[FORM
OF WARRANT]

    


    ISORAY,
INC.

    


    Series
D Warrant To Purchase Common Stock

    


    Warrant
No.:                          

    Number of
Shares of Common Stock:_____________

    Date of
Issuance: November [___], 2010 ("Issuance Date")

    


    IsoRay,
Inc., a Minnesota a
corporation (the "Company"), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, [BUYER]., the registered holder hereof or its permitted
assigns (the "Holder"),
is entitled, subject to the terms set forth below, to purchase from the Company,
at the Exercise Price (as defined below) then in effect, upon surrender of this
Warrant to Purchase Common Stock (including any Warrants to Purchase Common
Stock issued in exchange, transfer or replacement hereof, the "Warrant"), at any time or
times on or after the six month anniversary of the date hereof (the “Initial Exercisability Date”),
but not after 11:59 p.m., New York time, on the Expiration Date (as defined
below), TWO MILLION EIGHT HUNDRED TWELVE THOUSAND FIVE HUNDRED (2,812,500) fully
paid nonassessable shares of Common Stock (as defined below); PROVIDED THAT
NOTWITHSTANDING ANY PROVISION OF THIS WARRANT TO THE CONTRARY, NO MORE THAN THE
MAXIMUM ELIGIBILITY NUMBER OF WARRANT SHARES SHALL BE EXERCISABLE HEREUNDER.
(the "Warrant
Shares").  Except as otherwise defined herein, capitalized
terms in this Warrant shall have the meanings set forth in Section
17.  This Warrant is one of the Warrants to purchase Common Stock (the
"SPA Warrants") issued
pursuant to Section 1 of that certain Securities Purchase Agreement, dated as of
November 22, 2010 (the "Subscription Date"), by and
among the Company and the investors (the "Buyers") referred to therein
(the "Securities Purchase
Agreement").


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    1.   
EXERCISE OF
WARRANT.

     

    (a)  Mechanics of
Exercise.  Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(f)), this
Warrant may be exercised by the Holder on any day on or after the Initial
Exercisability Date, in whole or in part, by (i) delivery to the Company of
a written notice, in the form attached hereto as Exhibit A (the "Exercise Notice"), of the
Holder's election to exercise this Warrant and (ii) either (A) payment to the
Company of an amount equal to the applicable Exercise Price multiplied by the
number of Warrant Shares as to which this Warrant is being exercised (the "Aggregate Exercise Price") in
cash or by wire transfer of immediately available funds or (B) by notifying the
Company that this Warrant is being exercised pursuant to a Cashless Exercise (as
defined in Section 1(d)).  The Holder shall not be required to deliver
the original Warrant in order to effect an exercise
hereunder.  Execution and delivery of the Exercise Notice with respect
to less than all of the Warrant Shares shall have the same effect as
cancellation of the original Warrant and issuance of a new Warrant evidencing
the right to purchase the remaining number of Warrant Shares.  On or
before the first (1st)
Trading Day following the date on which the Company has received the Exercise
Notice (such date, the "Exercise Date"), the Company
shall transmit by facsimile an acknowledgment of confirmation of receipt of the
Exercise Notice to the Holder and the Company's transfer agent (the "Transfer
Agent").  On or before the third (3rd)
Trading Day following the date on which the Company has received the Exercise
Notice (the "Share Delivery
Date"), so long as the Holder delivers the Aggregate Exercise Price (or
notice of Cashless Exercise) on or prior to the Share Delivery Date, the Company
shall (X) provided that the Transfer Agent is participating in The Depository
Trust Company ("DTC")
Fast Automated Securities Transfer Program, upon the request of the Holder,
credit such aggregate number of Warrant Shares to which the Holder is entitled
pursuant to such exercise to the Holder's or its designee's balance account with
DTC through its Deposit/Withdrawal At Custodian system, or (Y) if the Transfer
Agent is not participating in the DTC Fast Automated Securities Transfer
Program, issue and dispatch by overnight courier to the address as specified in
the Exercise Notice, a certificate, registered in the Company's share register
in the name of the Holder or its designee, for the number of shares of Common
Stock to which the Holder is entitled pursuant to such exercise.  The
Company shall be responsible for all fees and expenses of the Transfer Agent and
all fees and expenses with respect to the issuance of Warrant Shares via DTC, if
any.  Upon delivery of the Exercise Notice, so long as the Holder
delivers the Aggregate Exercise Price (or notice of a Cashless Exercise) on or
prior to the Share Delivery Date, the Holder shall be deemed for all corporate
purposes to have become the holder of record of the Warrant Shares with respect
to which this Warrant has been exercised, irrespective of the date such Warrant
Shares are credited to the Holder's DTC account or the date of delivery of the
certificates evidencing such Warrant Shares, as the case may be.  If
this Warrant is submitted in connection with any exercise pursuant to this
Section 1(a) and the number of Warrant Shares represented by this Warrant
submitted for exercise is greater than the number of Warrant Shares being
acquired upon an exercise, then the Company shall as soon as practicable and in
no event later than three (3) Trading Days after any exercise and at its own
expense, issue a new Warrant (in accordance with Section 8(d)) representing the
right to purchase the number of Warrant Shares issuable immediately prior to
such exercise under this Warrant, less the number of Warrant Shares with respect
to which this Warrant is exercised.  No fractional shares of Common
Stock are to be issued upon the exercise of this Warrant, but rather the number
of shares of Common Stock to be issued shall be rounded up to the nearest whole
number.  The Company shall pay any and all taxes which may be payable
with respect to the issuance and delivery of Warrant Shares upon exercise of
this Warrant.

