[Maxim Group LLC Letterhead]

February 2, 2006

Mr. Roger Girard
Chairman and Chief Executive Officer
IsoRay, Inc.
350 Hills Street - Suite 106
Richland, WA 99352

Dear Mr. Girard:

The purpose of this letter agreement (“Agreement”) is to confirm the engagement
of Maxim Group LLC (“Maxim”) by IsoRay, Inc. (“Company”) to act as one of the
two exclusive co-placement agents in connection with the “best-efforts” proposed
offering (“Offering”) of equity or equity-linked securities (“Securities”) of
the Company. The gross proceeds from the Offering will be up to $20,000,000 and
the terms of the Securities and the gross proceeds of such Offering will be set
forth in a purchase agreement (“Purchase Agreement”) with investors (as defined
below). It is understood that Maxim and Punk, Ziegel & Company, L.P. will be the
exclusive co-placement agents (the “Placement Agents”) of the Offering.

1. Appointment.

(a) Subject to the terms and conditions of this Agreement, the Company hereby
retains Maxim, and Maxim hereby agrees to act, as one of the Company’s two
exclusive co-placement agents in connection with the Offering. As placement
agent for the Offering, Maxim will advise and assist the Company in identifying,
and assisting the Company in issuing the Securities to, one or more Investors
(“Investors”) in the Offering. The Company acknowledges and agrees that Maxim’s
is only required to use its “commercially reasonable efforts” in connection with
the Offering and that this Agreement does not constitute a commitment by Maxim
to purchase the Securities. The Company retains the right to determine all of
the terms and conditions of the Offering and to accept or reject and proposals
submitted to it by Maxim in its sole and absolute discretion.

(b) During the Term of this Agreement (as such term is hereinafter defined),
neither the Company nor any of its subsidiaries will, directly or indirectly,
solicit or otherwise encourage the submission of any proposal or offer
(“Investment Proposal”), from any person or entity relating to any issuance of
the Company’s or any of its subsidiaries’ equity securities (including debt
securities with any equity feature) or participate in any discussions regarding
an Investment Proposal. The term “Investment Proposal” shall not include (i) any
investment in the equity securities of any other entity, (ii) any commercial
loans to the Company, and (iii) any transaction or agreement with one or more
persons, firms or entities designated as a “strategic partner” of the Company,
as determined in good faith by the Board of Directors of the Company, provided
that each such person, firm or entity is, itself or through its subsidiaries, an
operating company in a business synergistic with the business of the Company and
in which the Company receives benefits in addition to the investment of funds,
but shall not include a transaction in which the Company is issuing securities
primarily for the purpose of raising capital or to an entity whose primary
business is investing in securities. The Company will immediately cease all
contracts, discussions and negotiations with third parties regarding any
Investment Proposal.
 
 
 

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2. Compensation and Expenses.

(a) In consideration of the services rendered by Maxim in connection with the
Offering, the Company agrees to pay Maxim a cash fee (the “Placement Fee”)
payable upon the closing of the transactions contemplated by this Agreement
(“Closing”) equal to three point fifteen percent (3.15%, or 45% of the 7.0%
total cash fee payable to the Placement Agents) of the gross proceeds received
by the Company from Investors at the Closing. Upon the execution of this
engagement letter, the Company shall deliver to Maxim $25,000 (by check or wire
transfer of immediately available funds) as a non-refundable cash retainer fee,
which shall be creditable against the payment of any Placement Fee. The Company
will reimburse Maxim in a timely manner for its out-of-pocket expenses relating
to the Offering, including but not limited to legal fees, printing expenses,
travel and other related expenses, provided that Maxim shall obtain the
Company’s prior approval if and when such expenses should cumulatively reach
$35,000.

(b) The Company shall deliver a warrant, or, if so requested, warrants, to Maxim
and/or its designees (the “Agent Warrant”), which Agent’s Warrant shall be
exercisable to purchase additional Securities equal to two and three quarters
percent (2.75%, or 55% of the 5% total warrants payable to the Placement Agents)
of the total number of shares sold pursuant to the Offering. The Agent’s Warrant
will be exercisable at any time and from time to time, in whole or in part,
during the four-year period commencing one year from the Offering, at a price
per share equal to 110% of the per share offering price of the Securities in the
Offering. The Agent’s Warrant will provide for registration rights (including a
one time demand registration right and unlimited piggyback rights), cashless
exercise and customary anti-dilution provisions (for stock dividends and splits
and recapitalizations) consistent with the National Association of Securities
Dealers, Inc. (“NASD”) Rules of Fair Practice and satisfactory to Maxim and its
counsel.

