SICAV
      ONE SECURITIES PURCHASE AGREEMENT

     

    THIS
      STOCK PURCHASE AND SUBSCRIPTION AGREEMENT (this “Agreement”) is made and entered
      into as of December 7, 2005, between  IsoRay,
      Inc, a corporation organized and existing under the laws of the State of
      Minnesota (the “Company”), and Mercatus & Partners, LP (the
“Purchaser”).

     

    WHEREAS,
      PURCHASER desires to subscribe for and purchase Shares of the Company;
      and 

     

    WHEREAS,
      Company desires for Purchaser to subscribe for and to purchase Shares of the
      Company.

     

    NOW,
      THEREFORE, subject to the terms and conditions set forth in this Agreement,
      for
      good, valuable and binding consideration, the receipt and sufficiency of which
      are hereby acknowledged, the parties hereto, intending to be legally bound
      hereby, now agree as follows:

    


    ARTICLE
      I 

     

    INTRODUCTION
      AND DEFINITIONS

     

    This
      Agreement is entered into by the parties for purchase of equity shares of the
      Company by the Purchaser for placement into a European bank SICAV fund.
This
      is not an immediate funding,
      and the Company recognizes the Purchaser shall have up to thirty (30) days,
      as
      set forth in this Agreement to tender the Purchase Price to the company through
      the intermediary Custodial Bank and intermediary Purchaser, once the valuation
      and repurchase of the shares is made in accordance with the terms of this
      Agreement. The Company shall have the right to contact the Custodial Bank
      administrator for Purchaser account verification and for confirmation of the
      share status, location and control at each step of the process. Purchaser shall
      have up to thirty (30) days from the date of delivery of the Shares to the
      Custodial Bank to pay the Purchase Price. In the event the Purchase Price is
      not
      paid within thirty (30) days from the date of delivery of the Shares to the
      Custodial Bank, the Shares shall be returned to the Company as provided in
      the
      Joint Written Direction attached as Schedule B to this Agreement. The particular
      expected time line and transaction sequence is set forth in Schedule A to this
      Agreement. 

    


    Certain
      Definitions.
      As used
      in this Agreement, and unless the context requires a different meaning, the
      following terms have the meanings indicated:

     

    “Affiliate”
      means,
      with respect to any Person, any Person that, directly or indirectly, controls,
      is controlled by or is under common control with such Person. For the purposes
      of this definition, “control”
      (including, with correlative meanings, the terms “controlled
      by”
      and
“under
      common control with”)
      shall
      mean the possession, directly or indirectly, of the power to direct or cause
      the
      direction of the management and policies of such Person, whether through the
      ownership of voting securities or by contract or otherwise.

     

    
      
        
        

      

      
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    “Agreement”
      shall
      have the meaning set forth in the introductory paragraph of this
      Agreement.

    


    “Attorney-in-fact”
      means
      the agent of the bank account holder, Banca MB, Dwight Parscale, Esquire. The
      attorney-in-fact, Dwight Parscale, has full oversight authority of the Purchaser
      and the receiving bank to verify share deposit, valuation process and share
      transaction status. 

     

    “Business
      Day”
      means
      any day except Saturday, Sunday, any day which shall be a legal holiday or
      a day
      on which banking institutions in the State of New York are authorized or
      required by law or other government actions to close.

     

    “Change
      of Control”
      means
      the acquisition, directly or indirectly, by any Person of ownership of, or
      the
      power to direct the exercise of voting power with respect to, a majority of
      the
      issued and outstanding voting shares of the Company.

     

    “Closing”
      shall
      have the meaning set forth in this document.

    


    “Closing
      Date”
      shall
      be the date this Agreement is executed by both parties.

    


    “Common
      Stock”
      shall
      have the meaning in the recital.

    


    “Company”
      shall
      have the meaning set forth in the introductory paragraph.

    


    “Custodial
      Bank”
      means
      the bank that will receive and retain the Shares of the Company on behalf of
      the
      parties, until payment is received the purchase is complete in accordance with
      Schedules A and B. In this case, the Custodial Bank is Brown Brothers Herriman,
      (BBH), New York City, New York. The account holder is Banca MB as the
      intermediary fund receiving bank. 

    


    “Default”
      means
      any event or condition which constitutes an Event of Default or which with
      the
      giving of notice or lapse of time or both would, unless cured or waived, become
      an Event of Default.

    


    “Disclosure
      Documents”
      means
the
      Company’s reports filed under the Exchange Act with the SEC.

    


    “Event
      of Default”
      shall
      have the meaning set forth in the document.

    


    “Exchange
      Act”
      means
      the Securities Exchange Act of 1934, as amended.

    


    “Execution
      Date”
      means
      the date of this Agreement first written above.

    


    “Indemnified
      Party”
      shall
      have the meaning set forth in the document.

    


    “Indemnifying
      Party”
      shall
      have the meaning set forth in the document.

    


    “NASD”
      means
      the National Association of Securities Dealers, Inc.

