Document:

EMPLOYMENT
      AGREEMENT

    

    This
      employment agreement (the “Agreement”) dated as of February 10, 2006, effective
      as of January 1, 2006 (the “Effective Date”), by and between XTL
      Biopharmaceuticals Ltd.,
      an
      Israeli company with its principal offices in Building No. 3 (third floor),
      Kiryat Weizmann, Rehovot, Israel,
      (the
      "Company"),
      and
      Bill Kessler I.D. Number: , an individual whose address is (the "Employee").

    

    WITNESSETH:

     

    WHEREAS,
      the Company desires to employ Employee as its Director of Finance (the
“Position”), and Employee desires to be employed by the Company in such
      capacity, on the terms and conditions set forth below:

     

    NOW,
      THEREFORE, in consideration of the foregoing and the mutual promises and
      covenants herein contained, the parties hereto agree as follows:

    

    It
      is hereby agreed by and between the parties as follows:

    

    
      	1.	
              Preamble

            

    

    

    The
      preamble to this Agreement and any attachments thereto are an integral part
      of
      this Agreement.

    

    
      	2.	
              Job
                Description

            

    

    

    The
      Company hereby employs Employee, and Employee hereby accepts employment, to
      serve in a position of Director, Finance. At a time to be determined by the
      Chief Executive Officer and at the discretion of the Chief Executive Officer,
      the Employee shall be responsible for the financial and accounting management
      of
      the Company. He shall report directly to the Chief Executive Officer, or his
      designate, the Chief Financial Officer. The description of responsibilities
      set
      forth herein shall serve as a general statement of the duties, responsibilities
      and authority of the Employee. Additional duties, responsibilities and authority
      may be assigned to the Employee by the Chief Executive Officer, or his
      designate, the Chief Financial Officer, from time to time in his
      discretion.

    

    
      	3.	
              Working
                Hours

            

    

    

    The
      Employee shall be employed by the Company on a full-time basis, namely for
      not
      less than forty-four (44) hours per week (inclusive of meal time). The Employee
      agrees that his position is considered to be a management position as defined
      in
      the Hours of Work and Rest Law - 1951, which requires a special measure of
      personal trust. Accordingly, the provisions of the Hours of Work and Rest Law
      -
      1951 shall not apply and the Employee shall not be entitled to receive any
      additional payment for his work other than those that are set forth in this
      Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	4.	
              Term
                of Agreement

            

    

    

    This
      Agreement shall take effect from the Effective Date and shall remain in effect
      through the third anniversary of such date, unless it is earlier terminated
      as
      hereinafter provided.

    

    
      	5.	
              Annual
                Salary

            

    

    

    
      	
            	5.1.	
              The
                Employee’s annual salary shall be as
                follows:

            

    

    

    
      	 	
              5.1.1.

            	
              The
                Employee shall receive an annual gross salary of seventy eight thousand
                dollars (US$78,000) payable in New Israeli Shekels according the
                representative rate of exchange in effect each month at the time
                Company
                salaries are calculated (the "Annual Salary"). In the event that
                (1) the
                Employee assumes the financial and accounting management of the Company,
                and (2) the departure of the Company’s current CFO, the Employee’s Annual
                Salary shall be increased to US$90,000 payable in New Israeli Shekels
                according the representative rate of exchange in effect each month
                at the
                time the Company salaries are calculated. The Employee’s Annual Salary
                shall be paid in twelve equal installments, monthly in arrears.
                

            

      	 	 	 

      	 	5.1.2.	On each anniversary date of this Agreement the Employee’s
              Annual Salary shall be increased by an amount to be determined by the
              Chief Executive Officer in consultation with the Board of
              Directors.

      	 	 	 

      	 	5.1.3	The Annual Salary set forth in paragraph 5.1.1,
              above,
              shall be referred to as the “Global Salary”. The linkage of the Global
              Salary to the United States dollar is in lieu of any generally-applicable
              increases, whether the statutory cost of living increase (“Tosefet Yoker”)
              or any other industry-wide increase applicable as the result of collective
              bargaining agreements or other order of the Ministry of Labor and Welfare
              (such as Tzavei Harhava). By signing this Agreement and accepting
              employment pursuant to its terms, the Employee represents that he will
              not
              claim any such increase.

      	 	 	 

      	 	5.1.4.	The Employee shall not be entitled to receive from
              the
              Company any salary or payment of any kind other than the Global Salary
              and
              other payments specifically set forth in this Agreement or properly
              authorized by the Board of Directors.

    

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    
      	 	
              5.2.

            	
              Other
                Terms of Employment

            

    

    

    
      	
            	5.2.1.	
              Bonuses:
                The Employee shall be eligible to receive one or more bonuses during
                any
                calendar year at the discretion of the Chief Executive Officer, acting
                in
                consultation with the Board of
                Directors.

            

    

    

    
      	
            	5.2.2.	
              Expenses:
                The Employee shall be entitled, in accordance with the Company’s standard
                policy in effect from time to time, to be reimbursed for expenses
                (Hotza’ot Eshel) incurred in Israel and abroad in connection with Company
                business against receipt by the Company of appropriate vouchers,
                receipts
                or other proof of the Employee’s
                expenditures.

            

    

    

    
      	
            	5.2.3.	
              Continuing
                Education Fund:
                The Employee shall be entitled to participate in the Company’s continuing
                education fund (Keren Hishtalmut). The Company shall contribute an
                amount
                equal to seven and a half percent (7.5%) of the Employee’s Global Salary
                and shall deduct two and a half percent (2.5%) of the Employee’s Global
                Salary and transfer it as the Employee’s contribution. The Employee
                consents to the deduction of this amount as his contribution to the
                continuing education fund. These contributions will be calculated
                up to
                the permissible tax-exempt salary ceiling according to the income
                tax
                regulations in effect from time to time. If the amount of the Company’s
                contribution is greater than permitted by those regulations, the
                Employee
                shall not have the right to receive the excess
                amount.

            

    

     

    
      	
            	5.2.4.	
              Reserve
                Duty:
                The Employee shall be entitled to receive his full Global Salary
                and other
                payments while performing reserve duty, provided that any amount
                received
                by the Employee from the I.D.F. or any other source (excluding Damei
                Calcala) is transferred to the Company or, in the alternative, an
                amount
                equal to that received from the I.D.F. or any other source is deducted
                from the Global Salary payable to the
                Employee.

            

    

    

    
      	
            	5.2.5.	
              Annual
                Leave and Damei Havra’a:
                The Employee shall be entitled to fifteen (15) working days of paid
                annual
                leave each year. The Employee shall not be allowed to accrue more
                than
                fifteen (15) working days of annual leave except in unusual circumstances
                and with the permission of the Company. Any accrued and unused vacation
                days can be redeemed by the Employee in accordance with the provisions
                of
                the Annual Leave Law –
                1951. In
                addition, the Employee shall be entitled to paid leave on the major
                national and religious holidays celebrated in Israel, and in accordance
                with the normal practice of the Company in effect from time to time.
                The
                Company shall also pay the Employee an amount equivalent to five
                (5) days
                of damei havra’a each year in accordance with the law and the normal
                practice of the Company in effect from time to time.
                

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
            	5.2.7.	
              Sickness
                and Disability Insurance:
                The Employee shall be entitled to the number of days for sick leave
                permitted by law. Compensation for sick days utilized shall be paid
                according to his Global Salary only upon the presentation of medical
                documentation as required by the Company. As detailed under Section
                5.3.1
                below, the Employee shall be covered by disability insurance that
                provides
                monthly compensation. Notwithstanding the foregoing, the Employee
                shall
                not be entitled to receive compensation for sick leave if such
                compensation is covered by the Employee’s disability insurance referred to
                above. However, should the amounts received by the Employee pursuant
                to
                such disability insurance be less than the amount that is properly
                payable
                as compensation for the Employee’s available sick leave, according to the
                Global Salary, the Company shall pay the difference. It is understood
                and
                agreed that unused sick leave cannot be redeemed by the Employee.
                For the
                avoidance of doubt, it is understood and agreed that the payments
                made by
                the Company in consideration of sick leave covers all obligations
                of the
                Company pursuant to the Sick Leave Law -
                1976.

            

    

    

    
      	 	
              5.3.

            	
              Pension
                Benefits and Severance Payments 

            

    

    

    
      	
            	5.3.1	
              Managers
                Insurance. Within ten days after the end of each month during the
                employment of Employee hereunder (or such other day as is consistent
                with
                the Company’s general practices), the Company shall pay an aggregate
                amount equal to 13-1/3% of the Employee’s monthly installment of the
                Global Salary for the preceding month to a Managers Insurance (Bituach
                Manahalim) policy (the “Policy”) and/or a comprehensive pension plan
                (“Pension Plan”) through an agency and with an insurance company or a
                pension fund, to be selected by the Employee, to be divided as follows:
                8-1/3% towards Severance (the “Company’s Severance Contribution”); 5%
                toward provident (compensation) as required by the new regulations
                in
                effect as of January 2006, relating to payments made to provident
                funds.
                In addition to the 13-1/3% mentioned above, at the beginning of each
                month
                the Company shall deduct from the monthly installment of the Global
                Salary
                of Employee an amount equal to 5% of the Employee’s monthly installment of
                the Global Salary for the preceding month, and shall pay such amount
                as
                premium payable in respect of the provident compensation component
                of
                Policy. In addition the Company shall also pay up to 2.5% of the
                Employee’s monthly installment of the Global Salary towards disability
                insurance (depending on the cost to the Company necessary to provide
                coverage). In the event the Employee elects to be insured under a
                Pension
                Plan, the allocations shall be modified in accordance with the Pension
                Plans policies, provided, in any event they do not exceed the amounts
                set
                forth above. 

            

    

    

    
      	(a)  	
              Section
                14 of the Severance Compensation Law –
1963.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	(i)  	
              It
                is hereby agreed that upon termination of employment under this Agreement,
                the Company shall release to the Employee all amounts accrued in
                the
                Managers Insurance on account of both the Company’s and Employee’s
                contributions. It is hereby clearly agreed and understood that the
                amounts
                accrued in the Managers Insurance on account the Company’s contribution
                [i.e. 13.33% of each monthly installment of the Global Salary payment]
                shall be in lieu and in full and final substation of any severance
                pay the
                Employee shall be or become entitled to under any applicable Israeli
                law.

            

    

    

    
      	(ii)  	
              The
                Company hereby waives in advance any right to any amounts accrued
                in the
                Managers Insurance, unless the Employee is either not entitled to
                Severance Pay according to Section 17 of the Severance Compensation
                Act,
                1963, or has withdrawn amounts from the Managers Insurance not
                due or as a result of an “Entitling Event”, as such term is defined in the
                General Approval of the Labor Minister, dated June 30, 1998, issued
                in
                accordance to the said Section 14 (the “General
                Approval”).

            

    

    

    
      	(iii)  	
              Sub-Sections
                (i) and (ii) are in accordance with Section 14 of the Severance
                Compensation Act, 1963 and the General Approval, a copy of which
                is
                attached hereby to this Schedule
                A
                as
                Exhibit
                A.

            

    

    

    
      	 	
              5.4.

            	
              Company
                Automobile.

            

    

    

    The
      Company will provide a leased automobile to the Employee, and will place such
      automobile at the disposal of the Employee under the terms of the Company’s
      general leasing plan (to be provided to the Employee upon provision of the
      automobile), for a period eual to the remaining term on the car assigned to
      the
      Employee. The Company will bear all expenses of the automobile, including
      gasoline, but excluding any traffic or parking fines resulting from the use
      of
      such automobile. All tax consequences resulting from the use of such automobile
      by the Employee shall be his sole and exclusive responsibility.

     

    
      	 	
              5.5.