3. Term of Engagement.

(a) This Agreement will remain in effect until one year after the date hereof,
after which either party shall have the right to terminate it on thirty (30)
days prior written notice to the other. The date of termination of this
Agreement is referred to herein from time to time as the “Termination Date”. The
period of time during which this Agreement remains in effect is referred to
herein from time to time as the “Term”. If, within one year after the
Termination Date, the Company completes any private financing of equity or debt
or other capital raising activity of the Company (other than the exercise by any
person or entity of any options, warrants or other convertible securities other
than the warrants issued pursuant to this Agreement) with any of the Investors
who were first introduced to the Company in connection with the financing
contemplated hereby by Maxim (i.e., an “Introduced Party”), the Company will pay
to Maxim upon the closing of such financing the compensation set forth in
Section 2 as a “Source Fee”. In the event that any merger, acquisition, change
of control transaction or sale of all or substantially all of the assets of the
Company shall be consummated with any Investor contacted by Maxim during the
term of this Agreement, the Company shall pay to Maxim a mutually agreed upon
fee reflecting industry standards for such transactions of such type. For
purposes of this Section 3(a), “Introduced Party” shall mean a person with whom
Maxim has had at least one face-to-face or telephone conversation in connection
with Maxim’s provision of services to the Company hereunder and who is included
in a list of Introduced Parties, which shall be maintained by Maxim and a true
and correct copy of which shall be furnished to the Company upon closing and/or
termination of the engagement contract. Such a list is deemed confidential and
is not to be disseminated to anyone other than IsoRay employees and members of
the Board of Directors of IsoRay.
 
 
 

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(b) Notwithstanding anything herein to the contrary, subject to the one year
limitation described in Section 3(a) above, the obligation to pay the
compensation and expenses described in Section 2, and the provisions of Sections
6, 7, 9-18 and all of Exhibit A attached hereto (the terms of which are
incorporated by reference hereto), will survive any termination or expiration of
this Agreement.

4. Right of First Refusal.

If the Company executes definitive transaction documents with an Investor
relating to the Offering, Maxim will have the right of first refusal to act as a
managing underwriter of any public offering of the Company’s equity or debt
securities, and will have the right of first refusal to act as a co-placement
agent on any private placement of any of the Company’s equity or debt securities
(excluding (i) sales to employees under any compensation or stock option plan
approved by the stockholders of the Company, (ii) shares issued in payment of
the consideration for an acquisition and (iii) conventional banking arrangements
and commercial debt financing) of the Company or any subsidiary or successor of
the Company during the one-year period following the completion of the Offering.
If Maxim fails to accept in writing any such proposal for such public or private
sale within 30 days after receipt of a written notice from the Company
containing such proposal, then Maxim will have no claim or right with respect to
any such sale contained in any such notice. If, thereafter, such proposal is
modified in any material respect, the Company will adopt the same procedure as
with respect to the original proposed public or private sale.
 
 
 

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5. Information.

(a) The Company recognizes that, in completing its engagement hereunder, Maxim
will be using and relying on publicly available information and on data,
material and other information furnished to Maxim by the Company or the
Company’s affiliates and agents. The Company will cooperate with Maxim and
furnish, and cause to be furnished, to Maxim, any and all information and data
concerning the Company, its subsidiaries and the Offering that Maxim deems
appropriate, including, without limitation, the Company’s acquisition plans and
plans for raising capital or additional financing (to the extent available to
the Company in the case of parties other than the Company) that is reasonably
requested by Maxim. The Company represents and warrants to Maxim that all such
information: (1) made available by the Company to Maxim or its agents,
representatives and any potential participant in the Offering, (2) contained in
any preliminary or final Private Placement Materials prepared by the Company in
connection with the Offering, and (3) contained in any filing by the Company
with any court or governmental regulatory agency, commission or instrumentality,
will be complete and correct in all material respects and will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein not misleading in the light of the circumstances
under which statements are made. The Company further represents and warrants to
Maxim that all such Information will have been prepared by the Company in good
faith and will be based upon assumptions which, in light of the circumstances
under which they were made, are reasonable. It is understood and agreed that in
performing under this engagement, Maxim will be relying upon the accuracy and
completeness of, and is not assuming any responsibility for independent
verification of, such publicly available information and the other information
so furnished.

