Document:

PLACEMENT AGENCY AGREEMENT

 

	 	July 13, 2012

 

Ladenburg Thalmann & Co. Inc.

4400 Biscayne Blvd

14th Floor

Miami, Florida 33137

 

Ladies and Gentlemen:

 

Introduction.
Subject to the terms and conditions herein (this “Agreement”), IsoRay, Inc., a Minnesota corporation (the “Company”),
hereby agrees to sell a minimum of $3,000,000 and up to an aggregate of $3,500,000 of registered securities (the “Securities”)
of the Company, including, but not limited to, shares (the “Shares”) of the Company’s common stock, par
value $.001 per share (the "Common Stock”) directly to various investors (each, an “Investor”
and, collectively, the “Investors”) through Ladenburg Thalmann & Co. Inc., as exclusive placement agent
(“Ladenburg” or the “Placement Agent”). The Placement Agent may retain other brokers or dealers
to act as sub-agents or selected-dealers on its behalf in connection with the Offering (as defined below).

 

The Company hereby
confirms its agreement with the Placement Agent as follows:

 

Section 1.              Agreement
to Act as Placement Agent.

 

(a)     On
the basis of the representations, warranties and agreements of the Company herein contained, and subject to all the terms and conditions
of this Agreement, the Placement Agent shall be the exclusive Placement Agent in connection with the offering and sale by the Company
of the Securities from time to time pursuant to the Company's registration statement on Form S-3 (File No. 333-162694) (the “Registration
Statement”), with the terms of such offering (the “Offering”) to be subject to market conditions and
negotiations between the Company and the prospective Investors. The Placement Agent will act on a reasonable best efforts basis
and the Company agrees and acknowledges that there is no guarantee of the successful placement of the Securities, or any portion
thereof, in the prospective Offering. Under no circumstances will the placement Agent or any of its “Affiliates” (as
defined below) be obligated to underwrite or purchase any of the Shares for its own account or otherwise provide any financing.
The Placement Agent shall act solely as the Company’s agent and not as principal. The Placement Agent shall have no authority
to bind the Company with respect to any prospective offer to purchase Shares and the Company shall have the sole right to accept
offers to purchase Shares and may reject any such offer, in whole or in part. Subject to the terms and conditions hereof, payment
of the purchase price for, and delivery of, the Securities shall be made at one or more closings (each a “Closing”
and the date on which each Closing occurs, a “Closing Date”). As compensation for services rendered, on each
Closing Date, the Company shall pay to the Placement Agent the fees and expenses set forth below:

 

(i)     A
cash fee equal to 5% of the gross proceeds received by the Company from the sale of the Securities at the closing of the Offering
(the “Closing”), which gross proceeds shall not include the proceeds of the sale of the Securities to Investors
set forth on Annex A attached hereto.

 

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(ii)     Subject
to compliance with FINRA Rule 5110(f)(2)(D), the Company also agrees to reimburse Ladenburg’s expenses equal to 0.3% of the
aggregate gross proceeds raised in the Offering, but in no event more than $7,500 without the Company’s consent (provided,
however, that such expense cap in no way limits or impairs the indemnification and contribution provisions of this Agreement).
Such reimbursement shall be payable immediately upon (but only in the event of) a Closing of the Offering.

 

(b)     The
term of the Placement Agent's exclusive engagement will be until the earlier of (i) 5 business days from the date hereof or (ii)
completion of the Offering (the “Exclusive Term”); provided, however, that a party hereto may
terminate the engagement with respect to itself at any time upon 10 days written notice to the other parties. Notwithstanding anything
to the contrary contained herein, the provisions concerning confidentiality, indemnification and contribution contained herein
and the Company’s obligations contained in the indemnification provisions will survive any expiration or termination of this
Agreement, and the Company’s obligation to pay fees actually earned and payable and to reimburse expenses actually incurred
and reimbursable pursuant to Section 1 hereof and which are permitted to be reimbursed under FINRA Rule 5110(f)(2)(D), will survive
any expiration or termination of this Agreement. Nothing in this Agreement shall be construed to limit the ability of the Placement
Agent or its Affiliates to pursue, investigate, analyze, invest in, or engage in investment banking, financial advisory or any
other business relationship with Persons (as defined below) other than the Company. As used herein (i) “Person” means
an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind and (ii) “Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person as such terms are used in and construed under Rule 405 under the Securities Act of 1933, as amended (the
“Securities Act”).

 

Section 2.              Representations,
Warranties and Covenants of the Company. The Company hereby represents, warrants and covenants to the Placement Agent as of
the date hereof, and as of each Closing Date, as follows:

 

(a)     Securities
Law Filings. The Company has filed with the Securities and Exchange Commission (the “Commission”) the Registration
Statement under the Securities Act of 1933, as amended (the “Securities Act”), which was filed on October 27,
2009 and declared effective on November 13, 2009 for the registration of the Securities. At the time of such filing, the Company
met the requirements of Form S-3 under the Securities Act. Following the determination of pricing among the Company and the prospective
Investors introduced to the Company by the Placement Agent, the Company will file with the Commission pursuant to Rule 424(b) under
the Securities Act, and the rules and regulations (the “Rules and Regulations”) of the Commission promulgated
thereunder, a prospectus supplement relating to the terms of the Offering and of the Securities and the plan of distribution thereof
and will advise the Placement Agent of all further information (financial and other) with respect to the Company required to be
set forth therein. Such registration statement, at any given time, including the exhibits thereto filed at such time, as amended
at such time, is hereinafter called the “Registration Statement”; such prospectus in the form in which it appears
in the Registration Statement is hereinafter called the “Base Prospectus”; and the amended or supplemented form
of prospectus, in the form in which it will be filed with the Commission pursuant to Rule 424(b) (including the Base Prospectus
as so amended or supplemented) is hereinafter called the “Prospectus Supplement.” The Registration Statement
at the time it originally became effective is hereinafter called the “Original Registration Statement.” Any
reference in this Agreement to the Registration Statement, the Original Registration Statement, the Base Prospectus or the Prospectus
Supplement shall be deemed to refer to and include the documents incorporated by reference therein (the “Incorporated
Documents”), if any, which were filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
at any given time, as the case may be; and any reference in this Agreement to the terms “amend,” “amendment”
or “supplement” with respect to the Registration Statement, the Original Registration Statement, the Base Prospectus
or the Prospectus Supplement shall be deemed to refer to and include the filing of any document under the Exchange Act after the
date of this Agreement, or the issue date of the Base Prospectus or the Prospectus Supplement, as the case may be, deemed to be
incorporated therein by reference. All references in this Agreement to financial statements and schedules and other information
that is “contained,” “included,” “described,” “referenced,” “set forth”
or “stated” in the Registration Statement, the Base Prospectus or the Prospectus Supplement (and all other references
of like import) shall be deemed to mean and include all such financial statements and schedules and other information that is or
is deemed to be incorporated by reference in the Registration Statement, the Base Prospectus or the Prospectus Supplement, as the
case may be. The Company has not received any notice that the Commission has issued or intends to issue a stop order suspending
the effectiveness of the Registration Statement or the use of the Base Prospectus or the Prospectus Supplement or intends to commence
a proceeding for any such purpose.