    


    
      
        
        

      

      
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    “Nasdaq”
      shall
      mean the Nasdaq Stock Market, Inc.®

     

    “OTCBB”
      shall
      mean the NASD over-the counter Bulletin Board®.

    


    “Per
      Share Market Value”
      of the
      Common Stock means on any particular date (a) the last sale price of
      shares
      of Common Stock on such date or, if no such sale takes place on such date,
      the
      last sale price on the most recent prior date, in each case as officially
      reported on the principal national securities exchange on which the Common
      Stock
      is then listed or admitted to trading.

    


    “Person”
      means
      an individual or a corporation, partnership, trust, incorporated or
      unincorporated association, joint venture, limited liability company, joint
      stock company, government (or an agency or political subdivision thereof) or
      other entity of any kind.

    


    “Proceeding”
      means
      an action, claim, suit, investigation or proceeding (including, without
      limitation, an investigation or partial proceeding, such as a deposition),
      whether commenced or threatened.

    


    "Placement
      Agent"
      shall
      have the meaning set forth in Section 3.1(k). 

    


    “Purchase
      Price”
      shall
      have the meaning set forth in this document.

    


    “Purchaser”
      shall
      have the meaning set forth in the introductory paragraph.

    


    “Reporting
      Issuer”
      means a
      company that is subject to the reporting requirements of Section 13 or 15(d)
      of
      the Exchange Act.

    


    “Required
      Approvals”
      shall
      have the meaning set forth in Section
      3.1(f).

    


    “Securities”
      means
      the Common Stock and stock of any other class into which such shares may
      hereafter have been reclassified or changed.

    


    “SEC”
      means
      the Securities and Exchange Commission.

    


    “Securities
      Act”
      means
      the Securities Act of 1933, as amended.

    


    “Shares”
      shall
      have the meaning set forth herein.

    


    “Subsidiaries”
      shall
      have the meaning set forth herein.

    


    “Trading
      Day”
      means
      (a) a day on which the Common Stock is quoted on Nasdaq, the OTCBB or
      the
      principal stock exchange on which the Common Stock has been listed, or
      (b) if the Common Stock is not quoted on Nasdaq, the OTCBB or any stock
      exchange.

    


    “Transaction
      Documents”
      means
      this Agreement and all exhibits and schedules hereto and all other documents,
      instruments and writings required pursuant to this Agreement.

    


    “U.S.”
      means
      the United States of America.

    


    
      
        
        

      

      
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    ARTICLE
      II

     

    The
      PURCHASER hereby irrevocably subscribes for and agrees to purchase 889,073
      shares of
      the
      Common Stock of the COMPANY
      (the
“Shares”).
      The
      purchase price to be paid by the Purchaser shall be $3.502
      per
      share for the purchase of the Shares.

     

    This
      agreement is binding under the conditions and timing set forth
      herein.


     

    ARTICLE
      III

     

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1   Representations,
      Warranties and Agreements of the Company.
      The
      Company hereby makes the following representations and warranties to the
      Purchaser, all of which shall survive the Closing:

     

    (a)   Organization
      and Qualification.
      The
      Company is a corporation, duly incorporated, validly existing and in good
      standing under the laws of the State of Minnesota, with the requisite corporate
      power and authority to own and use its properties and assets and to carry on
      its
      business as currently conducted. The Company has no subsidiaries other than
      as
      set forth on Schedule
      3.1(a)
      attached
      hereto (collectively, the “Subsidiaries”).
      Each
      of the Subsidiaries is a corporation, duly incorporated, validly existing and
      in
      good standing under the laws of the jurisdiction of its incorporation, with
      the
      full corporate power and authority to own and use its properties and assets
      and
      to carry on its business as currently conducted. Each of the Company and the
      Subsidiaries is duly qualified to do business and is in good standing as a
      foreign corporation in each jurisdiction in which the nature of the business
      conducted or property owned by it makes such qualification necessary, except
      where the failure to be so qualified or in good standing, as the case may be,
      would not, individually or in the aggregate, have a material adverse effect
      on
      the results of operations, assets, prospects, or financial condition of the
      Company and the Subsidiaries, taken as a whole (a “Material
      Adverse Effect”).

     

    (b)   Authorization,
      Enforcement.
      The
      Company has the requisite corporate power and authority to enter into and to
      consummate the transactions contemplated hereby and by each other Transaction
      Document and to otherwise to carry out its obligations hereunder and thereunder.
      The execution and delivery of this Agreement and each of the other Transaction
      Documents by the Company and the consummation by it of the transactions
      contemplated hereby and thereby has been duly authorized by all necessary action
      on the part of the Company. Each of this Agreement and each of the other
      Transaction Documents has been or will be duly executed by the Company and
      when
      delivered in accordance with the terms hereof or thereof will constitute the
      valid and binding obligation of the Company enforceable against the Company
      in
      accordance with its terms, except as such enforceability may be limited by
      applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
      or
      similar laws relating to, or affecting generally the enforcement of, creditors’
      rights and remedies or by other equitable principles of general
      application.