(b) It is further agreed that Maxim will conduct a due diligence investigation
of the Company and the Company will reasonably cooperate with such investigation
as a condition of Maxim’s obligations hereunder. The Company further recognizes,
understands and confirms that Maxim: (i) will use and rely primarily on data,
material and other information furnished to Maxim by the Company or the
Company’s affiliates and agents, including the Private Placement Materials, and
on information available from generally recognized public sources in performing
the services contemplated by this engagement without having independently
verified the same; (ii) is authorized as the Company’s placement agent to
transmit to any prospective investor a copy or copies of the Private Placement
Materials, forms of purchase agreements and any other legal documentation
supplied to Maxim for transmission to any prospective investor by or on behalf
of the Company or by any of the Company’s officers, representatives or agents,
in connection with the performance of Maxim’s services hereunder or any
transaction contemplated hereby; (iii) does not assume responsibility for the
accuracy or completeness of any data, material and other information furnished
to Maxim by the Company or the Company’s affiliates and agents, including the
Private Placement Materials, or any other information; and (iv) will not make an
appraisal of any assets of the Company. If at any time during the course of
Maxim’s engagement, the Company becomes aware of any material change in any of
the information previously furnished to Maxim, it will promptly advise Maxim of
the change.
 
 
 

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(c) Until the date that is two years from the date hereof, Maxim will keep all
information obtained from the Company strictly confidential except: (i)
information which is otherwise publicly available, or previously known to or
obtained by, Maxim independently of the Company and without breach of any of
Maxim’s agreements with the Company; (ii) Maxim may disclose such information to
its officers, directors, employees and agents, and to its other advisors and
financial sources on a need to know basis only and will ensure that all such
persons will keep such information strictly confidential. No such obligation of
confidentiality shall apply to information that: (i) is in the public domain as
of the date hereof or hereafter enters the public domain without a breach by
Maxim, (ii) was known or became known by Maxim prior to the Company’s disclosure
thereof to Maxim, (iii) becomes known to Maxim from a source other than the
Company, and other than by the breach of an obligation of confidentiality owed
to the Company, (iv) is disclosed by the Company to a third party without
restrictions on its disclosure, (v) is independently developed by Maxim or (vi)
is required to be disclosed by Maxim or its officers, directors, employees,
agents, attorneys and to its other advisors and financial sources, to any order
of a court of competent jurisdiction or other governmental body or as may
otherwise be required by law.

(d) The Company recognizes that in order for Maxim to perform properly its
obligations in a professional manner, the Company will keep Maxim informed of
and, to the extent practicable, permit Maxim to participate in meetings and
discussions between the Company and any third party relating to the matters
covered by the terms of Maxim’s engagement.

6. Indemnification. The Company agrees to indemnify Maxim in accordance with the
indemnification and other provisions attached to this Agreement as Exhibit A
(the “Indemnification Provisions”), which provisions are incorporated herein by
reference and shall survive the termination or expiration of this Agreement.

7. Securities Law Compliance. The Company, at its own expense, will obtain any
registration or qualifications required to sell any Securities under the Blue
Sky laws of any applicable jurisdictions.

8. No General Solicitation. The Securities will be offered only by approaching
prospective purchasers on an individual basis. No general solicitation or
general advertising in any form will be used by the Company or Maxim in
connection with the offering of the Securities.

9. Confidentiality. The Company will not provide or release any information with
respect to this Agreement or the Offering except as required by law or otherwise
disclosed in any offering memorandum.

10. Representations and Warranties. The Company and Maxim each respectively
represent and warrant that: (a) it has full right, power and authority to enter
into this Agreement and to perform all of its obligations hereunder; (b) this
Agreement has been duly authorized and executed and constitutes a legal, valid
and binding agreement of such party enforceable in accordance with its terms;
and (c) the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby does not conflict with or result in a breach of
(i) such party’s certificate of incorporation or by-laws or (ii) any agreement
to which such party is a party or by which any of its property or assets is
bound.