            	
              Cellular
                Phone

            

    

    

    The
      Company shall provide and maintain for the Employee a cellular telephone for
      as
      long as the Employee is employed by the Company. It is agreed that the Employee
      may transfer his own current cellular phone number to the Company. Upon
      cessation of the Employee’s employment with the Company for whatever reason, the
      Company agrees to return to the Employee his cellular phone number.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              5.6.

            	
              Grant
                of Stock/Share Options

            

    

    

    
      	5.6.1.  	
              The
                Employee shall be entitled to receive one or more grants of options
                to
                purchase the Company’s ordinary shares. The amount of options granted and
                timing of each grant shall be determined at the sole discretion of
                the
                Chief Executive Officer in consultation with the Board of Directors.
                The
                options shall be granted in accordance with the Company’s share option
                plans. The grant of such options and the terms and conditions applicable
                thereto, are subject to (i) the inclusion of the of the Employee
                in the
                Company’s share option plan; (ii) approval of the Company’s Board of
                Directors; and (iii) such other terms and conditions as required
                in order
                to effect the grant of the options. All tax consequences resulting
                from
                the grant, vesting and exercise of the share options to or by the
                Employee
                shall be his sole and exclusive responsibility.

            

    

    

    
      	
              6.

            	
              Termination
                of Employment

            

    

    

    
      	
            	6.1.	
              Either
                party may terminate the Employee’s employment with the Company without
                cause at any time upon three (3) month’s prior written notice. The Company
                shall have the right, in its sole discretion, to require the Employee
                to
                continue working for the Company during the notice period.
                

            

    

    

    
      	
            	6.2.	
              The
                Employee’s employment shall be terminated by his death or disability. (For
                purposes of this section, “disability” shall be deemed to have occurred if
                the Employee is unable, due to any physical or mental disease or
                condition, to perform his normal duties of employment for 120 consecutive
                days or 180 days in any twelve month period.). In such an event,
                he shall
                be entitled to continue to receive his annual salary for three (3)
                months
                following his last day of actual employment by the Company. Such
                amount
                shall be in addition to any severance payment he is entitled to receive
                according the provisions of the Severance Compensation Law - 1963.
                In
                addition, in such events, the Board of Directors shall take the necessary
                steps so that (a) any outstanding, but unvested, options granted
                to the
                Employee shall vest upon the effective date of his termination; and
                (b)
                the period during which the Employee shall be permitted to exercise
                such
                options shall be extended to two (2) years from the effective date
                of his
                termination as defined in the Share Option Plan governing the options
                in
                question. Should the Employee’s employment be terminated as a result of
                his death, the benefits granted herein, shall be granted instead
                to his
                lawful heir or heirs.

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              7.

            	
              Taxes
                and Other Payments

            

    

    

    
      	
            	7.1.	
              Unless
                otherwise specifically provided for in this Agreement, the Company
                shall
                not be liable for the payment of taxes or other payments for which
                the
                Employee is responsible as result of this Agreement or any other
                legal
                provision, and the Employee shall be personally liable for such taxes
                and
                other payments.

            

    

    

    
      	
            	7.2.	
              The
                Employee hereby agrees that the Company shall deduct from his Global
                Salary the Employee’s national insurance fees, income tax and other
                amounts required by law or the terms of this Agreement. The Company
                shall
                provide the Employee with documentation of such deductions.
                

            

    

    

    
      	
              8.

            	
              The
                Obligations of the Employee 

            

    

    

    
      	 	
              8.1.

            	
              The
                Employee agrees to devote his entire business time, energy, abilities
                and
                experience to the performance of his duties, effectively and in good
                faith. 

            

    

    

    
      	 	
              8.2.

            	
              During
                the period of his employment, the Employee shall not be employed,
                whether
                or not during regular business hours, for pay by any other party
                other
                than the Company, without the prior permission of the Company. The
                Company
                has approved that the Employee may continue his pre-existing consulting
                relationship with Keryx Biopharmaceuticals, Inc., provided such consulting
                relationship does not conflict in any way with the services provided
                to
                the Company hereunder.

            

    

    

    
      	 	
              8.3.

            	
              The
                Employee agrees to immediately inform the Company of any Company
                issue or
                transaction in which the Employee has a direct or indirect personal
                interest and/or where such issue or transaction could cause a conflict
                of
                interest for the Employee in the fulfillment of his responsibilities
                as an
                employee of the Company.

            

    

    

    
      	 	
              8.4.

            	
              The
                Employee hereby gives irrevocable instructions and permission to
                the
                Company to deduct from any amounts owed to the Employee by the Company,
                including amounts payable as severance compensation, (a) any debt
                he has
                or will have to the Company; and/or (b) any amount that was wrongfully
                or
                mistakenly paid to him by the Company. Any such amounts to be deducted
                shall be calculated in real terms as of the date of the deduction,
                including linkage to cost of living
                index.

            

    

    

    
      	 	
              8.5.

            	
              The
                Employee declares that the terms and conditions of his employment
                are
                personal and confidential and will not be disclosed by
                him.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              8.6.

            	
              The
                Employee declares that he is free to enter into this Agreement and
                that he
                has no obligations of any kind to any third party that would impair
                this
                Agreement, either as an employee or an independent contractor. The
                Employee further declares that as long as he remains an employee
                of the
                Company, he will not incur any such
                obligations.

            

    

    

    
      	 	
              8.7.

            	
              The
                Employee agrees to keep confidential (a) all professional, scientific,
                commercial, and business information; and (b) any other information
                or
                document that comes to the Employee’s knowledge in connection with the
                affairs of the Company (collectively, the “Confidential Information”), and
                agrees not to use or exploit the Confidential Information or to disclose
                it to any third party where such use, exploitation or disclosure
                in not
                directly related to the affairs of the Company, unless the Company
                gives
                prior written authorization of such
                disclosure.

            

    

    

    
      	 	
              8.8.

            	
              The
                Employees agrees that during his employment by the Company and thereafter
                he (a) will not disseminate or otherwise make use of the Confidential
                Information or of other non-public information of which he learned
                while
                working for the Company, except where such dissemination or use is
                directly related to the affairs of the Company; (b) will maintain
                the
                confidentiality of the Confidential Information; and (c) will not
                in any
                way act to injure the reputation of the Company or any of its affiliated
                companies.

            

    

    

    
      	 	
              8.9

            	
              The
                Employee understands and recognizes that his services to the Company
                are
                special and unique. Therefore, he agrees that during the term of
                this
                Agreement and for one (1) year after the termination for any reason
                of his
                employment, he shall not be employed in or give any services to any
                business or third party that competes directly with the Company or
                whose
                activities conflict with the activities of the Company, unless the
                Chief
                Executive Officer has given his explicit written consent prior the
                commencement of such employment or the giving of such
                services.

            

    

    

    
      	
            	8.10	
              Upon
                termination of his employment, the Employee agrees to assist the
                Company
                with an orderly transition of his responsibilities and to return
                to the
                Company any documents, information and/or materials that were given
                to him
                or which were created by him in connection with his
                employment.

            

    

    

    
      	
              9.

            	
              Intellectual
                Property Rights

            

    

    

    
      	
            	9.1.	
              The
                Employee declares that he is aware that anything that is done by
                him in
                the Company or in connection with the Company, whether it be an invention,
                a discovery, or the development of an idea or a thing, all within
                the
                framework of the Company’s business (the Development”) shall belong to and
                be controlled by the Company, unless the Board of Directors shall,
                in
                writing, direct otherwise.

            

    

    

    
      	
            	9.2.	
              The
                Company shall have the right to fully utilize and exploit the Development,
                as it sees fit, including changing it, registering part or all of
                it as a
                patent, whether in Israel or abroad, selling it, transferring it
                to a
                third party, all without being required to either receive the Employee’s
                consent or pay the Employee any additional payment for such Development
                apart from any payment he receives pursuant to this
                Agreement.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
            	9.3.	
              The
                Development and any subsequent intellectual property arising therefrom
                shall remain the sole property of the Employer even after the Employee’s
                employment terminates for any reason. The termination of this Agreement,
                whether due to its breach or its own terms, shall not impair the
                Company’s
                exclusive rights in the Development. Notwithstanding the termination
                of
                this Agreement, the Board of Directors shall have the discretion
                to award
                the Employee a cash payment in accordance with the terms of paragraph
                5.2.1, above, as a result of any Development or subsequent intellectual
                property arising therefrom developed primarily by the
                Employee.

            

    

    

    
      	
            	9.4.	
              The
                Employee may not do anything with the Development or any related
                materials
                without the knowledge and prior consent of the Company. The Employee
                declares that he neither has nor will have any rights in the Development
                or its fruits and that all rights to the Development and its fruits
                shall
                fully reside in the Company.

            

    

    

    
      	
            	9.5.	
              Even
                in the event that at the time of the termination of the Employee’s
                employment for any reason the Development has not been completed,
                the
                Employee shall be prohibited from any continued activity in connection
                with the subject of the Development, alone or in concert with others,
                that
                is not explicitly allowed in writing by the Company. The Company
                alone
                will be the sole owner of the uncompleted Development and shall have
                the
                sole right to complete the Development or to take any other action
                in
                connection with the Development.

            

    

    

    10.
      Indemnification

    

    The
      Company shall take whatever steps are necessary to indemnify the Employee,
      including, but not limited to the Employee, for all actions taken in good faith
      in pursuit of their duties and obligations to the Company. Such steps shall
      include, but shall not necessarily be limited to, the obtaining of an
      appropriate level of Directors and Officers Liability coverage, if appropriate.
      In the event the Employee will be signing the Company’s financial statements or
      other regulatory filings, then the Company shall include the Employee in its
      Directors and Officers Liability coverage.

    

    
      	
              11.

            	
              General

            

    

    

    
      	
            	11.1.	
              It
                is agreed that the provisions of this Agreement represent the full
                scope
                of the agreement between the parties and that neither side shall
                be bound
                by any promises, declarations, exhibits, agreements or obligations,
                oral
                or written, that are not included in this Agreement prior to its
                execution. Any changes or amendments to this Agreement must be in
                writing
                and signed by both parties.

            

    

    

    
      	
            	11.2.	
              This
                Agreement shall be governed by, and construed and interpreted under,
                the
                laws of the State of Israel. The parties agree that any legal claim
                lodged
                by one party against the other arising from the terms of this Agreement
                shall be adjudicated only by the appropriate court in Tel Aviv,
                Israel.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
            	11.3.	
              If
                any provision of this Agreement shall be declared by a court of competent
                jurisdiction to be invalid, illegal or incapable of being enforced
                in
                whole or in part, the remaining conditions and provisions or portions
                thereof shall nevertheless remain in full force and effect and
                enforceable, and no provision shall be deemed dependent upon any
                other
                covenant or provision unless so expressed herein.
                

            

    

    

    
      	
            	11.4.	
              The
                rights, benefits, duties and obligations under this Agreement shall
                inure
                to, and be binding upon, the Company, its successors and assigns,
                and upon
                the Employee and his legal representatives. This Agreement constitutes
                a
                personal service agreement, and the performance of the Employee's
                obligations hereunder may not be transferred or assigned by the Employee.
                

            

    

    

    
      	
            	11.5	
              The
                failure of either party to insist upon the strict performance of
                any of
                the terms, conditions and provisions of this Agreement shall not
                be
                construed as a waiver or relinquishment of future compliance therewith
                or
                with any other term, condition or provision hereof, and said terms,
                conditions and provisions shall remain in full force and effect.
                No waiver
                of any term or condition of this Agreement on the part of either
                party
                shall be effective or any purpose whatsoever unless such waiver is
                in
                writing and signed by such party. 

            

    

    

    
      	
            	11.6	
              The
                headings of Sections are inserted for convenience and shall not affect
                any
                interpretation of this Agreement. 

            

    

     

    
      	
              12.

