted.

(b)           The Company has all requisite
corporate power and authority to execute and deliver this Agreement and carry
out and perform its obligations under the terms of this Agreement.

(c)           The execution, delivery and
performance by the Company of this Agreement, and the performance of all of the
obligations of the Company under this Agreement have been duly authorized by
the Board of Directors, and, other than shareholder approval required with
respect to the Plan, no other corporate action on the part of the Company and
no other corporate or other approval or authorization is required on the part
of the Company or otherwise in order to make this Agreement the valid, binding
and enforceable obligations (subject to (i) laws of general

 10
 

application relating to
bankruptcy, insolvency, and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief, or other equitable remedies)
of the Company.

(d)           The execution, delivery, and
performance of, and compliance with this Agreement and the consummation of the
transactions contemplated by this Agreement, have not and will not:

(i)            (subject to the disclosure
requirements of the federal securities laws) violate, conflict with or result
in a breach of any provision of or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in the creation of any lien upon any of the assets, properties or
business of the Company under, any of the terms, conditions or provisions of
the Company’s Certificate of Incorporation and Bylaws (each as amended through
the date of this Agreement) or any agreement to which the Company is a party,
or

(ii)           violate any judgment, ruling, order,
writ, injunction, award, decree, or any Law or regulation of any court or
federal, state, county or local government or any other governmental,
regulatory or administrative agency or authority which is applicable to the
Company or any of its assets, properties or businesses, which violation would
have a material adverse effect on the Company.

(e)           The Company has complied with all
applicable securities laws, including, but not limited to the Securities Act of
1933 and Securities Exchange Act of 1934 and the rules and regulations
promulgated thereunder (collectively, the “Securities Laws”) prior to the date
hereof, except for that certain Form 8-K due to be filed with the Securities
and Exchange Commission with respect to certain events that occurred on
February 13, 2007 and February 14, 2007, which must be filed no later than
February 20, 2007.  The Company covenants
and agrees that such Form 8-K shall comply with the Securities Laws.

11.           Successors and Assigns; Third
Party Beneficiaries. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company, and unless clearly
inapplicable, all references herein to the Company shall be deemed to include
any such successor. In addition, this Agreement shall be binding upon and inure
to the benefit of Executive and his heirs, executors, legal representatives and
assigns; provided, however, that the obligations of Executive
under this Agreement may not be delegated without the prior written approval of
the Board of Directors.  In the event of
any consolidation or merger of the Company into or with any other corporation,
or the sale of all or substantially all of the assets of the Company to another
corporation, person or entity during the Employment Period, such successor
corporation shall assume this Agreement and become obligated to perform all of
the terms and provisions hereof applicable to the Company, and Executive’s
obligations hereunder shall continue in favor of such successor corporation.

12.           Acknowledgment. Executive
acknowledges that he has carefully read this Agreement, has had an opportunity
to consult counsel regarding this Agreement and hereby represents and warrants
to the Company that Executive’s entering into this Agreement, and the
obligations and duties undertaken by Executive under this Agreement, will not
conflict with, constitute a breach of or otherwise violate the terms of any
other agreement to which Executive

 11
 

is a party and that Executive is not required to
obtain the consent of any person, firm, corporation or other entity in order to
enter into and perform his obligations under this Agreement.

13.           Arbitration.

(a)           Any dispute arising between the
parties to this Agreement, including, but not limited to, those pertaining to
the formation, validity, interpretation, effect or alleged breach of this
Agreement (“Arbitrable Dispute”) will be submitted to arbitration in the Nassau
or Suffolk counties of the State of New York, before an experienced employment
arbitrator and selected in accordance with the rules of the American
Arbitration Association labor tribunal. 
Each party shall pay the fees of their respective attorneys, the expenses
of their witnesses and any other expenses connected with presenting their
claim.  Other costs of the arbitration,
including the fees of the arbitrator, cost of any record or transcript of the
arbitration, administrative fees, and other fees and costs shall be borne
equally by the parties hereto.

