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VENCORE
      SOLUTIONS LLC

    
      4500
        SW
        Kruse Way, Suite 350 ◊
        Lake
        Oswego, OR 97035

      503.699.4997
        ◊
        FAX:
        503.675.3137

      

      

      MASTER
        LEASE AGREEMENT

      NUMBER
        5209

      

      

      LESSEE
        NAME AND ADDRESS             LESSOR
        NAME AND ADDRESS

      

      ISORAY
        MEDICAL, INC., A DELAWARE CORPORATION   VENCORE
        SOLUTIONS LLC

      350
        HILLS
        STREET           4500
        SW
        KRUSE WAY

      SUITE
        106                   SUITE
        350

      RICHLAND,
        WA 99354              LAKE
        OSWEGO, OR 97035

      

      THIS
        AGREEMENT HAS BEEN MODIFIED AT THE REQUEST OF LESSEE.

      

      

      Terms
        and Conditions

      

      1.
         LEASE
        LINES AND LEASES.

      

      
        	
                a.)

              	
                Lease
                  Lines.
                  LESSOR and LESSEE hereby agree that LESSOR will acquire and lease
                  to
                  LESSEE, EQUIPMENT with an aggregate value of up to the amount specified
                  under “Approved
                  Amount of Lease Line”
                  on
                  the Lease Line Schedule attached as Exhibit A-1 to this Master
                  Lease
                  Agreement (such commitment is referred to as a “LEASE
                  LINE”).
                  From time to time, LESSOR and LESSEE may (but are under no obligation
                  to)
                  agree to establish one or more additional LEASE LINES pursuant
                  to which
                  LESSOR agrees to acquire and lease to LESSEE, EQUIPMENT with an
                  aggregate
                  value of up to the amount specified for each such LEASE LINE. For
                  each
                  LEASE LINE agreed by the parties, LESSOR and LESSEE will execute
                  an
                  additional Exhibit A to this Master Lease Agreement, and each such
                  Exhibit
                  A will be numbered sequentially (i.e., designated as Exhibit A-2,
                  Exhibit
                  A-3, etc.) and will incorporate the terms of this Master Lease
                  Agreement.
                  No LEASE LINE shall be established, and LESSOR shall have no liability
                  or
                  obligation under any LEASE LINE, unless and until the appropriate
                  Exhibit
                  A is executed by both LESSOR AND LESSEE.

              
	 	 
	
                b.)

              	
                Leases.
                  LESSOR and LESSEE agree that the terms of this Master Lease Agreement
                  shall apply to and be incorporated by reference in one or more
                  Lease
                  Schedules, each of which reference(s) the Master Lease Agreement
                  Number
                  indicated above. The word “LEASE”
                  shall mean any one of the Individual Lease Schedules executed hereunder,
                  each of which shall incorporate the terms and conditions of this
                  Master
                  Lease Agreement (including the terms specified on the applicable
                  Exhibit A
                  hereto, as determined below) and shall be evidenced by the original
                  Lease
                  Schedule and an attached copy of this Master Lease Agreement. The
                  word
                  “LEASES”
                  shall mean all of the individual Lease Schedules executed under
                  and
                  incorporating the terms of this Master Lease Agreement collectively.
                  The
                  work “EQUIPMENT”
                  shall mean (i) for purposes of each LEASE, the EQUIPMENT, which
                  is the
                  subject of such LEASE, as defined and described in the applicable
                  Lease
                  Schedule, and/or (ii) all of the EQUIPMENT subject to all of the
                  LEASES,
                  collectively, in each case as the context may require. Each Lease
                  Schedule
                  will include an EQUIPMENT description, the EQUIPMENT location,
                  the minimum
                  lease term and payment and security deposit information. Each LEASE
                  shall
                  be enforceable upon execution by LESSEE and subsequent counter-signature
                  by LESSOR indicating acceptance. By entering into each Lease Schedule,
                  LESSOR and LESSEE agree that (i) the transaction effected by the
                  Lease
                  Schedule constitutes a lease funding by LESSOR under the LEASE
                  LINE then
                  in effect, (ii) LESSOR’s
                  remaining funding obligations under the applicable LEASE LINE shall
                  be
                  reduced accordingly, and (iii) the initial lease period, the initial
                  rent
                  payment amount, the documentation fees, the security deposit payment
                  and
                  release requirements, the renewal rent payment amounts applicable
                  to the
                  LEASE shall be determined pursuant to the applicable LEASE LINE,
                  as
                  outlined on the Exhibit A to this Master Lease Agreement which
                  specifies a
                  “Date
                  of Lease Line Approval”
                  occurring on or before the date of the Lease Schedule and a “Funding
                  Expiration Date”
                  occurring after the date of acceptance of the Lease Schedule by
                  LESSOR,
                  and shall be set forth with specificity on the applicable Lease
                  Schedule.

              
	 	 

      

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      2. RENTAL
        PAYMENTS.
        Unless
        otherwise agreed in writing, each regular periodic payment of rent due during
        the term of each LEASE shall be due on either the tenth (10th)
        day of
        the month or the twenty-fifth(25th)
        day of
        the month (the “billing
        date”).
        The
        first billing date under each LEASE where LESSEE’s
        acceptance occurred after the twentieth (20th)
        day of
        the month and prior to the sixth (6th)
        day of
        the following month shall be the tenth (10th)
        day of
        the month immediately following LESSEE’s
        acceptance of the EQUIPMENT, of, if LESSEE’s
        acceptance occurs after the fifth (5th)
        day of
        a month and prior to the twenty-first (21st)
        day of
        the month, then the first billing date shall be the twenty-fifth (25th)
        day of
        the month that LESSEE completed its acceptance of the EQUIPMENT. On the date
        of
        acceptance of EQUIPMENT by LESSEE, LESSEE shall pay to LESSOR pro rated rent,
        together with applicable taxes, from the date of acceptance of the EQUIPMENT
        until the first billing date as interim rent. In addition, LESSEE shall pay
        to
        LESSOR, on demand by LESSOR, an amount equal to one thirtieth (1/30) of the
        proportional monthly rental payment per day for any amount funded by LESSOR
        prior to acceptance of the EQUIPMENT by LESSEE as additional interim rent.
        LESSEE agrees to pay rent for the minimum term specified on the Lease Schedule,
        commencing on the first billing date and continuing until the EQUIPMENT is
        returned to LESSOR on expiration or earlier termination of the LEASE. Each
        periodic rental installment shall be the sum set forth on the applicable
        Lease
        Schedule, plus any applicable sales and/or use taxes, and shall, at
        LESSOR’s
        option,
        include a pro rata portion of that year’s
        property tax. Payments shall be made by LESSEE at LESSOR’s
        address
        set forth herein or as otherwise directed by LESSOR. LESSEE shall not abate,
        set
        off, deduct any amount or reduce any payment for any reason without the prior
        written consent of LESSOR. Payments are delinquent if not in LESSOR’s
        possession by the due date.

      

      3. COMMENCEMENT
        AND TERMINATION.
        The
        Lease term shall commence on acceptance of the EQUIPMENT by LESSEE. The LEASE
        shall terminate on the expiration of its minimum term in months as set forth
        in
        the Lease Schedule following the first billing date and the fulfillment of
        all
        obligations of LESSEE thereunder or upon notice by LESSOR in the case of
        LESSEE
        default. In the event LESSEE retains part or all of the EQUIPMENT beyond
        the
        term of the LEASE, then the terms of the LEASE shall stay in effect during
        such
        hold-over period, subject to LESSOR’s
        right
        on default to terminate the LEASE.

      

      4. NO
        WARRANTIES BY LESSOR. LESSOR makes no warranty, express, implied or statutory,
        as to any matter whatsoever, including, without limitation, the condition
        of the
        EQUIPMENT, its merchantability or its fitness for any particular purpose,
        and as
        to LESSOR, LESSEE leases the EQUIPMENT “AS
        IS”.

      

      5. CHOICE
        OF LAW, VENUE AND JURISDICTION. The LEASE shall be deemed to have been made
        and
        shall be construed in accordance with the laws of the State of Oregon. Any
        and
        all suits or actions to enforce or for breach of the LEASE must be instituted
        and maintained in Multnomah County, State of Oregon, and LESSEE expressly
        agrees
        to submit to personal jurisdiction in such venue.

      

      6. ASSIGNMENT.
        Without LESSOR’s
        prior written consent, LESSEE shall not assign, transfer, pledge, hypothecate
        or
        otherwise dispose of the LEASE, any interest therein, or sublease or loan
        the
        EQUIPMENT or permit it to be used by anyone other than LESSEE or
        LESSEE’s
        qualified employees.
        LESSOR
        may assign the LEASE and/or grant a security interest in the EQUIPMENT, in
        whole
        or in part, to one or more assignees, without notice to LESSEE.
        LESSOR’s
        assignee(s) and/or the secured party(ies) may reassign the LEASE, and/or
        such
        security interest without notice to LESSEE. Each such assignee and/or secured
        party shall have all rights of LESSOR under the LEASE, but no such assignee
        or
        secured party shall be bound to perform any obligation of LESSOR. LESSEE
        shall
        recognize each such assignment and shall not assert against any assignee
        and/or
        secured party any defense, counterclaim or setoff it may have against LESSOR.
        LESSEE acknowledges that any assignment or transfer by LESSOR shall not
        materially change LESSEE’s
        duties
        or obligations under the LEASE nor materially increase the burdens or risks
        imposed on LESSEE. 

      

      7. SELECTION
        AND ACCEPTANCE OF EQUIPMENT. LESSEE
        has selected both the EQUIPMENT and the supplier(s) from whom LESSOR is to
        purchase the EQUIPMENT. LESSEE shall arrange for transportation, delivery
        and
        installation of the EQUIPMENT at LESSEE’s
        expense. LESSEE acknowledges that it has examined the EQUIPMENT as fully
        as it
        desires. If the EQUIPMENT is not properly installed, its delivery is delayed,
        it
        does not operate as represented by the supplier(s) or it is unsatisfactory
        for
        any reason, LESSEE shall make no claim on account thereof against LESSOR.
        LESSEE
        authorizes LESSOR to insert in the LEASE or other documents the serial numbers
        and other identification information for the EQUIPMENT as determined by
        LESSOR.

      

      8. SUPPLIER/BROKER
        NOT AGENT OF LESSOR.
        LESSEE
        understands and agrees that neither the supplier(s), nor any salesperson
        or
        agent of the supplier(s), is an agent of LESSOR. LESSEE further agrees that
        if
        any transaction hereunder is presented to LESSOR by a lease broker, that
        such
        broker is acting as an agent of LESSEE and is not an agent of LESSOR. No
        salesperson or agent of the supplier(s) or broker(s) is authorized to waive
        or
        alter any term or condition of the LEASE, and no representation as to the
        EQUIPMENT or any matter by the supplier(s) or broker(s) shall in any way
        affect
        LESSEE’s
        duty to
        pay rent and perform its other obligations set forth in the LEASE.

