Document:

Exhibit 10.6

 

IRREVOCABLE TRANSFER AGENT INSTRUCTIONS

 

THIS IRREVOCABLE TRANSFER AGENT INSTRUCTIONS (this “Agreement”),
dated as of June 13, 2008, by and among
ISONICS CORPORATION,
a California corporation (the “Company”), CONTINENTAL
STOCK TRANSFER AND TRUST COMPANY (the “Transfer Agent”) and YA GLOBAL INVESTMENTS, L.P. a Cayman Island exempted limited
partnership (individually, a “Buyer” or collectively “Buyers”).

 

WITNESSETH

 

WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the
Company and the Buyer are executing and delivering a Securities Purchase
Agreement dated the date hereof (the “Securities Purchase Agreement”)
pursuant to which the Company has agreed to sell and the Buyer(s) have
agreed to purchase notes (collectively, the “Notes”) in the aggregate
principal amount of One Million One Hundred Seventy-Five Thousand Dollars ($1,175,000),
plus accrued interest;

 

WHEREAS, pursuant to
the Securities Purchase Agreement the Company has issued to the Buyer(s) warrants
to purchase up to 13,000,000 shares of the Company’s common stock (“Common
Stock”), no par value per share (the “Warrant Shares”), at the Buyer’s
discretion (the “Warrant” and the “Warrant Shares”);

 

NOW, THEREFORE,
in consideration of the mutual covenants and other agreements contained in this
Agreement the Company, the Buyer(s) and the Transfer Agent hereby agree as
follows:

 

1.     WARRANT SHARES.

 

(a)           Instructions Applicable to Transfer Agent. 
The parties here to acknowledge that the Buyer(s) shall irrevocably
be entitled to deliver to the Transfer Agent on behalf of the Company an
Exercise Notice (the “Exercise Notice”) in the form attached as Exhibit A
to the Warrant.  Upon the Transfer Agents
receipt of a properly completed and duly executed Exercise Notice, the Transfer
Agent, provided they are acting as transfer agent at the time, shall without
the confirmation or instructions from the Company and within three (3) Trading
Days thereafter (i) issue and surrender to a common carrier for overnight
delivery to the address as specified in the Exercise Notice, a certificate,
registered in the name of the Buyer or its designees, for the number of shares
of Common Stock to which the Buyer shall be entitled as set forth in the
Exercise Notice or (ii) provided the Transfer Agent is participating in
The Depository Trust Company (“DTC”) Fast Automated Securities Transfer
Program, upon the request of the Buyers, credit such aggregate number of shares
of Common Stock to which the Buyers shall be entitled to the Buyer’s or their designees’
balance account with DTC through its Deposit Withdrawal At Custodian (“DWAC”)
system provided the Buyer causes its bank or broker to initiate the DWAC 

 

 

transaction. For purposes hereof “Trading Day” shall mean any day on which the
Nasdaq Market is open for customary trading.

 

(b).          No Restrictive
Legends.     The certificates representing
the Warrant Shares shall not bear any legend restricting transfer and should
not be subject to any stop-transfer restrictions and shall otherwise be freely
transferable on the books and records of the Company; provided
that counsel to the Company delivers (i) the Notice of
Effectiveness set forth in Exhibit I attached hereto and (ii) an
opinion of counsel in the form set forth in Exhibit II attached
hereto.

 

(c)           Restrictive Legends.   In the event that the Warrant Shares are not
registered for sale under the Securities Act of 1933, as amended, and the
request for issuance of the Warrant Shares is accompanied by an opinion from
the Company’s counsel or Buyer’s counsel that the issuance of the Warrant
Shares is pursuant to an available exemption under the Securities Act of 1933,
as amended, the certificates for the Warrant Shares shall bear the following
legend, or its equivalent:

 

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

 

(d)           Removal of
Restrictive Legends.       In
the event that the Buyer submits to the Transfer Agent the Warrant Shares for
the removal of the restrictive legends whether in connection with a sale of
such shares pursuant to any
exemption to the registration requirements the Securities Act of 1933, as
amended, or otherwise the Transfer Agents shall without the confirmation or
instructions from the Company and within three (3) Trading Days of receipt
of all required documentation from the Buyer, its agent or counsel, (i) issue
and surrender to a common carrier for overnight delivery to the address as
specified by the Buyer(s), a certificate, registered in the name of the Buyer or
its designees, for the number of shares of Common Stock to which the Buyer
shall be entitled as set forth pursuant to their submission or (ii) provided
the Transfer Agent is participating in The Depository Trust Company (“DTC”)
Fast Automated Securities Transfer Program, upon the request of the Buyers,
credit such aggregate number of shares of Common Stock to which the Buyers
shall be entitled to the Buyer’s or their designees’ balance account with DTC
through its Deposit Withdrawal At Custodian (“DWAC”) system
provided the Buyer causes its bank or broker to initiate the DWAC transaction.
For purposes hereof “Trading Day”
shall mean any day on which the Nasdaq Market is open for customary trading.