     

    
      
         

      

      
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    (c)   Capitalization.
      The
      authorized, issued and outstanding capital stock of the Company is set forth
      on
Schedule
      3.1(c).
      No
      shares of Common Stock are entitled to preemptive or similar rights, nor is
      any
      holder of the Common Stock entitled to preemptive or similar rights arising
      out
      of any agreement or understanding with the Company by virtue of this Agreement.
      Except as disclosed in Schedule
      3.1(c),
      there
      are no outstanding options, warrants, script, rights to subscribe to,
      registration rights, calls or commitments of any character whatsoever relating
      to securities, rights or obligations convertible into or exchangeable for,
      or
      giving any person any right to subscribe for or acquire, any shares of Common
      Stock, or contracts, commitments, understandings, or arrangements by which
      the
      Company or any Subsidiary is or may become bound to issue additional shares
      of
      Common Stock, or securities or rights convertible or exchangeable into shares
      of
      Common Stock. Neither the Company nor any Subsidiary is in violation of any
      of
      the provisions of its Certificate of Incorporation, bylaws or other charter
      documents.

     

    (d)   Issuance
      of Securities.
      The
      Shares have been duly and validly authorized for issuance, offer and sale
      pursuant to this Agreement and, when issued and delivered as provided hereunder
      against payment in accordance with the terms hereof, shall be valid and binding
      obligations of the Company enforceable in accordance with their respective
      terms. 

     

    (e)   No
      Conflicts.
      The
      execution, delivery and performance of this Agreement and the other Transaction
      Documents by the Company and the consummation by the Company of the transactions
      contemplated hereby and thereby do not and will not (i) conflict with
      or
      violate any provision of its Certificate of Incorporation or bylaws (each as
      amended through the date hereof) or (ii) be subject to obtaining any
      consents except those referred to in Section 3.1(f), conflict with, or
      constitute a default (or an event which with notice or lapse of time or both
      would become a default) under, or give to others any rights of termination,
      amendment, acceleration or cancellation of, any agreement, indenture or
      instrument to which the Company is a party, or (iii) result in a violation
      of any law, rule, regulation, order, judgment, injunction, decree or other
      restriction of any court or governmental authority to which the Company or
      its
      Subsidiaries is subject (including, but not limited to, those of other countries
      and the federal and state securities laws and regulations), or by which any
      property or asset of the Company or its Subsidiaries is bound or affected,
      except in the case of clause (ii), such conflicts, defaults, terminations,
      amendments, accelerations, cancellations and violations as would not,
      individually or in the aggregate, have a Material Adverse Effect. The business
      of the Company and its Subsidiaries is not being conducted in violation of
      any
      law, ordinance or regulation of any governmental authority.

     

    (f)   Consents
      and Approvals.
      Except
      as specifically set forth in
      Schedule 3.1(f),
      neither
      the Company nor any Subsidiary is required to obtain any consent, waiver,
      authorization or order of, or make any filing or registration with, any court
      or
      other federal, state, local or other governmental authority or other Person
      in
      connection with the execution, delivery and performance by the Company of this
      Agreement and each of the other Transaction Documents (together with the
      consents, waivers, authorizations, orders, notices and filings referred to
      in
Schedule 3.1(f),
      the
“Required
      Approvals”).

     

    
      
         

      

      
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    (g)   Litigation;
      Proceedings.
      Except
      as specifically disclosed in
      Schedule 3.1(g),
      there
      is no action, suit, notice of violation, proceeding or investigation pending
      or,
      to the best knowledge of the Company, threatened against or affecting the
      Company or any of its Subsidiaries or any of their respective properties before
      or by any court, governmental or administrative agency or regulatory authority
      (federal, state, county, local or foreign) which (i) relates to or challenges
      the legality, validity or enforceability of any of the Transaction Documents,
      the Shares or the Underlying Shares, (ii) could, individually or in
      the
      aggregate, have a Material Adverse Effect or (iii) could, individually or in
      the
      aggregate, materially impair the ability of the Company to perform fully on
      a
      timely basis its obligations under the Transaction Documents.

     

    (h)   No
      Default or Violation.
      Except
      as set forth in Schedule 3.1(h)
      hereto,
      neither the Company nor any Subsidiary (i) is in default under or in vio-lation
      of any indenture, loan or credit agreement or any other agreement or instrument
      to which it is a party or by which it or any of its properties is bound, except
      such conflicts or defaults as do not have a Material Adverse Effect, (ii) is
      in
      violation of any order of any court, arbitrator or governmental body, except
      for
      such violations as do not have a Material Adverse Effect, or (iii) is in
      violation of any statute, rule or regu-lation of any governmental authority
      which could (individually or in the aggregate) (iv) adversely affect the
      legality, validity or enforceability of this Agree-ment, (v have a Material
      Adverse Effect or (vi) adversely impair the Company’s ability or obligation to
      perform fully on a timely basis its obligations under this
      Agreement.