      

      

      

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      9. SECURITY
        DEPOSIT.
        Security
        deposits received by LESSOR are to guarantee prompt and full payment of rent
        and
        the faithful and timely performance of all provisions of the LEASE by LESSEE.
        Security deposits secure all obligations of LESSEE to LESSOR under the LEASES
        or
        otherwise. Unless otherwise specified in the applicable Exhibit A to this
        Master
        Lease Agreement or in another instrument in writing signed by LESSOR and
        LESSEE,
        no interest will accrue on the security deposit to the account of LESSEE.
        If
        LESSEE is not in default under any agreement with LESSOR, the security deposit
        shall be returned to LESSEE per the terms specified in the applicable Exhibit
        A
        to this Master Lease Agreement or such other instrument in writing signed
        by
        LESSOR and LESSEE. In the event LESSEE defaults on any of its obligations
        to
        LESSOR, LESSOR shall have the right, but shall not be obligated, to apply
        the
        security deposit to cure such default, and if so applied, LESSEE shall, within
        ten (10) days, restore the security deposit to the full amount held by LESSOR
        prior to any application to cure such default.

      

      10. CANCELLATION
        FOR NON-DELIVERY.
        If,
by
        August 31, 2005,
        and
        providing the LEASE has been signed by LESSEE, the EQUIPMENT has not been
        delivered to and accepted by LESSEE and if LESSOR has accepted the LEASE
        by
        signing, LESSOR, by written notice to LESSEE, shall have the option at any
        time
        thereafter to terminate LESSOR’s
        obligation, if any, to lease the subject EQUIPMENT to LESSEE. 

      

      11. LEASE
        TERMINATION OPTIONS.
        Upon
        LEASE termination, and provided LESSEE is not in default, LESSEE will have
        an
        option to purchase all, but not less than all, of the EQUIPMENT, renew the
        term
        of the LEASE, or return all, but not less than all, of the EQUIPMENT to LESSOR,
        as set forth below:

      

      a) Purchase
        Option.
        If
        LESSEE exercises the option to purchase, then provided no Event of Default
        has
        occurred and is then continuing, LESSEE will at the expiration of the LEASE
        term, renewal term or extension, as the case may be, purchase all, but not
        less
        than all, of the EQUIPMENT. The purchase price shall be the
        EQUIPMENT’s
        then
        fair market value (“FMV”)
        plus
        any applicable sales or other transfer tax. FMV, as applied to a purchase
        option, unless otherwise defined in the Exhibit A to the Master Lease Agreement,
        will be determined by LESSOR based on a price a willing buyer would pay and
        a
        willing seller would accept (neither buyer nor seller being compelled to
        act)
        for the EQUIPMENT as installed and in use, giving due consideration to its
        condition, utility, revenue-producing capability, and replacement
        costs.

      

      b) Renewal.
        If
        LESSEE exercises the option to renew, then provided no Event of Default has
        occurred and is then continuing, LESSEE will at the expiration of the LEASE
        term
        renew the LEASE with respect to all, but not less than all, of the EQUIPMENT
        for
        a period of three (3) months. Such renewal will be upon the terms of the
        LEASE
        and the applicable Lease Schedule and the monthly rental amount will be the
        same
        as the contracted monthly payment amount on the applicable Lease
        Schedule.

      

      c) Return. On
        the
        expiration of the LEASE, or earlier termination of the LEASE, or on LESSEE
        default if LESSOR chooses, LESSEE, at its expense, freight prepaid with full
        original value declared and insured, shall immediately return all, but not
        less
        than all, of the EQUIPMENT unencumbered to LESSOR in good repair, condition
        and
        working order, ordinary wear and tear resulting from proper use thereof alone
        excepted, by properly packing it for shipment and delivering it to any
        reasonable place designated by LESSOR. LESSEE will also pay LESSOR an amount
        equal to five percent (5%) of the original invoice amount of the EQUIPMENT
        specified in the applicable Lease Schedule as a restocking fee.

      

      d) Extension/Automatic
        Renewal.
        In the
        event LESSEE has not exercised one of the three above options within five
        (5)
        days after the expiration of the LEASE, the LEASE will automatically renew
        and
        be extended for a period of six (6) months. Payments will continue to be
        paid in
        advance and the first payment due under the extension will be due no later
        than
        ten (10) days after the expiration of the LEASE.

      

      12. OWNERSHIP.
        The
        EQUIPMENT shall at all times remain the personal property of LESSOR. LESSEE
        will
        at all times protect and defend, at its own cost and expense, the ownership
        of
        LESSOR against all claims, liens and legal processes of creditors of LESSEE
        and
        other persons, and keep the EQUIPMENT free and clear from all such claims,
        liens
        and processes. If the LEASE is deemed at any time to be one intended as security
        or should LESSOR agree at any time to sell the EQUIPMENT to LESSEE, LESSEE
        agrees that the EQUIPMENT shall secure, in addition to the indebtedness set
        forth in the LEASE, indebtedness at any time owing by LESSEE to LESSOR.
        Notwithstanding any other terms and conditions of the LEASE, in the event
        that
        the EQUIPMENT includes computer software, LESSEE agrees that LESSOR has not
        had,
        does not have, nor shall have any title to such computer software. LESSEE
        may
        have executed or may execute a separate software license agreement(s) and
        LESSEE
        agrees that LESSOR is not a party to nor responsible for any performance
        with
        regard to such license agreement(s).

      

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      13. LOCATION
        AND RIGHT OF INSPECTION.
        The
        EQUIPMENT shall be kept at the location specified on the Lease Schedule or,
        if
        none is specified, at LESSEE’s
        address
        as set forth therein, and
        shall not be removed from there without LESSOR’s
        prior written consent.
        LESSOR
        shall have the right at any time during normal business hours and upon
        reasonable notice to inspect the EQUIPMENT and for that purpose have access
        to
        the location of the EQUIPMENT.

      

      14. USE
        AND OPERATION.
        LESSEE
        shall use the EQUIPMENT in a careful manner and shall comply with all laws
        relating to its possession, use and maintenance. LESSEE represents that the
        EQUIPMENT shall be used in its business or commercial concern and that no
        item
        of EQUIPMENT will be used for personal, family or household
        purposes.

      

      15.
         REPAIRS
        AND ALTERATIONS.
        LESSEE
        shall at its own expense maintain the EQUIPMENT in good repair, appearance
        and
        functional order. LESSEE agrees to comply with all maintenance schedules
        and
        procedures recommended by the manufacturer of the EQUIPMENT and, if available,
        purchase or otherwise enter into and adhere to dealer maintenance contracts.
        LESSEE
        shall not make any alterations, additions or improvements to the EQUIPMENT
        without LESSOR’s
        prior written consent. All alterations, additions or improvements made to
        the
        EQUIPMENT shall belong to LESSOR. 

      

      16. LOSS
        AND DAMAGE.
        LESSEE
        shall bear the entire risk of loss, theft, damage or destruction of the
        EQUIPMENT from any cause whatsoever and, as between LESSOR and LESSEE, unless
        otherwise agreed between the parties, LESSEE shall bear that risk of loss
        during
        transportation and delivery, and LESSEE shall arrange and pay for transportation
        and delivery. No loss, theft, damage or destruction of the EQUIPMENT shall
        relieve LESSEE of the obligation to pay rent or to comply with any other
        obligation under the LEASE. In the event of damage to any item of EQUIPMENT,
        LESSEE shall immediately place the same in good repair at LESSEE’s
        expense. If either LESSOR or LESSEE determines that any of EQUIPMENT is lost,
        stolen, destroyed or damaged beyond repair, LESSEE shall, at LESSEE’s
        option:
        (a) replace the same with like EQUIPMENT in good repair; acceptable to LESSOR;
        or (b) pay LESSOR a sum equal to (i) all amounts due by LESSEE to LESSOR
        under
        the LEASE up to the date of the loss, (ii) the unpaid balance of the total
        rent
        for the remaining term under the LEASE which is attributable to said item
        of
        EQUIPMENT, and (iii) an amount equal to eighteen percent (18%) of the original
        cost of said item of EQUIPMENT, which the parties agree shall represent the
        fair
        market value of LESSOR’s
        residual interest in said item of EQUIPMENT. The amounts in (ii) and (iii)
        shall
        be discounted to present value at a discount rate of six percent (6%) per
        annum.

      

      17. INSURANCE.
        LESSEE
        shall provide and maintain primary insurance against loss, theft, damage
        or
        destruction of the EQUIPMENT in an amount not less than the full replacement
        value of the EQUIPMENT, with loss payable to LESSOR and with zero deductible.
        At
        LESSOR’s
        request, LESSEE also shall provide and maintain primary comprehensive general
        all risk liability insurance. Such insurance shall include, but shall not
        be
        limited to, product liability coverage, insuring LESSOR and LESSEE, with
        a
        severability of interest endorsement or its equivalent, against any and all
        loss
        or liability for all damages, either to persons, property or otherwise, which
        might result from or happen in connection with the condition, use or operation
        of the EQUIPMENT, with such limits and with an insurer satisfactory to LESSOR.
        Each policy shall expressly provide that the insurance as to LESSOR shall
        not be
        invalidated by any act, omission or neglect of LESSEE and cannot be canceled
        without thirty (30) days written notice to LESSOR. As to each policy, LESSEE
        shall furnish to LESSOR a certificate of insurance from the insurer evidencing
        the insurance coverage required by this Section. If LESSEE fails to procure
        or
        maintain such insurance, LESSOR shall have the right, but not be obligated,
        to
        obtain such insurance as to LESSOR’s
        and/or
        LESSEE’s
        interests. In that event, LESSEE shall repay to LESSOR the cost thereof with
        the
        next payment of rent, together with late charges as set forth in Section
        24. For
        all EQUIPMENT leased by LESSOR to LESSEE, LESSEE irrevocably appoints LESSOR
        as
        LESSEE’s
        attorney-in-fact to make claim for, receive payment of, and execute and endorse
        all documents, checks or drafts received in payment for loss or damage under
        such insurance policy(ies). All obligations of this Section shall extend
        throughout the term of the LEASE and until the EQUIPMENT is returned to
        LESSOR.

      

      18. LIENS
        AND TAXES.
        LESSEE
        shall keep the EQUIPMENT free and clear of all levies, liens and encumbrances.
        LESSEE shall pay LESSOR, on or before the due date, all charges and taxes,
        local, state or federal, which may now or hereafter be imposed upon the
        ownership, leasing, rental, sale, purchase, possession or use of the EQUIPMENT,
        excluding, however, all taxes on the LESSOR’s
        income.
        If LESSEE fails to pay said charges or taxes to LESSOR when due, LESSOR shall
        have the right, but shall not be obligated, to pay said charges or taxes,
        and
        add the same to the next payment of rent, together with late charges as set
        out
        in Section 24. LESSEE agrees to pay a reasonable fee to LESSOR for the
        processing of property tax payments.