            	
              Notices

            

    

    

    
      	
            	12.1.	
              A
                notice that is sent by registered mail to a party at its address
                as set
                forth in paragraph 12.2, below, shall be deemed received three (3)
                days
                after its posting, and the receipt stamped by the post office shall
                represent definitive evidence of the date of
                mailing.

            

    

    

    
      	
            	12.2.	
              The
                addresses of the parties for the purposes of this Agreement
                are:

            

    

    

    XTL
      Biopharmaceuticals Ltd.

    

    Building
      No. 3 (third floor)

    Kiryat
      Weizmann

    Rehovot

    

    Employee:

    

    Bill
      Kessler

    

    IN
      WITNESS WHEREOF
      the
      parties have hereunto set their hands at the place and on the date first above
      written.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    XTL
      Biopharmaceuticals Ltd.

    

     

    
      	By: 
 /s/
              Ron Bentsur	 	 	/s/
              Michael
              Weiss
	
              
                

              

              Name Ron
                Bentsur

            	 	 	
              
Michael
              Weiss
	
              Title Chief
                Executive Officer

                Date:
                  February 10, 2006

              

            	 	 	Chairman
February
              10, 2006

       

      
        	 	 	 	 
	By:  /s/
                Bill Kessler	 	 	
              
	
                
                  

                

                
                  Name Bill
                    Kessler

                

              	 	 	
              
	
                
                  
                    Date:
                      February 10, 2006SECURITIES
      PURCHASE AGREEMENT

    

    SECURITIES
      PURCHASE AGREEMENT
      (the
      "Agreement"),
      dated
      as of March 22, 2007, by and among IsoRay, Inc., a Minnesota corporation, with
      headquarters located at 350 Hills Street, Suite 106, Richland, Washington 99354
      (the "Company"),
      and
      the investors listed on the Schedule of Buyers attached hereto (individually,
      a
      "Buyer"
      and
      collectively, the "Buyers").

    

    WHEREAS:

    

    a. The
      Company and each Buyer desire to enter into this transaction to purchase the
      Purchased Shares (as defined below) set forth herein pursuant to a currently
      effective shelf registration statement on Form S-3, which provides for the
      registration of up to $20 million of the Company’s securities including shares
      of common stock, par value $0.001 per share, of the Company (the "Common
      Stock")
      and
      warrants to purchase shares of common stock (Registration Number 333-140246)
      (the "Registration
      Statement"),
      which
      Registration Statement has been declared effective in accordance with the
      Securities Act of 1933, as amended (the "1933
      Act"),
      by
      the United States Securities and Exchange Commission (the "SEC").

    

    b. Each
      Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
      conditions stated in this Agreement, (i) that aggregate number of shares of
      Common Stock, set forth opposite such Buyer's name in column (3) on the Schedule
      of Buyers (which aggregate amount for all Buyers together shall be 4,000,000
      shares of Common Stock and shall collectively be referred to herein as the
      "Purchased
      Shares")
      and
      (ii) a warrant representing the right to acquire initially up to that number
      of
      additional shares of Common Stock set forth opposite such Buyer's name in column
      (4) on the Schedule of Buyers (which aggregate amount for all Buyers together
      shall be initially 800,000 shares of Common Stock and shall collectively be
      referred to herein as the "Warrants"),
      in
      substantially the form attached hereto as Exhibit
      A
      (as
      exercised, collectively, the "Warrant
      Shares").

    

    c. The
      Purchased Shares, the Warrants and the Warrant Shares are collectively referred
      to herein as the "Securities".

    

    NOW,
      THEREFORE,
      the
      Company and each Buyer hereby agree as follows:

    

    1.
      PURCHASE
      AND SALE OF PURCHASED SHARES AND WARRANTS.

     

    a. Purchase
      of Purchased Shares and Warrants.
      Subject
      to the satisfaction (or waiver) of the conditions set forth in Sections 6 and
      7
      below, the Company shall issue and sell to each Buyer, and each Buyer severally,
      but not jointly, agrees to purchase from the Company on the Closing Date (as
      defined below) (i) the number of Purchased Shares as is set forth opposite
      such
      Buyer's name in column (3) on the Schedule of Buyers and (ii) Warrants to
      acquire initially up to that number of Warrant Shares as is set forth opposite
      such Buyer's name in column (4) on the Schedule of Buyers (the "Closing").
      The
      Closing shall occur on the Closing Date at the offices of Keller Rohrback,
      PLC,
      3101 North Central Avenue, Suite 1400, Phoenix, Arizona 85012.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    b. Purchase
      Price.
      The
      purchase price for each Purchased Share and the portion of the accompanying
      Warrant Share corresponding to such Purchased Share to be purchased by each
      Buyer at the Closing shall be $4.00 (the "Purchase
      Price").

     

    c. Closing
      Date.
      The date
      and time of the Closing (the "Closing
      Date")
      shall
      be 10:00 a.m., Mountain Standard Time, on March 19, 2007 (or such other date
      as
      is mutually agreed to by the Company and each Buyer), after notification of
      satisfaction (or waiver) of the conditions to the Closing set forth in Sections
      6 and 7 below (or such other date as is mutually agreed to by the Company and
      each Buyer). As used herein, "Business
      Day"
      means
      any day other than Saturday, Sunday or other day on which commercial banks
      in
      The City of Phoenix are authorized or required by law to remain
      closed.

     

    d. Form
      of Payment.
      Prior to
      the Closing Date, each Buyer shall have remitted its Purchase Price to an escrow
      account established by the Company in connection with the transactions
      contemplated hereby or by direct funding to the Company. On the Closing Date
      (i)
      through disbursement of the funds held in such escrow account or by direct
      funding, Buyer shall pay its Purchase Price to the Company for the Purchased
      Shares and Warrants to be issued and sold to such Buyer at the Closing, by
      wire
      transfer of immediately available funds in accordance with the Company's written
      wire instructions and (ii) the Company shall (A) cause Computershare Trust
      Company N.A., the Company's transfer agent (the "Transfer
      Agent"),
      to
      issue a certificate for such aggregate number of Purchased Shares that such
      Buyer is purchasing as is set forth opposite such Buyer's name in column (3)
      of
      the Schedule of Buyers in the name of such Buyer and (B) deliver to each Buyer
      a
      Warrant pursuant to which such Buyer shall have the right to acquire such number
      of Warrant Shares as is set forth opposite such Buyer's name in column (4)
      of
      the Schedule of Buyers, duly executed on behalf of the Company and registered
      in
      the name of such Buyer.

    

    2.
      REPRESENTATIONS
      AND WARRANTIES OF EACH BUYER.

     

    Each
      Buyer represents and warrants with respect to only itself that: 

    

    a. Organization;
      Authority.
      Such
      Buyer is an entity duly organized, validly existing and in good standing under
      the laws of the jurisdiction of its organization with the requisite power and
      authority to enter into and to consummate the transactions contemplated by
      the
      applicable Transaction Documents (as defined below) and otherwise to carry
      out
      its obligations thereunder. The execution, delivery and performance by such
      Buyer of the transactions contemplated by this Agreement has been duly
      authorized by all necessary action on the part of such Buyer. This Agreement
      has
      been duly executed by such Buyer, and when delivered by such Buyer in accordance
      with the terms hereof, each will constitute the valid and legally binding
      obligation of such Buyer, enforceable against it in accordance with its terms,
      except (a) as such enforceability may be limited by bankruptcy, insolvency,
      reorganization or similar laws affecting creditors' rights generally, (b) as
      enforceability of any indemnification and contribution provisions may be limited
      under the federal and state securities laws and public policy, and (c) that
      the
      remedy of specific performance and injunctive and other forms of equitable
      relief may be subject to equitable defenses and to the discretion of the court
      before which any proceeding therefor may be brought.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

      b. Certain
        Trading Activities.
        Such
        Buyer has not directly or indirectly, nor has any Person acting on behalf
        of or
        pursuant to any understanding with such Buyer, engaged in any purchases or
        sales
        of the Company's securities (including, without limitation, any Short Sales
        involving the Company's securities) since the time that such Buyer was first
        contacted by the Company or any agents thereof regarding the transactions
        contemplated hereby. Such Buyer covenants that neither it nor any Person
        acting
        on its behalf or pursuant to any understanding with it will engage in any
        transactions in the securities of the Company (including short sales) except
        in
        accordance with and as permitted by applicable law.

       

      c. No
        Conflicts.
        The
        execution, delivery and performance by such Buyer of this Agreement and the
        consummation by such Buyer of the transactions contemplated hereby will not
        (i)
        result in a violation of the organizational documents of such Buyer or (ii)
        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 such Buyer is a party or (iii) result in
        a
        violation of any law, rule, regulation, order, judgment or decree (including
        federal and state securities laws) applicable to such Buyer, except in the
        case
        of clauses (ii) and (iii) above, for such conflicts, defaults, rights or
        violations which would not, individually or in the aggregate, reasonably
        be
        expected to have a material adverse effect on the ability of such Buyer to
        perform its obligations hereunder.

       

      d. Residency.
        Such
        Buyer is a resident of that jurisdiction specified below its address on the
        Schedule of Buyers.

       

      e. No
        Intent to Effect a Change of Control.
        Such
        Buyer has no intent to change or influence the control of the Company within
        the
        meaning of Rule 13d-1 of the Exchange Act.

       

        f. Information
          And Suitability.

       

        (i) The
          Buyer
          has been given the opportunity to review the Disclosure Materials (as
          hereinafter defined) and has requested, received, reviewed and considered
          all
          other information the Buyer deems relevant in making an informed decision
          to
          purchase the Securities. The Buyer has had an opportunity to discuss the
          Company’s business, management and financial affairs with its management and
          also had an opportunity to ask questions of officers of the Company that
          were
          answered to the Buyer's satisfaction. 

       

        (ii) The
          Buyer
          recognizes that an investment in the Securities involves a high degree
          of risk,
          including a risk of total loss of the Buyer's investment. The Buyer is
          able to
          bear the economic risk of holding the Securities for an indefinite period,
          and
          has knowledge and experience in financial and business matters such that
          it is
          capable of evaluating the risks of the investment in the Securities.

       

        (iii) The
          Buyer
          agrees and acknowledges that it has not relied upon the Placement Agents
          (as
          hereinafter defined) in negotiating the terms of its investment in the
          Securities and has made its own decision to invest in the Securities, without
          the assistance of the Placement Agents and based solely on the Disclosure
          Materials, the Transaction Documents (as hereinafter defined) and information
          otherwise furnished to it by the Company. 

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      The
        Company acknowledges and agrees that each Buyer does not make or has not
        made
        any representations or warranties with respect to the transactions contemplated
        hereby other than those specifically set forth in this Section 2.

      

      3.
        REPRESENTATIONS
        AND WARRANTIES OF THE COMPANY.

       

      The
        Company hereby makes the following representations and warranties to each
        Buyer:

      

      a. Subsidiaries.
        There is
        no entity in which the Company, directly or indirectly, owns capital stock
        or
        holds an equity or similar interest other than those listed in Schedule
        3.1(a)
        ("Subsidiaries").
        Except as disclosed in Schedule
        3.1(a),
        the
        Company owns, directly or indirectly, all of the capital stock of each
        Subsidiary free and clear of any and all liens, charges, encumbrances, security
        interests, rights of first refusal or other restrictions of any kind
        ("Liens"),
        and
        all the issued and outstanding shares of capital stock of each Subsidiary
        are
        validly issued and are fully paid, non-assessable and free of preemptive
        and
        similar rights.

