Document:

Exhibit 10.2

 

ISONICS CORPORATION

EXECUTIVE EMPLOYMENT
AGREEMENT

 

                                THIS
EXECUTIVE EMPLOYMENT AGREEMENT (“Agreement”), effective February 6, 2008 (“Effective
Date”), is made between Isonics Corporation, a California corporation (“Employer”),
and John Sakys (“Executive”).  Collectively Employer and Executive are
referred to as the “parties.”

 

RECITALS

 

                                WHEREAS,
the Board of Directors of Employer desires to provide for the continued
employment of Executive.  Executive is
willing to commit himself to continue to serve Employer, on the terms and
conditions herein provided, although this Agreement may be amended at any time
by written agreement among the parties; and

 

                                WHEREAS,
the Executive understands that the Employer’s financial condition is such that
it has only limited working capital available and, as a result, Employer may
not be able to perform all of its obligations hereunder timely or completely;
and

 

                                WHEREAS,
in order to effect the foregoing, Employer and Executive wish to enter into
this Agreement on the terms and conditions set forth below.

 

AGREEMENT

 

                                NOW,
THEREFORE, in
consideration of the mutual covenants herein contained, and other good and
valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, the parties agree as follows:

 

                                1.             Employment.

 

                                (a)           Employer hereby employs Executive,
and Executive agrees to be employed as President, Chief Operating
Officer and Secretary.  Executive will report to the Board of
Directors.  Executive will devote
substantially full time and attention to achieving the purposes and discharging
the responsibilities of his positions.

 

                                (b)           Executive will comply with all rules,
policies and procedures of Employer as modified from time to time, including
without limitation, rules and procedures set forth in the Employer’s
employee manuals and handbooks, supervisor’s manuals and operating
manuals.  Executive will perform all of Executive’s responsibilities in
compliance with all applicable laws and will ensure that the operations that
Executive manages are in compliance with all applicable laws.

 

                                (c)           Notwithstanding anything to the
contrary contained in this Agreement, during the Employment Period, Executive
may continue to engage directly or indirectly in other business ventures that
he was engaged in as of the effective date of this Agreement and may 

 

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engage in other business activities (including associating with other
executives so long as such activities do not interfere with Executive’s duties
and responsibilities under this Agreement, and so long as the nature and extent
of such activities have been disclosed to, and approved by, the Compensation
Committee of the Board of Directors (the “Compensation Committee”).  During Executive’s employment, Executive
shall not engage in any other business activity that, in the reasonable
judgment of the Compensation Committee of the Board of Directors, conflicts
with the duties of Executive under this Agreement, whether or not such activity
is pursued for gain, profit or other pecuniary advantage.

 

                                2.             Prior Agreements.  The Executive and Employer
agree that all prior employment agreements and understandings between the
Executive and Employer related to Executive’s employment be and hereby are
cancelled and are of no further force or effect.

 

                                3.             Term of Employment.  The term of employment (“Term”) shall be for
one year from the Effective Date unless terminated earlier in accordance with
the terms and conditions of this Agreement. 
The Term will automatically renew for successive one-year terms unless
and until the Employer or the Executive provides notice at least 60 days in
advance of the expiration of the current Term that the Employer or the
Executive will not accept a renewal term.

 

                                4.             Compensation. 
For the duration of Executive’s employment hereunder, the Executive will
be entitled to compensation that will be computed and paid pursuant to the
following subsections.

 

                                4.1          Base Salary. 
Employer will pay to Executive a base salary (“Base Salary”) at an
annual rate of Two Hundred Forty Thousand Dollars ($240,000), subject to
withholdings, ratably in accordance with Employer’s policies, so long as
Executive remains employed.  Executive’s
Base Salary will be reviewed annually during the term of Executive’s employment
by the Compensation Committee or the Board of Directors of Employer and may be
increased based on such review.

 

                                4.2          Discretionary Cash Bonus.  Executive shall be eligible for a discretionary cash
bonus (“Cash Bonus”) equal to an amount as determined by the Compensation
Committee, which shall be based on the condition of Employer’s business and
results of operations, the Compensation Committee’s evaluation of Executive’s
individual performance for the relevant period, and the satisfaction of goals
that may be established by the Compensation Committee of the Employer.  Any Cash Bonus shall be paid in the
Compensation Committee’s discretion.

 

                                4.3          Equity-based Compensation.  Executive shall be entitled
to participate in all equity-based compensation plans offered by Employer to
its employees and as determined by the Compensation Committee.

 

                                4.4          Performance
Standards.  The Executive and
the Employer agree that the Executive’s discretionary cash bonus and
equity-based compensation will be based on the Executive’s and the Employer’s
achievement of performance goals that may be established by 

 

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the Compensation Committee after discussion
with the Executive and his supervisors (if any).  Until the Employer and the Compensation
Committee establish performance goals, the Executive’s discretionary cash bonus
and equity based compensation will be wholly discretionary.

 

                                4.5          Discretionary Bonus.  In recognition of the Executive’s
continuing efforts on the Employer’s behalf, the substantial risk that the
Executive is taking by remaining with the Employer notwithstanding the Employer’s
financial condition, the significant operational improvements accomplished by
the Executive with other executives of the Employer since February 2007,
the Executive’s willingness to enter into this Agreement, and other factors,
the Employer agrees to pay Executive the sum of Sixty Thousand Dollars
($60,000) as a discretionary bonus, such payment to be made at the earlier of:

 

                                (a)           The Employer having sufficient
working capital that is not committed for operations to allow the Employer to
pay all (or a portion) of this bonus to the Executive with such approval and
direction from the Compensation
Committee.  If the Employer pays any portion of this bonus to the
Executive, the Employer will pay the same proportionate amount of the bonus to
other Executives who have entered into agreements similar to this Agreement, or

 

                                (b)           Termination of this Agreement
pursuant to Sections 6.2(a), 6.2(b), 6.2(c), 6.2(d) or Article 7,
below, in which case the discretionary bonus payable pursuant to this Section 4.5
will be payable on the same terms and over the same period as the severance pay
is determined in Section 6.4 or (in the case of a termination under Article 7)
Section 7.2.

 

The amount payable pursuant to this Section 4.5 will be reduced to
zero in the event the Executive terminates this Agreement pursuant to Section 6.2(e) or
if the Employer terminates this Agreement for Cause pursuant to Section 6.1.

 

                                5.             Other
Benefits.

 

                                5.1          Certain
Benefits.  Executive will be
eligible to participate in all employee benefit programs established by
Employer that are applicable to management personnel on a basis commensurate
with Executive’s position and in accordance with Employer’s policies from time
to time, including, but not limited to, life insurance, disability insurance,
retirement plans, profit-sharing plans, savings plans, stock option plans and
other employee benefit plans and policies, but nothing herein shall require the
adoption or maintenance of any such plan. 
Notwithstanding the foregoing, Employer shall provide full medical and
dental insurance coverage for Executive as currently provided by Administaff (or
its successor) on the same terms as are then generally available to the Company’s
senior executive officers, at no cost to Executive.

 

                                5.2          Paid Time Off (“PTO”) and Expenses. 
For the duration of Executive’s employment hereunder, Executive will be
provided such PTO (which includes vacations and sick leave) as Employer makes
available to its management level employees generally as described in, and
subject to the provisions of, Employer’s employee manual. Employer will
reimburse 

 

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Executive in accordance with company policies and procedures for
reasonable expenses necessarily incurred in the performance of duties hereunder
against appropriate receipts and vouchers indicating the specific business
purpose for each such expenditure.