     

    (i)   Disclosure
      Documents.
      The
      Disclosure Documents are accurate in all material respects and do not contain
      any untrue statement of material fact or omit to state any material fact
      necessary in order to make the statements made therein, in light of the
      circumstances under which they were made, not misleading.

     

    (j)   Non-Registered
      Offering.
      Neither
      the Company nor any Person acting on its behalf has taken or will take any
      action (including, without limitation, any offering of any securities of the
      Company under circumstances which would require the integration of such offering
      with the offering of the Securities under the Securities Act) which might
      subject the offering, issuance or sale of the Securities to the registration
      requirements of Section 5 of the Securities Act.

     

    (k)   Placement
      Agent.
      The
      Company accepts and agrees that Artemis Capital (“Artemis”)
      is
      acting for the Purchaser and does not regard any person other than the Purchaser
      as its customer in relation to this Agreement, and that it has not made any
      recommendation to the Company, in relation to this Agreement and is not advising
      the Company with regard to the suitability or merits of the transaction. The
      Placement Agent shall be the Company contact for all information relating to
      the
      status of funding, location of Shares, settlement of the payment of the Purchase
      Price and any other information requests of the Company. Notwithstanding the
      above, in the event the Purchase Price is not paid as required herein, Company
      may directly contact the Custodial Bank and provide Company notice of demand
      for
      the return of the Shares as provided in Schedule B.

     

    
      
         

      

      
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    The
      Purchaser acknowledges and agrees that the Company makes no representation
      or
      warranty with respect to the transactions contemplated hereby other than those
      specifically set forth in Section
      3.1
      hereof.

     

    3.2   Representations
      and Warranties of the Purchaser.
      The
      Purchaser hereby represents and warrants to the Company as follows:


     

    (a)   Organization;
      Authority.
      The
      Purchaser is a corporation, duly organized, validly existing and in good
      standing under the laws of the jurisdiction of its formation with the requisite
      power and authority to enter into and to consummate the transactions
      contemplated hereby and by the other Transaction Documents and otherwise to
      carry out its obligations hereunder and thereunder. The acquisition of the
      Shares to be purchased by the Purchaser hereunder has been duly authorized
      by
      all necessary action on the part of the Purchaser. This Agreement has been
      duly
      executed and delivered by the Purchaser and constitutes the valid and legally
      binding obligation of the Purchaser, enforceable against it in accordance with
      its terms, except as such enforceability may be limited by applicable
      bankruptcy, insolvency, reorganization, moratorium or similar laws relating
      to,
      or affecting generally the enforcement of, creditors rights and remedies or
      by
      other general principles of equity.

     

    (b)   Investment
      Intent.
      The
      Purchaser is acquiring the Shares to be purchased by it hereunder, for its
      own
      account for investment purposes only and not with a view to or for distributing
      or reselling such Shares, or any part thereof or interest therein, without
      prejudice, however, to such Purchaser’s right, subject to the provisions of this
      Agreement, at all times to sell or otherwise dispose of all or any part of
      such
      Shares in compliance with applicable federal and state securities laws.


     

    (c)   Experience
      of Purchaser.
      The
      Purchaser, either alone or together with its representatives, has such
      knowledge, sophistication and experience in business and financial matters
      so as
      to be capable of evaluating the merits and risks of an investment in the Shares
      to be acquired by it hereunder, and has so evaluated the merits and risks of
      such investment.

     

    (e)   Ability
      of Purchaser to Bear Risk of Investment.
      The
      Purchaser is able to bear the economic risk of an investment in the Securities
      to be acquired by it hereunder and, at the pre-sent time, is able to afford
      a
      complete loss of such investment.

     

    (f)   Access
      to Information.
      The
      Purchaser acknowledges that it has been afforded (i) the opportunity to ask
      such
      questions as it has deemed necessary of, and to receive answers from,
      representatives of the Company concerning the terms and conditions of the
      Securities offered hereunder and the merits and risks of investing in such
      securities; (ii) access to information about the Company and the Company’s
      financial condition, results of operations, business, properties, management
      and
      prospects sufficient to enable it to evaluate its investment in the Securities;
      and (iii) the opportunity to obtain such additional information which the
      Company possesses or can acquire without unreasonable effort or expense that
      is
      necessary to make an informed investment decision with respect to the investment
      and to verify the accuracy and completeness of the information that it has
      received about the Company.

     

    
      
         

      

      
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    (g)   Reliance.
      The
      Purchaser understands and acknowledges that (i) the Shares being offered and
      sold to it hereunder are being offered and sold without registration under
      the
      Securities Act in a private placement that is exempt from the registration
      provisions of the Securities Act under Section 4(2) of the Securities Act and
      (ii) the availability of such exemption depends in part on, and that the Company
      will rely upon the accuracy and truthfulness of, the foregoing representations
      and such Purchaser hereby consents to such reliance.