      

      19. INDEMNITY.
        LESSEE
        shall indemnify LESSOR against, and hold LESSOR harmless from, any and all
        claims, actions, proceedings, expenses, damages and liabilities, including
        attorney fees, arising in connection with the EQUIPMENT, including, without
        limitation, its manufacture, selection, purchase, delivery, possession, use,
        operation or return and the recovery of claims under insurance policies thereon.
        This indemnity provision shall survive termination, cancellation or breach
        of
        the LEASE.

      

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      20. MISCELLANEOUS
        REPRESENTATION OF LESSEE.
        LESSEE
        and any guarantor of the LEASES shall provide LESSOR with such corporate
        resolutions, financial statements, and all other documents regarding the
        financial or credit condition of LESSEE or any guarantor, which LESSOR may
        request from time to time. LESSEE represents and warrants that all credit
        and
        financial information submitted to LESSOR in connection with the LEASES is
        materially true and correct in all respects. LESSEE agrees that LESSOR and/or
        its assigns may at any time investigate the credit-worthiness of LESSEE using
        all available means.

      

      21. FINANCIAL
        STATEMENTS AND FIXED ASSET LISTS.
        So long
        as any monies are owed by LESSEE to LESSOR under the terms of any LEASE,
        and/or
        until all terms under each LEASE have been fulfilled, LESSEE will provide
        LESSOR
        with financial statements on a monthly basis and will provide LESSOR with
        fixed
        asset lists on a quarterly basis. LESSEE represents and warrants that all
        credit
        and financial information submitted to LESSOR in connection with the LEASE
        is
        materially true and correct in all aspects.

      

      22. UNIFORM
        PERSONAL PROPERTY LEASING ACT. To
        the
        extent permitted by applicable law, and to the extent the LEASE is governed
        by
        the law of a jurisdiction which has adopted a version of the Uniform Personal
        Property Leasing Act (also known as “Uniform
        Commercial Code -
        Leases”),
        the
        parties hereto agree that: (1) the provisions thereof conferring remedies
        upon a
        LESSEE or imposing obligations upon a LESSOR shall not apply to the LEASE,
        its
        interpretation, or its enforcement; and (2) each LEASE is a Finance Lease
        as
        defined by Uniform Commercial Code -
        Section
        2A -
        103(g).
        LESSEE acknowledges that LESSEE has reviewed and approved any written Supply
        Contract(s) covering the EQUIPMENT purchased from the Supplier(s) for lease
        to
        LESSEE. LESSEE further acknowledges that LESSOR has informed or advised LESSEE,
        in writing, either previously or in the LEASE, of the following: (a) the
        identity of the Supplier(s); (b) that the LESSEE may have rights under the
        Supply Contract(s); and (c) that the LESSEE may contact the Supplier(s) for
        a
        description of any such rights LESSEE may have under the Supply
        Contract(s).

      

      23. FINANCING
        STATEMENTS.
        At the
        request of LESSOR, LESSEE will join LESSOR in executing financing statements
        pursuant to the Uniform Commercial Code. For any and all EQUIPMENT leased
        by
        LESSOR to LESSEE, LESSEE hereby authorizes LESSOR or its agents or assigns
        to
        execute financing statements on LESSEE’s
        behalf,
        and to file such financing statements in all jurisdictions where such execution
        and filing is permitted. It is agreed that a carbon or photocopy of any
        financing statement may be filed in place of the original and that a copy
        hereof
        may be filed as a financing statement.

      

      24. LATE
        CHARGES AND INTEREST.
        If
        LESSEE fails to pay LESSOR any amount when due or, in the case of an amount
        due
        to one other than LESSOR, if LESSOR pays an amount on LESSEE’s
        behalf,
        then LESSEE shall pay LESSOR a late charge of five percent (5%) of such amount
        for each calendar month or part thereof for which rent or other sum shall
        be
        delinquent or shall have been paid by LESSOR on LESSEE’s
        behalf.
        LESSEE also agrees to pay LESSOR the sum of thirty-five dollars ($35.00)
        for
        each check of LESSEE’s
        returned uncollectible by LESSEE’s
        bank.
        The amount of any charges assessed hereunder shall be added to and become
        part
        of the next rental payment or shall be separately invoiced, at
        LESSOR’s
        option.
        Interest shall accrue on any unpaid or unreimbursed amounts at the maximum
        rate
        allowable by law or eighteen percent (18%), whichever is less, from the due
        date
        until paid by LESSEE.

      

      25. TIME
        IS OF THE ESSENCE.
        Time is
        of the essence of the LEASE. This provision shall not be waived by the
        acceptance on occasion of late or defective performance.

      

      26. DEFAULT.
        LESSEE
        shall be in default if (a) LESSEE shall fail to pay rent or any other amount
        provided for under the LEASE within ten (10) days after the same becomes
        due and
        payable; or (b) LESSEE fails to observe, keep or perform any other provision
        of
        the LEASE or of any other agreement with LESSOR, and such failure shall continue
        for a period of ten (10) days; or (c) LESSEE shall abandon the EQUIPMENT;
        or (d)
        except as inconsistent with Federal Bankruptcy Law, any proceeding in
        bankruptcy, receivership or insolvency shall be commenced against LESSEE
        or its
        property or any guarantor or such guarantor’s
        property, LESSEE or any guarantor files voluntarily for bankruptcy or
        reorganization, or LESSEE or any guarantor makes an assignment for the benefit
        of its creditors; or (e) LESSEE or any guarantor makes any material
        misrepresentation or materially false statement as to its credit or financial
        standing in connection with the execution or the further performance of the
        LEASE; or (f) any attachment or execution be levied on any of LESSEE’s
        property; or (g) LESSEE permits any other entity or person to use the EQUIPMENT
        without the prior written consent of LESSOR; or (h) in the business and affairs
        of LESSEE or any guarantor there occurs a material change which shall impair
        the
        security of the EQUIPMENT or increase LESSOR’s
        credit
        risk involved in the LEASE; or (i) LESSEE moves any EQUIPMENT under LEASE
        to any
        location outside of the United States and/or moves any EQUIPMENT under LEASE
        to
        any other location not previously authorized in writing by LESSOR.

      

      

      ///

      ///

      ///

      

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      27.
         REMEDIES.
        In the
        event of LESSEE default, LESSOR shall have the right and option, but shall
        not
        be obligated, to exercise any one or more of the following remedies, which
        remedies or any of them may be exercised by LESSOR without notice to LESSEE
        and
        without any election of remedies by LESSOR and, if the obligations of LESSEE
        are
        guaranteed by a guarantor or guarantors, LESSOR shall not be obligated to
        proceed against any such guarantor or guarantors before resorting to its
        remedies against LESSEE under the LEASE: (a) to the extent permitted under
        applicable law, LESSOR and/or its agents may, without notice or legal process,
        enter onto any premises of or under control of LESSEE or any agent of LESSEE
        where the EQUIPMENT may be or is believed to be located and repossess the
        EQUIPMENT, disconnecting and separating all thereof from any other property,
        using all means necessary or permitted by law, LESSEE hereby expressly waiving
        any right of action of any kind whatsoever against LESSOR arising out of
        such
        access to or removal, repossession or retention of the EQUIPMENT; (b) LESSOR
        may
        declare all sums due and to become due under the LEASE immediately due and
        payable and institute litigation to collect the same; (c) LESSOR may institute
        litigation to collect all rents and other amounts due as of the date of such
        default together with any sums that may accrue up to the date of trial; (d)
        LESSOR may institute litigation to specifically enforce the terms of the
        LEASE;
        (e) LESSOR may terminate the LEASE; (f) LESSOR may require LESSEE to return
        the
        EQUIPMENT pursuant to Section 11; and/or (g) LESSOR may pursue any other
        remedy
        now, or hereafter, existing in law or equity. However, damages for any future
        rentals and/or LESSOR’s
        residual value in the EQUIPMENT shall be discounted to present value at a
        discount rate equal to six percent (6%) per annum. In the event of any default
        by LESSEE under the LEASE, LESSOR may at its sole discretion, although it
        shall
        not be obligated to do so, sell the EQUIPMENT at a private or public, cash
        or
        credit sale, or may re-let the EQUIPMENT for a term and a rental which may
        be
        equal to, greater than, or less than provided in the LEASE. Any proceeds
        of sale
        or any rental payments received under the new lease, less LESSOR’s
        expenses of taking possession, reasonable attorney fees and/or collection
        fees,
        storage and/or reconditioning costs, the costs of sale or re-letting, and
        less
        LESSOR’s
        FMV
        residual in the EQUIPMENT, shall be applied to LESSEE’s
        obligations under the LEASE, and LESSEE shall remain liable for the balance.
        LESSEE’s
        liability shall not be reduced by reason of any failure of LESSOR to see
        or
        re-let.

      

      28. EXPENSES
        OF ENFORCEMENT, ATTORNEY FEES.
        In the
        event of any default, LESSEE shall pay LESSOR a sum equal to all expenses,
        including attorney fees, if any, incurred by LESSOR in connection with the
        enforcement of any of LESSOR’s
        remedies and all expenses of repossessing, storing, repairing, and selling
        or
        re-letting the EQUIPMENT together with interest on such amount at the maximum
        rate allowable by law or eighteen percent (18%), whichever is less, from
        the
        date such amount is paid by LESSOR. In the event litigation is instituted
        to
        enforce any of the terms of the LEASE, the prevailing party shall be entitled
        to
        recover from the other party such sum as the court may judge reasonable as
        attorney fees at trial and upon appeal, in addition to all other sums provided
        for by law.

      

      29. SUCCESSOR
        INTERESTS.
        Subject
        to any prohibition against assignment contained herein, each LEASE shall
        be
        binding upon and inure to the benefit of the heirs, successors and assigns
        of
        the parties. As used in each LEASE, the term “LESSOR”
        shall
        include any assignee or secured party of LESSOR where appropriate. 

      

      30.
         MULTIPLE
        LESSEES.
        If more
        than one LESSEE is named herein, the reference to LESSEE refers to each and
        the
        liability of each shall be joint and several. 

      

      31. NOTICES.
        Any
        written notice or demand under the LEASE may be given to a party by mail
        at its
        address set forth on the LEASE Schedule or at such address as the party may
        provide in writing from time to time. Notice and demand so made shall be
        effective when deposited in the United States mail duly addressed with postage
        prepaid.

      

      32. WAIVER.
        Failure
        of LESSOR at any time to require performance of any provision of the LEASE
        shall
        not limit any right of LESSOR to enforce that provision, nor shall any waiver
        by
        LESSOR of any breach of any provision be a waiver of any succeeding breach
        of
        that provision or a waiver of that provision itself or any other provision.
        

      

      33. NUMBER
        AND CAPTIONS.
        As used
        herein, the singular shall include the plural, and the plural the singular.
        All
        captions used herein are intended solely for convenience of reference and
        shall
        in no way limit or explain any of the provisions of the LEASE.