       

      b. Organization
        and Qualification.
        The
        Company and each Subsidiary is an entity duly organized, validly existing
        and in
        good standing under the laws of the jurisdiction of its incorporation or
        organization (as applicable), with the requisite power and authority to own
        and
        use its properties and assets and to carry on its business as currently
        conducted. Neither the Company nor any Subsidiary is in violation of any
        of the
        provisions of its respective certificate or articles of incorporation, bylaws
        or
        other organizational or charter documents. The Company and each Subsidiary
        is
        duly qualified to conduct business and is in good standing as a foreign
        corporation or other entity 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, could not, individually or in the aggregate, have or reasonably be expected
        to result in (i) an adverse effect on the legality, validity or enforceability
        of any Transaction Document, (ii) a material and adverse effect on the results
        of operations, assets, prospects, business or financial condition of the
        Company
        and the Subsidiaries, taken as a whole or (iii) an adverse impairment to
        the
        Company's ability to perform on a timely basis its obligations under any
        Transaction Document (any of (i), (ii) or (iii), a "Material
        Adverse Effect").
        As
        used in this Agreement, a "Subsidiary"
        is an
        entity in which the Company, directly or indirectly, owns capital stock or
        holds
        an equity or similar interest.

       

      c. Authorization;
        Enforcement.
        The
        Company has the requisite corporate power and authority to enter into and
        to
        consummate the transactions contemplated by each of this Agreement, the
        Warrants, the Irrevocable Transfer Agent Instructions (as defined below)
        and any
        other documents or agreements executed in connection with the transactions
        contemplated hereunder (collectively, the "Transaction
        Documents")
        and
        otherwise to carry out its obligations hereunder and thereunder and to issue
        the
        Securities in accordance with the terms hereof and thereof. The execution
        and
        delivery of each of the Transaction Documents by the Company and the
        consummation by it of the transactions contemplated hereby and thereby,
        including, without limitation, the issuance of the Purchased Shares and the
        Warrants and the reservation for issuance of the Warrant Shares issuable
        upon
        exercise of the Warrants, have been duly authorized by all necessary action
        on
        the part of the Company and no further action is required by the Company,
        its
        Board of Directors or its stockholders in connection herewith and therewith.
        Each Transaction Document has been (or upon delivery will have been) duly
        executed by the Company and, when delivered in accordance with the terms
        hereof,
        will constitute the valid and binding obligation of the Company enforceable
        against the Company in accordance with its terms, except (a) as such
        enforceability may be limited by bankruptcy, insolvency, reorganization or
        similar laws affecting creditors' rights generally, (b) as enforceability
        of any
        indemnification and contribution provisions may be limited under the federal
        and
        state securities laws and public policy and (c) that the remedy of specific
        performance and injunctive and other forms of equitable relief may be subject
        to
        equitable defenses and to the discretion of the court before which any
        proceeding therefor may be brought.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      d. No
        Conflicts.
        The
        execution, delivery and performance of the Transaction Documents by the Company
        and the consummation by the Company of the transactions contemplated hereby
        and
        thereby (including, without limitation, the issuance of the Purchased Shares
        and
        the Warrants and reservation for issuance of the Warrant Shares) do not and
        will
        not (i) conflict with or violate any provision of the Company's or any
        Subsidiary's certificate or articles of incorporation, any certificate of
        designations, preferences and rights of any outstanding series of preferred
        stock, bylaws or other organizational or charter documents or (ii) conflict
        with, or constitute a default (or an event that 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 (with or without notice, lapse of
        time
        or both) of, any agreement, credit facility, debt or other instrument
        (evidencing a Company or Subsidiary debt or otherwise) or other understanding
        to
        which the Company or any Subsidiary is a party or by which any property or
        asset
        of the Company or any Subsidiary is bound or affected 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
        a Subsidiary is subject (including federal and state securities laws and
        regulations of whichever of any market or quotation service on which the
        Common
        Stock is listed or quoted for trading on the date in question (any of the
        foregoing, a "Trading
        Market"),
        or by
        which any property or asset of the Company or a Subsidiary is bound or affected;
        except in the case of each of clauses (ii) and (iii), such as could not,
        individually or in the aggregate, have or reasonably be expected to result
        in a
        Material Adverse Effect.

       

      e. Filings,
        Consents and Approvals.
        Neither
        the Company nor any Subsidiary is required to obtain any consent, waiver,
        authorization or order of, give any notice to, or make any filing or
        registration (collectively, "Consents")
        with,
        any Person in connection with the execution, delivery and performance by
        the
        Company of the Transaction Documents, other than (i) the filing with the
        SEC of
        the prospectus supplement required by the Registration Statement pursuant
        to
        Rule 424(b) under the 1933 Act (the "Prospectus
        Supplement")
        supplementing the base prospectus forming part of the Registration Statement
        (the "Prospectus"),
        (ii)
        all filings required pursuant to Section 4(e) hereof and (iii) those Consents
        that have been obtained prior to the date hereof. As used in this Agreement,
        "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.

       

      f. Issuance
        of the Securities.
        The
        Purchased Shares and Warrants are duly authorized and, upon issuance in
        accordance with the terms hereof, will be duly and validly issued, fully
        paid
        and nonassessable, free from all taxes, Liens and charges with respect to
        the
        issue thereof. The Warrant Shares have been duly authorized and, when issued
        and
        paid for in accordance with the Transaction Documents, will be duly and validly
        issued, fully paid and nonassessable, free and clear of all taxes, Liens
        and
        charges with respect to the issue thereof. The Company has reserved from
        its
        duly authorized capital stock the maximum number of shares of Common Stock
        issuable pursuant to the Warrants in order to issue the full number of Warrant
        Shares as are or may become issuable in accordance with the terms of the
        Warrants. The issuance by the Company of the Securities has been registered
        under the 1933 Act, the Securities are being issued pursuant to the Registration
        Statement and all of the Securities are freely transferable and tradable
        by the
        Buyers without restriction. The
        Registration Statement is effective and available for the issuance of the
        Purchased Shares thereunder and the Company has not received any notice that
        the
        SEC has issued or intends to issue a stop-order with respect to the Registration
        Statement or that the SEC otherwise has suspended or withdrawn the effectiveness
        of the Registration Statement, either temporarily or permanently, or intends
        or
        has threatened in writing to do so. The "Plan of Distribution" section under
        the
        Registration Statement permits the issuance and sale of the Securities
        hereunder. Upon receipt of the Purchased Shares and Warrant Shares, the Buyers
        will have good and marketable title to such Purchased Shares and Warrant
        Shares.
        

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      g. Capitalization.
        The
        number of shares and type of all authorized, issued and outstanding capital
        stock of the Company is set forth in Schedule
        3.1(g).
        All
        outstanding shares of capital stock of the Company are duly authorized, validly
        issued, fully paid and nonassessable and have been issued in compliance with
        all
        applicable securities laws. Except as set forth in Schedule
        3.1(g),
        no
        securities of the Company are entitled to preemptive or similar rights, and
        no
        Person has any right of first refusal, preemptive right, right of participation,
        or any similar right to participate in the transactions contemplated by the
        Transaction Documents. Except as a result of the purchase and sale of the
        Securities and except as disclosed in Schedule
        3.1(g),
        there
        are no outstanding options, warrants, scrip rights to subscribe to, calls
        or
        commitments of any character whatsoever relating to, or 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.
        Except as set forth in Schedule
        3.1(g),
        the
        issue and sale of the Securities will not, immediately or with the passage
        of
        time, obligate the Company to issue shares of Common Stock or other securities
        to any Person (other than the Buyers) and will not result in a right of any
        holder of Company securities to adjust the exercise, conversion, exchange
        or
        reset price under such securities. 

       

      h. SEC
        Reports; Financial Statements.
        The
        Company has filed all reports required to be filed by it under the 1933 Act
        and
        the 1934 Act, including pursuant to Section 13(a) or 15(d) thereof, for the
        two
        (2) years preceding the date hereof (or such shorter period as the Company
        was
        required by law to file such reports) (the foregoing materials being
        collectively referred to herein as the "SEC
        Reports"
        and,
        together with the Schedules to this Agreement, the "Disclosure
        Materials")
        on a
        timely basis or has received a valid extension of such time of filing and
        has
        filed any such SEC Reports prior to the expiration of any such extension.
        The
        Company has delivered to the Buyers a copy of all SEC Reports not available
        on
        the EDGAR system. As of their respective dates, the SEC Reports complied
        in all
        material respects with the requirements of the 1933 Act and the 1934 Act
        and the
        rules and regulations of the SEC promulgated thereunder, and none of the
        SEC
        Reports, when filed, contained any untrue statement of a material fact or
        omitted to state a material fact required to be stated therein or necessary
        in
        order to make the statements therein, in the light of the circumstances under
        which they were made, not misleading. The Registration Statement and any
        prospectus included therein, including the Prospectus and the Prospectus
        Supplement, complied in all material respects with the requirements of the
        1933
        Act and the 1934 Act and the rules and regulations of the SEC promulgated
        thereunder, and none of such Registration Statement or any such prospectus,
        including the Prospectus and the Prospectus Supplement, contain or contained
        any
        untrue statement of a material fact or omitted to state a material fact required
        to be stated therein or necessary in order to make the statements therein,
        in
        the case of any prospectus in the light of the circumstances under which
        they
        were made, not misleading. The financial statements of the Company included
        in
        the SEC Reports comply in all material respects with applicable accounting
        requirements and the rules and regulations of the SEC with respect thereto
        as in
        effect at the time of filing. Such financial statements have been prepared
        in
        accordance with generally accepted accounting principles applied on a consistent
        basis during the periods involved ("GAAP"),
        except as may be otherwise specified in such financial statements or the
        notes
        thereto, and fairly present in all material respects the financial position
        of
        the Company and its consolidated Subsidiaries as of and for the dates thereof
        and the results of operations and cash flows for the periods then ended,
        subject, in the case of unaudited statements, to normal, immaterial, year-end
        audit adjustments. The Company does not have pending before the SEC any request
        for confidential treatment of information.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      i. Material
        Changes.
        Since
        the date of the latest audited financial statements included within the SEC
        Reports (i) there has been no event, occurrence or development that has had
        or
        that could reasonably be expected to result in a Material Adverse Effect,
        (ii)
        the Company has not incurred any liabilities (contingent or otherwise) other
        than (A) trade payables and accrued expenses incurred in the ordinary course
        of
        business consistent with past practice and (B) liabilities not required to
        be
        reflected in the Company's financial statements pursuant to GAAP or required
        to
        be disclosed in filings made with the SEC, (iii) the Company has not altered
        its
        method of accounting or the identity of its auditors, (iv) other than as
        set
        forth in Schedule
        3.1(i),
        the
        Company has not declared or made any dividend or distribution of cash or
        other
        property to its stockholders or purchased, redeemed or made any agreements
        to
        purchase or redeem any shares of its capital stock, (v) the Company has not
        issued any equity securities to any officer, director or any Person that,
        directly or indirectly through one or more intermediaries, controls or is
        controlled by or is under common control with a Person, as such terms are
        used
        in and construed under Rule 144 promulgated under the 1933 Act, as amended
        (or a
        successor rule thereto) ("Rule
        144")
        (an
        "Affiliate"),
        except pursuant to existing Company stock option plans, (vi) the Company
        has not
        sold any assets, individually or in the aggregate, in excess of $100,000
        outside
        of the ordinary course of business or (vii) the Company has not had capital
        expenditures, individually or in the aggregate, in excess of $100,000 outside
        of
        the ordinary course of business. 