     

    (h)   No
      Short Position.
      The
      Purchaser, or any subsequent purchaser, shall not take or cause any short
      position to be taken in the security or Shares for a period of one year from
      the
      date of issuance to the Purchaser.

     

    The
      Company acknowledges and agrees that the Purchaser makes no representations
      or
      warranties with respect to the transactions contemplated hereby other than
      those
      specifically set forth in this Section
      3.2.

     

    ARTICLE
      IV

     

    OTHER
      AGREEMENTS OF THE PARTIES

    


    4.1   Manner
      of Offering.
      The
      Securities are being issued pursuant to section 4(2) of the Securities Act,
      and
      Rule 506 thereunder. 

     

    4.2   Notice
      of Certain Events.
      The
      Company shall, on a continuing basis, (i) advise the Purchaser promptly
      after obtaining knowledge of, and, if requested by the Purchaser, confirm such
      advice in writing, of (A) the issuance by any state securities commission of
      any
      stop order suspending the qualification or exemption from qualification of
      the
      Shares, for offering or sale in any jurisdiction, or the initiation of any
      proceeding for such purpose by any state securities commission or other
      regulatory authority, or (B) any event that makes any statement of a
      material fact made by the Company in Section
      3.1
      or in
      the Disclosure Documents untrue or that requires the making of any additions
      to
      or changes in Section
      3.1
      or in
      the Disclosure Documents in order to make the statements therein, in the light
      of the circumstances under which they are made, not misleading, (ii) use its
      best efforts to prevent the issuance of any stop order or order suspending
      the
      qualification or exemption from qualification of the Securities under any state
      securities or Blue Sky laws, and (iii) if at any time any state securities
      commission or other regulatory authority shall issue an order suspending the
      qualification or exemption from qualification of the Securities under any such
      laws, and use its best efforts to obtain the withdrawal or lifting of such
      order
      at the earliest possible time.

     

    4.3   Blue
      Sky Laws.
      The
      Company shall cooperate with the Purchaser in connection with the exemption
      from
      registration of the Shares under the securities or Blue Sky laws of such
      jurisdictions as the Purchasers may request; provided,
      however,
      that
      neither the Company nor its Subsidiaries shall be required in connection
      therewith to qualify as a foreign corporation where they are not now so
      qualified. The Company agrees that it will execute all necessary documents
      and
      pay all necessary state filing or notice fees to enable the Company to sell
      the
      Shares to the Purchaser.

     

    
      
         

      

      
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    4.4   Integration.
      The
      Company shall not and shall use its best efforts to ensure that no Affiliate
      shall sell, offer for sale or solicit offers to buy or otherwise negotiate
      in
      respect of any security (as defined in Section 2 of the Securities Act) that
      would be integrated with the offer or sale of the Securities in a manner that
      would require the registration under the Securities Act of the sale of the
      Shares to the Purchaser.

     

    4.5   Furnishing
      of Rule 144(c) Materials.
      The
      Company shall, for so long as any of the Shares remain outstanding and during
      any period in which the Company is not subject to Section 13 or 15(d)
      of
      the Exchange Act, make available to any registered holder of the Shares
      (“Holder” or “Holders”) in connection with any sale thereof and any prospective
      purchaser of such Shares from such Person, such information in accordance with
      Rule 144(c) promulgated under the Securities Act as is required to sell
      the
      Shares under Rule 144 promulgated under the Securities Act.

     

    4.6   Solicitation
      Materials.
      The
      Company shall not (i) distribute any offering materials in connection with
      the
      offering and sale of the Shares other than the Disclosure Documents and any
      amendments and supplements thereto prepared in compliance herewith or (ii)
      solicit any offer to buy or sell the Shares by means of any form of general
      solicitation or advertising.

     

    4.7   Listing
      of Common Stock.
      If the
      Common Stock is or shall become listed on the OTCBB or on another exchange,
      the
      Company shall (a) use its best efforts to maintain the listing of its
      Common Stock on the OTCBB or such other exchange on which the Common Stock
      is
      then listed until two years from the date hereof, and (b) shall provide
      to
      the Purchaser evidence of such listing.

     

    4.8   Indemnification.

     

    (a)   Indemnification

     

    (i)   The
      Company shall, notwithstanding termination of this Agreement and without
      limitation as to time, indemnify and hold harmless the Purchaser and its
      officers, directors, agents, employees and affiliates, each Person who controls
      the Purchaser (within the meaning of Section 15 of the Securities Act or Section
      20 of the Exchange Act) (each such Person, a “Control
      Person”)
      and
      the officers, directors, agents, employees and affiliates of each such Control
      Person, to the fullest extent permitted by applicable law, from and against
      any
      and all losses, claims, damages, liabilities, costs (including, without
      limitation, costs of preparation and attorneys’ fees) and expenses
      (collectively, “Losses”),
      as
      incurred, arising out of, or relating to, a breach or breaches of any
      representation, warranty, covenant or agreement by the Company under this
      Agreement or any other Transaction Document.