      

      34. DUPLICATE
        ENFORCEABLE AS ORIGINAL.
        LESSEE
        hereby consents to the use of each original Lease Schedule, along with a
        photocopy of the fully executed Master Lease Agreement, for all purposes
        including, but not limited to, evidence the applicable LEASE in litigation
        or
        any other judicial proceeding.

      

      35. SEVERABILITY.
        If any
        provision of the LEASE is held invalid, such invalidity shall not affect
        other
        provisions, which can be given effect without the invalid
        provision.

      

      ///

      ///

      

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      36. ENTIRE
        AGREEMENT. This Master Lease Agreement and each Lease Schedule, represent
        the
        entire, final and complete agreement of the parties pertaining to the lease
        of
        the EQUIPMENT under such LEASE and supersedes or replaces all written and
        oral
        agreements heretofore made or existing by and between the parties or their
        representatives insofar as the lease of the EQUIPMENT is concerned, and no
        modification or addition to the LEASE shall be binding unless agreed by a
        corporate officer, against whom enforcement is sought.

      

      

      

      PLEASE
        REQUEST ANY CHANGES

      

      LESSEE
        ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS ALL OF THE TERMS AND CONDITIONS
        CONTAINED IN THIS MASTER LEASE AGREEMENT AND THAT THESE TERMS AND CONDITIONS
        SHALL GOVERN EACH LEASE ENTERED INTO BY THE PARTIES.

      

      

      LESSOR
        Date ______________                                 LESSEE
        Date X
5-7-05

      

      VENCORE
        SOLUTIONS LLC                            ISORAY
        MEDICAL,
        INC.,

       A
        DELAWARE CORPORATION

       
        FULL LEGAL NAME OF LESSEE

      

      

      BY:
/s/
        Chris
        Fenner                                              
                    BY:
        X
        /s/ Roger Girard CEO & Chairman

                                           
                     Roger
        Girard (Title)

      

      THIS
        MASTER LEASE AGREEMENT WILL NOT BIND         BY:
        /s/ Roger Girard CEO/Chairman

      LESSOR
        OR
        BECOME EFFECTIVE UNTIL AND UNLESS     
        (Title)

      LESSOR
        ACCEPTS IT BY SIGNING ABOVE.     BY:
        X /s/
        Shari P. Girard    

      Witness               (Title)

       

       
        X Shari
        P. Girard    

      PRINT
        NAME OF WITNESS

      Master
        Lease Agreement                            
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      VENCORE
        SOLUTIONS LLC

      

      VENCORE
        SOLUTIONS LLC

      4500
        SW
        Kruse Way, Suite 350 ◊
        Lake
        Oswego, OR 97035

      503.699.4997
        ◊
        FAX:
        503.675.3137

      

      

      EXHIBIT
        A -
        1

      TO

      MASTER
        LEASE AGREEMENT NUMBER

      5209

      

      

      LESSEE
        NAME AND ADDRESS         LESSOR
        NAME AND ADDRESS

      

      ISORAY
        MEDICAL, INC., A DELAWARE CORPORATION    
VENCORE
        SOLUTIONS LLC

      350
        HILLS STREET             4500
        SW KRUSE WAY

      SUITE
        106                
SUITE
        350

      RICHLAND,
        WA 99354          LAKE
        OSWEGO, OR 97035

      

      

      
        	
                Date
                  of Lease of Line Approval:

              	
                April
                  18, 2005

              	 
	 	 	 
	
                Funding
                  Expiration Date:

              	
                July
                  31, 2005

              	 
	 	 	 
	
                Approved
                  Amount of Lease Line:

              	
                $430,000.00

              	 
	 	 	 
	
                Minimum
                  Funding Amount:

              	
                $25,000.00

              	 
	 	 	 
	
                Initial
                  Monthly Rent Factor:

              	
                1.765%,
                  payable in advance for the first 5 payments.

              	 
	 	
                3.70%,
                  payable in advance for the remaining 31 payments.

              	 

      

      

      

      Per
        each
        0.25% decrease or increase in the Prime Lending Rate, as published in the
        Wall
        Street Journal, the Monthly Rent Factor will decrease or increase by 0.007%
        respectively. At no time will the Monthly Rent Factor decrease or increase
        by
        more than 0.028% from the Initial Monthly Rent Factor. The Monthly Rent Factor
        for each Lease Schedule will be fixed at the time it is executed.

      

      
        	
                Prime
                  Lending Rate:

              	
                5.75%
                  (Effective March 31, 2005)

              	 
	 	 	 
	
                Initial
                  Lease Term:

              	
                36
                  Months

              	 
	 	 	 
	
                Advance
                  Payments:

              	
                Lessee
                  will pay Lessor the first payment at the time each individual
                  Lease

              	 
	
                Schedule
                  is executed.

              	 	 
	 	 	 
	
                Documentation
                  Fees:

              	
                0.50%
                  of the total equipment invoice amount included on the individual
                  Lease

              	 
	
                Schedule,
                  or $250.00, whichever is greater.

              	 	 
	 	 	 
	
                Security
                  Deposit Percentage:

              	
                15%
                  per each individual Lease Schedule, to be paid at the time each
                  individual
                  Lease Schedule is executed.

              	 
	 	 	 
	
                Security
                  Deposit Amount:

              	
                $64,500.00
                  (based on Approved Amount of Lease Line)

              	 
	 	 	 
	
                Security
                  Deposit Releases:

              	
                Before
                  releasing Security Deposits at Lease end the following three
                  conditions

              	 
	 	
                must
                  exist: 1) Lessor must be in receipt of Lessee’s
                  financial statements (Income/Profit & Loss Statement, Balance
                  Sheet,

              	 

      

      

      

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      Cash
        Flow
        Statement and Fixed Asset List) that are no more than 30 days old; 2) Lessee
        must demonstrate that they have cash reserves to service their debt for at
        least
        the subsequent six months; and 3) all payments must have been paid as agreed
        and
        all Lease Schedules must be current.

      

      Minimum
        Renewal Rent Factor:  3.70%
        for
        a minimum of three months.

      

      Eligible
        Equipment:    Premier
        Technology Hot Cell. Up to 10% of the Approved Amount of the Lease line may
        be
        compromised of Soft Costs (“SOFT”)
        where
        SOFT will include, but not be limited to, delivery costs, design and engineering
        costs, extended warranties, installation costs, labor, leasehold improvements,
        maintenance and upgrade contracts, sales tax, software, trade show booths,
        training, and upgrades to any equipment in which Lessor does not hold a security
        interest. For any given Lease Schedule, SOFT shall not exceed 10% of the
        scheduled amount. No equipment may be shipped to and/or located at a co-location
        facility or any facility other than Lessee’s
        principal place of business, unless the co-location facility first provides
        a
        Lessor with a waiver acknowledging Lessor’s
        ownership of the equipment. All equipment to be leased must be approved by
        Lessor.

      

      Early
        Termination Option:   Lessee
        may terminate the Lease Schedules early providing: i) all payments on all
        Lease
        Schedules are current at the time a Lease Schedule is terminated early, or
        ii)
        all Lease Schedules are terminated early and at the same time. Upon early
        termination, Lessee will be required to pay: i) all amounts due by Lessee
        to
        Lessor under the Lease up to the date of the early termination, ii) the unpaid
        balance of the total rent for the remaining term discounted to present value
        at
        a discount rate of six percent (6%) per annum. Upon Early Termination, Lessee
        will be subject to the Lease Termination Options from Paragraph 11 found
        in the
        Master Lease Agreement. The FMV shall not exceed 15% of the original Lease
        Amount. Lessee shall be responsible for any and all taxes which are due at
        the
        termination of each Lease Schedule.

      

      End
        of Lease Options:   Fair
        Market Value (“FMV”)
        shall
        not exceed 15% of the Equipment cost on each individual Lease
        Schedule.

      

      Condition
        Precedent to Funding:  Prior
        to
        funding any Lease Schedules or issuing any Purchase Orders, Lessee must issue
        to
        Lessor a Warrant to Purchase Shares of Common Stock equivalent to 6,757 Shares
        of Common Stock at $3.50 per Share with an expiration date of four (4) years
        from its Date of Issuance in a form acceptable to Lessor.

      

      The
        terms
        and information set forth above are a part of the Master
        Lease Agreement Number 5209,
        entered
        into by and between VenCore Solutions LLC (“Lessor”)
        and the
        Lessee set forth above.

      

      The
        undersigned representative of Lessee affirms that he or she has read and
        understands this Exhibit A -
        1 to
        Master Lease Agreement Number 5209 and is duly authorized to execute this
        Exhibit A -
        1 on
        behalf of the Lessee, and that, if Lessee is a corporation, this Exhibit
        A
-
        1 is
        entered into with consent of Lessee’s
        Board
        of Directors and stockholders, if so required.

      

      LESSOR:               
LESSEE:

      

      VENCORE
        SOLUTIONS LLC          ISORAY
        MEDICAL, INC.,

                  A
        DELAWARE
        CORPORATION

      

      By:
        /s/ Chris
        Fenner                                                               
  By:
        X
/s/
        Roger Girard

      

      Name:
        Chris Fenner                                 
        Name:
        ROGER
        GIRARD

      

      Title:
        Managing
        Director                                                      
  Title:
        CEO
        & CHAIRMAN

      

      Date:
        _______________________________   Date:
        X
        5-7-05

      

      

      

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      VENCORE
        SOLUTIONS LLC

      

      VENCORE
        SOLUTIONS LLC

      4500
        SW
        Kruse Way, Suite 350 ◊
        Lake
        Oswego, OR 97035

      503.699.4997
        ◊
        FAX:
        503.675.3137

      

      

      EXHIBIT
        B

      TO

      MASTER
        LEASE AGREEMENT NUMBER

      5209

      

      

      LESSEE
        NAME AND ADDRESS LESSOR
        NAME AND ADDRESS

      

      
        	
                ISORAY
                  MEDICAL, INC., A DELAWARE CORPORATION

              	
                VENCORE
                  SOLUTIONS LLC

              
	
                350
                  HILLS STREET

              	
                4500
                  SW KRUSE WAY

              
	
                SUITE
                  106

              	
                SUITE
                  350

              
	
                RICHLAND,
                  WA 99354

              	
                LAKE
                  OSWEGO, OR 97035

              
	 	 

      

      

      

      The
        undersigned acknowledges that it is the Lessee pursuant to the above-referenced
        Lease and has read the terms thereof, and specifically fully understands
        Section
        7 -
        SELECTION AND ACCEPTANCE OF EQUIPMENT, Section 15 -
        REPAIRS AND ALTERATIONS and Section 16 -
        LOSS AND DAMAGE.

      

      The
        undersigned further acknowledges and expressly understands that Lessor, VENCORE
        SOLUTIONS LLC (hereinafter “VENCORE”),
        is in
        no way responsible for the availability, delivery, installation, service,
        maintenance or repair of any of the equipment described in the Lease. The
        undersigned agrees that failure of the supplier or the installer of said
        equipment to deliver or install it, or failure of the equipment to perform
        properly or failure of the supplier and/or installer of said equipment to
        render
        service and/or make necessary repairs shall not be deemed grounds for nonpayment
        of any rental payments, nor for non-performance of any term and/or condition
        of
        the Lease whatsoever. 