(b)           Should any party to this Agreement
hereafter institute any legal action or administrative proceedings against
another party with respect to any claim waived by this Agreement or pursue any
other Arbitrable Dispute by any method other than said arbitration, the
responding party shall be entitled to recover from the initiating party all
damages, costs, expenses and attorney’s fees incurred as a result of such
action.

14.           Conditions Precedent to the
Effectiveness of this Agreement.

(a)           This agreement is subject to the
approval of the Board of Directors of the Company.  Even after the Board of Directors of the
Company approves this Agreement, the effectiveness of this Agreement is subject
to the completion of each of the following conditions precedent, unless waived
by the Company and Executive:

(i)            Receipt
of a letter of intent from Clayton, Dunning & Co., or other broker-dealer
reasonably acceptable to the Company for an equity or debt investment, on terms
reasonably acceptable to the Company and Executive, in an amount of at least
$2,000,000 (the “C-D Offering”); $1,380,000 of the proceeds of which financing
will be used by the Company for the funding of its next obligations to SenseIt
Corp. (being the working capital obligation due March 14, 2007 and for the
April 15, 2007 payment due to Lucent Technologies); and

(ii)           Receipt
of a waiver agreement from Cornell Capital Partners L.P. in form reasonably
acceptable to the Company and Executive, including an agreement from Cornell
Capital Partners L.P. to provide to the Company at least $1,000,000 in bridge
loan financing, to the extent less than $2,000,000 is raised in the C-D
Offering, with a minimum term of one year (or earlier, to the extent the
Company receives proceeds from the sale of assets) in a form reasonably
acceptable to the Company and Executive.

 12
 

(b)           For so long as Executive is a
director of the Company, the Company waives its rights under Section 4.1 of the
Shareholders’ Agreement, dated as of October 26, 2006, among SenseIt, Executive
and the Company.

(c)           Notwithstanding anything to the
contrary contained in this Agreement, for each calendar day after February 16,
2007 in which the conditions precedent set forth in paragraph 14(a) have not
been satisfied or waived by both the Company and Executive, one calendar day
shall be added to each of the dates set forth in subparagraph 3(c)(i) which
Executive must act or otherwise provide recommendations and documents in order
to receive the applicable portion of the Bonus provided in said subparagraph.

15.           Miscellaneous.

(a)           The construction, validity and
interpretation of this Agreement will be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law.

(b)           This Agreement supersedes all prior
agreements and constitutes the entire Agreement and understanding between
parties.  This Agreement may not be
amended, modified in any manner or terminated orally; and no amendment,
modification, termination or attempted waiver of any of the provisions hereof
shall be binding unless in writing and signed by the parties against whom the
same is sought to be enforced; provided, however, that Executive’s compensation
may be increased at any time by the Corporation without in any way affecting
any of the other terms and conditions of this Agreement which in all other
respects shall remain in full force and effect.

(c)           No delay or omission to exercise any
right, power or remedy accruing to any party under this Agreement, upon any
breach or default of any other party under this Agreement, shall impair any
such right, power or remedy of such nonbreaching or nondefaulting party nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring.

(d)           Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction to the greatest extent
possible to carry out the intentions of the parties hereto.

(e)           This Agreement may be executed in
separate counterparts each of which will be an original and all of which taken
together will constitute one and the same agreement.

(f)            The Company will reimburse Executive
for legal fees expended in negotiating the terms of this Agreement in an amount
not to exceed $30,000.

 13
 

(g)           Any signature page delivered by a fax
machine shall be binding to the same extent as an original signature page, with
regard to any agreement subject to the terms hereof or any amendment thereto.

(h)           The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

(i)            The language of all parts of this
Agreement shall in all cases be construed as a whole according to its fair
meaning, and not strictly for or against any of the parties.

(j)            As used in this Agreement, the term “or”
shall be deemed to include the term “and/or” and the singular or plural number
shall be deemed to include the other whenever the context so indicates or
requires.

 14
 

IN WITNESS WHEREOF,
the parties hereto have executed this Agreement as of the day of and year first
above written.

	
   

  	
  Isonics Corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Richard Hagman,

  
	
   

  	
  Director,
  Compensation Committee

  
	
   

  	
   

  
	
   

  	
  Christopher
  Toffales

  

 

 15

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