     

    (ii)   The
      Purchaser shall, notwithstanding termination of this Agreement and without
      limitation as to time, indemnify and hold harmless the Company, its officers,
      directors, agents and employees, each Control Person and the officers,
      directors, agents and employees of each Control Person, to the fullest extent
      permitted by application law, from and against any and all Losses, as incurred,
      arising out of, or relating to, a breach or breaches of any representation,
      warranty, covenant or agreement by the Purchaser under this Agreement or the
      other Transaction Documents.

     

    
      
         

      

      
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    (b)   Conduct
      of Indemnification Proceedings.
      If any
      Proceeding shall be brought or asserted against any Person entitled to indemnity
      hereunder (an “Indemnified
      Party”),
      such
      Indemnified Party promptly shall notify the Person from whom indemnity is sought
      (the “Indemnifying
      Party”)
      in
      writing, and the Indemnifying Party shall assume the defense thereof, including
      the employment of counsel reasonably satisfactory to the Indemnified Party
      and
      the payment of all fees and expenses incurred in connection with defense
      thereof; provided, that the failure of any Indemnified Party to give such notice
      shall not relieve the Indemnifying Party of its obligations or liabilities
      pursuant to this Agreement, except (and only) to the extent that it shall be
      finally determined by a court of competent jurisdiction (which determination
      is
      not subject to appeal or further review) that such failure shall have
      proximately and materially adversely prejudiced the Indemnifying
      Party.

     

    An
      Indemnified Party shall have the right to employ separate counsel in any such
      Proceeding and to participate in the defense thereof, but the fees and expenses
      of such counsel shall be at the expense of such Indemnified Party or Parties
      unless: (1) the Indemnifying Party has agreed to pay such fees and expenses;
      or
      (2) the Indemnifying Party shall have failed promptly to assume the defense
      of
      such Proceeding and to employ counsel reasonably satisfactory to such
      Indemnified Party in any such Proceeding; or (3) the named parties to any such
      Proceeding (including any impleaded parties) include both such Indemnified
      Party
      and the Indemnifying Party, and such Indemnified Party shall have been advised
      by counsel that a conflict of interest is likely to exist if the same counsel
      were to represent such Indemnified Party and the Indemnifying Party (in which
      case, if such Indemnified Party notifies the Indemnifying Party in writing
      that
      it elects to employ separate counsel at the expense of the Indemnifying Party,
      the Indemnifying Party shall not have the right to assume the defense of the
      claim against the Indemnified Party but will retain the right to control the
      overall Proceedings out of which the claim arose and such counsel employed
      by
      the Indemnified Party shall be at the expense of the Indemnifying Party). The
      Indemnifying Party shall not be liable for any settlement of any such Proceeding
      effected without its written consent, which consent shall not be unreasonably
      withheld. No Indemnifying Party shall, without the prior written consent of
      the
      Indemnified Party, effect any settlement of any pending Proceeding in respect
      of
      which any Indemnified Party is a party, unless such settlement includes an
      unconditional release of such Indemnified Party from all liability on claims
      that are the subject matter of such Proceeding.

     

    All
      fees
      and expenses of the Indemnified Party to which the Indemnified Party is entitled
      hereunder (including reasonable fees and expenses to the extent incurred in
      connection with investigating or preparing to defend such Proceeding in a manner
      not inconsistent with this Section) shall be paid to the Indemnified Party,
      as
      incurred, within ten (10) Business Days of written notice thereof to the
      Indemnifying Party.

     

    No
      right
      of indemnification under this Section shall be available as to a particular
      Indemnified Party if there is a non-appealable final judicial determination
      that
      such Losses arise solely out of the negligence or bad faith of such Indemnified
      Party in performing the obligations of such Indemnified Party under this
      Agreement or a breach by such Indemnified Party of its obligations under this
      Agreement.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

       

    

    (c)   Contribution.
      If a
      claim for indemnification under this Section is unavailable to an Indemnified
      Party or is insufficient to hold such Indemnified Party harmless for any Losses
      in respect of which this Section would apply by its terms (other than by reason
      of exceptions provided in this Section), then each Indemnifying Party, in lieu
      of indemnifying such Indemnified Party, shall contribute to the amount paid
      or
      payable by such Indemnified Party as a result of such Losses in such proportion
      as is appropriate to reflect the relative benefits received by the Indemnifying
      Party on the one hand and the Indemnified Party on the other and the relative
      fault of the Indemnifying Party and Indemnified Party in connection with the
      actions or omissions that resulted in such Losses as well as any other relevant
      equitable considerations. The relative fault of such Indemnifying Party and
      Indemnified Party shall be determined by reference to, among other things,
      whether there was a judicial determination that such Losses arise in part out
      of
      the negligence or bad faith of the Indemnified Party in performing the
      obligations of such Indemnified Party under this Agreement or the Indemnified
      Party’s breach of its obligations under this Agreement. The amount paid or
      payable by a party as a result of any Losses shall be deemed to include any
      attorneys’ or other fees or expenses incurred by such party in connection with
      any Proceeding to the extent such party would have been indemnified for such
      fees or expenses if the indemnification provided for in this Section was
      available to such party.