     

    (b)  Exercise
Price.  For purposes of this Warrant, "Exercise Price" means $1.56
(subject to adjustment for stock splits, stock dividends, recapitalizations,
reorganizations, reclassification, combinations, reverse stock splits or other
similar events).


    
      
         


      

      
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    (c)  Company's Failure to Timely
Deliver Securities.  If the Company shall fail for any reason
or for no reason to issue to the Holder within five (5) Trading Days of receipt
of the Exercise Notice, so long as the Holder delivers the Aggregate Exercise
Price (or notice of Cashless Exercise) on or prior to the Share Delivery Date, a
certificate for the number of shares of Common Stock to which the Holder is
entitled and register such shares of Common Stock on the Company's share
register or to credit the Holder's balance account with DTC for such number of
shares of Common Stock to which the Holder is entitled upon the Holder's
exercise of this Warrant, then, in addition to all other remedies available to
the Holder, the Company shall pay in cash to the Holder on each day after such
third Trading Day
that the issuance of such shares of Common Stock is not timely effected an
amount equal to 1.5% of the product of (A) the sum of the number of shares of
Common Stock not issued to the Holder on a timely basis and to which the Holder
is entitled and (B) the Closing Sale Price of the shares of Common Stock on the
Trading Day immediately preceding the last possible date which the Company could
have issued such shares of Common Stock to the Holder without violating Section
1(a).  In addition to the foregoing, if within three (3) Trading Days
after the Company's receipt of the facsimile copy of a Exercise Notice the
Company shall fail to issue and deliver a certificate to the Holder and register
such shares of Common Stock on the Company's share register or credit the
Holder's balance account with DTC for the number of shares of Common Stock to
which the Holder is entitled upon the Holder's exercise hereunder, and if on or
after such Trading Day the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of shares of Common Stock issuable upon such exercise that the Holder
anticipated receiving from the Company (a "Buy-In"), then the Company
shall, within three (3) Trading Days after the Holder's request and in the
Holder's discretion, either (i) pay cash to the Holder in an amount equal to the
Holder's total purchase price (including brokerage commissions and other
reasonable out-of-pocket expenses, if any) for the shares of Common Stock so
purchased (the "Buy-In
Price"), at which point the Company's obligation to deliver such
certificate (and to issue such shares of Common Stock) or credit such Holder's
balance account with DTC) shall terminate, or (ii) promptly honor its obligation
to deliver to the Holder a certificate or certificates representing such shares
of Common Stock or credit such Holder's balance account with DTC and pay cash to
the Holder in an amount equal to the excess (if any) of the Buy-In Price over
the product of (A) such number of shares of Common Stock, times (B) the Closing
Sale Price on the date of exercise.

     

    (d)  Cashless Exercise.
 Notwithstanding
anything contained herein to the contrary, if the Registration Statement (as
defined in the Securities Purchase Agreement) covering the Warrant Shares that
are the subject of the Exercise Notice (the "Unavailable Warrant Shares")
is not available for the issuance and resale of such Unavailable Warrant Shares,
the Holder may, in its sole discretion, exercise this Warrant in whole or in
part and, in lieu of making the cash payment otherwise contemplated to be made
to the Company upon such exercise in payment of the Aggregate Exercise Price,
elect instead to receive upon such exercise the "Net Number" of shares of Common
Stock determined according to the following formula (a "Cashless
Exercise"):

     

    Net Number = (A x B) - (A x
C)

           


    B

     

    For purposes of the foregoing
formula:

     

    
      
        	
              	
                A=

              	
                the
      total number of shares with respect to which this Warrant is then being
      exercised.