 

 

(e)           Opinions
of Counsel.          In the
event that the Buyer submits to the Transfer Agent a request for the issuance
of the Warrant Shares or the Warrant Shares for the removal of the restrictive
legends whether in connection with a sale of such shares pursuant to any exemption to the registration
requirements the Securities Act of 1933, as amended, or otherwise and the
Company and or its counsels refuses or fails for any reason to render an
opinion of counsel required for the removal of the restrictive legends the
Company hereby represents and warrants that the Buyer is hereby irrevocably and
expressly authorized to have counsel to the Buyer to render any and all
opinions which may be required and relied upon by the Transfer Agent.

 

In the event the Buyer submits an opinion of counsel as contemplated in
the preceding paragraph the Transfer Agent hereby acknowledges it will rely on
and accept such opinion of counsel and all documentation submitted in
connection therewith, with out the confirmation or instructions from the
Company, and issue such Warrant Shares without restrictive legends as
instructed by the Buyer as per Section 1 (d) herein.

 

2.     RESERVATION OF SHARES OF THE COMPANY.

 

(a).          The Transfer Agent shall
reserve for issuance to the Buyers a minimum of 13,000,000 Warrant Shares, as
may be increased under the Warrant and upon advice from the Company.  Under no circumstances, including but not
limited to the exhaustion of the number of reserved shares articulated herein, increase
of the number of Warrant Shares pursuant to terms of the Warrant, the share
reserve articulated herein is not created or other wise, shall such reservation
of Warrant shares articulated herein be deemed to be a cap on the number of
Warrant Shares to be issued to the Buyer.

 

(b).          All such shares shall
remain in reserve with the Transfer Agent until the Buyers provides the
Transfer Agent instructions that the shares or any part of them shall be taken
out of reserve and shall no longer be subject to the terms of these
instructions.

 

(c)           The Company and the
Transfer Agent acknowledge that as of the date hereof other than as created in
connection with existing option plans and warrants and convertible debentures
previously purchased by the Buyer from the Company, no share reserve exists or
will exist so long as the Notes are outstanding.

 

3.     AUTHORIZED AGENT OF THE
COMPANY.

 

(a)           The Company hereby
irrevocably appoints the Buyer Escrow Agent as a duly authorized agent of the
Company for the purposes of authorizing the Transfer Agent to process issuances
and transfers specifically contemplated herein.

 

i.                      The
Transfer Agent shall accept and rely exclusively on the Exercise Notice submitted
by the Buyer(s) and shall not seek confirmation and/or instructions from
the Company to process the Exercise Notice with or without Legends.

 

ii.                     The
Transfer Agent shall accept and rely exclusively on the opinions of counsel and
other documentation submitted by the Buyer(s) for the removal of the
restrictive legends as contemplated hereunder and shall not seek confirmation
and/or instructions from the Company to process such submission by the
Buyer(s).

 

 

iii.                    The
Transfer Agent shall have no liability for relying on such instructions.  Any Exercise Notice or request for removal of
restrictive legends and such supporting documentation delivered hereunder shall
constitute an irrevocable instruction to the Transfer Agent to process such
notice or notices in accordance with the terms thereof.  Such notice or notices may be transmitted to
the Transfer Agent by facsimile or any commercially reasonable method.

 

iv.                    The
Company hereby confirms to the Transfer Agent and the Buyers that it can NOT
and will NOT give instructions, including stop orders or otherwise, other than
as contemplated herein to Transfer Agent with regard to the issuances
contemplated herein.

 

v.                     In
the event that the Company provides instructions contrary to this Agreement to
the Transfer Agent, including but not limited to stop orders, the Transfer
Agent will disregard any contrary instructions, including but not limited to
stop orders, submitted by or on behalf of the Company and act according to such
instructions provided by the Buyer and according the time requirements set
forth herein.

 

vi.                    The
Company shall not be entitled to nor will the Transfer Agent grant a suspension
of the obligations hereunder for any time period in order for the Company to
obtain a court order or its equivalent in order to prevent the Transfer Agent
from acting hereunder.

 

vii.                   The
Company and the Transfer Agent hereby acknowledge and confirm that complying
with the terms of this Agreement does not and shall not prohibit the Transfer
Agent from satisfying any and all responsibilities and duties it may owe to the
Company.

 

viii.                  The
Transfer Agent, upon request of the Buyer(s) and with out instruction or
confirmation by the Company, will provide to the Buyer(s) the total number
of authorized shares of the Company’s Common Stock as well as the current
outstanding shares of the Company’s Common Stock as of the date of the request.

 

ix.                    Certain Notice Regarding the Escrow Agent.
The Company and the Transfer Agent hereby acknowledge that the Escrow Agent is
general counsel to the Buyers, a partner of the general partner of the Buyers
and counsel to the Buyers in connection with the transactions contemplated and
referred herein.  The Company and the
Transfer Agent agree that in the event of any dispute arising in connection
with this Agreement or otherwise in connection with any transaction or
agreement contemplated and referred herein, the Escrow Agent shall be permitted
to continue to represent the Buyers and neither the Company nor the Transfer
Agent will seek to disqualify such counsel.

 

4.   REPLACEMENT
OF TRANSFER AGENT.

 

(a)           The
Company hereby agrees that it shall not replace the Transfer Agent as the
Company’s transfer agent without the prior written consent of the Buyers.

 

(b)           The
Company agrees that, in the event the Transfer Agent resigns as the Company’s
transfer agent, the Company will engage a suitable replacement transfer agent
that has agreed to serve as transfer agent and to be bound by the terms and
conditions of these Irrevocable Transfer 

 

 

Agent Instructions within ten business days of the resignation of the
Transfer Agent.  The Company’s obligation
to obtain a suitable replacement transfer agent shall not affect the current
Transfer Agent’s ability to resign.

 

5.     Intentionally deleted.

 

6.     Intentionally
deleted.

 

7.     MISCELLANEOUS.

 

(a)           The
Company acknowledges that the Buyers is relying on the representations and
covenants made by the Company hereunder and are a material inducement to the
Buyers purchasing Notes under the Securities Purchase Agreement.  The Company further acknowledges that without
such representations and covenants of the Company made hereunder, the Buyers
would not purchase the Notes.

 

(b)           Each party hereto
specifically acknowledges and agrees that in the event of a breach or
threatened breach by a party hereto of any provision hereof, the Buyers will be
irreparably damaged and that damages at law would be an inadequate remedy if
these Irrevocable Transfer Agent Instructions were not specifically
enforced.  Therefore, in the event of a
breach or threatened breach by a party hereto, including, without limitation,
the attempted termination of the agency relationship created by this
instrument, the Buyers shall be entitled, in addition to all other rights or
remedies, to an injunction restraining such breach, without being required to
show any actual damage or to post any bond or other security, and/or to a
decree for specific performance of the provisions of these Irrevocable Transfer
Agent Instructions.

 

(c)           Each party hereto specifically acknowledges
and agrees that in any action to enforce this Agreement or any right hereunder
the prevailing party will be entitled to recover its reasonable attorney’s fees
and expenses from the other party or parties.

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

 

 

IN WITNESS
WHEREOF, the parties have caused this letter agreement
regarding Irrevocable Transfer Agent Instructions to be duly executed and
delivered as of the date first written above.

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  ISONICS CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name: Gregory A. Meadows

  
	
   

  	
  Title:   Vice President/Assistant Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  David Gonzalez, Esq.

  
	
   

  	
   

  
	
   

  	
   

  
	
  CONTINENTAL STOCK TRANSFER AND TRUST COMPANY

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
						

 

 

SCHEDULE I

 

SCHEDULE OF BUYERS

 

	
  Name

  	
   

  	
  Signature

  	
   

  	
  Address/Facsimile

  Number of Buyers

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  YA
  Global Investments, L.P.

  	
   

  	
  By:

  	
  Yorkville
  Advisors, LLC

  	
   

  	
  101
  Hudson Street – Suite 3700

  	
   

  
	
   

  	
   

  	
  Its:

  	
  General
  Partner

  	
   

  	
  Jersey
  City, NJ 07303

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Facsimile:  (201)
  985-8266

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Mark
  Angelo

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Portfolio
  Manager

  	
   

  	
   

  	
   

  
								

 

1

 

EXHIBIT I

 

TO IRREVOCABLE TRANSFER AGENT INSTRUCTIONS

 

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

 

                  ,
200

 

            

 

Attention:

 

RE:         ISONICS CORPORATION

 

Ladies and Gentlemen:

 

We are counsel to Isonics Corporation, (the “Company”), and have
represented the Company in connection with that certain Securities Purchase
Agreement, dated as of June 13, 2008 (the “Securities Purchase
Agreement”), entered into by and among the Company and the Buyers set forth
on Schedule I attached thereto (collectively the “Buyers”) pursuant to
which the Company has agreed to sell to the Buyers up to $1,175,000 of Notes
and warrants (“Warrants”) to purchase up to 13,000,000 shares of the
Company’s common stock (the “Common Stock”), no par value per share (the
“Warrant Shares”),.  Pursuant to
the Securities Purchase Agreement, the Company also has entered into a
Registration Rights Agreement, dated as of June 13, 2008, with the Buyers
(the “Registration Rights Agreement”) pursuant to which the Company
agreed, among other things, to upon request register the Warrant Shares under
the Securities Act of 1933, as amended (the “1933 Act”).  In connection with the Company’s obligations
under the Securities Purchase Agreement and the Registration Rights Agreement,
on               ,
200_, the Company filed a Registration Statement (File No.       -                  )
(the “Registration Statement”) with the Securities and Exchange
Commission (the “SEC”) relating to the sale of the Warrant Shares.

 

In connection with the
foregoing, we advise the Transfer Agent that a member of the SEC’s staff has
advised us by telephone that the SEC has entered an order declaring the
Registration Statement effective under the 1933 Act at          P.M.
on                     ,
200_ and we have no knowledge, after telephonic inquiry of a member of the SEC’s
staff, that any stop order suspending its effectiveness has been issued or that
any proceedings for that purpose are pending before, or threatened by, the SEC
and the Warrant Shares are available for sale under the 1933 Act pursuant to
the Registration Statement.

 

1

 

The Buyers has confirmed it
shall comply with all securities laws and regulations applicable to it
including applicable prospectus delivery requirements upon sale of the Warrant Shares.

 

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  

 

2

 

EXHIBIT II

 

TO IRREVOCABLE TRANSFER AGENT INSTRUCTIONS

 

FORM OF OPINION

 

                                
200  

 

VIA FACSIMILE AND REGULAR MAIL

 

 

 

Attention:

 

RE:         ISONICS CORPORATION

 

Ladies and Gentlemen:

 

We have acted as special
counsel to Isonics Corporation (the “Company”), in connection with the
registration of                       shares
(the “Shares”) of its common stock with the Securities and Exchange
Commission (the “SEC”).  We have
not acted as your counsel.  This opinion
is given at the request and with the consent of the Company.

 

In rendering this opinion we
have relied on the accuracy of the Company’s Registration Statement on Form SB-2,
as amended (the “Registration Statement”), filed by the Company with the
SEC on                          ,
200  .  The Company filed the
Registration Statement on behalf of certain selling stockholders (the “Selling
Stockholders”).  This opinion relates
solely to the Selling
Shareholders listed on Exhibit “A” hereto and number of Shares set
forth opposite such Selling Stockholders’ names.  The SEC declared the Registration Statement
effective on                     
      , 200  .

 

We understand that the Selling
Stockholders acquired the Shares in a private offering exempt from registration
under the Securities Act of 1933, as amended. 
Information regarding the Shares to be sold by the Selling Shareholders
is contained under the heading “Selling Stockholders” in the Registration
Statement, which information is incorporated herein by reference.  This opinion does not relate to the issuance
of the Shares to the Selling Stockholders. 
The opinions set forth herein relate solely to the sale or transfer by
the Selling Stockholders pursuant to the Registration Statement under the
Federal laws of the United States of America. 
We do not express any opinion concerning any law of any state or other
jurisdiction.

 

In rendering this opinion we
have relied upon the accuracy of the foregoing statements.

 

1

 

Based on the foregoing, it is
our opinion that the Shares have been registered with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, and that                 
may remove the restrictive legends contained on the Shares. This opinion
relates solely to the number of
Shares set forth opposite the Selling Stockholders listed on Exhibit “A”
hereto.

 

This opinion is furnished to
Transfer Agent specifically in connection with the sale or transfer of the
Shares, and solely for your information and benefit.  This letter may not be relied upon by
Transfer Agent in any other connection, and it may not be relied upon by any
other person or entity for any purpose without our prior written consent.  This opinion may not be assigned, quoted or
used without our prior written consent. 
The opinions set forth herein are rendered as of the date hereof and we
will not supplement this opinion with respect to changes in the law or factual
matters subsequent to the date hereof.

 

Very truly yours,

 

2

 

EXHIBIT A

 

(LIST
OF SELLING STOCKHOLDERS)

 

	
  Name:

  	
   

  	
  No. of Shares:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

1Exhibit 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.

 

[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

 

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

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