 

                                5.3          Directors and
Officers Insurance.  During
the term of this Agreement and for a three year period thereafter, and subject
to the availability of adequate financing, Employer shall use its best efforts
to 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 Employer in the minimum
benefit amount to be determined in good faith by the Board of Directors, and
provided that all officers and directors are treated alike.

 

                                6.             Termination Or Discharge.

 

                                6.1          For Cause.  Employer will have the right to immediately terminate
Executive’s services and this Agreement for “Cause.”  For the purposes of this Agreement, the term “for
cause” shall mean:

 

                                (a)           any act of fraud or embezzlement
materially adversely affecting the financial, market, reputation or other
interests of Employer,

 

                                (b)           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,

 

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

 

                                (d)           gross negligence, incompetence or willful misconduct in the
performance by the Executive of his duties,

 

                                (e)           refusal by the Executive, without
proper reason, to perform his duties,

 

                                (f)            the Executive willfully engaging in
conduct that is materially injurious to Employer or its subsidiaries
(monetarily or otherwise),

 

                                (g)           unauthorized disclosure by the
Executive of Confidential Information, as such term is defined in Section 10
of this Agreement, or the unauthorized disclosure of proprietary material
information of Employer or an affiliate), or

 

                                (h)           Employer’s reasonable belief supported by a legal
opinion that Executive has engaged in a violation of any statute, rule or
regulation, any of which in the judgment of Employer is harmful to Employer’s
business or to Employer’s reputation.

 

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                                Upon
termination of Executive’s employment hereunder for Cause, Executive will have
no rights to any unvested benefits or any other compensation or payments after
the termination date.

 

                                6.2          Termination Other
Than For Cause.  The Executive’s
employment hereunder may be terminated without any breach of this Agreement
under the following circumstances:

 

                                (a)           By Executive.  Upon the occurrence of any of the following
events, this Agreement may be terminated by the Executive upon not less than
three business days’ written notice to Employer specifying such reason:

 

                                                1.             if Employer makes a general
assignment for the benefit of creditors, files a voluntary bankruptcy petition,
files a petition or answer seeking a reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any law, or
there shall have been filed any petition or application for the involuntary
bankruptcy of Employer, or other similar proceeding, in which an order for
relief is entered or which remains undismissed for a period of thirty days or
more, or Employer seeks, consents to, or acquiesces in the appointment of a
trustee, receiver, or liquidator of Employer or any material part of its
assets;

 

                                                2.             the sale by Employer of
substantially all of its assets;

 

                                                3.             a decision by Employer to terminate
its business and liquidate its assets;

 

                                                4.             Employer’s corporate offices move
out of the Denver Colorado metropolitan area; or

 

                                                5.             the holder of any convertible
debenture issued by Employer prior to the date of this Agreement declares a
default or accelerates any obligations under any of the terms of such
debentures; or

 

                                                6.             a material breach of this Agreement
by Employer except to the extent that the material breach results directly or indirectly
from Employer’s lack of funding to cure any element of such material breach.

 

                                (b)           By Employer Without Cause.  The Employer may terminate this Agreement
without Cause at any time upon not less than 60 days’ written notice to the
Executive.

 

                                (c)           Death.  This Agreement shall terminate upon the death
of Executive.

 

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                                (d)           Disability.  The Employer may terminate this Agreement
upon the permanent disability of the Executive. 
Executive shall be considered disabled (whether permanent or temporary)
if:  (i) he is disabled as defined
in a disability insurance policy purchased by or for the benefit of the
Executive; or (ii) if no such policy is in effect, he is incapacitated to
such an extent that he is unable to perform substantially all of his duties for
Employer that he performed prior to such incapacitation.

 

                                (e)           Material Breach as a Result of
Lack of Funding.  If the Employer
breaches this Agreement but such breach results directly or indirectly from
Employer’s lack of funding to cure any element of such material breach (and
therefore such material breach is not a basis for termination by Executive
under Section 6.2(a)(5), Executive may terminate this Agreement upon not
less than 30 days’ prior written notice specifying such breach.

 

                                6.3          Notice of Termination. 
Any termination of the Executive’s employment by the Employer or by the
Executive (other than termination pursuant to Section 6.2(b) above)
shall be communicated by written Notice of Termination to the other party.

 

                                6.4          Compensation Upon Termination.

 

(a)     Upon a termination of this Agreement pursuant
to Section 6.2(a), Employer shall pay to Executive a cash severance
payment in an amount equal to the sum of (i) one year of Executive’s
annual salary payable in a lump sum payment within three months of the
Executive’s termination pursuant to Section 6.2(a), and (ii) the
pro-rated portion (based on the number of days in the calendar year ending
prior to the effective date of such termination of Executive by Employer) of
any Cash Bonus for the year in which the termination occurred that has been
earned but has not been paid to Executive, which shall not be less than any
bonus with respect to the previous calendar year, in each case.

 

(b)     Upon
a termination of this
Agreement pursuant to Section 6.2(b), Employer shall pay to Executive: (i) twelve
months of his annual salary then in effect, and (ii) the pro-rated portion
(based on the number of days in the calendar year ending prior to the effective
date of such termination of Executive by Employer) of any Cash Bonus for the
year in which the termination occurred that has been earned, but has not been
paid to Executive, in both cases payable upon such termination.

 

(c)     Following
the termination of
this Agreement pursuant to Section 6.2(c), Employer shall pay to Executive’s
estate the compensation which would otherwise be payable to Executive to the
end of the month in which his death occurs, including the pro-rated portion
(based on the number of days in the calendar year ending prior to the effective
date of such termination of Executive by Employer) of any Cash Bonus for the
year in which the termination occurred that has been earned but has not been
paid to Executive.

 

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(d)     If
Employer elects to terminate this Agreement in the event of permanent
disability of the Executive as described in Section 6.2(d), if the
Employer terminates this Agreement for Cause as set forth in Section 6.1,
or if the Executive elects to terminate this Agreement pursuant to 6.2(e),
Employer shall pay to Executive (i) compensation and benefits through the
Date of Termination; any such payment, however, shall (in the case of a
termination pursuant to Section 6.2(d)) be reduced by disability insurance
benefits, if any, paid to Executive under policies (other than group policies)
for which Employer pays all premiums and Executive is the beneficiary, and (ii) the
pro-rated portion (based on the number of days in the calendar year ending
prior to the effective date of such termination of Executive by Employer) of
any Cash Bonus for the year in which the termination occurred that has been
earned but has not been paid to Executive.

 

                                7.             Termination
by Executive due to Change of Control.  Upon
the occurrence of any Change of Control, the Executive may terminate this
Agreement upon not less than thirty days’ written notice to Employer.

 

                                7.1.         Change of Control —
Definition.  For purposes of
this Agreement, a “Change of Control” shall mean the happening of any of the
following:

 

                                (a)           A majority of the persons who were
members of the Board of Directors before any cash tender offer, merger or other
business combination, sale of assets, sale or transfer of Employer’s stock or
other equity securities, or contested election or combination of the foregoing,
shall cease to constitute a majority of the directors after the completion of
such event; or

 

                                (b)           The closing of: (i) a merger,
consolidation or reorganization of Employer with or into another corporation in
which the holders of Employer’s common stock immediately before such merger,
consolidation or reorganization do not, immediately following such merger,
consolidation or reorganization, hold as a group on a fully diluted basis both
the ability to elect at least a majority of the directors of the surviving
corporation (or its parent), and at least a majority in value of the surviving
corporation’s (or its parent’s) outstanding equity securities, or (ii) a
sale or other disposition of all or substantially all of the assets of
Employer, unless Employer owns 50% or more of the outstanding voting securities
or other equity interests of the transferee at the time of the transfer.