              


      

    

     

    
      
        	
              	
                B=

              	
                the
      Weighted Average Price of the Common Stock (as reported by Bloomberg) for
      the five (5) consecutive Trading Days ending on the date immediately
      preceding the date of the Exercise
Notice.

              


      

    


    
      
         


      

      
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                C=

              	
                the
      Exercise Price then in effect for the applicable Warrant Shares at the
      time of such exercise.

              


      

    

    


    (e)  Disputes.  In
the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall promptly issue
to the Holder the number of Warrant Shares that are not disputed and resolve
such dispute in accordance with Section 13.

     

    (f)
  Limitations on Exercises;
Beneficial Ownership.  The Company shall not effect the
exercise of this Warrant, and the Holder shall not have the right to exercise
this Warrant, to the extent that after giving effect to such exercise, such
Person (together with such Person's affiliates) would beneficially own in excess
of 9.99% (the “Maximum
Percentage”) of the shares of Common Stock outstanding immediately after
giving effect to such exercise.  For purposes of the foregoing
sentence, the aggregate number of shares of Common Stock beneficially owned by
such Person and its affiliates shall include the number of shares of Common
Stock issuable upon exercise of this Warrant with respect to which the
determination of such sentence is being made, but shall exclude shares of Common
Stock which would be issuable upon (i) exercise of the remaining, unexercised
portion of this Warrant beneficially owned by such Person and its affiliates and
(ii) exercise or conversion of the unexercised or unconverted portion of any
other securities of the Company beneficially owned by such Person and its
affiliates (including, without limitation, any convertible notes or convertible
preferred stock or warrants) subject to a limitation on conversion or exercise
analogous to the limitation contained herein.  Except as set forth in
the preceding sentence, for purposes of this paragraph, beneficial ownership
shall be calculated in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended (the "1934 Act").  For purposes of this
Warrant, in determining the number of outstanding shares of Common Stock, the
Holder may rely on the number of outstanding shares of Common Stock as reflected
in (1) the Company's most recent Form 10-K, Form 10-Q, Current Report on Form
8-K or other public filing with the Securities and Exchange Commission, as the
case may be, (2) a more recent public announcement by the Company or (3) any
other notice by the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding.  For any reason at any time, upon
the written or oral request of the Holder, the Company shall within one Business
Day confirm orally and in writing to the Holder the number of shares of Common
Stock then outstanding.  In any case, the number of outstanding shares
of Common Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including the SPA Warrants, by the Holder
and its affiliates since the date as of which such number of outstanding shares
of Common Stock was reported.  By written notice to the Company, the
Holder may from time to time increase or decrease the Maximum Percentage to any
other percentage not in excess of 9.99% specified in such notice; provided that
(i) any such increase will not be effective until the sixty-first (61st) day
after such notice is delivered to the Company, and (ii) any such increase or
decrease will apply only to the Holder and not to any other holder of SPA
Warrants.  The provisions of this paragraph shall be construed and
implemented in a manner other than in strict conformity with the terms of this
Section 1(f) to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended beneficial ownership limitation
herein contained or to make changes or supplements necessary or desirable to
properly give effect to such limitation.


    
      
         


      

      
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    (g)  Insufficient Authorized
Shares.  If at any time while any of the Warrants remain
outstanding the Company does not have a sufficient number of authorized and
unreserved shares of Common Stock to satisfy its obligation to reserve for
issuance upon exercise of the Warrants at least the maximum number of shares of
Common Stock equal to the number of shares of Common Stock as shall from time to
time be necessary to effect the exercise of all of the Warrants then outstanding
(the "Required Reserve
Amount") (an "Authorized
Share Failure"), then the Company shall immediately take all action
necessary to increase the Company's authorized shares of Common Stock to an
amount sufficient to allow the Company to reserve the Required Reserve Amount
for the Warrants then outstanding.  Without limiting the generality of
the foregoing sentence, as soon as practicable after the date of the occurrence
of an Authorized Share Failure, but in no event later than ninety (90) days
after the occurrence of such Authorized Share Failure, the Company shall hold a
meeting of its stockholders for the approval of an increase in the number of
authorized shares of Common Stock.  In connection with such meeting,
the Company shall provide each stockholder with a proxy statement and shall use
its best efforts to solicit its stockholders' approval of such increase in
authorized shares of Common Stock and to cause its board of directors to
recommend to the stockholders that they approve such proposal.