     

    (d)   Non-Exclusivity.
      The
      indemnity and contribution agreements contained in this Section are in addition
      to any obligation or liability that the Indemnifying Parties may have to the
      Indemnified Parties. 


     

    ARTICLE
      V

     

    MISCELLANEOUS

     

    5.1   Fees
      and Expenses.
      Except
      as set forth in this Agreement, each party shall pay the fees and expenses
      of
      its advisers, counsel, accountants and other experts, if any, and all other
      expenses incurred by such party incident to the negotiation, preparation,
      execution, delivery and performance of this Agreement. The Company shall pay
      all
      stamp and other taxes and duties levied in connection with the issuance of
      the
      Shares pursuant hereto. The Purchaser shall pay the Placement Agent
      pursuant
      to the terms and conditions contained in Schedule 5.1.
      The
      Purchaser shall be responsible for any taxes payable by the Purchaser that
      may
      arise as a result of the investment hereunder or the transactions contemplated
      by this Agreement or any other Transaction Document. The Company shall pay
      all
      costs, expenses, fees and all taxes incident to and in connection with:
      (A) the issuance and delivery of the Shares, (B) the exemption
      from
      registration of the Securities for offer and sale to the Purchaser under the
      securities or Blue Sky laws of the applicable jurisdictions, and (C) the
      preparation of certificates for the Shares (including, without limitation,
      printing and engraving thereof), and (D) all fees and expenses of counsel
      and accountants of the Company.

    


    5.2   Entire
      Agreement.
      This
      Agreement, together with all of the Exhibits and Schedules annexed hereto,
      and
      any other Transaction Document contains the entire understanding of the parties
      with respect to the subject matter hereof and supersede all prior agreements
      and
      understandings, oral or written, with respect to such matters. This Agreement
      shall be deemed to have been drafted and negotiated by both parties hereto
      and
      no presumptions as to interpretation, construction or enforceability shall
      be
      made by or against either party in such regard.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

       

    

    5.3   Notices.
      Any
      notice or other communication required or permitted to be given hereunder shall
      be in writing and shall be deemed to have been duly given upon facsimile
      transmission (with written transmission confirmation report) at the number
      designated below (if delivered on a Business Day during normal business hours
      where such notice is to be received), or the first Business Day following such
      delivery (if delivered other than on a Business Day during normal business
      hours
      where such notice is to be received) whichever shall first occur. The addresses
      for such communications shall be:

    


    
      	 	If to the Company:	IsoRay, Inc.


      	 	 	OTCBB: ISRY 


      	 	 	350 Hills Street


      	 	 	Suite 106


      	 	 	Richland, WA 99354 


      	 	 	Phone: (509) 375-1202


      	 	 	 


      	 	
              With
                copies to:

            	 


    

    


    
      	 	
              If
                to the Purchaser:

            	
              Mercatus
                & Partners, Limited

            


    

    
      	 	 	
              4100
                NINE MCFARLANE DRIVE

            


    

    
      	 	 	
              ALPHARETTA,
                GEORGIA 30004

            


    

    
      	 	 	
              Attn:
                Cary Masi, Director 

            


    

    
      	 	 	
              Phone:
                (770) 475-2266

            


    

    


    
      	 	
              With
                copies to:

            	 


    

     

    


     

    5.4   Amendments;
      Waivers.
      No
      provision of this Agreement may be waived or amended except in a written
      instrument signed, in the case of an amendment, by both the Company and the
      Purchaser, or, in the case of a waiver, by the party against whom enforce-ment
      of any such waiver is sought. No waiver of any default with respect to any
      provision, condition or require-ment of this Agreement shall be deemed to be
      a
      continuing waiver in the future or a waiver of any other provision, condition
      or
      requirement hereof, nor shall any delay or omission of either party to exercise
      any right hereunder in any manner impair the exercise of any such right accruing
      to it thereafter.

     

    5.5   Headings.
      The
      headings herein are for convenience only, do not constitute part of this
      Agreement and shall not be deemed to limit or affect any of the provisions
      hereof.

     

    5.6   Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their respective successors and permitted assigns. The assignment by a party
      of
      this Agreement or any rights hereunder shall not affect the obligations of
      such
      party under this Agreement.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

       

    

    5.7   No
      Third Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns and is not for the benefit of, nor may any
      provision hereof be enforced by, any other person.

     

    5.8   Governing
      Law; Venue; Service of Process.
      The
      parties hereto acknowledge that the transactions contemplated by this Agreement
      and the exhibits hereto bear a reasonable relation to the State of New York.
      The
      parties hereto agree that the internal laws of the State of New York shall
      govern this Agreement and the exhibits hereto, including, but not limited to,
      all issues related to usury. Any action to enforce the terms of this Agreement
      or any of its exhibits, or any other Transaction Document shall be brought
      exclusively in the state and/or federal courts situate in the County and State
      of New York. Service of process in any action by the Purchaser to enforce the
      terms of this Agreement may be made by serving a copy of the summons and
      complaint, in addition to any other relevant documents, by commercial overnight
      courier to the Company at its principal address set forth in this
      Agreement.

     

    5.9   Survival.
      The
      representa-tions and warranties of the Company and the Purchaser contained
      in
      this agreement shall survive the Closing.

     

    5.10   Counterpart
      Signatures.
      This
      Agreement may be executed in two or more counterparts, all of which when taken
      together shall be considered one and the same agreement and shall become
      effective when counterparts have been signed by each party and delivered to
      the
      other party, it being understood that both parties need not sign the same
      counterpart. In the event that any signature is delivered by facsimile
      transmission, such signature shall create a valid and binding obligation of
      the
      party executing (or on whose behalf such signature is executed) the same with
      the same force and effect as if such facsimile signature page were an original
      thereof.

     

    5.11   Publicity.
      The
      Company and the Purchaser shall consult with each other in issuing any press
      releases or otherwise making public statements with respect to the transactions
      contemplated hereby and neither party shall issue any such press release or
      otherwise make any such public statement without the prior written consent
      of
      the other, which consent shall not be unreasonably withheld or delayed, unless
      counsel for the disclosing party deems such public statement to be required
      by
      applicable federal and/or state securities laws. Except as otherwise required
      by
      applicable law or regulation, the Company will not disclose to any third party
      (excluding its legal counsel, accountants and representatives) the names of
      the
      Purchaser.

     

    5.12   Severability.
      In case
      any one or more of the provisions of this Agreement shall be invalid or
      unenforceable in any respect, the validity and enforceability of the remaining
      terms and provisions of this Agreement shall not in any way be affected or
      impaired thereby and the parties will attempt to agree upon a valid and
      enforceable provision which shall be a reasonable substitute therefore, and
      upon
      so agreeing, shall incorporate such substitute provision in this
      Agreement.

     

    5.13   Limitation
      of Remedies.
      With
      respect to claims by the Company or any person acting by or through the Company,
      or by the Purchaser or any person acting through the Purchaser, for remedies
      at
      law or at equity relating to or arising out of a breach of this Agreement,
      liability, if any, shall, in no event, include loss of profits or incidental,
      indirect, exemplary, punitive, special or consequential damages of any
      kind.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

       

    

    5.14   Delivery
      of
      Shares.
      The Company shall deliver the Shares directly to the Custodial Bank, for deposit
      into the Banca MB account in accordance with the directions provided in Schedule
      A, within five business days following delivery of the Joint Written Direction,
      in the form attached hereto as Schedule B, signed by both the Company and the
      Purchaser, to the Custodial Bank
      and SICAV. The
      Shares may not sold or a short position taken on the Securities by the Purchaser
      on or before January 1, 2007 and the Shares’ Certificates shall bear a
      restrictive legend prohibiting transfer until that date.

    


    5.15   Delivery
      of Payment.
      The Purchaser shall, within thirty (30) days of the delivery of the Shares
      to
      the Custodial Bank issue the Payment to the Company via wire transfer to the
      directed wire transfer bank and account as specified
      below:

     

    Beneficiary
      Account Name: Holland
      & Knight LLP 

     

    Beneficiary
      Account No.: ________________

     

    ABA/Transit
      No.: ______________

     

    Beneficiary
      Bank: 
      Chase Manhattan Bank

    


    If
      the Purchase Price is not paid within thirty (30) days of the delivery of the
      Shares to the Custodial Bank, the Company has the right to demand recall of
      the
      shares after that time, and such Shares shall be transmitted back to the Company
      within ten (10) business days from the date of the demand, as provided in the
      Joint Written Direction attached hereto as Schedule B. The timeline from deposit
      to payment shall be as provided in Schedule A attached
      hereto.

    


    5.16   Registration
      of
      Shares. As
      part
      of this Agreement
      the Company has agreed
      to file
      a registration statement pursuant to Form
      SB-2
      or amend a previously filed Form SB-2 Registration Statement registering the
      Shares on or before sixty (60) days after execution of this
      Agreement.

    


    [Signatures
      on Following Page]

    


    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    


    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
      executed as of the date first indicated above.

    
      	 	 	 
	 	Company:
	 	 
	 	IsoRay,
              Inc.
	 
 	 
 	 
              
 
	 	By:  	/s/ Roger
              E. Girard
	 	
              
Name:
              Roger E. Girard
	 	Title:
              Chairman/CEO


    

    
      	 	 	 
	 	Purchaser:
	 	 
	 	Cari
              Masi on behalf of Purchaser
	 
 	 
 	 
 
	 	By:  	/s/ Cari
              Masi
	 	
              
Name:
              Cari Masi
	 	Title:
              Director


    

     

     

    
      
        
        

      

      
        15