      

      The
        undersigned further acknowledges and it is expressly understood that any
        agreement for the availability, installation, service, maintenance or repair
        of
        said equipment is strictly between the supplier and the undersigned and that
        VENCORE shall be held harmless by the undersigned for any loss whatsoever
        which
        may be occasioned by any problem with the availability, installation, service,
        maintenance or repair of said equipment or from any claim of any nature made
        by
        the undersigned or any other party.

      

      The
        undersigned agrees that even though the equipment included in the Lease has
        not
        been either delivered nor installed, the undersigned shall begin and continue
        to
        make payments required by the terms of the Lease as if the equipment had
        been
        delivered and installed on the date thereof. The undersigned further
        acknowledges that VENCORE has made no representations nor warranties regarding
        when, if ever, said equipment is to be delivered or installed.

      

      THE
        UNDERSIGNED HEREBY ACKNOWLEDGES THAT THE ABOVE HAS BEEN READ AND THAT A
        COMPLETED, LEGIBLE COPY OF THE SAME HAS BEEN RECEIVED.

       

      

      
        	 LESSEE:	 LESSOR:
	 ISORAY
                MEDICAL, INC., 	 VENCORE
                SOLUTIONS LLC
	 A
                DELAWARE CORPORATION	 
	
                By:
                  X
                  /s/ Roger Girard

              	
                By:
                  /s/ Chris Fenner

              
	
                Roger
                  Girard

              	 
	 	 
	
                Title:
                  CEO
                  & CHAIRMAN

              	
                Title:
                  Managing Director

              
	 	 
	
                Date
                  x 5-7-05

              	
                Date:
                  ______________

              

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      SECURITY
        AGREEMENT

       

      It
        is
        hereby agreed this X
        7
day
        of
        X
        May
20X05,
        by and
        between IsoRay, Inc., a Delaware Corporation of 350 Hills Street, Suite 106,
        Richland, WA 99354 (“Debtor”)
        and
        VENCORE SOLUTIONS LLC of 4500 SW Kruse Way, Suite 350, Lake Oswego, OR 97035
        (“Secured
        Party”):

      

      1. To
        secure
        the payment, with interest thereon, and the performance and fulfillment of
        all
        Obligations (as hereinafter defined) of Debtor to Secured Party, Debtor hereby
        grants a Secured Party a security interest in all equipment of every kind
        and
        nature, together with all contents, attachments, proceeds, products and
        replacements thereof and substitutions and accessions thereto (hereinafter
        collectively called “Property”),
        wherever located, now or hereafter belonging to Debtor. Specifically
        excluded from this Security Agreement will be any equipment financed or leased
        by another financial institution (“Creditor”)
        wherein a contract for the financing of such equipment exists between Creditor
        and Debtor and wherein Creditor has perfected Creditor’s
        lien interest in such equipment by the recording of a UCC Financing Statement
        in
        Debtor’s
        state of incorporation.

      

      2. The
        term
“Obligations”
        as used
        herein shall mean and include any and all contract or account payables, leases,
        loans, advances, payments, extensions of credit, endorsements, guaranties,
        benefits, and financial accommodations heretofore and hereafter made, granted,
        or extended by Secured Party to Debtor or which Secured Party has or will
        become
        obligated to make, grant or extend to or for the account of Debtor; any and
        all
        interest, commissions, obligations, liabilities, indebtedness, charges, and
        expenses heretofore and hereafter chargeable against Debtor by Secured Party
        or
        owing by Debtor to Secured Party or upon which Debtor may be or have become
        liable as endorser or guarantor; any and all renewals or extensions of any
        of
        the foregoing, no matter how or when arising and whether under any present
        or
        future agreement or instrument between Debtor and Secured party or otherwise,
        and the amount due upon any notes or other instruments or documents given
        to or
        received by Secured Party for or on account of the foregoing; and the
        performance and fulfillment by Debtor of all the terms, conditions, promises,
        covenants, provisions, and warranties contained in the Agreement and in any
        note, instrument, or document secured hereby and in any present or future
        agreement or instrument between Debtor and Secured Party.

      

      3. Debtor
        covenants and warrants to Secured Party that:

      

      a)
        Debtor
        is the lawful owner of the Property and has the sole right and lawful authority
        to make this Agreement; the Property and every part thereof is free and clear
        of
        all liens and encumbrances of every kind and description (except any held
        by
        Secured Party); and Debtor will warrant and defend the Property against all
        claims and demands of all persons. Secured Party is hereby authorized to
        file
        one or more financing statements, signed only by Secured Party, and/or a
        reproduction hereof as a financing statement in order to perfect its security
        interest.

      

      b)
        Debtor
        will keep the Property free and clear of all attachments, levies, taxes,
        and
        lien encumbrances of every kind, nature, and description; Debtor, at its
        own
        cost and expense, will maintain and keep the Property in a good state of
        repair;
        and Debtor will not sell, assign, mortgage, lease, pledge, or otherwise dispose
        of the Property or any interest therein without the prior written consent
        of
        Secured Party. 

      

      c.)
        Debtor will insure the Property in the name of Secured Party or its assignee
        against loss or damage by fire and extended coverage perils, burglary and
        pilferage, in amounts and under policies acceptable to Secured Party, the
        proceeds to be payable to Secured Party or assignee. All premiums thereon
        shall
        be paid by Debtor. Debtor hereby irrevocably appoints Secured Party as
        Debtor’s
        Attorney-in-Fact to make claim for, receive payment of, and execute and endorse
        all documents, checks, or drafts received in payment for any loss or damage
        under any of said insurance policies.

      

      d)
        The
        Obligations are undertaken for commercial purposes only and the Property
        is in
        the possession of Debtor at is principal place of business, or, if not, at
        a
        location which has been agreed to by Secured Party prior to the execution
        hereof. Debtor will not remove the Property from said location without prior
        written consent of Secured Party, nor change its present business location(s)
        or
        name(s) without at least thirty days prior written notice to Secured Party.
        At
        all times, Debtor will allow Secured Party or its representatives free access
        to
        and right of inspection of the Property. At Secured Party’s
        request, Debtor shall furnish its current financial statements to Secured
        Party.

      

      

      

      

                                                                                  /s/
        REG

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      e)
        Debtor
        shall comply (so far as may be necessary to protect the Property and the
        lien of
        this Agreement thereon) with all of the terms and conditions of leases,
        mortgages, or deeds of trust covering the premises where the Property, or
        any
        portion thereof is located. Debtor shall also comply with any orders,
        ordinances, laws, or statutes of any city, state, or other governmental entity
        having jurisdiction with respect to the premises or the conduct of business
        thereon. 

      

      4. Debtor
        shall be in default upon occurrence of any of the following (hereinafter
        referred to as “Event
        of
        Default”):

      

      a)
        Debtor
        shall cease doing business, shall become insolvent, or make an assignment
        for
        the benefit of creditors; 

      

      b)
        Bankruptcy proceedings or proceedings for arrangement or reorganization under
        any Bankruptcy Act or proceeding for the appointment of a receiver, trustee,
        liquidator, or custodian for Debtor of any of Debtor’s
        property shall be commenced by or against Debtor;

      

      c)
        Debtor
        shall fail punctually and faithfully to fulfill, observe, or perform any
        of the
        Obligations; or 

      

      d)
        Any of
        the warranties, covenants, or representations made to Secured Party by Debtor
        are to become untrue or incorrect in any adverse respect, or if there shall
        be a
        substantial change in the management, ownership, or control of
        Debtor.

      

      5. If
        Debtor
        shall be in default hereunder, Secured Party shall have the right to pursue
        any
        other remedy now, or hereafter, existing in law or equity, without prior
        notice
        or demand, and specifically may enforce any one or more of the following
        remedies, successively, alternately, or concurrently, without waving its
        right
        to enforce any other remedy or any Obligation according to its
        terms:

      

      a)
        To the
        extent Debtor has failed to perform or fulfill an Obligation, Secured Party
        may
        perform or fulfill the same, or cause the performance of fulfillment thereof.
        The costs and expenses of performance or fulfillment, including reasonable
        attorney fees, shall be a lien on the Property, added to the amount of the
        Obligations, and payable on demand.

      

      b)
        Secured Party may take possession of the Property wherever it may be, and
        enter
        any of the premises of Debtor with or without process of law, and search
        for,
        take possession of, remove, or keep and store the same in said premises,
        without
        liability for trespass nor charge for storage of the Property, until sold.
        Debtor expressly waives any right to notice or hearing in any action to recover
        possession of any or all of the Property.

      

      c)
        Secured Party may sell the Property or any part thereof and all of
        Debtor’s
        equity
        of redemption therein, if any, at public or private sale, without notice
        or
        advertisement (such notice or advertisement being expressly waived by Debtor),
        for cash or on credit, and on such terms as Secured Party may in its sole
        discretion elect. The proceeds of any sale shall be applied first to pay
        all
        costs, expenses, and changes for repossessing, storing, repairing, selling
        and/or leasing the Property, including attorney fees, and second to the payment,
        partly or entirely, of the Obligations at Secured Party may in its sole
        discretion elect. Debtor shall remain liable to Secured Party for any
        deficiency. 

      

      d)
        Secured Party may, upon filing suit to enforce or preserve its rights under
        this
        Agreement or at any time while such suit is pending, apply for and secure
        the
        appointment of a receiver to take possession of and operate and manage
        Debtor’s
        business or the Property and the income, rents, and proceeds therefrom. The
        receiver may be an employee of Secured Party. Debtor hereby expressly waives
        the
        requirement that Secured Party or the receiver post bond upon the appointment
        of
        such receiver.

      

      e)
        Secured Party may appropriate and apply toward the payment of the Obligations
        any and all balances, sums, property, credits, deposits, accounts, reserves,
        collections, drafts, notes, or checks in or coming into Secured
        Party’s
        possession and belonging or owing to Debtor. For such purposes, Secured Party
        may endorse the name of Debtor on any such instrument made payable to Debtor
        for
        deposit, discount, or collection.

      

      6. Debtor
        will indemnify and save Secured Party harmless from all loss, damage, liability,
        and expense, including reasonable attorney fees, that Secured Party may sustain
        or incur to obtain or enforce payment, performance, or fulfillment of any
        of the
        Obligations; in the enforcement or foreclosure of this Agreement; or in the
        prosecution or defense of any action or proceeding either against Debtor
        or
        against Secured Party concerning any matter growing out of or connected with
        this Agreement and/or any of the Obligations or Property.

      

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      7. This
        Agreement cannot be changed or terminated orally. With respect to Secured
        Party,
        only in writing, signed by an officer of Secured Party, shall be effective
        to
        change, modify, waive, or terminate any of the Obligations, this Agreement,
        or
        any other agreement between Debtor and Secured Party. If Debtor is in default
        hereunder, and Secured Party fails to demand full payment, performance, or
        fulfillment hereunder or fails to otherwise exercise any right, privilege,
        remedy or option available to Secured Party, such shall not be deemed a waiver
        of any right of Secured Party. The acceptance by Secured Party of any payments
        subsequent to such default shall not be deemed a waiver of any rights of
        Secured
        Party.