     

    2.   
ADJUSTMENT OF EXERCISE
PRICE.  The Exercise Price shall be adjusted from time to time
as follows:

     

    (a)  [Intentionally
Omitted].

     

    (b)  Adjustment upon Subdivision
or Combination of shares of Common Stock.  If the Company at
any time on or after the Subscription Date subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, the Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of Warrant Shares will be proportionately increased.  If
the Company at any time on or after the Subscription Date  combines
(by combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination will be proportionately
increased and the number of Warrant Shares will be proportionately
decreased.  Any adjustment under this Section 2(b) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.

     

    3.    RIGHTS UPON DISTRIBUTION OF
ASSETS.  If the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets) to holders of
shares of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a "Distribution"), at any time
after the issuance of this Warrant, then, in each such case, upon an exercise of
this Warrant, in whole or in part, the Holder will be entitled to receive the
amount of any such Distribution that the Holder would have received if the
Holder had held, immediately before the date on which a record is taken for the
declaration or payment of the Distribution, or, if no such record date is taken,
the date as of which the record holders of shares of Common Stock are to be
determined for the declaration or payment of the Distribution, the number of
shares of Common Stock that the Holder is entitled to receive upon such exercise
(without taking into account any limitations or restrictions on the
convertibility of this Warrant).


    
      
         


      

      
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    4.    PURCHASE RIGHTS; FUNDAMENTAL
TRANSACTIONS.

     

    (a)  Purchase
Rights.  In addition to any adjustments pursuant to Section 2
above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
"Purchase Rights"), then
the Holder will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any limitations on the
exercise of this Warrant) immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of shares of Common Stock are
to be determined for the grant, issue or sale of such Purchase
Rights.

     

    (b)  Fundamental
Transactions.  The Company shall not enter into or be party to
a Fundamental Transaction unless the Successor Entity assumes in writing all of
the obligations of the Company under this Warrant and the other Transaction
Documents in accordance with the provisions of this Section (4)(b) pursuant to
written agreements in form and substance satisfactory to the Required Holders
and approved by the Required Holders prior to such Fundamental Transaction,
including agreements to deliver to each holder of Warrants in exchange for such
Warrants a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant, including, without
limitation, an adjusted exercise price equal to the value for the shares of
Common Stock reflected by the terms of such Fundamental Transaction, and
exercisable for a corresponding number of shares of capital stock equivalent to
the shares of Common Stock acquirable and receivable upon exercise of this
Warrant (without regard to any limitations on the exercise of this Warrant)
prior to such Fundamental Transaction, and satisfactory to the Required
Holders.  Upon the occurrence of any Fundamental Transaction, the
Successor Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of this Warrant
referring to the "Company" shall refer instead to the Successor Entity), and may
exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Warrant with the same effect as if such
Successor Entity had been named as the Company herein.  Upon
consummation of the Fundamental Transaction, the Successor Entity shall deliver
to the Holder confirmation that there shall be issued upon exercise of this
Warrant at any time after the consummation of the Fundamental Transaction, in
lieu of the shares of Common Stock (or other securities, cash, assets or other
property) issuable upon the exercise of the Warrant prior to such Fundamental
Transaction, such shares of the publicly traded common stock or common shares
(or its equivalent) of the Successor Entity (including its Parent Entity) which
the Holder would have been entitled to receive upon the happening of such
Fundamental Transaction had this Warrant been converted immediately prior to
such Fundamental Transaction, as adjusted in accordance with the provisions of
this Warrant.  In addition to and not in substitution for any other
rights hereunder, prior to the consummation of any Fundamental Transaction
pursuant to which holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for shares of Common
Stock (a "Corporate
Event"), the Company shall make appropriate provision to insure that the
Holder will thereafter have the right to receive upon an exercise of this
Warrant at any time after the consummation of the Corporate Event but prior to
the Expiration Date, in lieu of shares of Common Stock (or other securities,
cash, assets or other property) purchasable upon the exercise of this Warrant
prior to such Corporate Event, such shares of stock, securities, cash, assets or
any other property whatsoever (including warrants or other purchase or
subscription rights) which the Holder would have been entitled to receive upon
the happening of such Corporate Event had this Warrant been exercised
immediately prior to such Corporate Event.  Provision made pursuant to
the preceding sentence shall be in a form and substance reasonably satisfactory
to the Required Holders.  The provisions of this Section shall apply
similarly and equally to successive Fundamental Transactions and Corporate
Events and shall be applied without regard to any limitations on the exercise of
this Warrant.