       

      j. Litigation.
        There
        is no action, suit, inquiry, notice of violation, proceeding or investigation
        pending or, to the knowledge of the Company, threatened against or affecting
        the
        Company, any Subsidiary or any of their respective properties before or by
        any
        court, arbitrator, governmental or administrative agency or regulatory authority
        (federal, state, county, local or foreign) which (i) adversely affects or
        challenges the legality, validity or enforceability of any of the Transaction
        Documents or the Securities or (ii) could, if there were an unfavorable
        decision, individually or in the aggregate, have or reasonably be expected
        to
        result in a Material Adverse Effect. Neither the Company nor any Subsidiary,
        nor
        any director or officer thereof, is or has been the subject of any claim,
        action
        or proceeding involving a claim of violation of or liability under federal,
        state or foreign securities laws or a claim of breach of fiduciary duty nor
        has
        any director or officer engaged in any criminal activity. There has not been,
        and to the knowledge of the Company, there is not pending or contemplated,
        any
        investigation by the SEC involving the Company or any current or former director
        or officer of the Company. The SEC has not issued any stop order or other
        order
        suspending the effectiveness of any registration statement filed by the Company
        or any Subsidiary under the 1934 Act or the 1933 Act, including the Registration
        Statement.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      k. Labor
        Relations.
        No
        strike, work stoppage, slow down or other material labor problem exists or,
        to
        the knowledge of the Company, is threatened or imminent with respect to any
        of
        the employees of the Company or any Subsidiary.

       

      l. Compliance.
        Except
        as set forth in Schedule
        3.1(l),
        neither
        the Company nor any Subsidiary (i) is in default under or in violation of
        (and
        no event has occurred that has not been waived that, with notice or lapse
        of
        time or both, would result in a default by the Company or any Subsidiary
        under),
        nor has the Company or any Subsidiary received notice of a claim that it
        is in
        default under or that it is in violation 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 (whether or not such default or
        violation has been waived), (ii) is in violation of any order of any court,
        arbitrator, governmental body, or regulatory or self-regulatory authority
        or
        (iii) is or has been in violation of any statute, rule or regulation of any
        governmental authority, including without limitation all foreign, federal,
        state
        and local laws relating to taxes, environmental protection, occupational
        health
        and safety, product quality and safety and employment and labor matters,
        except
        in each case as could not, individually or in the aggregate, have or reasonably
        be expected to result in a Material Adverse Effect.

       

      m. Regulatory
        Permits.
        The
        Company and the Subsidiaries possess all certificates, authorizations and
        permits issued by the appropriate federal, state, local or foreign regulatory
        authorities necessary to conduct their respective businesses as described
        in the
        SEC Reports, except where the failure to possess such permits would not,
        individually or in the aggregate, have or reasonably be expected to result
        in a
        Material Adverse Effect ("Material
        Permits"),
        and
        neither the Company nor any Subsidiary has received any notice of proceedings
        relating to the revocation or modification of any Material Permit.

       

      n. Title
        to Assets.
        Except
        as disclosed in Schedule
        3.1(n),
        the
        Company and the Subsidiaries have good and marketable title in fee simple
        to all
        real property owned by them that is material to their respective businesses
        and
        good and marketable title in all personal property owned by them that is
        material to their respective businesses, in each case free and clear of all
        Liens, except for Liens as do not materially affect the value of such property
        and do not materially interfere with the use made and proposed to be made
        of
        such property by the Company and the Subsidiaries. Any real property and
        facilities held under lease by the Company and the Subsidiaries are held
        by them
        under valid, subsisting and enforceable leases of which the Company and the
        Subsidiaries are in compliance.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      o. Patents
        and Trademarks.
        Except
        as disclosed in Schedule
        3.1(o),
        the
        Company and the Subsidiaries have, or have rights to use, all patents, patent
        applications, trademarks, trademark applications, service marks, trade names,
        copyrights, licenses and other similar rights that are necessary or material
        for
        use in connection with their respective businesses as described in the SEC
        Reports and which the failure to so have could, individually or in the
        aggregate, have or reasonably be expected to result in a Material Adverse
        Effect
        (collectively, the "Intellectual
        Property Rights").
        None
        of the Intellectual Property Rights has expired, terminated or been abandoned,
        or is expected to expire or terminate or be abandoned within two (2) years
        from
        the date of this Agreement. Neither the Company nor any Subsidiary has received,
        since the date of the latest audited financial statements included within
        the
        SEC Reports, a written notice of a claim or otherwise has any knowledge that
        the
        Intellectual Property Rights violate or infringe upon the rights of any Person,
        except as would not have a Material Adverse Effect. To the knowledge of the
        Company, all such Intellectual Property Rights are enforceable. There is
        no
        claim, action or proceeding being made or brought, or to the knowledge of
        the
        Company, being threatened, against the Company or its Subsidiaries regarding
        its
        Intellectual Property Rights. 

       

      p. Insurance.
        The
        Company and the Subsidiaries are insured by insurers of recognized financial
        responsibility against such losses and risks and in such amounts as are prudent
        and customary in the businesses in which the Company and the Subsidiaries
        are
        engaged. Neither the Company nor any Subsidiary has any reason to believe
        that
        it will not be able to renew its existing insurance coverage as and when
        such
        coverage expires or to obtain similar coverage from similar insurers as may
        be
        necessary to continue its business without a significant increase in cost,
        except for cost increases being experienced by public companies in similar
        businesses and risk categories.

       

      q. Foreign
        Corrupt Practices.
        Neither
        the Company nor, to the knowledge of the Company, any director, officer or
        employee acting on behalf of the Company or any of its Subsidiaries has,
        in the
        course of its actions for, or on behalf of, the Company (i) used any corporate
        funds for any unlawful contribution, gift, entertainment or other unlawful
        expenses relating to political activity; (ii) made any direct or indirect
        unlawful payment to any foreign or domestic government official or employee
        from
        corporate funds, (iii) violated or is in violation of any provision of the
        U.S.
        Foreign Corrupt Practices Act of 1977, as amended or (iv) made any unlawful
        bribe, rebate, payoff, influence payment, kickback or other unlawful payment
        to
        any foreign or domestic government official or employee.

       

      r. Transactions
        With Affiliates and Employees.
        Except
        as set forth in the SEC Reports filed at least ten (10) days prior to the
        date
        hereof, none of the officers or directors of the Company and, to the knowledge
        of the Company, none of the employees of the Company is presently a party
        to any
        transaction with the Company or any Subsidiary (other than for services as
        employees, officers and directors), including any contract, agreement or
        other
        arrangement providing for the furnishing of services to or by, providing
        for
        rental of real or personal property to or from, or otherwise requiring payments
        to or from any officer, director or such employee or, to the knowledge of
        the
        Company, any entity in which any officer, director, or any such employee
        has a
        substantial interest or is an officer, director, trustee or
        partner.

       

      s. Tax
        Status.
        The
        Company and each of its Subsidiaries (i) has made or filed all federal and
        state
        income and all other tax returns, reports and declarations required by any
        jurisdiction to which it is subject (ii) has paid all taxes and other
        governmental assessments and charges that are material in amount, shown or
        determined to be due on such returns, reports and declarations, except those
        being contested in good faith and (iii) has set aside on its books provision
        reasonably adequate for the payment of all material taxes for periods subsequent
        to the periods to which such returns, reports or declarations apply. There
        are
        no unpaid taxes in any material amount claimed to be due by the taxing authority
        of any jurisdiction, and the officers of the Company know of no basis for
        any
        such claim.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      t. Internal
        Accounting Controls.
        The
        Company and the Subsidiaries maintain a system of internal accounting controls
        which the audit committee of the board of directors reasonably believes is
        sufficient to provide reasonable assurance that (i) transactions are executed
        in
        accordance with management's general or specific authorizations, (ii)
        transactions are recorded as necessary to permit preparation of financial
        statements in conformity with generally accepted accounting principles and
        to
        maintain asset accountability, (iii) access to assets is permitted only in
        accordance with management's general or specific authorization and (iv) the
        recorded accountability for assets is compared with the existing assets at
        reasonable intervals and appropriate action is taken with respect to any
        differences.

       

      u. Solvency.
        Based
        on the financial condition of the Company as of the date hereof and as of
        the
        Closing Date (i) the Company's fair saleable value of its assets exceeds
        the
        amount that will be required to be paid on or in respect of the Company's
        existing debts and other liabilities (including known contingent liabilities)
        as
        they mature and (ii) the current cash flow of the Company, together with
        the
        proceeds the Company would receive, were it to liquidate all of its assets,
        after taking into account all anticipated uses of the cash, would be sufficient
        to pay all amounts on or in respect of its debt when such amounts are required
        to be paid. 

       

        v. Placement
          Agent's Fees.
          The
          Company shall be responsible for the payment of any placement agent's fees,
          financial advisory or consultancy fees, brokers' commissions or finder's
          fee
          (other than for persons engaged by any Buyer or its investment advisor)
          relating
          to or arising out of the transactions contemplated hereby. The Company
          shall
          pay, and hold each Buyer harmless against, any liability, loss or expense
          (including, without limitation, attorney's fees and out-of-pocket expenses)
          arising in connection with any such claim. The Company has engaged as placement
          agents in connection with the sale of the Securities Punk, Ziegel & Company,
          L.P. and Maxim
          Group LLC
          (the
          "Placement
          Agents").

       

      w. Integration.
        Neither
        the Company, nor any of its Affiliates, nor any Person acting on its or their
        behalf has, directly or indirectly, made any offers or sales of any security
        or
        solicited any offers to buy any security, under circumstances that would
        cause
        this offering of the Securities to be integrated with prior offerings by
        the
        Company that would adversely affect eligibility to use a Form S-3 registration
        statement for purposes of any applicable securities laws or stockholder approval
        provisions, including, without limitation, under the rules and regulations
        of
        any exchange or automated quotation system on which any of the securities
        of the
        Company are listed or designated, nor will the Company or any of its
        Subsidiaries take any action or steps that would cause the offering of the
        Securities to be so integrated with other offerings.

       

      x. Listing
        and Maintenance Requirements.
        The
        Company has not, in the two (2) years preceding the date hereof, received
        notice
        (written or oral) from any Trading Market on which the Common Stock is or
        has
        been listed or quoted to the effect that the Company is not in compliance
        with
        the listing or maintenance requirements of such Trading Market. The Company
        is
        currently in compliance with all such listing and maintenance requirements
        and
        has no reason to believe that it will not in the foreseeable future continue
        to
        be in compliance with all such listing and maintenance requirements. The
        issuance and sale of the Securities hereunder does not contravene the rules
        and
        regulations of any such Trading Market and no approval of the stockholders
        of
        the Company is required for the Company to issue and deliver to the Buyers
        the
        maximum number of shares of Common Stock contemplated by this Agreement,
        including by reason of the issuance of shares of Common Stock upon the issuance
        of the Warrant Shares upon exercise in full of the Warrants. 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      y. Registration
        Rights.
        No
        holder of securities of the Company has rights to the registration of any
        securities of the Company because of the filing of the Registration Statement
        or
        the issuance of the Securities hereunder that could expose the Company to
        material liability or any Holder to any liability or that could impair the
        Company's ability to consummate the issuance and sale of the Securities in
        the
        manner, and at the times, contemplated hereby, which rights have not been
        waived
        by the holder thereof as of the date hereof.

       

      z. Investment
        Company.
        The
        Company is not, and is not an Affiliate of, an "investment company" within
        the
        meaning of the Investment Company Act of 1940, as amended.

       

      aa. Application
        of Takeover Protections.
        The
        Company has taken all necessary action, if any, in order to render inapplicable
        any control share acquisition, business combination, poison pill (including
        any
        distribution under a rights agreement) or other similar anti-takeover provision
        under the Company's Certificate of Incorporation (or similar charter documents)
        or the laws of its state of incorporation that is or could become applicable
        to
        the Buyers solely as a result of the Buyers and the Company fulfilling their
        obligations or exercising their rights under the Transaction Documents,
        including without limitation the Company's issuance of the Securities and
        the
        Buyers' ownership of the Securities.

       

      bb. Disclosure.
        The
        Company confirms that neither it nor any Person acting on its behalf has
        provided any of the Buyers or their agents or counsel with any information
        that
        the Company believes constitutes material, non-public information. The Company
        understands and confirms that the Buyers will rely on the foregoing
        representations and covenants in effecting transactions in securities of
        the
        Company. All disclosure provided to the Buyers regarding the Company, its
        business and the transactions contemplated hereby, furnished by or on behalf
        of
        the Company (including the Company's representations and warranties set forth
        in
        this Agreement) are true and correct and do not contain any untrue statement
        of
        a material fact or omit to state any material fact necessary in order to
        make
        the statements made therein, in the light of the circumstances under which
        they
        were made, not misleading.

       

      cc. Sarbanes-Oxley
        Act.
        The
        Company is in compliance with any and all applicable requirements of the
        Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and
        any and
        all applicable rules and regulations promulgated by the SEC thereunder that
        are
        effective as of the date hereof. 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      dd. Acknowledgment
        Regarding Buyer's Purchase of Securities.
        The
        Company acknowledges and agrees that each Buyer is acting solely in the capacity
        of arm's length purchaser with respect to the Transaction Documents and the
        transactions contemplated hereby and thereby, and that no Buyer is an officer
        or
        director of the Company. The Company further acknowledges that no Buyer is
        acting as a financial advisor or fiduciary of the Company (or in any similar
        capacity) with respect to the Transaction Documents and the transactions
        contemplated hereby and thereby, and any advice given by a Buyer or any of
        its
        representatives or agents in connection with the Transaction Documents and
        the
        transactions contemplated hereby and thereby is merely incidental to such
        Buyer's purchase of the Securities. The Company further represents to each
        Buyer
        that the Company's decision to enter into the Transaction Documents has been
        based solely on the independent evaluation by the Company and its
        representatives.

       

      ee. Registration
        Statement.
        The
        Company has prepared and filed the Registration Statement in conformity with
        the
        requirements of the 1933 Act, which became effective on February 15, 2007
        (the
        "Effective
        Date"),
        including a base prospectus relating to the Securities (the "Base
        Prospectus"),
        and
        such amendments and supplements thereto as may have been required to the
        date of
        this Agreement. The Registration Statement is effective under the 1933 Act
        and
        no stop order preventing or suspending the effectiveness of the Registration
        Statement or suspending or preventing the use of the Prospectus has been
        issued
        by the SEC and no proceedings for that purpose have been instituted or, to
        the
        knowledge of the Company, are threatened by the SEC. The Company, if required
        by
        the rules and regulations of the SEC, proposes to file the Prospectus (as
        defined below), with the SEC pursuant to Rule 424(b). At the time the
        Registration Statement and any amendments thereto became effective, at the
        date
        of this Agreement and at the Closing Date, the Registration Statement and
        any
        amendments thereto conformed and will conform in all material respects to
        the
        requirements of the 1933 Act and did not and will not contain any untrue
        statement of a material fact or omit to state any material fact required
        to be
        stated therein or necessary to make the statements therein not misleading;
        and
        the Prospectus and any amendments or supplements thereto, at the time the
        Prospectus or any amendment or supplement thereto was issued and at the Closing
        Date, conformed and will conform in all material respects to the requirements
        of
        the 1933 Act and did not and will not contain an untrue statement of a material
        fact or omit to state a material fact necessary in order to make the statements
        therein, in light of the circumstances under which they were made, not
        misleading.

       

      4.
        COVENANTS.

       

      a. Best
        Efforts.
        Each
        party shall use its best efforts timely to satisfy each of the covenants
        and the
        conditions to be satisfied by it as provided in Sections 5, 6 and 7 of this
        Agreement.

       

      b. Maintenance
        of Registration Statement.
        For so
        long as any of the Warrants remain outstanding, the Company shall use its
        reasonable best efforts to maintain the effectiveness of the Registration
        Statement for the issuance thereunder of the Warrant Shares; provided that,
        if
        at any time while the Warrants are outstanding the Company shall be ineligible
        to utilize Form S-3 (or any successor form) for the purpose of issuance of
        the
        Warrant Shares the Company shall promptly amend the Registration Statement
        on
        such other form as may be necessary to maintain the effectiveness of the
        Registration Statement for this purpose.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      c. Prospectus
        Supplement, Form D and Blue Sky.
        On or
        before the execution of this Agreement, the Company shall have delivered,
        and as
        soon as practicable after the Closing the Company shall file, the Prospectus
        Supplement with respect to the Purchased Shares as required under and in
        conformity with the 1933 Act, including Rule 424(b) thereunder. If required,
        the
        Company, on or before the Closing Date, shall take such action as the Company
        shall reasonably determine is necessary in order to obtain an exemption for
        or
        to qualify the Securities for sale to the Buyers at the Closing pursuant
        to this
        Agreement under applicable securities or "Blue Sky" laws of the states of
        the
        United States (or to obtain an exemption from such qualification), and shall
        provide evidence of any such action so taken to the Buyers on or prior to
        the
        Closing Date. The Company shall make all filings and reports relating to
        the
        offer and sale of the Securities required under applicable securities or
        "Blue
        Sky" laws of the states of the United States following the Closing
        Date.

       

      d. Reporting
        Status.
        Until
        the date on which the Buyers shall have sold all the Purchased Shares and
        Warrant Shares and
        none
        of the Warrants is outstanding (the "Reporting
        Period"),
        the
        Company shall timely file all reports required to be filed with the SEC pursuant
        to the 1934 Act, and the Company shall not terminate its status as an issuer
        required to file reports under the 1934 Act even if the 1934 Act or the rules
        and regulations thereunder would otherwise permit such termination.

       

      e. Listing.
        The
        Company shall promptly secure the listing of all of the Purchased Shares
        and
        Warrant Shares upon each national securities exchange and automated quotation
        system, if any, upon which the Common Stock is then listed (subject to official
        notice of issuance) and shall maintain such listing of all shares of Common
        Stock from time to time issuable under the terms of the Transaction Documents.
        So long as any Warrants are outstanding, the Company shall maintain the Common
        Stock's authorization for listing thereon. Neither the Company nor any of
        its
        Subsidiaries shall take any action which would be reasonably expected to
        result
        in the delisting or suspension of the Common Stock from any market. The Company
        shall pay all fees and expenses in connection with satisfying its obligations
        under this Section 4(e).

       

      f. Fees.
        The
        Company shall be responsible for the payment of any placement agent's fees,
        financial advisory fees, or broker's commissions (other than for Persons
        engaged
        by any Buyer) relating to or arising out of the transactions contemplated
        hereby. Except as otherwise set forth in this Agreement or in the Transaction
        Documents, each party to this Agreement shall bear its own expenses in
        connection with the sale of the Securities to the Buyers. 

       

      g. Disclosure
        of Transactions and Other Material Information.
        The
        Company shall, on or before 8:30 a.m., Eastern Daylight Savings Time, on
        the
        first Business Day following
        the execution and delivery of this Agreement,
        issue a
        press release reasonably acceptable to the Buyers disclosing all material
        terms
        of the transactions contemplated hereby (the "Press
        Release").
        On
        or
        before 8:30 a.m., Eastern Daylight Savings Time, on the
        first
        Business Day following the execution and delivery of this Agreement, the
        Company
        shall file a Current Report on Form 8-K describing the terms of the transactions
        contemplated by the Transaction Documents in the form required by the 1934
        Act,
        and attaching the material Transaction Documents (including, without limitation,
        this Agreement and the form of the Warrants) as exhibits to such filing
        (including all attachments, the "8-K
        Filing").
        The
        Company acknowledges and covenants that from and after the filing of the
        Press
        Release, no Buyer shall be in possession of any material, nonpublic information
        received from the Company, any of its Subsidiaries or any of its respective
        officers, directors, employees or agents, that is not disclosed in such Press
        Release. The Company shall not, and shall cause each of its Subsidiaries
        and its
        and each of their respective officers, directors, employees and agents, not
        to,
        provide any Buyer with any material nonpublic information regarding the Company
        or any of its Subsidiaries from and after the filing of the press release
        referred to in the first sentence of this Section without the express written
        consent of such Buyer. Subject to the foregoing, neither the Company nor
        any
        Buyer shall issue any press releases or any other public statements with
        respect
        to the transactions contemplated hereby; provided,
        however,
        that
        the Company shall be entitled, without the prior approval of any Buyer, to
        make
        any press release or other public disclosure with respect to such transactions
        (i) in substantial conformity with the 8-K Filing and contemporaneously
        therewith and (ii) as is required by applicable law and regulations, including
        the applicable rules and regulations of any securities market (provided that
        in
        the case of clause (i) each Buyer shall be consulted by the Company in
        connection with any such press release or other public disclosure prior to
        its
        release). Other than in connection with the future SEC Reports, the Company
        shall not disclose the name of any Buyer without the prior written consent
        of
        such Buyer in any filing, announcement, release or otherwise.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      h. Reservation
        of Shares.
        The
        Company shall take all action necessary to at all times have authorized,
        and
        reserved for the purpose of issuance, from and after the Closing Date, the
        number of shares of Common Stock issuable upon exercise of the Warrants being
        issued at the Closing.

       

      i. Use
        of
        Proceeds.
        The
        Company will use the proceeds from the sale of the Securities as set forth
        in
        the Prospectus Supplement and not for the repayment of long-term debt or
        any
        repurchase of capital securities.

       

      5.
        TRANSFER
        AGENT INSTRUCTIONS.

       

      The
        Company shall issue irrevocable instructions to the Transfer Agent, and any
        subsequent transfer agent, to issue certificates or credit shares to the
        applicable balance accounts at the Depository Trust Company if the Company
        is
        then eligible to do so, registered in the name of each Buyer or its respective
        nominee(s), for the Warrant Shares in
        such
        amounts as specified from time to time by each Buyer to the Company upon
        exercise of the Warrants in the form of Exhibit
        B
        attached
        hereto (the "Irrevocable
        Transfer Agent Instructions").
        The
        Company represents and warrants that no instruction other than the Irrevocable
        Transfer Agent Instructions referred to in this Section 5 will be given by
        the
        Company to the Transfer Agent, and any subsequent transfer agent with respect
        to
        the Securities, and that the Securities shall otherwise be freely transferable
        on the books and records of the Company as and to the extent provided in
        this
        Agreement and the other Transaction Documents. The Company acknowledges that
        a
        breach by it of its obligations hereunder will cause irreparable harm to
        a
        Buyer. Accordingly, the Company acknowledges that the remedy at law for a
        breach
        of its obligations under this Section 5 will be inadequate and agrees, in
        the
        event of a breach or threatened breach by the Company of the provisions of
        this
        Section 5, that a Buyer shall be entitled, in addition to all other available
        remedies, to an order and/or injunction restraining any breach and requiring
        immediate issuance and transfer, without the necessity of showing economic
        loss
        and without any bond or other security being required.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      6.
        CONDITIONS
        TO THE COMPANY'S OBLIGATION TO SELL.

       

      The
        obligation of the Company hereunder to issue and sell the Purchased Shares
        and
        the related Warrants to each Buyer at the Closing is subject to the
        satisfaction, at or before the Closing Date, of each of the following
        conditions, provided that these conditions are for the Company's sole benefit
        and may be waived by the Company at any time in its sole discretion by providing
        each Buyer with prior written notice thereof:

      

      a. Such
        Buyer shall have executed this Agreement and delivered the same to the
        Company.

       

      b. Such
        Buyer shall have delivered to the Company the Purchase Price for the Purchased
        Shares and the related Warrants being purchased by such Buyer at the Closing
        as
        provided for in Section 1(d) hereof.

       

      c. The
        representations and warranties of such Buyer shall be true and correct in
        all
        material respects as of the date when made and as of the Closing Date as
        though
        made at that time (except for representations and warranties that speak as
        of a
        specific date), and such Buyer shall have performed, satisfied and complied
        in
        all material respects with the covenants, agreements and conditions required
        by
        this Agreement to be performed, satisfied or complied with by such Buyer
        at or
        prior to the Closing Date.