 
 

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11. Parties; Assignment; Independent Contractor. This Agreement has been and is
made solely for the benefit of Maxim and the Company and each of the persons,
agents, employees, officers, directors and controlling persons referred to in
Exhibit A and their respective heirs, executors, personal representatives,
successors and assigns, and nothing contained in this Agreement will confer any
rights upon, nor will this Agreement be construed to create any rights in, any
person who is not party to such Agreement, other than as set forth in this
paragraph. The rights and obligations of either party under this Agreement may
not be assigned without the prior written consent of the other party hereto and
any other purported assignment will be null and void. Maxim has been retained
under this Agreement as an independent contractor, and it is understood and
agreed that this Agreement does not create a fiduciary relationship between
Maxim and the Company or their respective Board of Directors. Maxim shall not be
considered to be the agent of the Company for any purpose whatsoever and Maxim
is not granted any right or authority to assume or create any obligation or
liability, express or implied, on the Company’s behalf, or to bind the Company
in any manner whatsoever.

12. Validity. In case any term of this Agreement will be held invalid, illegal
or unenforceable, in whole or in part, the validity of any of the other terms of
this Agreement will not in any way be affected thereby.

13. Waiver of Breach. The failure of any party hereto to insist upon strict
performance of any of the covenants and agreements herein contained, or to
exercise any option or right herein conferred in any one or more instances, will
not be construed to be a waiver or relinquishment of any such option or right,
or of any other covenants or agreements, and the same will be and remain in full
force and effect.

14. Counterparts. This Agreement may be executed in counterparts and each of
such counterparts will for all purposes be deemed to be an original, and such
counterparts will together constitute one and the same instrument.

15. Governing Law; Jurisdiction Law. This Agreement will be governed as to
validity, interpretation, construction, effect and in all other aspects by the
internal law of the State of New York. The Company and Maxim each (i) agree that
any legal suit, action or proceeding arising out of or relating to this
Agreement shall be instituted exclusively in the New York State Supreme Court,
County of New York, or in the United States District Court for the Southern
District of New York, (ii) waives any objection to the venue of any such suit,
action or proceeding, and the right to assert that such forum is an inconvenient
forum, and (iii) irrevocably consents to the jurisdiction of the New York State
Supreme Court, County of New York, and the United States District Court for the
Southern District of New York in any such suit, action or proceeding. Each of
the Company and Maxim further agrees to accept and acknowledge service of any
and all process that may be served in any such suit, action or proceeding in the
New York State Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York and agree that service of
process upon it mailed by certified mail to its address shall be deemed in every
respect effective service of process in any such suit, action of proceeding.

 
 

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16. Successors and Assigns. The benefits of the Agreement shall inure to the
parties hereto, their respective successors and assigns and to the indemnified
parties hereunder and their respective successors and assigns, and the
obligations and liabilities assumed in the Agreement shall be binding upon the
parties hereto and their respective successors and assigns. Notwithstanding
anything contained herein to the contrary, neither Maxim nor the company shall
assign to an unaffiliated third party of its obligations hereunder.

17. Press Announcements. The company agrees that Maxim shall, upon a successful
transaction, have the right to place advertisement in financial and other
newspapers and journals at its own expense describing its services to the
Company hereunder, provided that Maxim shall submit a copy of any such
advertisement to the Company for its approval, such approval not be unreasonably
withheld.

18. Notices. All notices will be in writing and will be effective when delivered
in person or sent via facsimile and confirmed by letter, to the party to whom it
is addressed at the following address or such other address as such party may
advise the other in writing:

To the Company:
Mr. Roger Girard
 
Chairman and Chief Executive Officer
 
IsoRay, Inc.
 
350 Hills Street - Suite 106
 
Richland, WA 99352
 
Attention: Roger Girard
 
Phone: 509-375-1202
 
Facsimile: 509-375-3473
       
To Maxim:
Mr. Roberto T. Fabros
 
Managing Director
 
Maxim Group LLC
 
405 Lexington Avenue
 
New York, NY 10174
 
Attention: Roberto T. Fabros
 
Telephone: (212) 895-3840
 
Facsimile: (212) 895-3783

[Signature Page Follows]

 
 

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If the foregoing correctly sets forth our agreement, please confirm this by
signing and returning to us the duplicate copy of this letter.

We appreciate this opportunity to be of service and are looking forward to
working with you on this matter.

 
Very truly yours,
     
MAXIM GROUP LLC
         
By: /s/ Roberto T. Fabros                                          
 
       Roberto T. Fabros
 
       Managing Director
         
By: /s/ Clifford A. Teller                                            
 
       Clifford A. Teller
 
       Director of Investment Banking

 
 

ISORAY, INC.

By: /s/ Roger Girard                                    
       Roger Girard
       Chairman and Chief Executive Officer

 
 
 

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