 

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(b)     Assurances.
The Original Registration Statement, as amended, (and any further documents to be filed with the Commission) contains all exhibits
and schedules as required by the Securities Act. Each of the Registration Statement and any post-effective amendment thereto, at
the time it became effective, complied in all material respects with the Securities Act and the Exchange Act and the applicable
Rules and Regulations and did not and, as amended or supplemented, if applicable, will not, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.
The Base Prospectus, and the Prospectus Supplement, each as of its respective date, comply or will comply in all material respects
with the Securities Act and the Exchange Act and the applicable Rules and Regulations. Each of the Base Prospectus and the Prospectus
Supplement, as amended or supplemented, did not and will not contain as of the date thereof any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Incorporated Documents, if any, taken as a whole with the Base Prospectus and Prospectus Supplement,
when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act and the applicable
Rules and Regulations, and none of such documents, when they were filed with the Commission, contained any untrue statement of
a material fact or omitted to state a material fact necessary to make the statements therein (with respect to Incorporated Documents
incorporated by reference in the Base Prospectus or Prospectus Supplement), in light of the circumstances under which they were
made not misleading; and any further documents so filed and incorporated by reference in the Base Prospectus or Prospectus Supplement,
when such documents are filed with the Commission, will conform in all material respects to the requirements of the Exchange Act
and the applicable Rules and Regulations, as applicable, and will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
No post-effective amendment to the Registration Statement reflecting any facts or events arising after the date thereof which represent,
individually or in the aggregate, a fundamental change in the information set forth therein is required to be filed with the Commission.
There are no documents required to be filed with the Commission in connection with the transaction contemplated hereby that (x)
have not been filed as required pursuant to the Securities Act or (y) will not be filed within the requisite time period. There
are no contracts or other documents required to be described in the Base Prospectus, or Prospectus Supplement, or to be filed as
exhibits or schedules to the Registration Statement, that have not been described or filed as required. The Company is eligible
to use free writing prospectuses in connection with the Placement pursuant to Rules 164 and 433 under the Securities Act. Any free
writing prospectus that the Company is required to file pursuant to Rule 433(d) under the Securities Act has been, or will be,
filed with the Commission in accordance with the requirements of the Securities Act and the applicable rules and regulations of
the Commission thereunder. Each free writing prospectus that the Company has filed, or is required to file, pursuant to Rule 433(d)
under the Securities Act or that was prepared by or behalf of or used by the Company complies or will comply in all material respects
with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder. The Company
will not, without the prior consent of the Placement Agent, prepare, use or refer to, any free writing prospectus.

 

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(c)     Offering
Materials. The Company has delivered, or will as promptly as practicable deliver, to the Placement Agent complete conformed
copies of the Registration Statement and of each consent and certificate of experts, as applicable, filed as a part thereof, and
conformed copies of the Registration Statement (without exhibits), the Base Prospectus, and the Prospectus Supplement, as amended
or supplemented, in such quantities and at such places as the Placement Agent reasonably requests. Neither the Company nor any
of its directors and officers has distributed and none of them will distribute, prior to the Closing Date, any offering material
in connection with the offering and sale of the Securities other than the Base Prospectus, the Prospectus Supplement, the Registration
Statement, copies of the documents incorporated by reference therein and any other materials permitted by the Securities Act.

 

(d)     Subsidiaries.
All of the direct and indirect subsidiaries of the Company (the “Subsidiaries”) are set forth in the Incorporated
Documents. The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free
and clear of any liens, charges, security interests, encumbrances, rights of first refusal, preemptive rights or other restrictions
(collectively, “Liens”), and all of the issued and outstanding shares of capital stock of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.

 

(e)     Organization
and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power
and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company
nor any Subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity
or enforceability of this Agreement or any other agreement entered into between the Company and the Investors, (ii) a material
adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and
the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material
respect on a timely basis its obligations under this Agreement or the transactions contemplated under the Prospectus Supplement
(any of (i), (ii) or (iii), a “Material Adverse Effect”) and no action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened
(“Proceeding”) has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke,
limit or curtail such power and authority or qualification.

 

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(f)     Authorization;
Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated
by this Agreement and the Prospectus Supplement and otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of each of this Agreement by the Company and the consummation by it of the transactions contemplated hereby and thereby
and under the Prospectus Supplement have been duly authorized by all necessary action on the part of the Company and no further
action is required by the Company, the Company’s Board of Directors (the “Board of Directors”) or the
Company’s stockholders in connection therewith other than in connection with the Required Approvals (as defined below). This
Agreement has been duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid
and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by
applicable law.

 

(g)     No
Conflicts. The execution, delivery and performance by the Company of this Agreement and the transactions contemplated pursuant
to the Prospectus Supplement, the issuance and sale of the Securities and the consummation by it of the transactions contemplated
hereby and thereby to which it is a party do not and will not (i) conflict with or violate any provision of the Company’s
or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result
in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights
of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company
or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii)
subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal
and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material
Adverse Effect.

 

(h)     Filings,
Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority
or other Person in connection with the execution, delivery and performance by the Company of this Agreement and the
transactions contemplated pursuant to the Prospectus Supplement, other than: (i) the filing with the Commission of the
Prospectus Supplement, (ii) the filing with the Commission of a Form S-3 pursuant to Rule 462(b) to register additional
securities for the transactions contemplated hereunder, (iii) prompt application(s) to the NYSE MKT (the “Trading
Market”) for the listing of the Securities for trading thereon and (iv) such filings as are required to be made
under applicable state securities laws (collectively, the “Required Approvals”).