      

      8. This
        Agreement may be assigned by Secured Party along with any and all Obligations
        without notice to Debtor. Upon such assignment, Debtor agrees not to assert
        against any assignee any defense, set-off, recoupment, claim, counterclaim,
        or
        cross-complaint which Debtor may have against Secured Party, whether arising
        hereunder or otherwise. All rights, remedies, options, privileges, and elections
        given to Secured Party hereunder or otherwise inure to the benefit of Secured
        Party or any assignee, and their respective successors and assigns. Debtor
        may
        not transfer, pledge, or assign its interests and obligations hereunder without
        the prior written approval of Secured Party. 

      

      9. This
        Agreement shall not adversely affect any rights of Secured Party under any
        other
        security agreement. This Agreement shall not be construed as a waiver of
        any of
        the terms and provisions of any other agreement, guaranty, or endorsement,
        all
        of which remain and continue in full force and effect.

      

      10. Any
        notices given or required hereunder shall be in writing, and shall be delivered
        in person or shall be mailed to a party at its last known address. Reasonable
        notification hereunder shall be any notification given or sent at least five
        (5)
        days prior to the event for which such notification is sent.

      

      11. If
        Debtor
        shall be in default hereunder, Debtor shall pay Secured Party a sum equal
        to all
        expenses, including attorney fees, if any, incurred by Secured Party in
        connection with the enforcement of any of Secured Party’s
        remedies, together with all expenses of repossessing, storing, repairing
        and
        selling and/or leasing the Property. If litigation is instituted to enforce
        any
        of the terms of this Agreement, the prevailing party shall be entitled to
        recover such sum as the court may judge reasonable as attorney fees and costs
        of
        litigation, trial, and appeal, in addition to all other sums provided for
        by
        law.

      

      12. It
        is
        intended that each and every provision of this Agreement be fully effective
        and
        enforceable according to its terms. If, however, any one or more provisions
        hereof are in conflict with any statute or law and therefore are not valid
        or
        enforceable, then each such provision shall be deemed null and void, but
        to the
        extent of such conflict only and without invalidating or affecting the remaining
        provisions hereof.

      

      13. The
        Agreement shall be deemed to have been made and shall be construed and enforced
        in accordance with the laws of the State of Oregon. Any and all suits or
        actions
        for any and every breach hereof shall be instituted and maintained in Multnomah
        County, Oregon.

      

      

      IN
        WITNESS WHEREOF, this Agreement has been executed effective the date first
        above-written.

       

      
        	 	
                SECURED
                  PARTY: DEBTOR

              	ISORAY MEDICAL,
                INC., 
	 	VENCORE
                SOLUTIONS
                LLC  	A DELAWARE
                CORPORATION 
	 	
                By:
                  /s/ Chris Fenner

              	
                By:
                  X
                  /s/ Roger Girard

              
	 	 	
                Roger
                  Girard

              
	 	 	 
	 	
                Title:
                  Managing Director

              	
                Title:
                  CEO & CHAIRMAN

              
	 	 	 
	 	
                Date:_____________________________

              	
                Date:
                  X
                  5-07-05 

              

      

      

      

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      VENCORE
        SOLUTIONS LLC

      Financial
        Services and Emerging Growth Companies Coming Together

      

      VENCORE
        SOLUTIONS LLC

      4500
        SW
        Kruse Way, Suite 350 ◊
        Lake
        Oswego, OR 97035

      503.699.4997
        ◊
        FAX:
        503.675.3136

      

      MASTER
        LEASE AGREEMENT NUMBER 5209

      

      CONTINUING
        CORPORATE RESOLUTION AUTHORIZING LEASES

      

      Resolution
        of the Board of Directors of IsoRay Medical, Inc., a Delaware Corporation,
        (the
“Corporation”).

      

      Recitals

      

      WHEREAS,
        the jurisdiction of the Corporation’s
        incorporation empowers Corporation to lease real and personal property; and
        

      

      WHEREAS,
        the jurisdiction of the Corporation’s
        incorporation expressly provides that the powers of the Corporation are to
        be
        exercised by its Board of Directors, subject to certain limitations;
        and

      

      WHEREAS,
        the Board of Directors of the Corporation deems it to be in the best interests
        of the Corporation and its shareholders to enter into a Master Lease Agreement
        and one or more Lease Schedules thereunder with VENCORE SOLUTIONS LLC (the
        “LESSOR”),
        whether now or hereafter, for the lease of certain personal property described
        in each such Lease Schedule.

      

      Resolutions

      

      NOW
        THEREFORE, IT IS RESOLVED, that the Corporation enter into the Master Lease
        Agreement and one or more Lease Schedules thereunder, for the lease of certain
        personal property described in the Lease Schedules on the terms and conditions
        set forth in the Master Lease Agreement and the Lease Schedules, and that
        the
        Corporation consents to the use of original Lease Schedules, along with a
        photocopy of the fully executed Master Lease Agreement, and photocopies of
        the
        related documents (including this Corporate Resolution Authorizing Leases),
        for
        all purposes including, but not limited to, evidence in litigation or any
        other
        judicial proceeding; and it is further

      

      RESOLVED,
        that any of this Corporation’s
        officers, referenced below, are authorized and directed to execute and deliver
        the Master Lease Agreement, the Lease Schedules, and any other related
        documents; and it is further

      

      RESOLVED,
        that any of this Corporation’s
        officers, referenced below, are authorized to appoint an alternative employee
        or
        agent of the Corporation, via telephonic or other communication with LESSOR,
        to
        provide verbal verification of delivery and acceptance of equipment under
        the
        Master Lease Agreement and Lease Schedules. Such appointment and subsequent
        verification and acceptance shall be binding upon the Corporation. In addition
        to these officers, X___________________, who is the X___________________
        of this
        Corporation, is also hereby appointed to provide this verification.

      

      I
        certify
        that the persons whose names, titles and signatures appear below are duly
        elected (or appointed), qualified and acting officer(s), employee(s) or agent(s)
        of the Corporation and hold on the date of this certificate the office or
        position set forth, opposite their respective names, and the signatures
        appearing opposite their respective names are the genuine signatures of such
        officer(s), employee(s), or agent(s).

      

      
        	
                NAME

              	 	
                TITLE
                  OR POSITION

              	 	
                SIGNATURE

              
	 	 	 	 	 
	
                ROGER
                  GIRARD

              	 	
                CEO
                  & CHAIRMAN

              	 	
                X
                  /s/ Roger Girard

              
	 	 	 	 	 

      

      

      CERTIFICATE

      

      I,
        David
        J. Swanberg certify:

      

      That
        I am
        the duly elected and acting Secretary of IsoRay Medical, Inc., a Delaware
        Corporation;

      

      That
        the
        foregoing Corporate Resolution Authorizing Leases was duly adopted by the
        Board
        of Directors in conformity with the Articles of Incorporation and Bylaws
        of the
        Corporation; and

      

      That
        the
        resolution has been neither modified nor rescinded and is, as of the date
        of
        this Certificate, in full force and effect, and will remain in full force
        and
        effect until such time as the Board of Directors terminates the resolution
        and
        notifies LESSOR of such termination in writing. Such termination shall not
        affect the Master Lease Agreement and Lease Schedules executed prior to
        LESSOR’s
        receipt
        of the notice of termination.

      

      IN
        WITNESS WHEREOF, I set my hand this X 7
        day
        of X
May
        X,
        2005.

      

      
        	 	
                X
                  /s/ David J. Swanberg

              
	 	
                Corporate
                  Secretary

              
	 	
                David
                  J. Swanberg

              

      

      

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      VENCORE
        SOLUTIONS LLC

      Financial
        Services and Emerging Growth Companies Coming Together

      PLEASE
        PROVIDE INSURANCE INFORMATION

      VENCORE
        SOLUTIONS LLC

      4500
        SW
        Kruse Way, Suite 350 ◊
        Lake
        Oswego, OR 97035

      503.699.4997
        ◊
        FAX:
        503.675.3137

      

      MASTER
        LEASE # 5209     DATE:
        MAY
        5, 2005

      

      Insurance
        Agent: x Brad Toner/Conover Insurance

      Address:
        x
        1804
        W. Lewis St. P.O Box 2528

      City:
        x
        Tri-Cities

      State:
        x
WA             Zip:
x
        99302 

      Phone:
        x
        509
        545 3800   
Fax:
        x 509
        545 7860

      Attention:
        x
        Alenda Simonson

      

      FROM: ISORAY
        MEDICAL, INC., A DELAWARE CORPORATION

      350
        HILLS
        STREET, SUITE 106

      RICHLAND,
        WA 99354

      

      Ins.
        Co.:
        x
        Esset
        Insurance Co.          Policy
        #.
        3CE5574C         Expiration
        Date:
        x
        11/18/05

      

      Dear
        Agent:

      

      VENCORE
        SOLUTIONS LLC (“Lessor”)
        is
        about to enter into a Master Lease Agreement and one or more Lease Schedules
        (the “Lease(s)”)
        with
        the above-referenced LESSEE for the equipment to be more fully described
        on the
        Schedule “A”
        to each
        individual Lease Schedule (the “Equipment”).
        The
        Equipment will be located at 350 Hills Street, Suite 106, Richland, WA 99354
        (EQUIPMENT LOCATION) and has an original equipment cost of Four Hundred Thirty
        Thousand Dollars and 00/100 ($430,000.00). Pursuant to the terms of the Lease,
        the LESSEE is required to provide insurance coverage in relation to the
        Equipment and is required to provide Lessor with an insurance certificate
        naming
        Lessor and its assigns as loss payee and/or additional insured as indicated
        below:

      

      Business
        personal property insurance is to be provided for all risks of any kind
        whatsoever for the full replacement value of the Equipment. Lessor and its
        assigns and successors as they may appear are to be named as loss payees,
        and
        the certificate should reflect such loss payees as follows: Lessor and its
        assigns and successors.

      

      Liability
        coverage is to be provided with a combined single limit in the amount of
        $1,000,000.00. Lessor and its assigns and successors are to be named as
        additional insureds, and the certificate should reflect such additional insureds
        as follows: Lessor and its assigns and successors.

      

      Please
        send the Certificate of Insurance with the standard (30) day notice of
        cancellation clause to VENCORE SOLUTIONS LLC, 4500 SW Kruse Way, Suite 350,
        Lake
        Oswego, OR 97035. Please place the above-referenced Master Lease Agreement
        Number on the Certificate of Insurance.

      

      Thank
        you
        very much for your assistance.