    
      
         


      

      
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    (c)  Notwithstanding
the foregoing and the provisions of Section 4(b) above, in the event of a
Fundamental Transaction, at the request of the Holder delivered before the
ninetieth (90th) day after the consummation of such Fundamental Transaction, the
Company (or the Successor Entity) shall purchase this Warrant from the Holder by
paying to the Holder, within five (5) Business Days after a request therefor
(or, if later, on the effective date of the Fundamental Transaction), cash in an
amount equal to the Black Scholes Value of the remaining unexercised portion of
this Warrant on the date of such Fundamental Transaction.

     

    5.    NONCIRCUMVENTION.  The
Company hereby covenants and agrees that the Company will not, by amendment of
its Articles of Incorporation, Bylaws or through any reorganization, transfer of
assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale
of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, and will at all
times in good faith carry out all the provisions of this Warrant and take all
action as may be required to protect the rights of the
Holder.  Without limiting the generality of the foregoing, the Company
(i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the SPA Warrants are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the exercise of the
SPA Warrants, the number of shares of Common Stock as shall from time to time be
necessary to effect the exercise of the SPA Warrants then outstanding (without
regard to any limitations on exercise).

     

    6.    WARRANT HOLDER NOT DEEMED A
STOCKHOLDER.  Except as otherwise specifically provided herein,
the Holder, solely in such Person's capacity as a holder of this Warrant, shall
not be entitled to vote or receive dividends or be deemed the holder of share
capital of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the Holder, solely in such Person's capacity
as the Holder of this Warrant, any of the rights of a stockholder of the Company
or any right to vote, give or withhold consent to any corporate action (whether
any reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of the
Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant.  In addition, nothing contained in this
Warrant shall be construed as imposing any liabilities on the Holder to purchase
any securities (upon exercise of this Warrant or otherwise) or as a stockholder
of the Company, whether such liabilities are asserted by the Company or by
creditors of the Company.  Notwithstanding this Section 7, the Company
shall provide the Holder with copies of the same notices and other information
given to the stockholders of the Company generally, contemporaneously with the
giving thereof to the stockholders.


    
      
         


      

      
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    7.    REISSUANCE OF
WARRANTS.

     

    (a)  Transfer of
Warrant.  If this Warrant is to be transferred, the Holder
shall surrender this Warrant to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 8(d)), registered as the Holder may request,
representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less than the total number of Warrant Shares
then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 8(d)) to the Holder representing the right to purchase the number
of Warrant Shares not being transferred.

     

    (b)  Lost, Stolen or Mutilated
Warrant.  Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of this Warrant, the
Company shall execute and deliver to the Holder a new Warrant (in accordance
with Section 8(d)) representing the right to purchase the Warrant Shares then
underlying this Warrant.

     

    (c)  Exchangeable for Multiple
Warrants.  This Warrant is exchangeable, upon the surrender
hereof by the Holder at the principal office of the Company, for a new Warrant
or Warrants (in accordance with Section 8(d)) representing in the aggregate the
right to purchase the number of Warrant Shares then underlying this Warrant, and
each such new Warrant will represent the right to purchase such portion of such
Warrant Shares as is designated by the Holder at the time of such surrender;
provided, however, that no Warrants for fractional shares of Common Stock shall
be given.

     

    (d)  Issuance of New
Warrants.  Whenever the Company is required to issue a new
Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of
like tenor with this Warrant, (ii) shall represent, as indicated on the face of
such new Warrant, the right to purchase the Warrant Shares then underlying this
Warrant (or in the case of a new Warrant being issued pursuant to Section 8(a)
or Section 8(c), the Warrant Shares designated by the Holder which, when added
to the number of shares of Common Stock underlying the other new Warrants issued
in connection with such issuance, does not exceed the number of Warrant Shares
then underlying this Warrant), (iii) shall have an issuance date, as indicated
on the face of such new Warrant which is the same as the Issuance Date, and (iv)
shall have the same rights and conditions as this Warrant.