 

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(i)     Issuance
of the Securities; Registration. The Securities are duly authorized and, when issued and paid for in accordance with the Prospectus
Supplement, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company.
The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant
to the Prospectus Supplement.

 

(j)     Capitalization.
The capitalization of the Company is as set forth in the Incorporated Documents. The Company has not issued any capital stock since
its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise
of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant
to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of securities of the Company
or the Subsidiaries which would entitle the holder thereof to acquire at any time any Common Stock, including, without limitation,
any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or
exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock (“Common Stock Equivalents”)
outstanding as of the date of the most recently filed periodic report under the Exchange Act. Other than as set forth on Schedule
2(j), no Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate
in the transactions contemplated by this Agreement and the transactions contemplated pursuant to the Prospectus Supplement. Except
as set forth in the SEC Reports, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments
of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for,
or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings
or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common
Stock Equivalents. Other than as set forth on Schedule 2(j), the issuance and sale of the Securities will not obligate the
Company to issue shares of Common Stock or other securities to any Person (other than the Investors) and will not result in a right
of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All
of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive
rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the
Board of Directors or others is required for the issuance and sale of the Securities. There are no stockholders agreements, voting
agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s stockholders.

 

(k)     SEC
Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such
material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, together with
the Prospectus and the Prospectus Supplement, being collectively referred to herein as the “SEC Reports”) on
a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration
of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of
the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance
with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements
may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company
and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods
then ended, subject, in the case of unaudited statements, to normal, year-end audit adjustments.

 

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(l)     Material
Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof, (i) there has
been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the
Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property
to its stockholders (other than a dividend to the holders of the Preferred Stock) or purchased, redeemed or made any agreements
to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option plans. The Company does not have pending before the Commission
any request for confidential treatment of information. Except for the issuance of the Securities contemplated by the Prospectus
Supplement or disclosed in the Prospectus Supplement, no event, liability, fact, circumstance, occurrence or development has occurred
or exists with respect to the Company or its Subsidiaries or their respective business, prospects, properties, operations, assets
or financial condition that would be required to be disclosed by the Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly disclosed at least 1 Trading Day prior to the date that this representation
is made.

 

(m)     Litigation.
There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”)
which (i) adversely affects or challenges the legality, validity or enforceability of any of this Agreement and the transactions
contemplated pursuant to the Prospectus Supplement or the Securities or (ii) could, if there were an unfavorable decision, have
or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any current officer
thereof, has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws
or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated,
any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission
has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or
any Subsidiary under the Exchange Act or the Securities Act.

 

(n)     Labor
Relations. No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees
of the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’
employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither
the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. No executive officer, to the knowledge of the Company, is, or is now expected
to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement
or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the
continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with
respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all U.S. federal, state, local
and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages
and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.

 

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(o)     Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture,
loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any
court, arbitrator or governmental body or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as
could not have or reasonably be expected to result in a Material Adverse Effect.

 

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

 

(q)     Title
to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them
and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries,
in each case free and clear of all Liens, except for Liens as do not materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and Liens for the payment
of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities
held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which
the Company and the Subsidiaries are in compliance.

 

(r)     Patents
and Trademarks. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property
rights and similar rights necessary or material for use in connection with their respective businesses as described in the SEC
Reports and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property
Rights”). None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of,
the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned,
within two (2) years from the date of this Agreement. Neither the Company nor any Subsidiary has received, since the date of the
latest audited financial statements included within the SEC Reports, a notice (written or otherwise) of a claim or otherwise has
any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as would not have
a Material Adverse Effect. To the knowledge of the Company other than as described in the SEC Reports, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The
Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.

 

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(s)     Insurance.
The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and
in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including,
but not limited to, directors and officers insurance coverage. Neither the Company nor any Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue its business without a significant increase in cost.

 

(t)     Transactions
With Affiliates and Employees. Except as set forth in the SEC Reports, none of the officers or directors of the Company and,
to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company
or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess
of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred
on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan of the
Company.

 

(u)     Sarbanes-Oxley;
Internal Accounting Controls. The Company is in compliance with any and all applicable requirements of the Sarbanes-Oxley Act
of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission
thereunder that are effective as of the date hereof and as of each Closing Date. Other than as described in the SEC Reports, the
Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that:
(i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect
to any differences. The Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that information required to be disclosed
by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in the Commission’s rules and forms. The Company’s certifying officers have evaluated the
effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by the Company’s
most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company presented
in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness
of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no changes in the Company’s internal control over financial reporting (as such term is defined in the Exchange
Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial
reporting.

 

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(v)     Certain
Fees. Except as set forth in the Prospectus Supplement, no brokerage or finder’s fees or commissions are or will be payable
by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by this Agreement and the transactions contemplated pursuant to the Prospectus Supplement.
The Investors shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement
and the transactions contemplated pursuant to the Prospectus Supplement.

 

(w)     Investment
Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will
not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject
to registration under the Investment Company Act of 1940, as amended.

 

(x)     Registration
Rights. No Person has any right to cause the Company to effect the registration under the Securities Act of any securities
of the Company.

 

(y)     Listing
and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration
of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating
such registration. The Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on
which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market. The Company will not be in compliance with all such listing and maintenance requirements
as of the year ended September 30, 2012 unless this or a similar financing of not less than $1 million is completed.

 

(z)     Application
of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s certificate of incorporation (or similar charter documents)
or the laws of its state of incorporation that is applicable to the purchase of the Shares.

 

(aa)     Disclosure.
Except with respect to the material terms and conditions of the transactions contemplated by this Agreement and the transactions
contemplated pursuant to the Prospectus Supplement, the Company confirms that neither it nor any other Person acting on its behalf
has provided any of the Investors or their agents or counsel with any information that it believes constitutes or might constitute
material, non-public information which is not otherwise disclosed in the Prospectus Supplement. The Company understands and confirms
that the Investors will rely on the foregoing representation in effecting transactions in securities of the Company. All of the
disclosure furnished by or on behalf of the Company to the Investors regarding the Company, its business and the transactions contemplated
hereby, including the Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading.

 

    	10

    	 

    
 

(bb)     No
Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in the Securities
Purchase Agreement, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly
or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would
cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of any applicable shareholder
approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.