      

      
        	
                LESSOR

              	 	
                LESSEE:

              
	 	 	 
	 	 	
                ISORAY
                  MEDICAL, INC.,

              
	
                VENCORE
                  SOLUTIONS LLC

              	 	
                A
                  DELAWARE CORPORATION

              
	 	 	 
	
                By:______________________________________

              	 	
                By:
                  x /s/
                  Roger Girard

              
	 	 	
                Roger
                  Girard

              
	 	 	 
	
                Title:______________________________________

              	 	
                Title:
                  x
                  CEO & CHAIRMAN

              
	 	 	 
	
                Date:______________________________________

              	 	
                Date:
                  x
                  05-07-05

              
	 	 	 

      

      

      

      PLEASE
        PLACE MASTER LEASE NUMBER ON INSURANCE POLICY

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      MASTER
        LEASE AGREEMENT NUMBER: 5209

      

      SUBORDINATION
        AGREEMENT

      

      This
        subordination Agreement is entered into this X_________ day of X______________,
        20X____, between VENCORE SOLUTIONS LLC and its assigns, as Lessor, and IsoRay
        Medical, Inc., a Delaware Corporation, as Lessee, and Benton-Franklin Economic
        Development District, as Creditor.

      

      WHEREAS,
        Lessor and Lessee intend to enter into one or more Lease Schedules to the
        Master
        Lease Agreement (the “Lease(s)”)
        under
        which Lessor will lease personal property to Lessee; and 

      

      WHEREAS,
        one of the conditions of Lessor’s
        approval and acceptance of the Lease(s) is that Lessor is taking a security
        interest in all Equipment and Machinery of the Lessee; and 

      

      WHEREAS,
        Creditor has a perfected blanket security interest in all FIXTURES, EQUIPMENT,
        FURNITURE, AND MACHINERY (“Equipment”);
        and

      

      WHEREAS,
        Lessor would not enter into the Lease but for Creditor’s
        agreement to subordinate to Lessor Creditor’s
        interest in the Equipment; NOW THEREFORE,

      

      THE
        PARTIES HEREBY AGREE AS FOLLOWS:

      

      
        	 	
                1.

              	
                Creditor
                  agrees to subordinate its interest in the Equipment to the interest
                  of
                  Lessor in the Equipment.

              

      

      

      
        	 	
                2.

              	
                Creditor
                  agrees that it shall take no actions against the Equipment and
                  shall not
                  assign or transfer its security interest in the Equipment of Lessee
                  to any
                  other party, until and unless all of the terms and conditions of
                  the
                  Lease(s), including but not limited to the payment of all lease
                  rental
                  payments, have been satisfied, without first obtaining the written
                  consent
                  of Lessor.

              

      

      

      This
        Agreement shall remain in force as long as Lessee has any remaining obligations
        to Lessor under the Lease(s).

      

      

      LESSOR: CREDITOR:

      

      
        	 	 	
                BENTON-FRANKLIN
                  ECONOMIC DEVELOPMENT

              
	
                VENCORE
                  SOLUTIONS LLC

              	 	
                DISTRICT

              
	 	 	 
	
                By:_____________________________________

              	 	
                By:
                  X________________________________________

              
	 	 	 
	
                Title:
                  ___________________________________

              	
                 

              	
                Title:
                  X________________________________________

              
	 	 	 
	
                Date:____________________________________

              	
                 

              	
                Date:
                  X________________________________________

              
	 	 	 
	 	 	LESSEE:
	 	 	ISORAY
                MEDICAL, INC., 
	 	 	A
                DELAWARE CORPORATION 
	 	 	By: X
/s/
                Roger Girard 
	 	 	Roger
                Girard 
	 	 	Title:
CEO
                & CHAIRMAN 
	 	 	
                Date:
                  X
                  05-07-05 

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      MASTER
        LEASE AGREEMENT NUMBER: 5209

      

      SUBORDINATION
        AGREEMENT

      

      This
        subordination Agreement is entered into this X
        9th day
        of
        X
        May
,
        20X05,
        between
        VENCORE SOLUTIONS LLC and its assigns, as Lessor, and IsoRay Medical, Inc.,
        a
        Delaware Corporation, as Lessee, and Benton-Franklin Economic Development
        District, as Creditor.

      

      WHEREAS,
        Lessor and Lessee intend to enter into one or more Lease Schedules to the
        Master
        Lease Agreement (the “Lease(s)”)
        under
        which Lessor will lease personal property to Lessee; and 

      

      WHEREAS,
        one of the conditions of Lessor’s
        approval and acceptance of the Lease(s) is that Lessor is taking a security
        interest in all Equipment and Machinery of the Lessee; and 

      

      WHEREAS,
        Creditor has a perfected blanket security interest in all FIXTURES, EQUIPMENT,
        FURNITURE, AND MACHINERY (“Equipment”);
        and

      

      WHEREAS,
        Lessor would not enter into the Lease but for Creditor’s
        agreement to subordinate to Lessor Creditor’s
        interest in the Equipment; NOW THEREFORE,

      

      THE
        PARTIES HEREBY AGREE AS FOLLOWS:

      

      2. Creditor
        agrees to subordinate its interest in the Equipment to the interest of Lessor
        in
        the Equipment.

      

      
        	 	
                3.

              	
                Creditor
                  agrees that it shall take no actions against the Equipment and
                  shall not
                  assign or transfer its security interest in the Equipment of Lessee
                  to any
                  other party, until and unless all of the terms and conditions of
                  the
                  Lease(s), including but not limited to the payment of all lease
                  rental
                  payments, have been satisfied, without first obtaining the written
                  consent
                  of Lessor.

              

      

      

      This
        Agreement shall remain in force as long as Lessee has any remaining obligations
        to Lessor under the Lease(s).

      

      

      
        	
                LESSOR:

              	 	
                CREDITOR:

              
	 	 	 
	 	 	
                BENTON-FRANKLIN
                  ECONOMIC DEVELOPMENT

              
	
                VENCORE
                  SOLUTIONS LLC

              	 	
                DISTRICT

              
	 	 	 
	
                By:_____________________________________

              	 	
                By:
                  X /s/
                  Gwen Luper

              
	 	 	 
	
                Title:
                  ___________________________________

              	 	
                Title:
                  XEXECUTIVE
                  DIRECTOR

              
	 	 	 
	
                Date:____________________________________

              	 	
                Date:
                  X5-9-05

              
	 	 	 
	 	 	 
	 	 	
                LESSEE:

              
	 	 	 
	 	 	
                ISORAY
                  MEDICAL, INC.,

              
	 	 	
                A
                  DELAWARE CORPORATION

              
	 	 	 
	 	 	
                By:
                  X _________________

              
	 	 	
                Roger
                  Girard

              
	 	 	 
	 	 	
                Title:
                  CEO
                  & CHAIRMAN

              
	 	 	 
	 	 	
                Date:
                  X
                  ________________

              

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      MASTER
        LEASE AGREEMENT NUMBER: 5209

      

      SUBORDINATION
        AGREEMENT

      

      This
        subordination Agreement is entered into this X__________ day of X ___________,
        20X ____, between VENCORE SOLUTIONS LLC and its assigns, as Lessor, and IsoRay
        Medical, Inc., a Delaware Corporation, as Lessee, and Columbia River Bank,
        as
        Creditor.

      

      WHEREAS,
        Lessor and Lessee intend to enter into one or more Lease Schedules to the
        Master
        Lease Agreement (the “Lease(s)”)
        under
        which Lessor will lease personal property to Lessee; and 

      

      WHEREAS,
        one of the conditions of Lessor’s
        approval and acceptance of the Lease(s) is that Lessor is taking a security
        interest in all Equipment and Machinery of the Lessee; and 

      

      WHEREAS,
        Creditor has perfected blanket security interest in all FIXTURES, EQUIPMENT,
        FURNITURE, AND MACHINERY (“Equipment”);
        and

      

      WHEREAS,
        Lessor would not enter into the Lease but for Creditor’s
        agreement to subordinate to Lessor Creditor’s
        interest in the Equipment; NOW THEREFORE,

      

      THE
        PARTIES HEREBY AGREE AS FOLLOWS:

      

      
        	 	
                1.

              	
                Creditor
                  agrees to subordinate its interest in the Equipment to the interest
                  of
                  Lessor in the Equipment with
                  the exception of two Unitech Myachi L W5A-JE laser welders, model
                  numbers
                  8-800-01-01 and 8-802-01-01 with serial numbers of 04110099 and
                  04040181.

              

      

      

      
        	 	
                2.

              	
                Creditor
                  agrees that it shall take no actions against the Equipment and
                  shall not
                  assign or transfer its security interest in the Equipment of Lessee
                  to any
                  other party, until and unless all of the terms and conditions of
                  the
                  Lease(s), including but not limited to the payment of all lease
                  rental
                  payments, have been satisfied, without first obtaining the written
                  consent
                  of Lessor.

              

      

      

      This
        Agreement shall remain in force as long as Lessee has any remaining obligations
        to Lessor under the Lease(s).

      

      

      
        
          	 LESSOR:	 CREDITOR:
	 VENCORE SOLUTIONS
                  LLC    	 COLUMBIA RIVER
                  BANK  
	 By:_____________________________________  	 By: X /s/  
	 Title:
                  ___________________________________ 	
                   Title:
                    X SUP
                    + REGION MANAGER

                
	 Date:____________________________________ 	
                   Date:
                    X
                    May 6, 2005

                
	 	 
	 	
                   LESSEE:

                
	 	
                   ISORAY
                    MEDICAL,
                    INC.,

                
	 	 A DELAWARE
                  CORPORATION  
	 	 By: X
                  /s/ Roger Girard 
	 	 Roger Girard
	 	 Title: CEO
                  & CHAIRMAN 
	 	 Date: X
                  05-07-05Unassociated Document

     

    

      AGREEMENT

      

      

      THIS
        AGREEMENT made and entered into by and between THE CURATORS OF THE UNIVERSITY
        OF
        MISSOURI, a public corporation of the State of Missouri, contracting on behalf
        of its Research Reactor Center, University of Missouri-Columbia (hereinafter
        “University”) and IsoRay Medical, Inc. (hereinafter “Customer”).

       

      WITNESSETH:

       

      WHEREAS,
        Customer wishes to irradiate Barium Carbonate (BaCO3)
        for use
        in production of a medical radioisotopes; and

       

      WHEREAS,
        University has the facilities and technical expertise and is willing and
        able to
        provide such irradiation services to Customer;

       

      NOW,
        THEREFORE, in consideration of the individual and mutual promises hereinafter
        set forth, the parties agree as follows:

       

      
        	
                1.

              	
                DEFINITIONS:
                  

              

      

       

      a. “Irradiation
        Services” shall mean the activation of Target Material by neutron
        bombardment.

       

      b. “Target
        Material” shall mean the Barium Carbonate (BaCO3)
        target
        provided by Customer.

       

      c. “Can”
        shall mean [**] aluminum can provided by University, containing no more
        than [**] of Target Material. 

       

      d. “Activated
        Target” shall mean Target Material having undergone Irradiation Services at
        University.

       

      e. “Reactor
        Operating Cycle” shall mean the weekly period during which University’s reactor
        is operational and at which time the production of Activated Target shall
        be
        undertaken. 