 

                7.2.         Compensation Upon Termination by
Executive Upon a Change of Control. 
Upon a termination upon a Change of Control Employer shall pay Executive
a cash severance payment in an amount equal to the sum of (a) one year of
Executive’s annual salary payable in a lump sum payment within three months the
Executive’s termination pursuant to Section 7, and (b) the pro-rated portion (based on the
number of days in the calendar year ending prior to the effective date of such
termination of Executive by Employer) of any Cash Bonus for the year in which
the termination occurred that has been earned but has not been paid to
Executive, which shall not be less than any bonus with respect to the previous
calendar year, in each case. 
In addition, in the event of a Change of Control, all of Executive’s
equity-based 

 

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compensation shall immediately vest
regardless whether the Executive is retained by the Employer or successor
following the Change of Control.

 

8.             Covenant
Not To Compete.

 

(a)           Except as otherwise provided for in this Agreement, during
the Term of this Agreement and, if this Agreement is terminated for any reason
during the Term, for one year following such date of termination (the “Termination
Period”), the Executive shall not, directly or indirectly, compete with respect
to any services or products of Employer which are either offered or are being
developed by Employer as of the date of termination; or, without limiting the
generality of the foregoing, be or become, or agree to be or become, interested
in or associated with, in any capacity (whether as a partner, shareholder,
owner, officer, director, executive, principal, agent, creditor, trustee,
consultant, co-venturer or otherwise), any individual, corporation, firm,
association, partnership, joint venture or other business entity, which
competes with respect to any services or products of Employer which are either
offered or are being developed by Employer as of the date of termination;
provided, however, that the Executive may own, solely as an investment, not
more than 9.99% of any class of securities of any corporation in competition
with Isonics whose securities are traded on any national securities exchange in
the United States of America.

 

                                (b)           Employer and Executive agree to the
following: this provision does not impose an undue hardship on Executive and is
not injurious to the public; this provision is necessary to protect the
business of Employer and its affiliates; the nature of Executive’s
responsibilities with Employer under this Agreement require Executive to have access
to Confidential Information, as such term is defined in Section 10 of this
Agreement, which is valuable and confidential to all of the business; the scope
of this Section 8 is reasonable in terms of length of time and geographic
scope; and adequate consideration supports this Section 8, including
consideration herein.

 

                                (c)           In the event that any of the
covenants in this Section 8 shall be determined by any court of competent
jurisdiction to be unenforceable by reason of extending for too great a period
of time or by reason of being too extensive in any other respect, it shall be
interpreted to extend over the maximum period of time for which it may be
enforceable and to the maximum extent in all other respects as to which it may
be enforceable, and enforced as so interpreted, all as determined by such court
in such action.  Executive acknowledges
the uncertainty of the law in this respect and expressly stipulates that this
Agreement is to be given the construction that renders its provisions valid and
enforceable to the maximum extent (not exceeding its express terms) possible
under applicable law.

 

                                9.             Non-solicitation.  During the term of this
Agreement and, if applicable, during the Termination Period, the Executive
shall not, directly or indirectly, (i) induce or attempt to influence any
executive or other employee of Isonics to leave its employ, (ii) aid or
agree to aid any competitor, customer or supplier of Isonics in any attempt to
hire any person who is an executive or other employee of Isonics, or (iii) induce
or attempt to influence any 

 

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person or business entity who was a customer
or supplier of Isonics during any portion of said period to transact business
with a competitor of any aspect of Isonics’ business.

 

                                10.          Confidentiality.

 

                                (a)           Executive acknowledges that, during
the course of Executive’s employment with Employer, Executive may have
developed Confidential Information (as defined below) for Employer, and
Executive may have learned of Confidential Information developed or owned by
Employer or its affiliates or entrusted to Employer or its affiliates by
others.  Executive agrees that Executive
will not, directly or indirectly, use any Confidential Information or disclose
it to any other person or entity, except as otherwise required by law.

 

(b)           “Confidential Information” means any
and all information relating to Employer that is not generally known by the
public or others with whom Employer does (or plans to) compete or do business,
as well as comparable information relating to any of Employer’s
affiliates.  Confidential Information
includes, but is not limited to, information relating to the terms of this
Agreement, as well as Employer’s business, technology, practices, products,
marketing, sales, services, finances, strategic opportunities, internal
strategies, legal affairs (including pending litigation), the terms of business
relationships not yet publicly known, intellectual property and the filing or
pendency of patent applications.  Confidential Information also includes, but is
not limited to, comparable information that Employer may receive or has
received belonging to customers, suppliers, consultants and others who do
business with Employer, or any of Employer’s affiliates.

 

(c)           “Confidential Information” does not
include any information that is: (i) shown to have been developed
independently by Executive prior to Executive’s employment with Employer; or (ii) required
by a judicial tribunal or similar governmental body to be disclosed under law
(provided that Executive have first promptly notified Employer of such
disclosure requirement and have cooperated fully with Employer (at Employer’s
expense) in exhausting all appeals

 

                                11.          Property of Employer.  Upon any termination from Employer, Executive agrees
to return to Employer any and all records, files, notes, memoranda, reports,
work product and similar items, and any manuals, drawings, sketches, plans,
tape recordings, computer programs, disks, cassettes and other physical representations
of any information, relating to Employer, or any of its affiliates, whether or
not constituting confidential information; and Executive agrees to return to
Employer any other property, including but not limited to a laptop computer,
belonging to Employer, no later than the date of Executive’s termination from
employment for any reason, and Executive further agrees not to retain copies of
any Confidential Information.  Upon
termination of this Agreement or employment hereunder, Executive who has been
using a computer owned by the Employer may purchase said computer from the
Employer for fair market value provided the information in the computer is
backed up in the Employer’s data files and all Confidential Information has
been deleted from the computer in a manner reasonably satisfactory to the
remaining senior officers of the Employer. 
The Executive will pay 

 

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the Employer the fair market value of such computer as may be
reasonably determined by the Employer.

 

                                12.          Section 280G
Safe Harbor Cap.  In the event it shall be determined that
any payment or distribution or any part thereof of any type to or for the
benefit of Executive whether pursuant to the Agreement or any other agreement
between Executive and the Employer, or any person or entity that acquires
ownership or effective control the Employer or ownership of a substantial
portion of the Employer’s assets (within the meaning of Section 280G of
the Internal Revenue Code of 1986, as amended, and the regulations thereunder
(the “Code”)) whether paid or payable or distributed or distributable pursuant
to the terms of the Agreement or any other agreement, (the “Total Payments”),
is or will be subject to the excise tax imposed by Section 4999 of the Code
(the “Excise Tax”), then the Total Payments shall be reduced to the maximum
amount that could be paid to Executive without giving rise to the Excise Tax
(the “Safe Harbor Cap”), if the net after-tax payment to Executive after
reducing Executive’s Total Payments to the Safe Harbor Cap is greater than the
net after-tax (including the Excise Tax) payment to Executive without such
reduction.  The reduction of the amounts payable hereunder, if applicable,
shall be made by reducing first the payment made pursuant to the Agreement and
then to any other agreement that triggers such Excise Tax, unless an
alternative method of reduction is elected by Executive.  All mathematical
determinations, and all determinations as to whether any of the Total Payments
are “parachute payments” (within the meaning of Section 280G of the Code),
that are required to be made under this Section 12, including
determinations as to whether the Total Payments to Executive shall be reduced
to the Safe Harbor Cap and the assumptions to be utilized in arriving at such
determinations, shall be made by a nationally recognized accounting firm
selected by the Employer (the “Accounting Firm”).  If the Accountant
determines that the Total Payments to Executive shall be reduced to the Safe
Harbor Cap (the “Cutback Payment”) and it is established pursuant to a final
determination of a court or an Internal Revenue Service (the “IRS”) proceeding
which has been finally and conclusively resolved, that the Cutback Payment is
in excess of the limitations provided in Section 6(e) (hereinafter
referred to as an “Excess Payment”), such Excess Payment shall be deemed for
all purposes to be an overpayment to Executive made on the date such Executive
received the Excess Payment and Executive shall repay the Excess Payment to the
Employer on demand; provided, however, if Executive shall be required to pay an
Excise Tax by reason of receiving such Excess Payment (regardless of the
obligation to repay the Employer), Executive shall not be required to repay the
Excess Payment (if Executive has already repaid such amount, the Employer shall
refund the amount to the Executive), and the Employer shall pay Executive an
amount equal to the difference between the Total Payments and the Shortfall
Cap.