 

(cc)     Solvency.
The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing
and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which
lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction
within one year from each Closing Date. The SEC Reports sets forth as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. For the purposes of
this Agreement, “Indebtedness” means (x) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements and other contingent
obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s balance
sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions
in the ordinary course of business; and (z) the present value of any lease payments in excess of $50,000 due under leases required
to be capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.

 

(dd)     Tax
Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, the Company and each Subsidiary (i) has made or filed all United States federal and state income and all
foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has
paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such
returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material
taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in
any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary
know of no basis for any such claim.

 

(ee)     Foreign
Corrupt Practices. Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of
the Company, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials
or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully
any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is in violation
of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

 

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(ff)     Accountants.
The Company’s accounting firm is set forth in the Incorporated Documents. To the knowledge and belief of the Company, such
accounting firm (i) is a registered public accounting firm as required by the Exchange Act and (ii) intends to express its opinion
with respect to the financial statements to be included in the Company’s Annual Report for the year ending June 30, 2012.     

 

(gg)     Regulation
M Compliance.  The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate
the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases
of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any
other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Company’s placement
agent in connection with the placement of the Securities.

 

(hh)     Office
of Foreign Assets Control. Neither the Company nor, to the Company's knowledge, any director, officer, agent, employee or affiliate
of the Company is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury
Department (“OFAC”).

 

(ii)     U.S.
Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Investor’s
request.

 

(jj)     Bank
Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company Act
of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the
“Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly
or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent or
more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither
the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank
or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

 

(kk)     Money
Laundering. The operations of the Company are and have been conducted at all times in compliance with applicable financial
record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable
money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”),
and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving
the Company with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.

 

(ll)     Certificates.
Any certificate signed by an officer of the Company and delivered to the Placement Agent or to counsel for the Placement
Agent shall be deemed to be a representation and warranty by the Company to the Placement Agent as to the matters set forth
therein.

 

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(mm)     Reliance.
The Company acknowledges that the Placement Agent will rely upon the accuracy and truthfulness of the foregoing representations
and warranties and hereby consents to such reliance.     

 

(nn)     Forward-Looking
Statements. No forward-looking statements (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act) contained in either the Registration Statement, the Base Prospectus or the Prospectus Supplement has been made or reaffirmed
without a reasonable basis or has been disclosed other than in good faith.

 

(oo)     FINRA
Affiliations. There are no affiliations with any FINRA member firm among the Company’s officers, directors or, to the
knowledge of the Company, any five percent (5%) or greater stockholder of the Company.

 

Section 3.              Delivery
and Payment. Each Closing shall occur at the offices of the Placement Agent (or at such other place as shall be agreed upon
by the Placement Agent and the Company). Subject to the terms and conditions hereof, at each Closing payment of the purchase price
for the Securities sold on such Closing Date shall be made by Federal Funds wire transfer, against delivery of such Securities,
and such Securities shall be registered in such name or names and shall be in such denominations, as the Placement Agent may request
at least one business day before the time of purchase (as defined below).

 

Deliveries of the documents
with respect to the purchase of the Securities, if any, shall be made at the offices of Placement Agent. All actions taken at a
Closing shall be deemed to have occurred simultaneously.

 

Section 4.              Covenants
and Agreements of the Company. The Company further covenants and agrees with the Placement Agent as follows:

 

(a)     Registration
Statement Matters. The Company will advise the Placement Agent promptly after it receives notice thereof of the time when any
amendment to the Registration Statement has been filed or becomes effective or any supplement to any Prospectus Supplement or any
amended Prospectus Supplement has been filed and will furnish the Placement Agent with copies thereof. The Company will file promptly
all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant
to Section 13(a), 14 or 15(d) of the Exchange Act subsequent to the date of any Prospectus Supplement and for so long as the delivery
of a prospectus is required in connection with the Offering. The Company will advise the Placement Agent, promptly after it receives
notice thereof (i) of any request by the Commission to amend the Registration Statement or to amend or supplement any Prospectus
Supplement or for additional information, and (ii) of the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or any post-effective amendment thereto or any order directed at any Incorporated Document, if any,
or any amendment or supplement thereto or any order preventing or suspending the use of the Base Prospectus or any Prospectus Supplement
or any amendment or supplement thereto or any post-effective amendment to the Registration Statement, of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, of the institution or threatened institution of any proceeding
for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or a
Prospectus Supplement or for additional information. The Company shall use its best efforts to prevent the issuance of any such
stop order or prevention or suspension of such use.  If the Commission shall enter any such stop order or order or notice
of prevention or suspension at any time, the Company will use its best efforts to obtain the lifting of such order at the earliest
possible moment, or will file a new registration statement and use its best efforts to have such new registration statement declared
effective as soon as practicable.  Additionally, the Company agrees that it shall comply with the provisions of Rules 424(b),
430A, 430B and 430C, as applicable, under the Securities Act, including with respect to the timely filing of documents thereunder,
and will use its reasonable efforts to confirm that any filings made by the Company under such Rule 424(b) are received
in a timely manner by the Commission.

 

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(b)     Blue
Sky Compliance. The Company will cooperate with the Placement Agent and the Investors in endeavoring to qualify the Securities
for sale under the securities laws of such jurisdictions (United States and foreign) as the Placement Agent and the Investors may
reasonably request and will make such applications, file such documents, and furnish such information as may be reasonably required
for that purpose, provided the Company shall not be required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction where it is not now so qualified or required to file such a consent, and provided further
that the Company shall not be required to produce any new disclosure document other than a Prospectus Supplement. The Company will,
from time to time, prepare and file such statements, reports and other documents as are or may be required to continue such qualifications
in effect for so long a period as the Placement Agent may reasonably request for distribution of the Securities. The Company will
advise the Placement Agent promptly of the suspension of the qualification or registration of (or any such exemption relating to)
the Securities for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose,
and in the event of the issuance of any order suspending such qualification, registration or exemption, the Company shall use its
best efforts to obtain the withdrawal thereof at the earliest possible moment.