    
      
         


      

      
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    8.    NOTICES.  Whenever
notice is required to be given under this Warrant, unless otherwise provided
herein, such notice shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement.  The Company shall provide the Holder
with prompt written notice of all actions taken pursuant to this Warrant,
including in reasonable detail a description of such action and the reason
therefor.  Without limiting the generality of the foregoing, the
Company will give written notice to the Holder (i) immediately upon any
adjustment of the Exercise Price, setting forth in reasonable detail, and
certifying, the calculation of such adjustment and (ii) at least fifteen days
prior to the date on which the Company closes its books or takes a record (A)
with respect to any dividend or distribution upon the shares of Common Stock,
(B) with respect to any grants, issuances or sales of any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
to holders of shares of Common Stock or (C) for determining rights to vote with
respect to any Fundamental Transaction, dissolution or liquidation, provided in
each case that such information shall be made known to the public prior to or in
conjunction with such notice being provided to the Holder.

     

    9.    AMENDMENT AND
WAIVER.  Except as otherwise provided herein, the provisions of
this Warrant may be amended and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the Required Holders;
provided that no such action may increase the exercise price of any SPA Warrant
or decrease the number of shares or class of stock obtainable upon exercise of
any SPA Warrant without the written consent of the Holder.  No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the SPA Warrants then outstanding.

     

    10.  GOVERNING
LAW.  This Warrant shall be governed by and construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Warrant shall be governed by,
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.

     

    11.  CONSTRUCTION;
HEADINGS.  This Warrant shall be deemed to be jointly drafted
by the Company and all the Buyers and shall not be construed against any person
as the drafter hereof.  The headings of this Warrant are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Warrant.

     

    12.  DISPUTE
RESOLUTION.  In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within two Business Days of receipt of the Exercise Notice giving rise
to such dispute, as the case may be, to the Holder.  If the Holder and
the Company are unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three Business Days of such disputed
determination or arithmetic calculation being submitted to the Holder, then the
Company shall, within two Business Days submit via facsimile (a) the disputed
determination of the Exercise Price to an independent, reputable investment bank
selected by the Company and approved by the Holder  or (b) the
disputed arithmetic calculation of the Warrant Shares to the Company's
independent, outside accountant.  The Company shall cause at its
expense the investment bank or the accountant, as the case may be, to perform
the determinations or calculations and notify the Company and the Holder of the
results no later than ten Business Days from the time it receives the disputed
determinations or calculations.  Such investment bank's or
accountant's determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error.


    
      
         


      

      
        - 9
-

        
          

        

      

      
         


      

    

     

    13.  REMEDIES, OTHER OBLIGATIONS,
BREACHES AND INJUNCTIVE RELIEF.  The remedies provided in this
Warrant shall be cumulative and in addition to all other remedies available
under this Warrant and the other Transaction Documents, at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the right of the Holder to pursue actual damages for
any failure by the Company to comply with the terms of this
Warrant.  The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate.  The Company
therefore agrees that, in the event of any such breach or threatened breach, the
holder of this Warrant shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being
required.

     

    14.  TRANSFER.    This
Warrant may be offered for sale, sold, transferred or assigned without the
consent of the Company.

     

    15.  SEVERABILITY. If
any provision of this Warrant is prohibited by law or otherwise determined to be
invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the
validity of the remaining provisions of this Warrant so long as this Warrant as
so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of
the parties or the practical realization of the benefits that would otherwise be
conferred upon the parties.  The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable provision(s).

     

    16.  CERTAIN
DEFINITIONS.  For purposes of this Warrant, the following terms
shall have the following meanings:

     

    (a)  "Black Scholes Value" means the
value of this Warrant based on the Black and Scholes Option Pricing Model
obtained from the "OV" function on Bloomberg determined as of the day
immediately following the public announcement of the applicable Fundamental
Transaction for pricing purposes and reflecting (i) a risk-free interest rate
corresponding to the U.S. Treasury rate for a period equal to the remaining term
of this Warrant as of such date of request, (ii) an expected volatility equal to
100%, (iii) the underlying price per share used in such calculation shall be the
sum of the price per share being offered in cash, if any, plus the value of any
non -cash consideration, if any, being offered in the Fundamental Transaction
and (iv) a 360 day annualization factor.