 

                                13.          Remedies.  Notwithstanding
other provisions of this Agreement regarding dispute resolution, Executive
agrees that Executive’s violation of any of Sections 8, 9, 10 or 11 of this
Agreement would cause Employer irreparable harm that would not be adequately
compensated by monetary damages and that an injunction may be granted by any
court or courts having jurisdiction, restraining Executive from violation of
the terms of this Agreement, upon any breach or threatened breach of Executive
of the obligations set forth in any of the Sections 8, 9, 10 or 11.  The preceding sentence shall not be construed
to limit Employer from any other 

 

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relief or damages to which it may be entitled as a result of Executive’s
breach of any provision of this Agreement, including Sections 8, 9, 10 or
11.  Executive also agrees that a
violation of any of Sections 8, 9, 10 or 11 would entitle Employer, in addition
to all other remedies available at law or equity, to recover from Executive any
and all funds, including, without limitation, wages, salary and profits, which
will be held by Executive in constructive trust for Employer, received by
Executive in connection with such violation.

 

                                14.          Indemnification.

 

                                (a)           Employer agrees
to indemnify Executive and hold Executive harmless from and 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 Employer, as may be amended from time to time, and
pursuant to any indemnification agreement between Executive and Employer.

 

                                (b)           The indemnification provision of this
Section 14 shall be in addition to any liability which Employer 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 Employer
with reasonable promptness.  Executive shall have the right to retain
counsel of Executive’s own choice to represent Executive and Employer 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 Employer and any counsel designated by Employer.  Employer shall be liable for any settlement of any
claim against Executive made with Employer’s written consent, which consent shall not be unreasonably withheld or
delayed, to the fullest extent permitted by the California General Corporation
Law and the Certificate of Incorporation and Bylaws of Employer, as may be amended from time to time.

 

                                15.          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 State
of Colorado, 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 

 

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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.

 

                                16.          Fees. 
Unless otherwise agreed, the prevailing party will be entitled to its
costs and attorneys’ fees incurred in any litigation or dispute relating to the
interpretation or enforcement of this Agreement.

 

                                17.          Professional Fees and
Costs.  Each of the Parties
shall be responsible to pay his or its respective attorneys’ and other
professional fees and costs incurred in connection with the negotiation and
drafting of this Agreement.

 

                                18.          Disclosure.  Executive agrees fully and completely to
reveal the terms of this Agreement to any future employer or potential employer
of Executive and authorizes Employer, at its election, to make such disclosure.

 

                                19.          Representation of
Executive.  Executive
represents and warrants to Employer that Executive is free to enter into this
Agreement and has no contract, commitment, arrangement or understanding to or
with any party that restrains or is in conflict with Executive’s performance of
the covenants, services and duties provided for in this Agreement.  Executive agrees to indemnify Employer and to
hold it harmless against any and all liabilities or claims arising out of any
unauthorized act or acts by Executive that, the foregoing representation and
warranty to the contrary notwithstanding, are in violation, or constitute a
breach, of any such contract, commitment, arrangement or understanding.  Executive further represents and warrants to
Employer that Executive has consulted with his legal, tax, accounting, and
investment advisors with respect to the advisability of entering into this
Agreement to the extent that the Executive has determined such consultation to
be necessary or appropriate.

 

                                20.          Assignability.  During
Executive’s employment, this Agreement may not be assigned by either party
without the written consent of the other; provided, however, that Employer may
assign its rights and obligations under this Agreement without Executive’s
consent to a successor by sale, merger or liquidation, if such successor
carries on the Employer’s business substantially in the form in which it is
being conducted at the time of the sale, merger or liquidation.  This Agreement is binding upon Executive,
Executive’s heirs, personal representatives and permitted assigns and on
Employer, its successors and assigns.

 

                                21.          Notices.  For purposes of this Agreement, notices and
all other communications provided for herein shall be in writing and shall be
deemed to have been duly 

 

12

 

given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:

 

	
  IF TO EMPLOYER TO:

  	
  Isonics Corporation

  5906 McIntyre Street

  Golden, CO 80403

  Attention: Chairman of the Compensation Committee

   

  
	
  IF TO EXECUTIVE TO:

  	
  John Sakys

  

 

                                22.          Severability.  If any
provision of this Agreement or compliance by any of the parties with any
provision of this Agreement constitutes a violation of any law, or is or
becomes unenforceable or void, then such provision, to the extent only that it
is in violation of law, unenforceable or void, shall be deemed modified to the
extent necessary so that it is no longer in violation of law, unenforceable or void,
and such provision will be enforced to the fullest extent permitted by
law.  If such modification is not
possible, said provision, to the extent that it is in violation of law,
unenforceable or void, shall be deemed severable from the remaining provisions
of this Agreement, which provisions will remain binding on the parties.

 

                                23.          Waivers. 
No failure on the part of either party to exercise, and no delay in
exercising, any right or remedy hereunder will operate as a waiver thereof; nor
will any single or partial waiver of a breach of any provision of this
Agreement operate or be construed as a waiver of any subsequent breach; nor
will any single or partial exercise of any right or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other right or
remedy granted hereby or by law.

 

                                24.          Governing Law.  The validity, construction and
performance of this Agreement shall be governed by the laws of the State of
Colorado without regard to the conflicts of law provisions of such laws.

 

                                25.          Entire Agreement. 
This instrument contains the entire agreement of the parties with
respect to the relationship between Executive and Employer and supersedes all
prior agreements and understandings, and there are no other representations or agreements
other than as stated in this Agreement related to the terms and conditions of
Executive’s employment.  This Agreement
may be changed only by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought, and any such modification will be signed by the Chairman of the
Compensation Committee.

 

                                26.          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.

 

13

 

                                IN WITNESS WHEREOF, the parties have duly signed and
delivered this Agreement as of the day and year first above written.

 

	
   

  	
  EMPLOYER:

  
	
   

  	
   

  
	
   

  	
  ISONICS CORPORATION

  
	
   

  	
   

  
	
  By:

  	
  /s/ Richard Hagman

  
	
   

  	
  Richard Hagman,
  Chairman

  
	
   

  	
  Compensation Committee

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
  /s/ John Sakys

  
	
   

  	
  Name: John Sakys

  

 

14Exhibit 10.3

 

ISONICS CORPORATION

EXECUTIVE EMPLOYMENT
AGREEMENT

 

                                THIS
EXECUTIVE EMPLOYMENT AGREEMENT (“Agreement”), effective February 6, 2008 (“Effective
Date”), is made between Isonics Corporation, a California corporation (“Employer”),
and Gregory A. Meadows (“Executive”).  Collectively
Employer and Executive are referred to as the “parties.”