 

(c)     Amendments
and Supplements to a Prospectus Supplement and Other Matters. The Company will comply with the Securities Act and the Exchange
Act, and the rules and regulations of the Commission thereunder, so as to permit the completion of the distribution of the Securities
as contemplated in this Agreement, the Incorporated Documents and any Prospectus Supplement. If during the period in which a prospectus
is required by law to be delivered in connection with the distribution of Securities contemplated by the Incorporated Documents
or any Prospectus Supplement (the “Prospectus Delivery Period”), any event shall occur as a result of which,
in the judgment of the Company or in the opinion of the Placement Agent or counsel for the Placement Agent, it becomes necessary
to amend or supplement the Incorporated Documents or any Prospectus Supplement in order to make the statements therein, in the
light of the circumstances under which they were made, as the case may be, not misleading, or if it is necessary at any time to
amend or supplement the Incorporated Documents or any Prospectus Supplement or to file under the Exchange Act any Incorporated
Document to comply with any law, the Company will promptly prepare and file with the Commission, and furnish at its own expense
to the Placement Agent and to dealers, an appropriate amendment to the Registration Statement or supplement to the Registration
Statement, the Incorporated Documents or any Prospectus Supplement that is necessary in order to make the statements in the Incorporated
Documents and any Prospectus Supplement as so amended or supplemented, in the light of the circumstances under which they were
made, as the case may be, not misleading, or so that the Registration Statement, the Incorporated Documents or any Prospectus Supplement,
as so amended or supplemented, will comply with law.

 

(d)     Copies
of any Amendments and Supplements to a Prospectus Supplement. The Company will furnish the Placement Agent, without charge,
during the period beginning on the date hereof and ending on the later of the last Closing Date of the Offering, as many copies
of the Incorporated Documents and any Prospectus Supplement and any amendments and supplements thereto (including any Incorporated
Documents, if any) as the Placement Agent may reasonably request.

 

    	14

    	 

    
 

(e)     Free
Writing Prospectus. The Company covenants that it will not, unless it obtains the prior written consent of the Placement Agent,
make any offer relating to the Securities that would constitute a Company Free Writing Prospectus or that would otherwise constitute
a “free writing prospectus” (as defined in Rule 405 of the Securities Act) required to be filed by the Company
with the Commission or retained by the Company under Rule 433 of the Securities Act. In the event that the Placement Agent expressly
consents in writing to any such free writing prospectus (a “Permitted Free Writing Prospectus”), the Company
covenants that it shall (i) treat each Permitted Free Writing Prospectus as a Company Free Writing Prospectus, and (ii) comply
with the requirements of Rule 164 and 433 of the Securities Act applicable to such Permitted Free Writing Prospectus, including
in respect of timely filing with the Commission, legending and record keeping.

 

(f)     Transfer
Agent. The Company will maintain, at its expense, a registrar and transfer agent for the Common Stock.

 

(g)     Periodic
Reporting Obligations. During the Prospectus Delivery Period, the Company will duly file, on a timely basis, with the Commission
and the Trading Market all reports and documents required to be filed under the Exchange Act within the time periods and in the
manner required by the Exchange Act.

 

(h)     Additional
Documents. The Company will enter into any subscription, purchase or other customary agreements as the Placement Agent
or the Investors deem necessary or appropriate to consummate the Offering, all of which will be in form and substance reasonably
acceptable to the Placement Agent and the Investors. The Company agrees that the Placement Agent may rely upon, and each is a third
party beneficiary of, the representations and warranties, and applicable covenants, set forth in any such purchase, subscription
or other agreement with Investors in the Offering.

 

(i)     No
Manipulation of Price.  The Company will not take, directly or indirectly, any action designed to cause or result
in, or that has constituted or might reasonably be expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.

 

(j)     Acknowledgment.
The Company acknowledges that any advice given by the Placement Agent to the Company is solely for the benefit and use of the Board
of Directors of the Company and may not be used, reproduced, disseminated, quoted or referred to, without the Placement Agent's
prior written consent.

 

Section 5.              Conditions
of the Obligations of the Placement Agent. The obligations of the Placement Agent hereunder shall be subject to the accuracy
of the representations and warranties on the part of the Company set forth in Section 2 hereof, in each case as of the date hereof
and as of each Closing Date as though then made, to the timely performance by each of the Company of its covenants and other obligations
hereunder on and as of such dates, and to each of the following additional conditions:

 

(a)     Compliance
with Registration Requirements; No Stop Order; No Objection from the FINRA. Each Prospectus Supplement (in accordance with
Rule 424(b)) and “free writing prospectus” (as defined in Rule 405 of the Securities Act), if any, shall have
been duly filed with the Commission, as appropriate; no stop order suspending the effectiveness of the Registration Statement or
any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission;
no order preventing or suspending the use of any Prospectus Supplement shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission; no order having the effect of ceasing or suspending the distribution
of the Securities or any other securities of the Company shall have been issued by any securities commission, securities regulatory
authority or stock exchange and no proceedings for that purpose shall have been instituted or shall be pending or, to the knowledge
of the Company, contemplated by any securities commission, securities regulatory authority or stock exchange; all requests for
additional information on the part of the Commission shall have been complied with; and the FINRA shall have raised no objection
to the fairness and reasonableness of the placement terms and arrangements.

 

    	15

    	 

    
 

(b)     Corporate
Proceedings. All corporate proceedings and other legal matters in connection with this Agreement, the Registration Statement
and each Prospectus Supplement, and the registration, sale and delivery of the Securities, shall have been completed or resolved
in a manner reasonably satisfactory to the Placement Agent's counsel, and such counsel shall have been furnished with such papers
and information as it may reasonably have requested to enable such counsel to pass upon the matters referred to in this Section 5.

 

(c)     No
Material Adverse Effect. Subsequent to the execution and delivery of this Agreement and prior to each Closing Date, in
the Placement Agent's sole judgment after consultation with the Company, there shall not have occurred any  Material
Adverse Effect.

 

(d)     Opinion
of Counsel for the Company. The Placement Agent shall have received on each Closing Date the favorable opinion of legal counsel
to the Company, dated as of such Closing Date, including, without limitation, a negative assurance letter, addressed to the Placement
Agent in form and substance satisfactory to the Placement Agent.