     

    (b)  "Bloomberg" means Bloomberg
Financial Markets.


    
      
         


      

      
        - 10
-

        
          

        

      

      
         


      

    

     

    (c)  "Business Day" means any day
other than Saturday, Sunday or other day on which commercial banks in The City
of New York are authorized or required by law to remain closed.

     

    (d)  "Closing Bid Price" and "Closing Sale Price" means, for
any security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price,
as the case may be, then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the "pink sheets" by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.).  If the
Closing Bid Price or the Closing Sale Price cannot be calculated for a security
on a particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price, as the case may be, of such security on such date shall be
the fair market value as mutually determined by the Company and the
Holder.  If the Company and the Holder are unable to agree upon the
fair market value of such security, then such dispute shall be resolved pursuant
to Section 13.  All such determinations to be appropriately adjusted
for any stock dividend, stock split, stock combination or other similar
transaction during the applicable calculation period.

     

    (e)  "Common Stock" means
(i) the Company's shares of Common Stock, par value $0.001 per share, and
(ii) any share capital into which such Common Stock shall have been changed
or any share capital resulting from a reclassification of such Common
Stock.

     

    (f)   "Convertible Securities" means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for shares of Common Stock.

     

    (g)  "Eligible Market" means the
Principal Market, The New York Stock Exchange, Inc., The NASDAQ Global Select
Market, The NASDAQ Global Market or The NASDAQ Capital Market..

     

    (h)  "Expiration Date" means the
date sixty (60) months after the Initial Exercisability Date, or, if such date
falls on a day other than a Business Day or on which trading does not take place
on the Principal Market (a "Holiday"), the next date that
is not a Holiday.


    
      
         


      

      
        - 11
-

        
          

        

      

      
         


      

    


    (i)   "Fundamental Transaction" means
that (i) the Company shall, directly or indirectly, in one or more related
transactions, (A) consolidate or merge with or into (whether or not the Company
is the surviving corporation) another Person, or (B) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties or
assets of the Company to another Person, or (C) allow another Person to make a
purchase, tender or exchange offer that is accepted by the holders of more than
the 50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the Person or Persons making or party to, or associated or
affiliated with the Persons making or party to, such purchase, tender or
exchange offer), or (D) consummate a stock purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than 50% of the outstanding shares of Common Stock (not including
any shares of Common Stock held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making or party to,
such stock purchase agreement or other business combination), or (E) reorganize,
recapitalize or reclassify its Common Stock, or (ii) any "person" or "group" (as
these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act)
is or shall become the "beneficial owner" (as defined in Rule 13d-3 under the
1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power
represented by issued and outstanding shares of Common Stock.

     

    (j)   "Maximum Eligibility Number"
means initially zero and shall be increased to the number of warrant shares
otherwise issuable to the Holder pursuant to the terms of the Holder's Series C
Warrants (as defined in the Securities Purchase Agreement) to the extent that
such warrant shares are not permitted to be issued to the Holder pursuant to the
limitation set forth in Section 1(f)(2) of the Series C Warrant.

     

    (k)  "Options" means any rights,
warrants or options to subscribe for or purchase shares of Common Stock or
Convertible Securities.

     

    (l)   "Option Value" means the value
of an Option based on the Black and Scholes Option Pricing model obtained from
the "OV" function on Bloomberg determined as of the day prior to the public
announcement of the applicable Option for pricing purposes and reflecting (i) a
risk-free interest rate corresponding to the U.S. Treasury rate for a period
equal to the remaining term of the applicable Option as of the applicable date
of determination, (ii) an expected volatility equal to 100%, (iii) the
underlying price per share used in such calculation shall be the highest
Weighted Average Price during the period beginning on the day prior to the
execution of definitive documentation relating to the issuance of the applicable
Option and the public announcement of such issuance and (iv) a 360 day
annualization factor.

     

    (m) "Parent Entity" of a Person
means an entity that, directly or indirectly, controls the applicable Person and
whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the
Person or Parent Entity with the largest public market capitalization as of the
date of consummation of the Fundamental Transaction.

     

    (n)  "Person" means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.

     

    (o)  "Principal Market" means the
NYSE Amex Equities.


    
      
         


      

      
        - 12
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    (p)  "Required Holders" means the
holders of the SPA Warrants representing at least a majority of shares of Common
Stock underlying the SPA Warrants then outstanding.