 

RECITALS

 

                                WHEREAS,
the Board of Directors of Employer desires to provide for the continued
employment of Executive.  Executive is
willing to commit himself to continue to serve Employer, on the terms and
conditions herein provided, although this Agreement may be amended at any time
by written agreement among the parties; and

 

                                WHEREAS,
the Executive understands that the Employer’s financial condition is such that
it has only limited working capital available and, as a result, Employer may
not be able to perform all of its obligations hereunder timely or completely;
and

 

                                WHEREAS,
in order to effect the foregoing, Employer and Executive wish to enter into
this Agreement on the terms and conditions set forth below.

 

AGREEMENT

 

                                NOW,
THEREFORE, in
consideration of the mutual covenants herein contained, and other good and
valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, the parties agree as follows:

 

                                1.             Employment.

 

                                (a)           Employer hereby employs Executive,
and Executive agrees to be employed as Chief Financial Officer,
Vice President — Finance and Treasurer.   Executive
will report to the Board of Directors. 
Executive will devote substantially full time and attention to achieving
the purposes and discharging the responsibilities of his positions.

 

                                (b)           Executive will comply with all rules,
policies and procedures of Employer as modified from time to time, including
without limitation, rules and procedures set forth in the Employer’s
employee manuals and handbooks, supervisor’s manuals and operating
manuals.  Executive will perform all of Executive’s responsibilities in
compliance with all applicable laws and will ensure that the operations that
Executive manages are in compliance with all applicable laws.

 

                                (c)           Notwithstanding anything to the
contrary contained in this Agreement, during the Employment Period, Executive
may continue to engage directly or indirectly in other business ventures that
he was engaged in as of the effective date of this Agreement and may 

 

1

 

engage in other business activities (including associating with other
executives so long as such activities do not interfere with Executive’s duties
and responsibilities under this Agreement, and so long as the nature and extent
of such activities have been disclosed to, and approved by, the Compensation
Committee of the Board of Directors (the “Compensation Committee”).  During Executive’s employment, Executive
shall not engage in any other business activity that, in the reasonable
judgment of the Compensation Committee of the Board of Directors, conflicts
with the duties of Executive under this Agreement, whether or not such activity
is pursued for gain, profit or other pecuniary advantage.

 

                                2.             Prior Agreements.  The Executive and Employer
agree that all prior employment agreements and understandings between the
Executive and Employer related to Executive’s employment be and hereby are
cancelled and are of no further force or effect.

 

                                3.             Term of Employment.  The term of employment (“Term”) shall be for
one year from the Effective Date unless terminated earlier in accordance with
the terms and conditions of this Agreement. 
The Term will automatically renew for successive one-year terms unless
and until the Employer or the Executive provides notice at least 60 days in
advance of the expiration of the current Term that the Employer or the
Executive will not accept a renewal term.

 

                                4.             Compensation. 
For the duration of Executive’s employment hereunder, the Executive will
be entitled to compensation that will be computed and paid pursuant to the
following subsections.

 

                                4.1          Base Salary. 
Employer will pay to Executive a base salary (“Base Salary”) at an
annual rate of One Hundred Eighty Thousand Dollars ($180,000), subject to
withholdings, ratably in accordance with Employer’s policies, so long as
Executive remains employed.  Executive’s
Base Salary will be reviewed annually during the term of Executive’s employment
by the Compensation Committee or the Board of Directors of Employer and may be
increased based on such review.

 

                                4.2          Discretionary Cash Bonus.  Executive shall be eligible for a discretionary cash
bonus (“Cash Bonus”) equal to an amount as determined by the Compensation
Committee, which shall be based on the condition of Employer’s business and
results of operations, the Compensation Committee’s evaluation of Executive’s
individual performance for the relevant period, and the satisfaction of goals
that may be established by the Compensation Committee of the Employer.  Any Cash Bonus shall be paid in the
Compensation Committee’s discretion.

 

                                4.3          Equity-based Compensation.  Executive shall be entitled
to participate in all equity-based compensation plans offered by Employer to
its employees and as determined by the Compensation Committee.

 

                                4.4          Performance
Standards.  The Executive and
the Employer agree that the Executive’s discretionary cash bonus and
equity-based compensation will be based on the Executive’s and the Employer’s
achievement of performance goals that may be established by 

 

2

 

the Compensation Committee after discussion
with the Executive and his supervisors (if any).  Until the Employer and the Compensation
Committee establish performance goals, the Executive’s discretionary cash bonus
and equity based compensation will be wholly discretionary.

 

                                4.5          Discretionary Bonus.  In recognition of the Executive’s
continuing efforts on the Employer’s behalf, the substantial risk that the
Executive is taking by remaining with the Employer notwithstanding the Employer’s
financial condition, the significant operational improvements accomplished by
the Executive with other executives of the Employer since February 2007,
the Executive’s willingness to enter into this Agreement, and other factors,
the Employer agrees to pay Executive the sum of Fifty Thousand Dollars
($50,000) as a discretionary bonus, such payment to be made at the earlier of:

 

                                (a)           The Employer having sufficient
working capital that is not committed for operations to allow the Employer to
pay all (or a portion) of this bonus to the Executive with such approval and
direction from the Compensation
Committee.  If the Employer pays any portion of this bonus to the
Executive, the Employer will pay the same proportionate amount of the bonus to
other Executives who have entered into agreements similar to this Agreement, or

 

                                (b)           Termination of this Agreement
pursuant to Sections 6.2(a), 6.2(b), 6.2(c), 6.2(d) or Article 7,
below, in which case the discretionary bonus payable pursuant to this Section 4.5
will be payable on the same terms and over the same period as the severance pay
is determined in Section 6.4 or (in the case of a termination under Article 7)
Section 7.2.

 

The amount payable pursuant to this Section 4.5 will be reduced to
zero in the event the Executive terminates this Agreement pursuant to Section 6.2(e) or
if the Employer terminates this Agreement for Cause pursuant to Section 6.1.

 

                                5.             Other
Benefits.

 

                                5.1          Certain
Benefits.  Executive will be
eligible to participate in all employee benefit programs established by
Employer that are applicable to management personnel on a basis commensurate
with Executive’s position and in accordance with Employer’s policies from time
to time, including, but not limited to, life insurance, disability insurance,
retirement plans, profit-sharing plans, savings plans, stock option plans and
other employee benefit plans and policies, but nothing herein shall require the
adoption or maintenance of any such plan. 
Notwithstanding the foregoing, Employer shall provide full medical and
dental insurance coverage for Executive as currently provided by Administaff
(or its successor) on the same terms as are then generally available to the
Company’s senior executive officers, at no cost to Executive.

 

                                5.2          Paid Time Off (“PTO”) and Expenses. 
For the duration of Executive’s employment hereunder, Executive will be
provided such PTO (which includes vacations and sick leave) as Employer makes
available to its management level employees generally as described in, and
subject to the provisions of, Employer’s employee manual. Employer will
reimburse 

 

3

 

Executive in accordance with company policies and procedures for
reasonable expenses necessarily incurred in the performance of duties hereunder
against appropriate receipts and vouchers indicating the specific business
purpose for each such expenditure.

 

                                5.3          Directors and
Officers Insurance.  During
the term of this Agreement and for a three year period thereafter, and subject
to the availability of adequate financing, Employer shall use its best efforts
to 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 Employer in the minimum
benefit amount to be determined in good faith by the Board of Directors, and
provided that all officers and directors are treated alike.

 

                                6.             Termination Or Discharge.

 

                                6.1          For Cause.  Employer will have the right to immediately terminate
Executive’s services and this Agreement for “Cause.”  For the purposes of this Agreement, the term “for
cause” shall mean:

 

                                (a)           any act of fraud or embezzlement
materially adversely affecting the financial, market, reputation or other
interests of Employer,

 

                                (b)           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,

 

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

 

                                (d)           gross negligence, incompetence or willful misconduct in the
performance by the Executive of his duties,

 

                                (e)           refusal by the Executive, without
proper reason, to perform his duties,

 

                                (f)            the Executive willfully engaging in
conduct that is materially injurious to Employer or its subsidiaries (monetarily
or otherwise),

 

                                (g)           unauthorized disclosure by the
Executive of Confidential Information, as such term is defined in Section 10
of this Agreement, or the unauthorized disclosure of proprietary material
information of Employer or an affiliate), or

 

                                (h)           Employer’s reasonable belief supported by a legal
opinion that Executive has engaged in a violation of any statute, rule or
regulation, any of which in the judgment of Employer is harmful to Employer’s
business or to Employer’s reputation.

 

4

 

                                Upon
termination of Executive’s employment hereunder for Cause, Executive will have
no rights to any unvested benefits or any other compensation or payments after
the termination date.

 

                                6.2          Termination Other
Than For Cause.  The Executive’s
employment hereunder may be terminated without any breach of this Agreement
under the following circumstances:

 

                                (a)           By Executive.  Upon the occurrence of any of the following
events, this Agreement may be terminated by the Executive upon not less than
three business days’ written notice to Employer specifying such reason:

 

                                                1.             if Employer makes a general
assignment for the benefit of creditors, files a voluntary bankruptcy petition,
files a petition or answer seeking a reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any law, or
there shall have been filed any petition or application for the involuntary
bankruptcy of Employer, or other similar proceeding, in which an order for
relief is entered or which remains undismissed for a period of thirty days or
more, or Employer seeks, consents to, or acquiesces in the appointment of a
trustee, receiver, or liquidator of Employer or any material part of its
assets;

 

                                                2.             the sale by Employer of
substantially all of its assets;

 

                                                3.             a decision by Employer to terminate
its business and liquidate its assets;

 

                                                4.             Employer’s corporate offices
move out of the Denver Colorado metropolitan area; or

 

                                                5.             the holder of any convertible debenture
issued by Employer prior to the date of this Agreement declares a default or
accelerates any obligations under any of the terms of such debentures; or

 

                                                6.             a material breach of this Agreement
by Employer except to the extent that the material breach results directly or
indirectly from Employer’s lack of funding to cure any element of such material
breach.

 

                                (b)           By Employer Without Cause.  The Employer may terminate this Agreement
without Cause at any time upon not less than 60 days’ written notice to the
Executive.

 

                                (c)           Death.    This Agreement shall terminate upon the death of Executive.

 

5

 

                                (d)           Disability.  The Employer may terminate this Agreement
upon the permanent disability of the Executive. 
Executive shall be considered disabled (whether permanent or temporary)
if:  (i) he is disabled as defined
in a disability insurance policy purchased by or for the benefit of the
Executive; or (ii) if no such policy is in effect, he is incapacitated to
such an extent that he is unable to perform substantially all of his duties for
Employer that he performed prior to such incapacitation.

 

                                (e)           Material Breach as a Result of
Lack of Funding.  If the Employer
breaches this Agreement but such breach results directly or indirectly from
Employer’s lack of funding to cure any element of such material breach (and
therefore such material breach is not a basis for termination by Executive
under Section 6.2(a)(5), Executive may terminate this Agreement upon not
less than 30 days’ prior written notice specifying such breach.

 

                                6.3          Notice of Termination. 
Any termination of the Executive’s employment by the Employer or by the
Executive (other than termination pursuant to Section 6.2(b) above)
shall be communicated by written Notice of Termination to the other party.

 

                                6.4          Compensation Upon Termination.

 

                                (a)           Upon a termination of this Agreement
pursuant to Section 6.2(a), Employer shall pay to Executive a cash
severance payment in an amount equal to the sum of (i) one year of
Executive’s annual salary payable in a lump sum payment within three months of
the Executive’s termination pursuant to Section 6.2(a), and (ii) the
pro-rated portion (based on the number of days in the calendar year ending
prior to the effective date of such termination of Executive by Employer) of
any Cash Bonus for the year in which the termination occurred that has been
earned but has not been paid to Executive, which shall not be less than any
bonus with respect to the previous calendar year, in each case.

 

                                (b)           Upon a termination of this Agreement
pursuant to Section 6.2(b), Employer shall pay to Executive: (i) twelve
months of his annual salary then in effect, and (ii) the pro-rated portion
(based on the number of days in the calendar year ending prior to the effective
date of such termination of Executive by Employer) of any Cash Bonus for the
year in which the termination occurred that has been earned, but has not been
paid to Executive, in both cases payable upon such termination.

 

                                (c)           Following the termination of this
Agreement pursuant to Section 6.2(c), Employer shall pay to Executive’s
estate the compensation which would otherwise be payable to Executive to the
end of the month in which his death occurs, including the pro-rated portion (based
on the number of days in the calendar year ending prior to the effective date
of such termination of Executive by Employer) of any Cash Bonus for the year in
which the termination occurred that has been earned but has not been paid to
Executive.

 

                                (d)           If Employer elects to terminate this
Agreement in the event of permanent disability of the Executive as described in
Section 6.2(d), if the Employer terminates this 

 

6

 

Agreement for Cause as set forth in Section 6.1,
or if the Executive elects to terminate this Agreement pursuant to 6.2(e),
Employer shall pay to Executive (i) compensation and benefits through the
Date of Termination; any such payment, however, shall (in the case of a
termination pursuant to Section 6.2(d)) be reduced by disability insurance
benefits, if any, paid to Executive under policies (other than group policies)
for which Employer pays all premiums and Executive is the beneficiary, and (ii) the
pro-rated portion (based on the number of days in the calendar year ending
prior to the effective date of such termination of Executive by Employer) of
any Cash Bonus for the year in which the termination occurred that has been
earned but has not been paid to Executive.

 

                                7.             Termination
by Executive due to Change of Control.  Upon
the occurrence of any Change of Control, the Executive may terminate this
Agreement upon not less than thirty days’ written notice to Employer.

 

                                7.1.         Change of Control —
Definition.  For purposes of
this Agreement, a “Change of Control” shall mean the happening of any of the
following:

 

                                (a)           A majority of the persons who were
members of the Board of Directors before any cash tender offer, merger or other
business combination, sale of assets, sale or transfer of Employer’s stock or
other equity securities, or contested election or combination of the foregoing,
shall cease to constitute a majority of the directors after the completion of
such event; or

 

                                (b)           The closing of: (i) a merger,
consolidation or reorganization of Employer with or into another corporation in
which the holders of Employer’s common stock immediately before such merger,
consolidation or reorganization do not, immediately following such merger,
consolidation or reorganization, hold as a group on a fully diluted basis both
the ability to elect at least a majority of the directors of the surviving
corporation (or its parent), and at least a majority in value of the surviving
corporation’s (or its parent’s) outstanding equity securities, or (ii) a
sale or other disposition of all or substantially all of the assets of
Employer, unless Employer owns 50% or more of the outstanding voting securities
or other equity interests of the transferee at the time of the transfer.

 

                7.2.         Compensation Upon Termination by Executive
Upon a Change of Control. 
Upon a termination upon a Change of Control Employer shall pay Executive
a cash severance payment in an amount equal to the sum of (a) one year of
Executive’s annual salary payable in a lump sum payment within three months the
Executive’s termination pursuant to Section 7, and (b) the pro-rated portion (based on the
number of days in the calendar year ending prior to the effective date of such
termination of Executive by Employer) of any Cash Bonus for the year in which the
termination occurred that has been earned but has not been paid to Executive,
which shall not be less than any bonus with respect to the previous calendar
year, in each case.  In addition, in
the event of a Change of Control, all of Executive’s equity-based compensation
shall immediately vest regardless whether the Executive is retained by the
Employer or successor following the Change of Control.

 

7

 

8.             Covenant
Not To Compete.

 

(a)           Except as otherwise provided for in this Agreement, during
the Term of this Agreement and, if this Agreement is terminated for any reason
during the Term, for one year following such date of termination (the “Termination
Period”), the Executive shall not, directly or indirectly, compete with respect
to any services or products of Employer which are either offered or are being
developed by Employer as of the date of termination; or, without limiting the
generality of the foregoing, be or become, or agree to be or become, interested
in or associated with, in any capacity (whether as a partner, shareholder,
owner, officer, director, executive, principal, agent, creditor, trustee,
consultant, co-venturer or otherwise), any individual, corporation, firm,
association, partnership, joint venture or other business entity, which
competes with respect to any services or products of Employer which are either
offered or are being developed by Employer as of the date of termination;
provided, however, that the Executive may own, solely as an investment, not
more than 9.99% of any class of securities of any corporation in competition
with Isonics whose securities are traded on any national securities exchange in
the United States of America.

 

                                (b)           Employer and Executive agree to the
following: this provision does not impose an undue hardship on Executive and is
not injurious to the public; this provision is necessary to protect the
business of Employer and its affiliates; the nature of Executive’s
responsibilities with Employer under this Agreement require Executive to have
access to Confidential Information, as such term is defined in Section 10
of this Agreement, which is valuable and confidential to all of the business;
the scope of this Section 8 is reasonable in terms of length of time and geographic
scope; and adequate consideration supports this Section 8, including
consideration herein.

 

                                (c)           In the event that any of the
covenants in this Section 8 shall be determined by any court of competent
jurisdiction to be unenforceable by reason of extending for too great a period
of time or by reason of being too extensive in any other respect, it shall be
interpreted to extend over the maximum period of time for which it may be
enforceable and to the maximum extent in all other respects as to which it may
be enforceable, and enforced as so interpreted, all as determined by such court
in such action.  Executive acknowledges
the uncertainty of the law in this respect and expressly stipulates that this
Agreement is to be given the construction that renders its provisions valid and
enforceable to the maximum extent (not exceeding its express terms) possible
under applicable law.

 

                                9.             Non-solicitation.  During the term of this
Agreement and, if applicable, during the Termination Period, the Executive shall
not, directly or indirectly, (i) induce or attempt to influence any
executive or other employee of Isonics to leave its employ, (ii) aid or
agree to aid any competitor, customer or supplier of Isonics in any attempt to
hire any person who is an executive or other employee of Isonics, or (iii) induce
or attempt to influence any person or business entity who was a customer or
supplier of Isonics during any portion of said period to transact business with
a competitor of any aspect of Isonics’ business.

 

8

 

                                10.          Confidentiality.

 

(a)           Executive acknowledges that, during
the course of Executive’s employment with Employer, Executive may have
developed Confidential Information (as defined below) for Employer, and Executive
may have learned of Confidential Information developed or owned by Employer or
its affiliates or entrusted to Employer or its affiliates by others.  Executive agrees that Executive will not,
directly or indirectly, use any Confidential Information or disclose it to any
other person or entity, except as otherwise required by law.

 

(b)           “Confidential Information” means any
and all information relating to Employer that is not generally known by the
public or others with whom Employer does (or plans to) compete or do business,
as well as comparable information relating to any of Employer’s
affiliates.  Confidential Information
includes, but is not limited to, information relating to the terms of this
Agreement, as well as Employer’s business, technology, practices, products,
marketing, sales, services, finances, strategic opportunities, internal
strategies, legal affairs (including pending litigation), the terms of business
relationships not yet publicly known, intellectual property and the filing or
pendency of patent applications. 
Confidential Information also includes, but is not limited to,
comparable information that Employer may receive or has received belonging to
customers, suppliers, consultants and others who do business with Employer, or
any of Employer’s affiliates.

 

(c)           “Confidential Information” does not
include any information that is: (i) shown to have been developed
independently by Executive prior to Executive’s employment with Employer; or (ii) required
by a judicial tribunal or similar governmental body to be disclosed under law
(provided that Executive have first promptly notified Employer of such
disclosure requirement and have cooperated fully with Employer (at Employer’s
expense) in exhausting all appeals

 

                                11.          Property of Employer.  Upon any termination from Employer, Executive agrees
to return to Employer any and all records, files, notes, memoranda, reports,
work product and similar items, and any manuals, drawings, sketches, plans,
tape recordings, computer programs, disks, cassettes and other physical
representations of any information, relating to Employer, or any of its
affiliates, whether or not constituting confidential information; and Executive
agrees to return to Employer any other property, including but not limited to a
laptop computer, belonging to Employer, no later than the date of Executive’s
termination from employment for any reason, and Executive further agrees not to
retain copies of any Confidential Information. 
Upon termination of this Agreement or employment hereunder, Executive
who has been using a computer owned by the Employer may purchase said computer
from the Employer for fair market value provided the information in the
computer is backed up in the Employer’s data files and all Confidential
Information has been deleted from the computer in a manner reasonably
satisfactory to the remaining senior officers of the Employer.  The Executive will pay the Employer the fair
market value of such computer as may be reasonably determined by the Employer.

 

                                12.          Section 280G
Safe Harbor Cap.  In the event it shall be determined that
any payment or distribution or any part thereof of any type to or for the
benefit of Executive whether pursuant to the Agreement or any other agreement
between Executive and the 

 

9

 

Employer, or any person or entity that acquires ownership or effective
control the Employer or ownership of a substantial portion of the Employer’s
assets (within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended, and the regulations thereunder (the “Code”)) whether paid or
payable or distributed or distributable pursuant to the terms of the Agreement
or any other agreement, (the “Total Payments”), is or will be subject to the
excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then
the Total Payments shall be reduced to the maximum amount that could be paid to
Executive without giving rise to the Excise Tax (the “Safe Harbor Cap”), if the
net after-tax payment to Executive after reducing Executive’s Total Payments to
the Safe Harbor Cap is greater than the net after-tax (including the Excise
Tax) payment to Executive without such reduction.  The reduction of the
amounts payable hereunder, if applicable, shall be made by reducing first the
payment made pursuant to the Agreement and then to any other agreement that
triggers such Excise Tax, unless an alternative method of reduction is elected
by Executive.  All mathematical determinations, and all determinations as
to whether any of the Total Payments are “parachute payments” (within the
meaning of Section 280G of the Code), that are required to be made under
this Section 12, including determinations as to whether the Total Payments
to Executive shall be reduced to the Safe Harbor Cap and the assumptions to be
utilized in arriving at such determinations, shall be made by a nationally
recognized accounting firm selected by the Employer (the “Accounting Firm”). 
If the Accountant determines that the Total Payments to Executive shall be
reduced to the Safe Harbor Cap (the “Cutback Payment”) and it is established
pursuant to a final determination of a court or an Internal Revenue Service
(the “IRS”) proceeding which has been finally and conclusively resolved, that
the Cutback Payment is in excess of the limitations provided in Section 6(e) (hereinafter
referred to as an “Excess Payment”), such Excess Payment shall be deemed for
all purposes to be an overpayment to Executive made on the date such Executive
received the Excess Payment and Executive shall repay the Excess Payment to the
Employer on demand; provided, however, if Executive shall be required to pay an
Excise Tax by reason of receiving such Excess Payment (regardless of the
obligation to repay the Employer), Executive shall not be required to repay the
Excess Payment (if Executive has already repaid such amount, the Employer shall
refund the amount to the Executive), and the Employer shall pay Executive an
amount equal to the difference between the Total Payments and the Shortfall
Cap.

 

                                13.          Remedies.  Notwithstanding
other provisions of this Agreement regarding dispute resolution, Executive
agrees that Executive’s violation of any of Sections 8, 9, 10 or 11 of this
Agreement would cause Employer irreparable harm that would not be adequately
compensated by monetary damages and that an injunction may be granted by any
court or courts having jurisdiction, restraining Executive from violation of
the terms of this Agreement, upon any breach or threatened breach of Executive
of the obligations set forth in any of the Sections 8, 9, 10 or 11.  The preceding sentence shall not be construed
to limit Employer from any other relief or damages to which it may be entitled
as a result of Executive’s breach of any provision of this Agreement, including
Sections 8, 9, 10 or 11.  Executive also
agrees that a violation of any of Sections 8, 9, 10 or 11 would entitle
Employer, in addition to all other remedies available at law or equity, to
recover from Executive any and all funds, including, without limitation, wages,
salary and profits, which will be held by Executive in constructive trust for
Employer, received by Executive in connection with such violation.

 

10

 

                                14.          Indemnification.

 

                                (a)           Employer agrees
to indemnify Executive and hold Executive harmless from and 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 Employer, as may be amended from time to time, and
pursuant to any indemnification agreement between Executive and Employer.

 

                                (b)           The indemnification provision of this
Section 14 shall be in addition to any liability which Employer 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 Employer with
reasonable promptness.  Executive shall
have the right to retain counsel of Executive’s own choice to represent
Executive and Employer 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 Employer and any counsel designated by Employer.  Employer shall be liable for any settlement of any
claim against Executive made with Employer’s written consent, which consent shall not be unreasonably withheld or
delayed, to the fullest extent permitted by the California General Corporation
Law and the Certificate of Incorporation and Bylaws of Employer, as may be amended from time to time.

 

                                15.          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 State
of Colorado, 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.

 

11

 

                                16.          Fees. 
Unless otherwise agreed, the prevailing party will be entitled to its
costs and attorneys’ fees incurred in any litigation or dispute relating to the
interpretation or enforcement of this Agreement.

 

                                17.          Professional Fees and
Costs.  Each of the Parties
shall be responsible to pay his or its respective attorneys’ and other
professional fees and costs incurred in connection with the negotiation and
drafting of this Agreement.

 

                                18.          Disclosure.  Executive agrees fully and completely to
reveal the terms of this Agreement to any future employer or potential employer
of Executive and authorizes Employer, at its election, to make such disclosure.

 

                                19.          Representation of
Executive.  Executive
represents and warrants to Employer that Executive is free to enter into this
Agreement and has no contract, commitment, arrangement or understanding to or
with any party that restrains or is in conflict with Executive’s performance of
the covenants, services and duties provided for in this Agreement.  Executive agrees to indemnify Employer and to
hold it harmless against any and all liabilities or claims arising out of any
unauthorized act or acts by Executive that, the foregoing representation and
warranty to the contrary notwithstanding, are in violation, or constitute a
breach, of any such contract, commitment, arrangement or understanding.  Executive further represents and warrants to
Employer that Executive has consulted with his legal, tax, accounting, and
investment advisors with respect to the advisability of entering into this
Agreement to the extent that the Executive has determined such consultation to
be necessary or appropriate.

 

                                20.          Assignability.  During
Executive’s employment, this Agreement may not be assigned by either party
without the written consent of the other; provided, however, that Employer may
assign its rights and obligations under this Agreement without Executive’s
consent to a successor by sale, merger or liquidation, if such successor
carries on the Employer’s business substantially in the form in which it is
being conducted at the time of the sale, merger or liquidation.  This Agreement is binding upon Executive,
Executive’s heirs, personal representatives and permitted assigns and on
Employer, its successors and assigns.

 

                                21.          Notices.  For purposes of this Agreement, notices and
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given when personally delivered or when mailed by
United States registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:

 

	
  IF TO EMPLOYER TO:

  	
  Isonics Corporation

  5906 McIntyre Street

  Golden, CO 80403

  Attention: Chairman of the Compensation Committee

  

 

12

 

	
  IF TO EXECUTIVE TO:

  	
  Gregory A. Meadows

  

 

                                22.          Severability.  If any
provision of this Agreement or compliance by any of the parties with any
provision of this Agreement constitutes a violation of any law, or is or
becomes unenforceable or void, then such provision, to the extent only that it
is in violation of law, unenforceable or void, shall be deemed modified to the
extent necessary so that it is no longer in violation of law, unenforceable or
void, and such provision will be enforced to the fullest extent permitted by
law.  If such modification is not
possible, said provision, to the extent that it is in violation of law, unenforceable
or void, shall be deemed severable from the remaining provisions of this
Agreement, which provisions will remain binding on the parties.

 

                                23.          Waivers. 
No failure on the part of either party to exercise, and no delay in
exercising, any right or remedy hereunder will operate as a waiver thereof; nor
will any single or partial waiver of a breach of any provision of this
Agreement operate or be construed as a waiver of any subsequent breach; nor
will any single or partial exercise of any right or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other right or
remedy granted hereby or by law.

 

                                24.          Governing Law.  The validity, construction and
performance of this Agreement shall be governed by the laws of the State of
Colorado without regard to the conflicts of law provisions of such laws.

 

                                25.          Entire Agreement. 
This instrument contains the entire agreement of the parties with
respect to the relationship between Executive and Employer and supersedes all
prior agreements and understandings, and there are no other representations or
agreements other than as stated in this Agreement related to the terms and
conditions of Executive’s employment. 
This Agreement may be changed only by an agreement in writing signed by
the party against whom enforcement of any waiver, change, modification,
extension or discharge is sought, and any such modification will be signed by
the Chairman of the Compensation Committee.

 

                                26.          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.

 

13

 

IN WITNESS WHEREOF, the parties have duly signed and delivered this
Agreement as of the day and year first above written.

 

	
   

  	
  EMPLOYER:

  
	
   

  	
   

  
	
   

  	
  ISONICS CORPORATION

  
	
   

  	
   

  
	
  By:

  	
  /s/ Richard Hagman

  
	
   

  	
  Richard Hagman,
  Chairman

  
	
   

  	
  Compensation Committee

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
  /s/ Gregory A.
  Meadows

  
	
   

  	
  Name: Gregory A.
  Meadows

  

 

14

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