      

      7.
        CONDITIONS
        TO EACH BUYER'S OBLIGATION TO PURCHASE. 

       

      The
        obligation of each Buyer hereunder to purchase the Purchased Shares and the
        related Warrants at the Closing is subject to the satisfaction, at or before
        the
        Closing Date, of each of the following conditions, provided that these
        conditions are for each Buyer's sole benefit and may be waived by such Buyer
        at
        any time in its sole discretion by providing the Company with prior written
        notice thereof:

      

      a. The
        Company shall have (i) executed and delivered to such Buyer each of the
        Transaction Documents, (ii) caused the Transfer Agent to deliver certificates
        representing the Purchased Shares being purchased by such Buyer at the Closing
        pursuant to this Agreement and (iii) executed and delivered the related Warrants
        (in such amounts as such Buyer shall request) being purchased by such Buyer
        at
        the Closing pursuant to this Agreement.

       

      b. The
        Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
        Agent Instructions, in the form of Exhibit
        B
        attached
        hereto, which instructions shall have been delivered to and acknowledged
        in
        writing by the Company's transfer agent.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      c. The
        Common Stock shall not have been suspended, as of the Closing Date, by the
        SEC
        or any securities market from trading on such market nor shall suspension
        by the
        SEC or any such market have been threatened, as of the Closing Date, either
        (A)
        in writing by the SEC or any such principal market or (B) by falling below
        the
        minimum listing maintenance requirements of such principal market.

       

      d. The
        Company shall have delivered to such Buyer a certified copy of the Articles
        of
        Incorporation, as amended to date (the "Articles
        of Incorporation")
        as
        certified by the Secretary of State of Minnesota within 10 days of the Closing
        Date.

       

      e. The
        representations and warranties of the Company shall be true and correct as
        of
        the date when made and as of the Closing Date as though made at that time
        (except for representations and warranties that speak as of a specific date,
        which shall be true and correct as of such specific date) and the Company
        shall
        have performed, satisfied and complied in all respects with the covenants,
        agreements and conditions required by the Transaction Documents to be performed,
        satisfied or complied with by the Company at or prior to the Closing
        Date.

       

      f. The
        Company shall have obtained all governmental, regulatory or third party consents
        and approvals, if any, necessary for the sale of the Purchased Shares, the
        Warrants and the Warrant Shares.

       

      g. The
        Registration Statement shall be effective and available for the issuance
        and
        sale of the Purchased Shares hereunder and the Company shall have delivered
        to
        such Buyer the Prospectus and the Prospectus Supplement as required
        thereunder.

       

      8.
        MISCELLANEOUS.

       

      a. Governing
        Law; Jurisdiction; Jury Trial.
        All
        questions concerning the construction, validity, enforcement and interpretation
        of this Agreement 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.
        Each
        party hereby irrevocably submits to the exclusive jurisdiction of the state
        and
        federal courts sitting in The City of New
        York,
        Borough of Manhattan
        for the
        adjudication of any dispute hereunder or in connection herewith or with any
        transaction contemplated hereby or discussed herein, and hereby irrevocably
        waives, and agrees not to assert in any suit, action or proceeding, any claim
        that it is not personally subject to the jurisdiction of any such court,
        that
        such suit, action or proceeding is brought in an inconvenient forum or that
        the
        venue of such suit, action or proceeding is improper. Each party hereby
        irrevocably waives personal service of process and consents to process being
        served in any such suit, action or proceeding by mailing a copy thereof to
        such
        party at the address for such notices to it under this Agreement and agrees
        that
        such service shall constitute good and sufficient service of process and
        notice
        thereof. Nothing contained herein shall be deemed to limit in any way any
        right
        to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
        WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR
        THE
        ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT
        OF
        THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      b. Counterparts.
        This
        Agreement may be executed in two or more identical counterparts, all of which
        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;
        provided that a facsimile signature shall be considered due execution and
        shall
        be binding upon the signatory thereto with the same force and effect as if
        the
        signature were an original, not a facsimile signature.

       

      c. Headings.
        The
        headings of this Agreement are for convenience of reference and shall not
        form
        part of, or affect the interpretation of, this Agreement.

       

      d. Severability.
        If any
        provision of this Agreement shall be invalid or unenforceable in any
        jurisdiction, such invalidity or unenforceability shall not affect the validity
        or enforceability of the remainder of this Agreement in that jurisdiction
        or the
        validity or enforceability of any provision of this Agreement in any other
        jurisdiction.

       

      e. Entire
        Agreement; Amendments.
        This
        Agreement supersedes all other prior oral or written agreements between the
        Buyers, the Company, their Affiliates and Persons acting on their behalf
        with
        respect to the matters discussed herein, and this Agreement and the instruments
        referenced herein contain the entire understanding of the parties with respect
        to the matters covered herein and therein and, except as specifically set
        forth
        herein or therein, neither the Company nor any Buyer makes any representation,
        warranty, covenant or undertaking with respect to such matters. No provision
        of
        this Agreement may be amended other than by an instrument in writing signed
        by
        the Company and the Buyers who purchased at least a majority of the amount
        of
        the Purchased Shares, or, if prior to the Closing Date, the Buyers listed
        on the
        Schedule of Buyers as being obligated to purchase at least a majority of
        the
        amount of the Purchased Shares. No provision hereof may be waived other than
        by
        an instrument in writing signed by the party against whom enforcement is
        sought.
        No such amendment shall be effective to the extent that it applies to less
        than
        all of the holders of the Purchased Shares then outstanding. No consideration
        shall be offered or paid to any Person to amend or consent to a waiver or
        modification of any provision of any of the Transaction Documents unless
        the
        same consideration also is offered to all of the parties to the Transaction
        Documents, holders of Purchased Shares, holders of the Warrants or holders
        of
        Warrant Shares, as the case may be. The Company has not, directly or indirectly,
        made any agreements with any Buyers relating to the terms or conditions of
        the
        transactions contemplated by the Transaction Documents except as set forth
        in
        the Transaction Documents.

       

      f. Notices.
        Any
        notices, consents, waivers or other communications required or permitted
        to be
        given under the terms of this Agreement must be in writing and will be deemed
        to
        have been delivered: (i) upon receipt, when delivered personally; (ii) upon
        receipt, when sent by facsimile (provided confirmation of transmission is
        mechanically or electronically generated and kept on file by the sending
        party);
        or (iii) one Business Day after deposit with an overnight courier service,
        in
        each case properly addressed to the party to receive the same. The addresses
        and
        facsimile numbers for such communications shall be:

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      If
        to the
        Company:

       

      IsoRay,
        Inc.

      350
        Hills
        Street, Suite 106

      Richland,
        WA 99354

      Facsimile
        No.: (509) 375-3473

      Telephone
        No.: (509) 375-1202

      Attn.:
        Roger Girard, Chief Executive Officer

       

      If
        to the
        Transfer Agent:

       

      Computershare
        Trust Company N.A.

      350
        Indiana Street, 8th Floor

      Golden,
        Colorado 80401

      Telephone:
        (303) 262-0710

      Facsimile:
        (303) 262-0700

      Attention:
        IsoRay, Inc. Representative

       

      If
        to a
        Buyer, to its address and facsimile number set forth on the Schedule of Buyers,
        with copies to such Buyer's representatives as set forth on the Schedule
        of
        Buyers,

       

      or
        to
        such other address and/or facsimile number and/or to the attention of such
        other
        Person as the recipient party has specified by written notice given to each
        other party five (5) days prior to the effectiveness of such change. Written
        confirmation of receipt (A) given by the recipient of such notice, consent,
        waiver or other communication, (B) mechanically or electronically generated
        by
        the sender's facsimile machine containing the time, date, recipient facsimile
        number and an image of the first page of such transmission or (C) provided
        by an
        overnight courier service shall be rebuttable evidence of personal service,
        receipt by facsimile or receipt from an overnight courier service in accordance
        with clause (i), (ii) or (iii) above, respectively.

      

      g. Successors
        and Assigns.
        This
        Agreement shall be binding upon and inure to the benefit of the parties and
        their respective successors and assigns, including any purchasers of the
        Purchased Shares or the Warrants. The Company shall not assign this Agreement
        or
        any rights or obligations hereunder without the prior written consent of
        the
        holders of Purchased Shares representing at least a majority of the number
        of
        the Purchased Shares. A Buyer may assign some or all of its rights hereunder
        without the consent of the Company, in which event such assignee shall be
        deemed
        to be a Buyer hereunder with respect to such assigned rights.

       

      h. 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.

       

      i. Survival.
        The
        representations and warranties of the Company and the Buyers contained in
        Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5
        and 8
        shall survive the Closing and the delivery and exercise of Securities, as
        applicable. Each Buyer shall be responsible only for its own representations,
        warranties, agreements and covenants hereunder.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      j. Further
        Assurances.
        Each
        party shall do and perform, or cause to be done and performed, all such further
        acts and things, and shall execute and deliver all such other agreements,
        certificates, instruments and documents, as any other party may reasonably
        request in order to carry out the intent and accomplish the purposes of this
        Agreement and the consummation of the transactions contemplated
        hereby.

       

      k. Indemnification.
        (i) In
        consideration of each Buyer's execution and delivery of the Transaction
        Documents and acquiring the Securities thereunder and in addition to all
        of the
        Company's other obligations under the Transaction Documents, the Company
        shall
        defend, protect, indemnify and hold harmless each Buyer and each other holder
        of
        the Securities and all of their shareholders, partners, members, officers,
        directors, employees and direct or indirect investors and any of the foregoing
        Persons' agents or other representatives (including, without limitation,
        those
        retained in connection with the transactions contemplated by this Agreement)
        (collectively, the "Indemnitees")
        from
        and against any and all actions, causes of action, suits, claims, losses,
        costs,
        penalties, fees, liabilities and damages, and expenses in connection therewith
        (irrespective of whether any such Indemnitee is a party to the action for
        which
        indemnification hereunder is sought), and including reasonable attorneys'
        fees
        and disbursements (the "Indemnified
        Liabilities"),
        incurred by any Indemnitee as a result of, or arising out of, or relating
        to (a)
        any misrepresentation or breach of any representation or warranty made by
        the
        Company in the Transaction Documents or any other certificate, instrument
        or
        document contemplated hereby or thereby, (b) any breach of any covenant,
        agreement or obligation of the Company contained in the Transaction Documents
        or
        any other certificate, instrument or document contemplated hereby or thereby
        or
        (c) any cause of action, suit or claim brought or made against such Indemnitee
        by a third party that is not an Affiliate of such Indemnitee (including for
        these purposes a derivative action brought on behalf of the Company) and
        arising
        out of or resulting from (i) the execution, delivery, performance or enforcement
        of the Transaction Documents or any other certificate, instrument or document
        contemplated hereby or thereby, (ii) any transaction financed or to be financed
        in whole or in part, directly or indirectly, with the proceeds of the issuance
        of the Securities or (iii) the status of such Buyer or holder of the Securities
        as an investor in the Company. To the extent that the foregoing undertaking
        by
        the Company may be unenforceable for any reason, the Company shall make the
        maximum contribution to the payment and satisfaction of each of the Indemnified
        Liabilities which is permissible under applicable law. 