 

(e)     Officers’
Certificate. The Placement Agent shall have received on each Closing Date a certificate of the Company, dated as of such Closing
Date, signed by the Chief Executive Officer and Controller of the Company, to the effect that, and the Placement Agent shall be
satisfied that, the signers of such certificate have reviewed the Registration Statement, the Incorporated Documents, any Prospectus
Supplement, any Permitted Free Writing Prospectus and this Agreement and to the further effect that:

 

(i)     The
representations and warranties of the Company in this Agreement are true and correct, as if made on and as of such Closing Date,
and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied
at or prior to such Closing Date;

 

(ii)     No
stop order suspending the effectiveness of the Registration Statement or the use of the Base Prospectus or any Prospectus Supplement
has been issued and no proceedings for that purpose have been instituted or are pending or, to the Company’s knowledge, threatened
under the Securities Act; no order having the effect of ceasing or suspending the distribution of the Securities or any other securities
of the Company has been issued by any securities commission, securities regulatory authority or stock exchange in the United States
and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, contemplated by any
securities commission, securities regulatory authority or stock exchange in the United States;

 

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(iii)     When
the Registration Statement became effective, at the time of sale, and at all times subsequent thereto up to the delivery of such
certificate, the Registration Statement and the Incorporated Documents, if any, taken as a whole, when such documents became effective
or were filed with the Commission, contained all material information required to be included therein by the Securities Act and
the Exchange Act and the applicable rules and regulations of the Commission thereunder, as the case may be, and in all material
respects conformed to the requirements of the Securities Act and the Exchange Act and the applicable rules and regulations of the
Commission thereunder, as the case may be, and the Registration Statement and the Incorporated Documents, if any, taken as a whole,
did not and do not include any untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided,
however, that the preceding representations and warranties contained in this paragraph (iii) shall not apply to any statements
or omissions made in reliance upon and in conformity with information furnished in writing to the Company by the Placement Agent
expressly for use therein) and, since the effective date of the Registration Statement, there has occurred no event required by
the Securities Act and the rules and regulations of the Commission thereunder to be set forth in the Incorporated Documents taken
as a whole which has not been so set forth; and

 

(iv)     Subsequent
to the respective dates as of which information is given in the Registration Statement, the Incorporated Documents and any Prospectus
Supplement, taken as a whole, there has not been: (a) any transaction that is material to the
Company and the Subsidiaries taken as a whole, except transactions entered into in the ordinary course of business; (b) any obligation,
direct or contingent, that is material to the Company and the Subsidiaries taken as a whole, incurred by the Company or any Subsidiary,
except obligations incurred in the ordinary course of business; (c) any material change in the capital stock (except changes thereto
resulting from the exercise of outstanding stock options or warrants) or outstanding indebtedness of the Company or any Subsidiary;
(d) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company; or (e) any loss or damage
(whether or not insured) to the property of the Company or any Subsidiary which has been sustained or will have been sustained
which has a Material Adverse Effect.

 

(f)     Escrow
Agreement. The Company and the Placement Agent shall have entered into an escrow agreement with a commercial bank or trust
company reasonably satisfactory to both parties pursuant to which the Investors shall deposit their subscription funds in an escrow
account and the Company and the Placement Agent shall jointly authorize the disbursement of the funds from the escrow account.
The Company shall pay the reasonable fees of the escrow agent.

 

(g)     Stock
Exchange Listing. Prior to any sale of the Shares, the Common Stock shall be registered under the Exchange Act and shall be
listed on the principal Trading Market, and the Company shall not have taken any action designed to terminate, or likely to have
the effect of terminating, the registration of the Common Stock under the Exchange Act or delisting or suspending from trading
the Common Stock from the principal Trading Market, nor shall the Company have received any information suggesting that the Commission
or the principal Trading Market is contemplating terminating such registration or listing.

 

(h)     Additional
Documents. On or before each Closing Date, the Placement Agent and counsel for the Placement Agent shall have received such
information and documents as they may reasonably require for the purposes of enabling them to pass upon the issuance and sale of
the Securities as contemplated herein, or in order to evidence the accuracy of any of the representations and warranties, or the
satisfaction of any of the conditions or agreements, herein contained.

 

    	17

    	 

    
 

If any condition specified
in this Section 5 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Placement Agent
by notice to the Company at any time on or prior to a Closing Date, which termination shall be without liability on the part of
any party to any other party, except that Section 6 (Payment of Expenses), Section 7 (Indemnification and Contribution) and Section
8 (Representations and Indemnities to Survive Delivery) shall at all times be effective and shall survive such termination.

 

Section 6.              Payment
of Expenses. The Company agrees to pay all costs, fees and expenses incurred by the Company in connection with the performance
of its obligations hereunder and in connection with the transactions contemplated hereby, including, without limitation: (i) all
expenses incident to the issuance, delivery and qualification of the Securities (including all printing and engraving costs); (ii)
all fees and expenses of the registrar and transfer agent of the Common Stock; (iii) all necessary issue, transfer and other stamp
taxes in connection with the issuance and sale of the Securities; (iv) all fees and expenses of the Company’s counsel,
independent public or certified public accountants and other advisors; (v) all costs and expenses incurred in connection with the
preparation, printing, filing, shipping and distribution of the Registration Statement (including financial statements, exhibits,
schedules, consents and certificates of experts), the Base Prospectus and each Prospectus Supplement, and all amendments and supplements
thereto, and this Agreement; (vi) [RESERVED]; (vii) if applicable, the filing fees incident to the review and approval by the FINRA
of the Placement Agent's participation in the offering and distribution of the Securities; (viii) the fees and expenses associated
with including the Securities on the Trading Market; (ix) all costs and expenses incident to the travel and accommodation of the
Company’s and the Placement Agent's employees on the “roadshow,” if any; and (x) all other fees, costs
and expenses referred to in Part II of the Registration Statement.

 

Section 7.              Indemnification
and Contribution. The Company agrees to indemnify the Placement Agent in accordance with the provisions of Schedule A
hereto, which is incorporated by reference herein and made a part hereof.

 

Section 8.              Representations
and Indemnities to Survive Delivery. The respective indemnities, agreements, representations, warranties and other statements
of the Company or any person controlling the Company, of its officers, and of the Placement Agent set forth in or made pursuant
to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of the Placement Agent,
the Company, or any of its or their partners, officers or directors or any controlling person, as the case may be, and will survive
delivery of and payment for the Securities to be sold in the proposed Offering and any termination of this Agreement. A successor
to a Placement Agent, or to the Company, its directors or officers or any person controlling the Company, shall be entitled to
the benefits of the indemnity, contribution and reimbursement agreements contained in this Agreement.

 

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Section 9.              Notices.
All communications hereunder shall be in writing and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:

 

If to the Placement Agent to the address
set forth above, attn: General Counsel, Facsimile: 305.572.4220.

 

With a copy to: 

 

Ellenoff Grossman & Schole LLP

150 East 42nd Street

New York, New York 10017

Facsimile: (212) 401-4741

Attention: Joseph Smith

 

If to the Company:

 

IsoRay, Inc.