       

      
        	
                2.

              	
                SERVICES

              

      

       

      a. Customer
        shall provide University with Target Material at least seven (7) days prior
        to
        the start of each Reactor Operating Cycle. Target Material shall be provided
        by
        Customer at no cost to University. 

       

      b. University
        agrees to supply Irradiation Services to Customer to produce and supply
        Activated Target. In connection with the supply of such Irradiation Services,
        University agrees to encapsulate Target Material provided by Customer in
        Cans
        and provide associated leak checking and quality assurance for $100 per
        encapsulation. 

      [**]Certain
        information in this document has been omitted and filed separately with the
        Securities and Exchange Commission. Confidential treatment has been requested
        with respect to the omitted portions.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      c. University
        will ship Activated Target to Customer in unopened Can. 

       

      d. Customer
        acknowledges that Target Material is the only authorized product approved
        for
        irradiation under this Agreement. University reserves the right to disqualify
        any Target Material that has an apparent abnormality or if irradiation, tests
        or
        analyses performed by University demonstrate that the Target Material is
        not as
        represented in paragraph (1.)(b.) above or otherwise represents a substantial
        risk of damage to the reactor, its subsystems, or a safety hazard to University
        personnel.

       

      
        	
                3.

              	
                SUPPLY

              

      

       

      a. University
        initially agrees to use commercially reasonable best efforts to supply Customer
        with Irradiation Services for up to four [**]per week.

       

      b. Customer
        initially agrees to purchase and/or pay for Irradiation Services for at least
        [**] such cans per twelve (12) month Agreement period. 

       

      c. At
        any
        time during the Term of this Agreement, if Customer’s purchases to date have
        averaged two cans per week, Customer may, with University’s agreement which
        shall not be unreasonably withheld, increase its purchase commitment set
        forth
        in paragraph 3.b. in return for a corresponding increase in University’s supply
        commitment set forth in paragraph 3.a. as follows: 

       

      
        	
                Customer

              	
                University
                  Irradiation

              
	
                Purchase
                  Commitment: 

              	
                Services
                  Commitment:

              
	 	 	 
	
                o 

              	
                [**]

              	
                [**]

              

      

      

       

      d.Upon
        agreement between Customer and University as provided in paragraph 3.c.,
        University agrees to provide such increased capacity and Customer agrees
        to
        purchase and/or pay for no less than such minimum number of Irradiation Services
        committed to in paragraph 3.c. for the duration of the Term, unless mutually
        agreed otherwise in writing. 

       

      
        	
                4.

              	
                TERM

              

      

       

      a. The
        initial term of this agreement shall commence on June 1, 2005 (the Effective
        Date). The initial term will be for twelve (12) months. 

      [**]Certain
        information in this document has been omitted and filed separately with the
        Securities and Exchange Commission. Confidential treatment has been requested
        with respect to the omitted portions.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      b. The
        agreement will automatically renew for successive twelve (12) month periods
        unless terminated by either party upon written notice three (3) months prior
        to
        the end of a contract year. 

       

      
        	
                5.

              	
                REPRESENTATIONS
                  AND WARRANTIES

              

      

       

      a. Customer
        represents, warrants and covenants as follows:

       

      i. Customer
        has the full right, power, and authority to enter into this Agreement and
        there
        is no impediment which would inhibit its ability to perform the terms and
        conditions imposed on it by this Agreement.

       

      ii. This
        Agreement constitutes a valid and binding obligation of Customer, enforceable
        in
        accordance with its terms.

       

      iii. To
        the
        best of it’s knowledge, neither the execution nor the delivery of this Agreement
        by Customer, nor the fulfillment of or compliance with the terms and provisions
        hereof by Customer shall contravene any provision of law including, without
        limitation, any statute, rule, regulation, judgment, decree, order or permit
        applicable to Customer.

       

      b. University
        represents, warrants and covenants as follows: 

       

      i. University
        has the full right, power, and authority to enter into this Agreement and
        there
        is no impediment which would inhibit its ability to perform the terms and
        conditions imposed on it by this Agreement.

       

      ii. This
        Agreement constitutes a valid and binding obligation of University, enforceable
        in accordance with its terms.

       

      iii. To
        the
        best of it’s knowledge, neither the execution nor the delivery of this Agreement
        by University, nor the fulfillment of or compliance with the terms and
        provisions hereof by University shall contravene any provision of law including,
        without limitation, any statute, rule, regulation, judgment, decree, order
        or
        permit applicable to University.

       

      
        	
                6. 

              	
                RISK
                  OF LOSS

              

      

       

      Title
        in
        and to the Target Material shall at all times remain Customer’s. Risk of loss of
        Target Material shall pass to University upon delivery to University’s reactor.
        Risk of loss of Activated Targets shall pass to Customer FOB University’s
        reactor. Unless otherwise agreed, shipping arrangements for delivery of
        Activated Targets to Customer shall be the responsibility of University in
        accordance with instructions received from Customer. All carriers, containers,
        and delivery locations are subject to University approval, which shall not
        be
        unreasonably withheld. 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	
                7.

              	
                COMPENSATION

              

      

       

      a. Prices
        charged for Irradiation Services under this Agreement shall be as follows:
        

       

      i.   [**]
        per Can of Activated Target if Customer guarantees to purchase [**]
        Irradiation Services per twelve Agreement months,

       

      ii.   [**]
         per Can of Activated Target if Customer guarantees to purchase
[**]
        Irradiation Services per twelve Agreement months, or

       

      iii.  [**] 
        per Can of Activated Target if Customer guarantees to purchase [**]
        Irradiation Services per twelve Agreement months.

       

      This
        price will remain in effect for one (1) year from the Effective Date of this
        Agreement. On the anniversary date of the Agreement the prices for Irradiation
        Services will be increased by an amount not to exceed the change from February
        to February of the previous twelve (12) months in the U.S. Producer Price
        Index
        (Drugs and Pharmaceuticals 06-3) as published by the U.S. Department of Labor
        Bureau of Labor Statistics or zero percent, whichever is greater. 

       

      b.Subject
        to the annual minimum purchases as set forth in paragraph 3.b. above, Customer
        initially agrees to purchase a minimum of [**]
        Cans of Activated Target per month in return for the pricing set forth in
        this
        paragraph seven (7). Any subsequent increase in Customer’s minimum purchase
        commitment as set forth in paragraph 3.b. above will automatically increase
        the
        minimum number of Cans of Activated Target per month set forth herein, at
        the
        same time by the same ratio. 

       

      8.     SHIPPING
        AND HANDLING

       

      a. The
        Activated Target will be packaged in accordance with DOT regulations and
        shipped
        FOB Columbia, MO. Customer will be responsible for paying all freight charges.
        Shipments will be made on Wednesday, Thursday, or Friday in “Type B” packages
        unless mutually agreed otherwise.

       

      b. Customer
        will also pay standard packaging and container charges (currently about
        $385/package).

       

      9.     INDEMNITY
        OBLIGATIONS

       

      a. It
        is
        understood and agreed that University’s sole responsibility is to provide
        Irradiation Services. Customer agrees to indemnify and save harmless the
        University, its officers, agents and employees from and against any and all
        loss
        of or damage to property or injuries to or deaths of any person or persons,
        and
        against any and all claims, damages, suits, costs, expense, liability, actions,
        or proceedings of any and all nature whatsoever in any way resulting from
        or
        arising out of Customer’s negligence or that of its directors, officers,
        employees, agents or representatives or arising from the use, distribution
        or
        sale of Activated Targets by Customer. 

      

        [**]Certain
          information in this document has been omitted and filed separately with
          the
          Securities and Exchange Commission. Confidential treatment has been requested
          with respect to the omitted portions.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

       

      b. To
        the
        extent permitted by Missouri law and without waiving sovereign immunity,
        University shall assume responsibility for any and all loss of or damage
        to
        property or injuries to or deaths of any person or persons, and against any
        and
        all claims, damages, suits, costs, expense, liability, actions, or proceedings
        of any and all nature whatsoever in any way resulting from or arising out
        of
        University’s negligence or that of its directors, officers, employees, agents or
        representatives in connection with the provision of Irradiation
        Services.

       

      10.     FORCE
        MAJEURE

       

      Notwithstanding
        any other provision of this Agreement, neither party shall be in default
        hereunder by reason of delay in the performance of, or failure to perform
        any of
        its obligations hereunder, if such delay or failure is caused by strikes,
        lockouts, acts of God or the public enemy, riots, fire, interference by civil
        or
        military authorities, inability to obtain raw materials, delays in transit
        or
        delivery, failure to secure necessary governmental approvals for materials,
        failure of power supplies, or any other cause or delay beyond its reasonable
        control. The affected party shall immediately inform the other party of the
        occurrence of such a delay and provide an estimate of its probable duration.
        If
        such delay extends for a period beyond sixty (60) days, then such delay shall
        be
        deemed to entitle the party not subject of the force majeure to terminate
        this
        Agreement forthwith upon giving notice to the other party.

       

      11.     ASSIGNABILITY

       

       

      This
        Agreement shall be binding upon the respective successors and permitted assigns
        of the parties hereto and shall inure to the benefit of and be enforceable
        by
        the parties hereto and their respective successors and assigns, provided
        however
        that this Agreement may not be assigned by either party without the prior
        written consent of the other party, which will not be unreasonably
        withheld.

       

       

      12.     MISCELLANEOUS

       

       

      a. Customer
        agrees that it shall not advertise any connection with the University nor
        make
        use of the University’s name or other identifying marks or property, nor make
        representation, either express or implied, as to University’s endorsement of
        Customer’s operations without prior written approval by the University, except
        as required by Securities and Exchange Commission regulations. This however
        shall not be construed as to prevent mention of the contribution of the
        University in any scientific publication.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      b. No
        member, individually or collectively, or officers of The Curators of the
        University of Missouri incurs or assumes any individual or personal liability
        by
        the execution of this agreement or by reason of the default of the University
        in
        the performance of any of the terms hereof. All such liability of members
        or
        officers of the Board of Curators of the University of Missouri, as such,
        is
        hereby released by Customer as a condition of and in consideration for the
        execution of this agreement.

       

      c. This
        agreement shall be deemed to have been entered into under the laws of the
        State
        of Missouri and the rights and obligations of the parties hereunder shall
        be
        governed and determined according to the laws of said state.

       

      IN
        WITNESS WHERE OF, the parties have executed this agreement as of the day
        and
        year as signed below.

      

      

      

      THE
        CURATORS OF THE UNIVERSITY OF MISSOURI

       

      Lisa
        Wimmenauer / 8/9/05 

       

      Name:    Date:

       

      /s/Lisa
        Wimmenauer/ Associate Director Business Services

       

      Signature:    Title:

       

      
 

       

      IsoRay
        Medical, Inc 

       

      Michael
        Dunlop /7/14/05 

       

      Name:    Date:

       

      /s/Michael
        Dunlop / CFO 

       

      Signature:    Title:

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