       

      (ii) Promptly
        after receipt by an Indemnitee under this Section 8(k) of notice of the
        commencement of any action or proceeding (including any governmental action
        or
        proceeding) involving an Indemnified Liability, such Indemnitee shall, if
        a
        claim for indemnification in respect thereof is to be made against any
        indemnifying party under this Section 8(k), deliver to the indemnifying party
        a
        written notice of the commencement thereof, and the indemnifying party shall
        have the right to participate in, and, to the extent the indemnifying party
        so
        desires, jointly with any other indemnifying party similarly noticed, to
        assume
        control of the defense thereof with counsel mutually satisfactory to the
        indemnifying party and the Indemnitee; provided, however, that an Indemnitee
        shall have the right to retain its own counsel with the fees and expenses
        of not
        more than one counsel for such Indemnitee to be paid by the indemnifying
        party,
        if, in the reasonable opinion of the Indemnitee, the representation by such
        counsel of the Indemnitee and the indemnifying party would be inappropriate
        due
        to actual or potential differing interests between such Indemnitee and any
        other
        party represented by such counsel in such proceeding. Legal counsel referred
        to
        in the immediately preceding sentence shall be selected by the Buyers holding
        at
        least a majority of the Purchased Shares. The Indemnitee shall cooperate
        fully
        with the indemnifying party in connection with any negotiation or defense
        of any
        such action or Indemnified Liabilities by the indemnifying party and shall
        furnish to the indemnifying party all information reasonably available to
        the
        Indemnitee that relates to such action or Indemnified Liabilities. The
        indemnifying party shall keep the Indemnitee fully apprised at all times
        as to
        the status of the defense or any settlement negotiations with respect thereto.
        No indemnifying party shall be liable for any settlement of any action, claim
        or
        proceeding effected without its prior written consent, provided, however,
        that
        the indemnifying party shall not unreasonably withhold, delay or condition
        its
        consent. No indemnifying party shall, without the prior written consent of
        the
        Indemnitee, consent to entry of any judgment or enter into any settlement
        or
        other compromise which does not include as an unconditional term thereof
        the
        giving by the claimant or plaintiff to such Indemnitee of a release from
        all
        liability in respect to such Indemnified Liabilities or litigation. The failure
        to deliver written notice to the indemnifying party within a reasonable time
        of
        the commencement of any such action shall not relieve such indemnifying party
        of
        any liability to the Indemnitee under this Section 8(k), except to the extent
        that the indemnifying party is prejudiced in its ability to defend such
        action.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (iii) The
        indemnification required by this Section 8(k) shall be made by periodic payments
        of the amount thereof during the course of the investigation or defense,
        as and
        when bills are received or Indemnified Liabilities are incurred.

       

      (iv) The
        indemnity agreements contained herein shall be in addition to (x) any cause
        of
        action or similar right of the Indemnitee against the indemnifying party
        or
        others, and (y) any liabilities the indemnifying party may be subject to
        pursuant to the law.

      

      l. No
        Strict Construction.
        The
        language used in this Agreement will be deemed to be the language chosen
        by the
        parties to express their mutual intent, and no rules of strict construction
        will
        be applied against any party.

       

      m. Remedies.
        Each
        Buyer and each holder of the Securities shall have all rights and remedies
        set
        forth in the Transaction Documents and all rights and remedies which such
        holders have been granted at any time under any other agreement or contract
        and
        all of the rights which such holders have under any law. Any Person having
        any
        rights under any provision of this Agreement shall be entitled to enforce
        such
        rights specifically (without posting a bond or other security), to recover
        damages by reason of any breach of any provision of this Agreement and to
        exercise all other rights granted by law. Furthermore, the Company recognizes
        that in the event that it fails to perform, observe, or discharge any or
        all of
        its obligations under the Transaction Documents, any remedy at law may prove
        to
        be inadequate relief to the Buyers. The Company therefore agrees that the
        Buyers
        shall be entitled to seek temporary and permanent injunctive relief in any
        such
        case without the necessity of proving actual damages and without posting
        a bond
        or other security.

       

      n. Rescission
        and Withdrawal Right.
        Notwithstanding anything to the contrary contained in (and without limiting
        any
        similar provisions of) the Transaction Documents, whenever any Buyer exercises
        a
        right, election, demand or option under a Transaction Document and the Company
        does not timely perform its related obligations within the periods therein
        provided, then such Buyer may rescind or withdraw, in its sole discretion
        from
        time to time upon written notice to the Company, any relevant notice, demand
        or
        election in whole or in part without prejudice to its future actions and
        rights.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      o. Payment
        Set Aside.
        To the
        extent that the Company makes a payment or payments to the Buyers hereunder
        or
        pursuant to any of the other Transaction Documents or the Buyers enforce
        or
        exercise their rights hereunder or thereunder, and such payment or payments
        or
        the proceeds of such enforcement or exercise or any part thereof are
        subsequently invalidated, declared to be fraudulent or preferential, set
        aside,
        recovered from, disgorged by or are required to be refunded, repaid or otherwise
        restored to the Company, a trustee, receiver or any other Person under any
        law
        (including, without limitation, any bankruptcy law, state or federal law,
        common
        law or equitable cause of action), then to the extent of any such restoration
        the obligation or part thereof originally intended to be satisfied shall
        be
        revived and continued in full force and effect as if such payment had not
        been
        made or such enforcement or setoff had not occurred.

       

      p. Independent
        Nature of Buyers' Obligations and Rights.
        The
        obligations of each Buyer under any Transaction Document are several and
        not
        joint with the obligations of any other Buyer, and no Buyer shall be responsible
        in any way for the performance of the obligations of any other Buyer under
        any
        Transaction Document. Nothing contained herein or in any other Transaction
        Document, and no action taken by any Buyer pursuant hereto or thereto, shall
        be
        deemed to constitute the Buyers as a partnership, an association, a joint
        venture or any other kind of entity, or create a presumption that the Buyers
        are
        in any way acting in concert or as a group with respect to such obligations
        or
        the transactions contemplated by the Transaction Documents. Each Buyer confirms
        that it has independently participated in the negotiation of the transaction
        contemplated hereby with the advice of its own counsel and advisors. Each
        Buyer
        shall be entitled to independently protect and enforce its rights, including,
        without limitation, the rights arising out of this Agreement or out of any
        other
        Transaction Documents, and it shall not be necessary for any other Buyer
        to be
        joined as an additional party in any proceeding for such purpose.

       

      [Signature
        Page Follows]

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF,
        each
        Buyer and the Company have caused their respective signature page to the
        Securities Purchase Agreement to be duly executed as of the date first written
        above.

      

      
        	 	
                COMPANY:

              
	 	
                 

                ISORAY,
                  INC.

                 

                 

                By:
                  ______________________________________

                       
                  Name: 

                       
                  Title: 

              

      

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF,
        each
        Buyer and the Company have caused their respective signature page to the
        Securities Purchase Agreement to be duly executed as of the date first written
        above.

      

      Name
        of
        Investing Entity or Person: __________________________

      

      Name
        to
        be listed on Stock Certificate (if different from above):
        __________________________

      

      Name
        of
        Authorized Signatory: _________________________

      

      Title
        of
        Authorized Signatory: __________________________

      

      Email
        Address of Authorized Signatory: ________________________________

      

      Tax
        ID
        number of Investing Entity or Person:
        __________________________________

      

      Address
        for Notice of Investing Entity or Person:

      

      

      

      Address
        for Delivery of Securities for Investing Entity or Person (if different from
        above):

      

      

      Subscription
        Amount:

      

      Number
        of
        Shares: __________________

      

      Dollar
        Amount:      $_________________

      

      
        	 	
                BUYERS:

                 

              
	 	
                ________________________________

                Buyer
                  Name

                 

                 

                By:
                  ______________________________

                      
                  Name: 

                      
                  Title: 

              

      

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      

      SCHEDULE
        3.1(a)

      

      COMPANY’S
        SUBSIDIARIES

      

      IsoRay
        Medical, Inc.

       

       

       

      

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      

      SCHEDULE
        3.1(g)

      

      CAPITALIZATION

      

      The
        Company’s Articles of Incorporation provide that the Company has the authority
        to issue 200 million shares of capital stock, which are currently divided
        into
        two classes as follows: 194 million shares of common stock, par value of
        $0.001
        per share; and 6 million shares of preferred stock, also with a par value
        of
        $0.001 per share. As of March 21, 2007, the Company had 18,559,933 shares
        of
        common stock and 59,065 shares of Series B preferred stock outstanding. The
        Company also had options to purchase 3,088,439 shares of common stock, warrants
        to purchase 2,656,931 shares of common stock, and $355,000 in principal amount
        of convertible debentures (convertible into common stock at $4.15 per share)
        outstanding on that date.

      

       

      On
        July
        28, 2005, the Company adopted the Amended and Restated 2005 Stock Option
        Plan
        (the "Option Plan") and the Amended and Restated 2005 Employee Stock Option
        Plan
        (the "Employee Plan"), pursuant to which it may grant equity awards to eligible
        persons. On August 15, 2006, the Company adopted the 2006 Director Stock
        Option
        Plan (the “Director Plan”) pursuant to which it may grant equity awards to
        eligible persons. The Option Plan allows the Board of Directors to grant
        options
        to purchase up to 1,800,000 shares of common stock to directors, officers,
        key
        employees and service providers of the Company, and the Employee Plan allows
        the
        Board of Directors to grant options to purchase up to 2,000,000 shares of
        common
        stock to officers and key employees of the Company. The Director Plan allows
        the
        Board of Directors to grant options to purchase up to 1,000,000 shares of
        common
        stock to directors of the Company. As of March 21, 2007, options to purchase
        1,755,468 shares had been granted (net of cancellations) under the Option
        Plan,
        options to purchase 1,882,754 shares had been granted (net of cancellations)
        under the Employee Plan, and options to purchase 250,000 shares had been
        granted
        under the Director Plan. Of these options, 573,826 had been exercised under
        the
        Option Plan, 225,957 had been exercised under the Employee Plan, and no options
        had been exercised under the Director Plan, as of March 21, 2007. 

       

      
        	
                Plan
                  Category

              	 	
                Number
                  of securities to be issued upon exercise of outstanding options,
                  warrants
                  and rights (#)

              	 	
                Weighted-average
                  exercise price of outstanding options, warrants and rights
                  ($)

              	 	
                Number
                  of securities remaining available for future issuance under equity
                  compensation plans

              
	 	 	 	 	 	 	 
	
                Equity
                  compensation plans approved by shareholders

              	 	
                N/A

              	 	
                N/A

              	 	
                N/A

              
	
                Equity
                  compensation plans not approved by shareholders

              	 	
                3,088,439

              	 	
                $2.48

              	 	
                911,778

              
	 	 	 	 	 	 	 
	
                Total

              	 	
                3,088,439

              	 	
                $2.48

              	 	
                911,778

              

      

      

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      

      SCHEDULE
        3.1(i)

      

      MATERIAL
        CHANGES

      

      Preferred
        Dividends 

      On
        February 1, 2007, the Board of Directors declared a dividend on the Series
        B
        Preferred Stock of all outstanding and cumulative dividends through December
        31,
        2006. The total dividend of $38,458 was paid on February 15, 2007. 

      

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      

      SCHEDULE
        3.1(l)

      

      COMPLIANCE

      

      The
        Company has obtained a debt covenant waiver from the Benton-Franklin Economic
        Development District as set forth below.

      

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      SCHEDULE
        3.1(n)

      

      TITLE
        TO ASSETS

      

      Included
        on the Company’s books are assets leased under capital leases. These assets
        include a hot cell and glovebox and they are owned by the lessor subject
        to the
        terms of the lease agreements.

      

      The
        Company has two notes payable to Benton-Franklin Economic Development District
        (“BFEDD”) and Hanford Area Economic Investment Fund Committee (“HAEIFC”). The
        BFEDD note is collateralized by substantially all of the Company’s assets and is
        guaranteed by certain shareholders. The HAEIFC note is collateralized by
        receivables, inventory, equipment, and certain life insurance policies. A
        potion
        of the HAEIFC note is guaranteed by certain shareholders.

      

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      

      SCHEDULE
        3.1(o)

      

      PATENTS
        AND TRADEMARKS

      

      None.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00120-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00120-of-00352.parquet"}]]