350 Hills Street, Suite 106

Richland, Washington 99354

 

Facsimile: _______________

Attention: Dwight Babcock

 

With a copy to: 

 

Keller Rohrback P.L.C.

3101 N. Central Avenue, Suite 1400

Phoenix, Arizona 85012

Facsimile: (602) 248-2822

Attention: Stephen R. Boatwright

 

Any party hereto may
change the address for receipt of communications by giving written notice to the others.

 

Section 10.             Successors.
This Agreement will inure to the benefit of and be binding upon the parties hereto, and to the benefit of the employees, officers
and directors and controlling persons referred to in Section 7 hereof, and to their respective successors, and personal representative,
and no other person will have any right or obligation hereunder.

 

Section 11.             Partial
Unenforceability. The invalidity or unenforceability of any section, paragraph or provision of this Agreement shall not affect
the validity or enforceability of any other section, paragraph or provision hereof. If any Section, paragraph or provision of this
Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and
only such minor changes) as are necessary to make it valid and enforceable.

 

Section 12.             Governing
Law Provisions. This Agreement shall be deemed to have been made and delivered in New York City and both this engagement letter
and the transactions contemplated hereby shall be governed as to validity, interpretation, construction, effect and in all other
respects by the internal laws of the State of New York, without regard to the conflict of laws principles thereof. Each of the
Placement Agent and the Company: (i) agrees that any legal suit, action or proceeding arising out of or relating to this engagement
letter and/or the transactions contemplated hereby shall be instituted exclusively in New York Supreme Court, County of New York,
or in the United States District Court for the Southern District of New York, (ii) waives any objection which it may have or hereafter
to the venue of any such suit, action or proceeding, and (iii) irrevocably consents to the jurisdiction of the New York Supreme
Court, County of New York, and the United States District Court for the Southern District of New York in any such suit, action
or proceeding. Each of the Placement Agent and the Company further agrees to accept and acknowledge service of any and all process
which may be served in any such suit, action or proceeding in the New York Supreme Court, County of New York, or in the United
States District Court for the Southern District of New York and agrees that service of process upon the Company mailed by certified
mail to the Company’s address shall be deemed in every respect effective service of process upon the Company, in any such
suit, action or proceeding, and service of process upon the Placement Agent mailed by certified mail to the Placement Agent’s
address shall be deemed in every respect effective service process upon the Placement Agent, in any such suit, action or proceeding.
Notwithstanding any provision of this engagement letter to the contrary, the Company agrees that neither the Placement Agent nor
its affiliates, and the respective officers, directors, employees, agents and representatives of the Placement Agent, its affiliates
and each other person, if any, controlling the Placement Agent or any of its affiliates, shall have any liability (whether direct
or indirect, in contract or tort or otherwise) to the Company for or in connection with the engagement and transaction described
herein except for any such liability for losses, claims, damages or liabilities incurred by us that are finally judicially determined
to have resulted from the bad faith or gross negligence of such individuals or entities. If either party shall commence an action
or proceeding to enforce any provision of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed
by the other party for its reasonable attorney’s fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.

 

    	19

    	 

    
 

Section 13.            General
Provisions.

 

(a)     This
Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous
oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement may not be amended or modified unless in writing by all of the parties hereto, and no
condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit.
Section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of
this Agreement.

 

(b)     The
Company acknowledges that in connection with the offering of the Securities: (i) the Placement Agent has acted at arms length,
are not agents of, and owe no fiduciary duties to the Company or any other person, (ii) the Placement Agent owes the Company only
those duties and obligations set forth in this Agreement and (iii) the Placement Agent may have interests that differ from those
of the Company. The Company waives to the full extent permitted by applicable law any claims it may have against the Placement
Agent arising from an alleged breach of fiduciary duty in connection with the offering of the Securities

 

[The remainder of this page has been
intentionally left blank.]

 

 

 

    	20

    	 

    
 

If the foregoing is
in accordance with your understanding of our agreement, please sign below whereupon this instrument, along with all counterparts
hereof, shall become a binding agreement in accordance with its terms.

 

	 	Very truly yours,
	 	 
	 	ISORAY, INC.,
	 	a Minnesota corporation
	 	 	 	 
	 	 	 	 
	 	By:	/s/ Dwight Babcock	 
	 	 	Name: Dwight Babcock	 
	 	 	Title: CEO and Chairman	 

 

 

The foregoing Placement
Agency Agreement is hereby confirmed and accepted as of the date first above written.

 

	LADENBURG THALMANN & CO. INC.	 	 
	 	 	 	 
	 	 	 	 
	By:	/s/ Nicholas Stergis	 	 
	 	Name: Nicholas Stergis	 
	 	Title: Managing Director-Investment Banking	 

 

    	21

    	 

    
 

SCHEDULE A – INDEMNIFICATION

 

The Company hereby
agrees to indemnify and hold Ladenburg, its officers, directors, principals, employees, affiliates, and shareholders, and their
successors and assigns, harmless from and against any and all loss, claim, damage, liability, deficiencies, actions, suits, proceedings,
costs and legal expenses or expense whatsoever (including, but not limited to, reasonable legal fees and other expenses and reasonable
disbursements incurred in connection with investigating, preparing to defend or defending any action, suit or proceeding, including
any inquiry or investigation, commenced or threatened, or any claim whatsoever, or in appearing or preparing for appearance as
witness in any proceeding, including any pretrial proceeding such as a deposition) (collectively, "Losses") arising out
of, based upon, or in any way related or attributed to, (i) any breach of a representation, warranty or covenant by the Company
contained in this Agreement or (ii) any activities or services performed hereunder by Ladenburg, unless it is finally judicially
determined in a court of competent jurisdiction that such Losses were the primary and direct result of the intentional misconduct
or gross negligence of Ladenburg in performing the services hereunder.

 

If Ladenburg receives
written notice of the commencement of any legal action, suit or proceeding with respect to which the Company is or may be obligated
to provide indemnification pursuant to this Schedule A, Ladenburg shall, within thirty (30) days of the receipt of such
written notice, give the Company written notice thereof (a "Claim Notice"). Failure to give such Claim Notice within
such thirty (30) day period shall not constitute a waiver by Ladenburg of its right to indemnity hereunder with respect to such
action, suit or proceeding. Upon receipt by the Company of a Claim Notice from Ladenburg with respect to any claim for indemnification
which is based upon a claim made by a third party ("Third Party Claim"), the Company may assume the defense of the Third
Party Claim with counsel of its own choosing, as described below. Ladenburg shall cooperate in the defense of the Third Party Claim
and shall furnish such records, information and testimony and attend all such conferences, discovery proceedings, hearings, trial
and appeals as may be reasonably required in connection therewith. Ladenburg shall have the right to employ its own counsel in
any such action, which shall be at the Company's expense if (i) the Company and Ladenburg shall have mutually agreed in writing
to the retention of such counsel, (ii) the Company shall have failed in a timely manner to assume the defense and employ counsel
or experts reasonably satisfactory to Ladenburg in such litigation or proceeding or (iii) the named parties to any such litigation
or proceeding (including any impleaded parties) include the Company and Ladenburg and representation of the Company and Ladenburg
by the same counsel or experts would, in the reasonable opinion of Ladenburg, be inappropriate due to actual or potential differing
interests between the Company and Ladenburg. The Company shall not satisfy or settle any Third Party Claim for which indemnification
has been sought and is available hereunder, without the prior written consent of Ladenburg, which consent shall not be delayed
and which shall not be required if Ladenburg is granted a release in connection therewith. The indemnification provisions hereunder
shall survive the termination or expiration of this Agreement.

 

The Company further
agrees, upon demand by Ladenburg, to promptly reimburse Ladenburg for, or pay, any fees, expenses or disbursements as to which
Ladenburg has been indemnified herein with such reimbursement to be made currently as any such fees, expenses or disbursements
are incurred by Ladenburg. Notwithstanding the provisions of the aforementioned indemnification, any such reimbursement or payment
by the Company of fees, expenses, or disbursements incurred by Ladenburg shall be repaid by Ladenburg in the event of any proceeding
in which a final judgment (after all appeals or the expiration of time to appeal) is entered in a court of competent jurisdiction
against Ladenburg based solely upon its gross negligence or intentional misconduct in the performance of its duties hereunder,
and provided further, that the Company shall not be required to make reimbursement or payment for any settlement effected without
the Company’s prior written consent (which consent shall not be unreasonably withheld or delayed).

 

    	22

    	 

    
 

If
for any reason the foregoing indemnification is unavailable or is insufficient to hold Ladenburg harmless, the Company agrees to
contribute the amount paid or payable by Ladenburg in such proportion as to reflect not only the relative benefits received by
the Company, on the one hand, and Ladenburg, on the other hand, but also the relative fault of the Company and Ladenburg as well
as any relevant equitable considerations. In no event shall Ladenburg contribute in excess of the fees actually received
by it pursuant to the terms of this Agreement. For purposes of this Agreement,
each officer, director, shareholder, and employee or affiliate of Ladenburg and each person, if any, who controls Ladenburg (or
any affiliate) within the meaning of either Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Securities
Exchange Act of 1934, as amended, shall have the same rights as Ladenburg with respect to matters of indemnification by the Company
hereunder.

 

    	23CERTIFICATE OF AMENDMENT

OF THE AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION 

OF

MEDGENICS, INC.

 

Pursuant
to Section 242 of the General Corporation Law of the State of Delaware, Medgenics, Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the “corporation”), does hereby certify:

 

1.          The
name of the corporation is Medgenics, Inc.

 

2.          The
corporation’s Amended and Restated Certificate of Incorporation, which was previously filed with the Secretary of State of
the State of Delaware on December 3, 2007, and amended by that certain Certificate of Amendment to the Amended and Restated Certificate
of Incorporation, which was previously filed with the Secretary of State of the State of Delaware on June 4, 2009, is hereby further
amended by deleting ARTICLE IV thereof in its entirety and replacing it with the following:

  

“ARTICLE IV

AUTHORIZED STOCK

 

The total number of shares of all classes of stock which the
corporation shall have the authority to issue is 100,000,000 all of which shall be shares of common stock, $0.0001 par value per
share (“Common Stock”).

 

At the time that this Certificate of Amendment
becomes effective pursuant to the General Corporation Law of the State of Delaware (the “Effective Time”), the shares
of Common Stock issued and outstanding immediately prior to the Effective Time and the shares of Common Stock issued and held in
the treasury of the corporation immediately prior to the Effective Time are reclassified into a smaller number of shares such that
each twenty to fifty shares of issued Common Stock immediately before the Effective Time is reclassified into one share of Common
Stock, the exact ratio within the twenty-to-fifty range to be determined by the board of directors of the corporation prior to
the Effective Time and publicly announced by the corporation. Notwithstanding the immediately preceding sentence, the corporation
shall issue no fractional shares as a result of the actions set forth herein and neither the number of shares of Common Stock authorized
pursuant to the first sentence of this Article IV nor the par value of such shares shall be altered. As contemplated by the preceding
sentence, a holder who otherwise would be entitled to receive a fraction of a share of Common Stock shall, in lieu thereof, be
entitled to receive a cash payment equal to the fraction to which such holder would otherwise be entitled multiplied by the closing
sales price of such Common Stock as reported by AIM on the MEDU.L line immediately following the Effective Time.

 

    	 

    	 

    

 

Each stock certificate that, immediately
prior to the Effective Time, represented shares of Common Stock that were issued and outstanding immediately prior to the Effective
Time shall, from and after the Effective Time, automatically and without the necessity of presenting the same for exchange, represent
that number of whole shares of Common Stock after the Effective Time into which the shares
of Common Stock formerly represented by such certificate shall have been reclassified (as well as the right to receive cash in
lieu of fractional shares of Common Stock after the Effective Time); provided, however, that each holder of record of a
certificate that represented shares of Common Stock that were issued and outstanding immediately prior to the Effective Time shall
receive, upon surrender of such certificate, a new certificate representing the number of whole shares of Common Stock into which
the shares of Common Stock formerly represented by such certificate shall have been reclassified.”

 

3.          The
amendment set forth in this Certificate of Amendment was duly adopted in accordance with Section 242 of the General Corporation
Law of the State of Delaware and by written consent of the stockholders of the corporation in accordance with Section 228 of the
General Corporation Law of the State of Delaware.

 

IN WITNESS WHEREOF, Medgenics, Inc.
has caused this Certificate of Amendment to be executed by its duly authorized officer on this 10th day of February,
2011.

 

	 	Medgenics, Inc.
	 	 
	 	By: 	/s/ Andrew L. Pearlman
	 	Name:  Andrew L. Pearlman
	 	Its:  President

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