     

    (q)  "Successor Entity" means the
Person (or, if so elected by the Required Holders, the Parent Entity) formed by,
resulting from or surviving any Fundamental Transaction or the Person (or, if so
elected by the Required Holders, the Parent Entity) with which such Fundamental
Transaction shall have been entered into.

     

    (r)   "Trading Day" means any day on
which the Common Stock is traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is
then traded; provided that "Trading Day" shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York
time).

     

    (s)  "Weighted Average Price" means,
for any security as of any date, the dollar volume-weighted average price for
such security on the Principal Market during the period beginning at 9:30:01
a.m., New York time (or such other time as the Principal Market publicly
announces is the official open of trading), and ending at 4:00:00 p.m., New York
time (or such other time as the Principal Market publicly announces is the
official close of trading) as reported by Bloomberg through its "Volume at
Price" functions, or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market on
the electronic bulletin board for such security during the period beginning at
9:30:01 a.m., New York time (or such other time as such market publicly
announces is the official open of trading), and ending at 4:00:00 p.m., New York
time (or such other time as such market publicly announces is the official close
of trading) as reported by Bloomberg, or, if no dollar volume-weighted average
price is reported for such security by Bloomberg for such hours, the average of
the highest Closing Bid Price and the lowest closing ask price of any of the
market makers for such security as reported in the "pink sheets" by Pink Sheets
LLC (formerly the National Quotation Bureau, Inc.).  If the Weighted
Average Price cannot be calculated for a security on a particular date on any of
the foregoing bases, the Weighted Average Price of such security on such date
shall be the fair market value as mutually determined by the Company and the
Holder.  If the Company and the Holder are unable to agree upon the
fair market value of such security, then such dispute shall be resolved pursuant
to Section 13 with the term "Weighted Average Price" being substituted for the
term "Exercise Price."  All such determinations are to be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during the applicable calculation period.

     

    [Signature
Page Follows]


    
      
         


      

      
        - 13
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    IN WITNESS WHEREOF, the
Company has caused this Warrant to Purchase Common Stock to be duly executed as
of the Issuance Date set out above.

    


    
      
        
          	
                  ISORAY,
      INC.

                
	 
      
	
                  By: 

                	 
      
	
                  Name:

                
	
                  Title:

                


        

      

    


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    


    EXHIBIT
A

    EXERCISE
NOTICE

     

    TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

    WARRANT
TO PURCHASE COMMON STOCK

    


    ISORAY,
INC.

     

    The undersigned holder hereby exercises
the right to purchase _________________ of the shares of Common Stock ("Warrant Shares") of IsoRay,
Inc., a Minnesota corporation (the "Company"), evidenced by the
attached Warrant to Purchase Common Stock (the "Warrant").  Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.

    


    1.  Form of Exercise
Price.  The Holder intends that payment of the Exercise Price shall be
made as:

    


    
      ____________
a
"Cash Exercise"
with respect to _________________ Warrant Shares; and/or

    

    


    
      ____________
a
"Cashless
Exercise" with respect to _______________ Warrant
Shares.

    

    


    2.  Payment of Exercise
Price.  In the event that the holder has elected a Cash Exercise with
respect to some or all of the Warrant Shares to be issued pursuant hereto, the
holder shall pay the Aggregate Exercise Price in the sum of $___________________
to the Company in accordance with the terms of the Warrant.

    


    3.  Delivery of Warrant
Shares.  The Company shall deliver to the holder __________ Warrant
Shares in accordance with the terms of the Warrant.

    


    Date:
_______________ __, ______

    


    
      
        
          	 
      
	
                  Name
      of Registered Holder

                


        

      

    

    


    
      
        
          	
                  By:  

                	 
      
	 
      	
                  Name:

                
	 
      	
                  Title:

                


        

      

    


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    


    ACKNOWLEDGMENT

    


    The Company hereby acknowledges this
Exercise Notice and hereby directs Computershare
Trust Company, N.A. to issue the above indicated number of shares of
Common Stock in accordance with the Transfer Agent Instructions dated November
22, 2010 from the Company and acknowledged and agreed to by Computershare Trust Company, N.A..

    


    
      
        
          	
                  ISORAY,
      INC.

                
	 
      
	
                  By: 

                	 
      
	 
      	
                  Name:

                
	 
      	
                  Title: