Document:

ISORAY,
      INC.

     

    
      	 	
              COMMON
                STOCK PURCHASE WARRANT

            	
              No._____

            

    

     

    This
      certifies that, for value received, __________________________ ("Holder"),
      is
      entitled to subscribe for and purchase from IsoRay, Inc., a Minnesota
      corporation ("Company"), ________ shares, subject to adjustment as set forth
      in
      Article II below
      ("Warrant Shares"), of Common Stock of the Company, par value $0.001 per share
      ("Common Stock"), at the exercise price of $5.00 per share, which price is
      subject to adjustment as set forth in Article II below
      (the "Exercise Price"), at any time and from time to time beginning on the
      date
      of this Warrant as set forth below ("Exercise Date"), and ending on the date
      that is four years (4) years after the date of this Warrant ("Expiration Date"),
      upon written notice from the Holder to the Company ("Notice") and subject to
      the
      terms provided herein.

     

    This
      Warrant is issued pursuant to Section
      1(a)
      of that
      certain Securities Purchase Agreement between the Company and certain
“Purchasers” thereunder, dated as of March 21, 2007 (the “Purchase Agreement”),
      pursuant to which such Purchasers, including the Holder, purchased Common Stock
      and Warrants of the Company.

     

    This
      Warrant is subject to the following provisions, terms and conditions:

     

    ARTICLE
      I.

     

    EXERCISE;
      RESERVATION OF SHARES

     

    Section
      1.01 Warrant
      Exercise.
      The
      rights represented by this Warrant may be exercised in whole or in part by
      the
      Holder at any time and from time to time prior to the expiration of this
      Warrant, upon Notice, by the surrender at the principal office of the Company
      of
      this Warrant together with a duly executed subscription in the form annexed
      hereto as Exhibit A ("Subscription Form") and, subject to Section 1.02,
      accompanied by payment, in certified or immediately available funds, of the
      Exercise Price for the number of Warrant Shares specified in the Subscription
      Form. The shares so purchased shall be deemed to be issued to the Holder as
      the
      record owner of such shares as of the close of business on the date on which
      this Warrant shall be exercised as hereinabove provided. No fractional shares
      or
      scrip representing fractional shares shall be issued upon exercise of this
      Warrant and the number of shares that shall be issued upon such exercise shall
      be rounded to the nearest whole share without the payment or receipt of any
      additional consideration. 

     

    Section
      1.02 Net
      Issue Exercise.
      If
      at the
      time of exercise of this Warrant a registration statement covering the Warrant
      Shares that are the subject of the Subscription Notice (the "Unavailable Warrant
      Shares") is not available for the resale of such Unavailable Warrant Shares,
      the
      Holder may, in its sole discretion, and in
      lieu of
      exercising this Warrant pursuant to Section 1.01 hereof, exercise this
      Warrant by surrendering this Warrant to the Company, with a duly executed
      Subscription Form marked to reflect Net Issue Exercise and specifying the number
      of Warrant Shares to be purchased, during normal business hours on any business
      day during the Exercise Period. Such Warrant Shares shall be deemed to be issued
      to Holder as the record holder of such Warrant Shares as of the close of
      business on the date on which this Warrant is surrendered in accordance with
      the
      provisions hereof. Upon such exercise, Holder shall be entitled to receive,
      and
      the Company shall issue to Holder, a number of Warrant Shares computed as of
      the
      date of surrender of this Warrant to the Company using the following
      formula:

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    X
      =
Y(A-B)

    A

     

    
      	
              Where

            	
              X
                =

            	
              the
                number of Warrant Shares to be issued to Holder under this Section
                1.02;

            

    

     

    
      	 	
              Y
                =

            	
              the
                number of Warrant Shares in respect of which this election is
                made;

            

    

     

    
      	 	
              A
                =

            	
              the
                fair market value of one share of the Common Stock at the date of
                such
                calculation; and

            

    

     

    
      	 	
              B
                =

            	
              the
                Exercise Price (as adjusted to the date of the
                issuance).

            

    

     

    Section
      1.03 Fair
      Market Value.
      For the
      purposes of Section 1.02 hereof, the fair market value of one share of the
      Common Stock shall mean, as of any date:

     

    (i) the
      fair
      market value of the shares of the Company's Common Stock as of such date, as
      determined from the last closing price per share of the Company's Common Stock
      on the principal national securities exchange on which the Company's Common
      Stock is listed or admitted to trading, or

     

    (ii) the
      fair
      market value of the shares of the Company's Common Stock as of such date, as
      determined from the last reported sales price per share of the Company's Common
      Stock on the Nasdaq National Market, the Nasdaq Capital Market or any other
      NASDAQ market if the Company's Common Stock is not listed or traded on any
      such
      exchange, or

     

    (iii) the
      fair
      market value of the shares of the Company's Common Stock as of such date, as
      determined from the average of the bid and asked price per share of the
      Company's Common Stock, at the closing of the market on such date, as reported
      on the OTC Bulletin Board or in the "pink
      sheets"
      published by the National Quotation Bureau, Inc., if the Company's Common Stock
      is not listed or traded on any exchange or Nasdaq, or

     

    (iv) if
      such
      quotations are not available, the fair market value per share of the Company's
      Common Stock on the date such notice was received by the Company as reasonably
      determined in good faith by the Board of Directors of the Company.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    Section
      1.04 Certificates.
      Certificates for the shares purchased pursuant to Sections 1.01 and
      1.02
      shall be delivered to the Holder within two (2) business days after the rights
      represented by this Warrant shall have been so exercised (which exercise shall
      be deemed to occur on the date on which this Warrant, together with a duly
      executed Subscription Form and full payment of the Exercise Price, whether
      in
      cash or by Net Issue Exercise, are delivered to the Company at its principal
      offices (the "Date of Exercise")), by the transfer agent of the Company either
      (i) by crediting the account in the Holder's name held at the Holder's prime
      broker with the Depository Trust Company through its Deposit Withdrawal Agent
      Commission ("DWAC") system if the Company is then a participant in such system
      or (ii) if the Company is not then a participant in such system, the Warrant
      Shares are not issuable without restrictive legend or Holder so elects ,by
      physical delivery to the address specified by Holder on the Subscription Form,
      and a new Warrant in the name of the Holder representing the rights, if any,
      that shall not have been exercised prior to the Expiration Date with respect
      to
      this Warrant shall also be delivered to such Holder within such time, with
      such
      new Warrant to be identical in all other respects to this Warrant. The Holder
      shall for all purposes be deemed to have become the holder of record of the
      Warrant Shares on the date this Warrant was exercised (the date the Holder
      has
      fully complied with the requirements of Section 1.01), irrespective of the
      date of delivery of the certificate or certificates representing the Warrant
      Shares; provided that, if the date such exercise is made is a date when the
      stock transfer books of the Company are closed, such person shall be deemed
      to
      have become the holder of record of the Warrant Shares at the close of business
      on the next succeeding date on which the stock transfer books are open. The
      term
      "Warrant," as used herein, includes any Warrants into which this Warrant may
      be
      divided or combined and any subsequent Warrants issued upon the transfer or
      exchange or reissuance upon loss hereof. 

     

    Section
      1.05 Company's
      Failure to Timely Deliver Securities.
      If for
      any reason or for no reason within three (3) trading days of the Date of
      Exercise the Company shall fail to issue and deliver a certificate to the Holder
      and register such shares of Common Stock on the Company's share register or
      credit the Holder's balance account with Depository Trust Company for the number
      of shares of Common Stock to which the Holder is entitled upon the Holder's
      exercise hereunder, and if on or after such trading day the Holder purchases
      (in
      an open market transaction or otherwise) shares of Common Stock to deliver
      in
      satisfaction of a sale by the Holder of shares of Common Stock issuable upon
      such exercise that the Holder anticipated receiving from the Company (a
      "Buy-In"), then the Company shall, within three (3) trading days after the
      Holder's request and in the Company's discretion, either (i) pay cash to the
      Holder in an amount equal to the Holder's total purchase price (including
      brokerage commissions, if any) for the shares of Common Stock so purchased
      (the
      "Buy-In Price"), at which point the Company's obligation to deliver such
      certificate (and to issue such shares of Common Stock) shall terminate, or
      (ii)
      promptly honor its obligation to deliver to the Holder a certificate or
      certificates representing such shares of Common Stock and pay cash to the Holder
      in an amount equal to the excess (if any) of the Buy-In Price over the product
      of (A) such number of shares of Common Stock, times (B) the VWAP on the date
      of
      exercise. For purposes of this Warrant, “VWAP” means, for any date, the price
      determined by the first of the following clauses that applies: (a) if the Common
      Stock is then listed or quoted on a trading market, the daily volume weighted
      average price of the Common Stock for such date (or the nearest preceding date)
      on the trading market on which the Common Stock is then listed or quoted for
      trading as reported by Bloomberg L.P. (based on a trading day from 9:30 a.m.
      (New York City time) to 4:02 p.m. (New York City time); (b) if the Common Stock
      is then quoted on the OTC Bulletin Board, the volume weighted average price
      of
      the Common Stock for such date (or the nearest preceding date) on the OTC
      Bulletin Board; (c) if the Common Stock is not then quoted for trading on the
      OTC Bulletin Board and if prices for the Common Stock are then reported in
      the
“Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency
      succeeding to its functions of reporting prices), the most recent bid price
      per
      share of the Common Stock so reported; or (d) in all other cases, the fair
      market value of a share of Common Stock as determined by an independent
      appraiser selected in good faith by the Company and reasonably acceptable to
      the
      Holder, the fees and expenses of which shall be paid by the
      Company.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    Section
      1.06 Replacement
      of Warrant.
      On
      receipt of evidence reasonably satisfactory to the Company of the loss, theft,
      destruction or mutilation of this Warrant and, in the case of loss, theft or
      destruction, on delivery of an indemnity agreement and security reasonably
      satisfactory in form and substance to the Company or, in the case of mutilation,
      on surrender and cancellation of this Warrant, the Company at its expense shall
      execute and deliver, in lieu of this Warrant, a new Warrant of like tenor and
      amount.

     

    Section
      1.07 Company
      Covenants.
      The
      Company represents, warrants, covenants and agrees: 

     

    (a) That
      all
      shares of Common Stock that may be issued upon exercise of this Warrant will,
      upon issuance, be validly issued, fully paid and nonassessable and free from
      all
      taxes, liens and charges with respect to the issue thereof;

     

    (b) That
      during the period the rights represented by this Warrant may be exercised,
      the
      Company will at all times have authorized, and reserved for the purpose of
      issue
      and delivery upon exercise of the rights evidenced by this Warrant, a sufficient
      number of shares of Common Stock to provide for the exercise of the rights
      represented by this Warrant; and

     

    (c)
      That
      the Company will pay any documentary stamp taxes attributable to the initial
      issuance of Warrant Shares issuable upon the exercise of the
      Warrant.

     

    ARTICLE
      II.

     

    ADJUSTMENTS

     

    Section
      2.01 Adjustment
      Events.

     

    (a) Capital
      Events.
      If any
      reorganization or reclassification of the capital stock of the Company, or
      any
      consolidation or merger of the Company with another corporation, or the sale
      of
      all or substantially all of its assets to another corporation (in any instance,
      a "Capital Event") shall be effected in such a way that holders of Common Stock
      shall be entitled to receive stock, securities or assets (including cash) with
      respect to or in exchange for their Common Stock, then, as a condition of such
      Capital Event, lawful and adequate provisions shall be made whereby the Holder
      hereof shall thereafter have the right to purchase and receive upon the basis
      and upon the terms and conditions specified in this Warrant and in lieu of
      the
      shares of the Common Stock of the Company immediately theretofore purchasable
      and receivable upon the exercise of the rights represented hereby, an amount
      of
      such shares of stock, securities or assets (including cash) as may have been
      issued or payable with respect to or in exchange for a number of outstanding
      shares of such Common Stock equal to the number of shares of such stock
      immediately theretofore purchasable and receivable upon the exercise of the
      rights represented hereby had such Capital Event not taken place. 

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    (b) Preservation
      of Value.
      In the
      case of any Capital Event, appropriate provision shall be made with respect
      to
      the rights and interests of the Holder of this Warrant to the end that the
      provisions hereof (including, without limitation, provisions for adjustment
      of
      the number of shares that may be issued upon exercise of this Warrant and the
      Exercise Price hereof) shall thereafter be applicable, as nearly as may be,
      in
      relation to any shares of stock, securities or assets (including cash)
      thereafter deliverable upon the exercise of the rights represented hereby.
      

     

    (c) Obligation
      Expressly Assumed.
      The
      Company shall not effect any consolidation, merger, sale or transfer of all
      or
      substantially all of its assets, unless prior to the consummation thereof the
      successor corporation (if other than the Company) resulting from such
      consolidation or merger, or the corporation into or for the securities of which
      the previously outstanding stock of the Company shall be changed in connection
      with such consolidation or merger, or the corporation purchasing such assets,
      as
      the case may be, shall assume by written instrument executed and mailed or
      delivered to the registered Holder at the last address of such Holder appearing
      on the books of the Company, the obligation to deliver to such Holder, upon
      exercise of this Warrant, such shares of stock, securities or assets (including
      cash) as, in accordance with the foregoing provisions, such Holder may be
      entitled to purchase. 

     

    Section
      2.02 Subdivision
      or Combination of Stock.
      In the
      event that the Company shall at any time subdivide or split its outstanding
      shares of Common Stock into a greater number of shares, the number of Warrant
      Shares subject to issuance upon exercise of this Warrant at the opening of
      business on the day upon which such subdivision becomes effective shall be
      proportionately increased. In the event that the outstanding shares of Common
      Stock of the Company shall be combined into a smaller number of shares, the
      number of shares subject to issuance upon exercise of this Warrant at the
      opening of business on the day upon which such subdivision becomes effective
      shall be proportionately decreased. Any such increase or decrease, as the case
      may be, shall become effective immediately after the opening of business on
      the
      day following the day upon which such subdivision or combination, as the case
      may be, becomes effective.

     

    Section
      2.03 Stock
      Dividends.
      In the
      event that the Company shall at any time declare any dividend or distribution
      upon its Common Stock payable in stock, the number of Warrant Shares subject
      to
      issuance upon exercise of this Warrant shall be increased by the number (and
      the
      kind) of shares which would have been issued to the holder of this Warrant
      if
      this Warrant were exercised immediately prior to such dividend. Such increase
      shall become effective immediately after the opening of business on the day
      following the record date for such dividend or distribution. 

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    Section
      2.04 Treasury
      Shares.
      The
      number of shares of Common Stock outstanding at any given time shall not include
      shares of the Company owned or held by or for the account of the Company.

     

    Section
      2.05 Minimum
      Adjustment.
      No
      adjustment in the number of shares that may be issued upon exercise of this
      Warrant as provided in this Article II shall be required unless such adjustment
      would require an increase or decrease in such number of shares of at least
      one
      percent (1%) of the then adjusted number of shares of Common Stock that may
      be
      issued upon exercise of this Warrant; provided, however, that any such
      adjustments that by reason of the foregoing are not required to be made shall
      be
      carried forward and taken into account and included in determining the amount
      of
      any subsequent adjustment. 

     

    Section
      2.06 Adjustment
      of Exercise Price.
      Whenever the number of shares of Common Stock that may be issued upon exercise
      of this Warrant is adjusted, and effective at the time such adjustment is
      effective, as provided in Sections 2.01, 2.02 and 2.03 of this Article II,
      the Exercise Price shall be adjusted (to the nearest whole cent) by multiplying
      each such Exercise Price immediately prior to such adjustment by a fraction
      (x)
      the numerator of which shall be the number of shares of Common Stock which
      may
      be issued upon the exercise of each such Warrant immediately prior to such
      adjustment, and (y) the denominator of which shall be the number of shares
      of
      Common Stock so purchasable immediately thereafter. The Company may retain
      a
      firm of independent certified public accountants (which may not be the regular
      accountants employed by the Company) to make any required computation, and
      a
      certificate signed by such firm shall be conclusive evidence of the correctness
      of such adjustment. 

     

    Section
      2.07 Record
      Date.
      In the
      event that the Company shall not take a record of the holders of its Common
      Stock for the purpose of entitling them to receive a dividend payable in Common
      Stock, then such record date shall be deemed for the purposes of this Article
      II
      to be the date of the issue or sale of the shares of Common Stock deemed to
      have
      been issued or sold upon the declaration of such dividend. 

     

    Section
      2.08 Officer's
      Certificate.
      Whenever the Exercise Price shall be adjusted as provided in this Article II,
      the Company shall forthwith file with its Secretary and retain in the permanent
      records of the Company, an officer's certificate showing the adjusted Exercise
      Price determined as provided in this Article II, setting forth in reasonable
      detail the facts requiring such adjustment, including a statement of the number
      of additional or fewer shares of Common Stock, and such other facts as may
      be
      reasonably necessary to show the reason for and the method of computing such
      adjustment. Each such officer's certificate shall be made available at all
      reasonable times for inspection by the Holder. 

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    Section
      2.09 Notice
      of Adjustment.
      Upon
      any adjustment of the number of shares that may be issued upon exercise of
      this
      Warrant or the Exercise Price, the Company shall give prompt notice thereof
      to
      the Holder, which notice shall state the increase or decrease in the number
      of
      shares that may be issued upon the exercise of this Warrant and the Exercise
      Price, setting forth in reasonable detail the method of calculation and the
      facts upon which such calculation is based. 

     

    Section
      2.10 Definition
      of "Common Stock".
      As used
      in this Article II, the term "Common Stock" shall mean and include all of the
      Company's authorized Common Stock of any class as constituted on the date of
      this Warrant as set forth below, and shall also include any capital stock of
      any
      class of the Company thereafter authorized that shall not be limited to a fixed
      sum or stated value in respect of the rights of the holders thereof to
      participate in dividends or the distribution of assets upon the voluntary or
      involuntary liquidation, dissolution or winding up of the Company. 

     

    ARTICLE
      III.

     

    MISCELLANEOUS

     

    Section
      3.01 Notices.
      Any
      notice or communication to be given pursuant to this Warrant shall be in writing
      and shall be delivered in person or by certified mail, return receipt requested,
      in the United States mail, postage prepaid. Notices to the Company shall be
      addressed to the Company's principal office. Notices to the Holder shall be
      addressed to the Holder's address as reflected in the records of the Company.
      Notices shall be effective upon delivery in person, or, if mailed, at midnight
      on the fifth business day after mailing.

     

    Section
      3.02 No
      Shareholder Rights.
      This
      Warrant shall not entitle the Holder to any voting rights or other rights as
      a
      shareholder of the Company.

     

    Section
      3.03 Governing
      Law.
      This
      Warrant shall be governed by, and construed in accordance with, the internal
      laws of the State of New York, without reference to the choice of law provisions
      thereof. The Company and, by accepting this Warrant, the Holder, each
      irrevocably submits to the exclusive jurisdiction of the courts of the State
      of
      New York located in New York County and the United States District Court for
      the
      Southern District of New York for the purpose of any suit, action, proceeding
      or
      judgment relating to or arising out of this Warrant and the transactions
      contemplated hereby. Service of process in connection with any such suit, action
      or proceeding may be served on each party hereto anywhere in the world by the
      same methods as are specified for the giving of notices under this Warrant.
      The
      Company and, by accepting this Warrant, the Holder, each irrevocably consents
      to
      the jurisdiction of any such court in any such suit, action or proceeding and
      to
      the laying of venue in such court. The Company and, by accepting this Warrant,
      the Holder, each irrevocably waives any objection to the laying of venue of
      any
      such suit, action or proceeding brought in such courts and irrevocably waives
      any claim that any such suit, action or proceeding brought in any such court
      has
      been brought in an inconvenient forum..

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    Section
      3.04 Headings;
      Interpretation.
      The
      section headings used herein are for convenience of reference only and are
      not
      intended to define, limit or describe the scope or intent of any provision
      of
      this Warrant. When used in this Warrant, the term "including" shall mean
      "including, without limitation.” 

     

    Section
      3.05 Successors.
      The
      covenants, agreements and provisions of this Warrant shall bind the parties
      hereto and their respective successors and permitted assigns.

     

    Section
      3.06 Amendment;
      Waiver.
      This
      Warrant is one of a series of Warrants of like tenor issued by the Company
      pursuant to the Purchase Agreement and initially covering an aggregate of
      826,100 shares of Common Stock (collectively, the “Company
      Warrants”).
      Any
      term of this Warrant may be amended or waived (including the adjustment
      provisions included in Article II of this Warrant) upon the written consent
      of
      the Company and the Holder.

     

    IN
      WITNESS WHEREOF, the Company has caused this Warrant to be issued effective
      as
      of the 21st
      day of
      March, 2007.

    

     

    
      	 	
              ISORAY,
                INC.,
                a
                Minnesota corporation

            
	 	
               

               

              By:__________________________________

              Jonathan
                Hunt, CFO

            

    

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    Exhibit
      A

     

    SUBSCRIPTION
      FORM

     

    (To
      be Executed only upon Exercise of Warrant)

     

    The
      undersigned registered owner of this Warrant irrevocably exercises this Warrant
      and purchases __________ shares of Common Stock of IsoRay, Inc., a Minnesota
      corporation, that may be issued under this Warrant and 

     

    
      	 	
              (a)

            	
              herewith
                delivers the sum of $____________;
                or

            

    

     

    
      	 	
              (b)

            	
              hereby
                elects (if available at the time of exercise) a "net exercise" pursuant
                to
                Section 1.02 of this Warrant

            

    

     

    in
      either
      case, in full payment of the Exercise Price for such shares, all on the terms
      and conditions specified in this Warrant. Such shares are to be delivered to
      such holder at the address reflected in the records of the Company unless
      contrary instructions are herein given.

     

    Deliver
      certificates to:

    __________________________

     

    
      	
              Dated:_____________

            	
              ________________________________________

            

    

    (Signature
      of Registered Owner)

     

    
      ________________________________________

      (Street
        Address)

    

     

    
      ________________________________________

    

    (City)
      (State) (Zip Code)

     

    
      
         

      

        
        1[Punk,
        Ziegel & Company, L.P. Letterhead]

      

      

      March
        14,
        2007

      

      CONFIDENTIAL

      

      Roger
        Girard

      Chief
        Executive Officer and Chairman

      IsoRay,
        Inc.

      350
        Hills
        St., Suite 106 

      Richland
        , WA 99354

      

      Dear
        Mr.
        Girard:

      

      This
        letter (the “Agreement”) confirms that Punk, Ziegel & Company, L.P. (“Punk,
        Ziegel & Company”) will, subject to the second paragraph of this Agreement,
        act as exclusive financial advisor and lead placement agent to IsoRay, Inc.
        (together with its subsidiaries and affiliates, “IsoRay” or the “Company”) in
        connection with the offering and sale of up to twenty million dollars
        ($20,000,000) of equity or equitylike securities of IsoRay (the "Securities”) to
        investors (the “Potential Transaction”), on the terms and conditions set forth
        below.

      

      Subject
        to the terms and conditions of this Agreement, the Company hereby appoints
        Punk,
        Ziegel & Company to place the Securities in an amount and on terms and
        conditions satisfactory to the Company. Punk, Ziegel & Company hereby
        accepts such agency and agrees on the terms of this Agreement to use its
        best
        efforts to privately place the Securities with potential investors. The Company
        shall promptly refer to Punk, Ziegel & Company all offers, inquiries and
        proposals relating to any placement of the Securities made at any time.
        Notwithstanding anything to the contrary contained in this Agreement, the
        Company may retain Maxim Group LLC ("Maxim") as a co-placement agent in
        connection with the placement of the Securities.

      

      This
        Agreement supersedes the Engagement Agreement dated January 26, 2006 between
        the
        parties hereto (the "Original Letter"), and upon execution and delivery by
        the
        parties of this Agreement, the Original Letter shall terminate.

      

      1. Services
        to be Rendered. Punk,
        Ziegel & Company agrees, on the terms and conditions set forth herein, and
        subject to the performance by the Company of all its obligations hereunder
        and
        the completeness and accuracy, in all material respects, of the representations
        and warranties of the Company set forth herein, to act as exclusive financial
        advisor to the Company (subject to the second paragraph of this Agreement),
        and
        in that regard to (i) assist the Company in the preparation of a summary
        business description, (ii) at the Company’s request, be available to the Board
        of Directors to discuss a Potential Transaction and its financial implications,
        (iii) assist the Company in structuring the Securities, (iv) market the
        Securities on a best efforts basis and assist in negotiating the terms of
        the
        Securities, (v) on behalf of the Company, coordinate the due diligence effort
        of
        potential Investors and (vi) assist the Company in negotiation of the final
        terms of the Potential Transaction. 

      

      Punk,
        Ziegel & Company agrees, on the terms and conditions set forth herein, and
        subject to the performance by the Company of all its obligations hereunder
        and
        the completeness and accuracy, in all material respects, of the representations
        and warranties of the Company set forth herein, to act as a Placement Agent,
        with Maxim, to assist the Company in identifying and contacting possible
        parties
        to a Potential Transaction (“Investors”).

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          IsoRay,
            Inc. 

          March
            14, 2007

          Page
            2

        

      

      2. Compensation.
        For
        Punk, Ziegel & Company’s services hereunder, the Company agrees to pay Punk,
        Ziegel & Company (a) a non-refundable cash retainer fee (the “Retainer Fee”)
        of forty thousand dollars ($40,000) and (b) a placement fee (the “Placement
        Fee”) equal to three point three percent (3.30% or 55% of the 6.0% cash fee
        payable to the placement agents) of the aggregate gross proceeds of the
        Securities placed, payable in full, in cash, upon the closing of the sale
        of any
        of the Securities. The Retainer Fee will be creditable against the payment
        of a
        Placement Fee.

      

      The
        Company shall deliver a warrant, or, if so requested, warrants, to Punk,
        Ziegel
& Company and/or its designees (the “Agent Warrant”), which Agent’s Warrant
        shall be exercisable to purchase additional Securities equal to two point
        two
        five percent (2.25% or 45% of the 5% total warrants payable to the placement
        agents rounded to the nearest higher whole number) of the total number of
        shares
        sold to the Investors. Any fractional shares shall be rounded to the nearest
        whole number. The Agent’s Warrant will be exercisable at any time and from time
        to time, in whole or in part, during the four-year period commencing one
        year
        from the closing of the offering, at a price per share equal to 110% of the
        per
        share offering price of the Securities in the offering. The Agent’s Warrant will
        provide for registration rights (including a one time demand registration
        right
        and unlimited piggyback rights), cashless exercise and customary anti-dilution
        provisions (for stock dividends and splits and recapitalizations) consistent
        with the National Association of Securities Dealers, Inc. (“NASD”) Rules of Fair
        Practice and satisfactory to Punk, Ziegel & Company and its
        counsel.

      

      For
        a
        period of twelve months following the closing of the sale of any of the
        Securities, Punk, Ziegel & Company will have a right of first refusal (i) to
        act as the Company’s exclusive financial advisor with regard to any privately
        negotiated sales of the Company’s equity securities in excess of five million
        dollars ($5,000,000) or financing required to consummate any merger,
        acquisition, change of control transaction or sale of all or substantially
        all
        of the assets of the Company and (ii) to act as a managing underwriter of
        any
        public offering of the Company’s equity securities.

      

      3. Expenses.
        In
        addition to any fees that may be payable hereunder and regardless of whether
        or
        not any Potential Transaction is consummated, the Company shall reimburse
        Punk,
        Ziegel & Company from time to time, upon request (but not less frequently
        than monthly), for (i) travel and other out-of-pocket expenses, up to a maximum
        of $35,000, incurred in connection with Punk, Ziegel & Company’s engagement
        hereunder and under the Original Letter, plus (ii) including the reasonable
        fees, expenses and other charges of its legal counsel. Any individual expenses
        under clause (i) above that are greater than $5,000 and any aggregate expenses
        under such clause in excess of $35,000, shall require prior authorization
        by the
        Company. 

      

      4. Information.
        The
        Company will furnish Punk, Ziegel & Company such information with respect to
        the Company and access to such Company personnel and representatives, including
        the Company’s auditors and counsel, as Punk, Ziegel & Company may request in
        order to permit Punk, Ziegel & Company to advise the Company and to assist
        the Company in preparing any informational materials it may deem necessary
        for
        use in connection with the Potential Transaction ("Offering Materials").
        The
        Company will be solely responsible for the contents of the Offering Materials
        and any other information provided to potential Investors with the approval
        of
        the Company. The Company represents and warrants to Punk, Ziegel & Company
        that such information 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. The
        Company agrees to advise Punk, Ziegel & Company promptly upon the Company
        becoming aware of the occurrence of any event or change in circumstance that
        results or might reasonably be expected to result in such information containing
        any untrue statement of a material fact or omitting to state a material fact
        necessary to make the statements therein, in light of the circumstances under
        which they were made, not misleading. The Company authorizes Punk, Ziegel
&
Company to provide such information to potential Investors in a Potential
        Transaction. The Company and Punk, Ziegel & Company shall jointly approve
        every form of letter, circular, notice, memorandum or other written
        communication from the Company or any person acting on its behalf in connection
        with a Potential Transaction.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          IsoRay,
            Inc. 

          March
            14, 2007

          Page
            3

        

      

      5. Termination and
        Survival.
        This
        Agreement shall terminate on the first anniversary of the execution thereof,
        subject to the extension thereafter as may be agreed in writing by the parties,
        but either party hereto may terminate this Agreement at any time upon 30
        days’
prior written notice. Notwithstanding the foregoing, it is understood that
        the
        provisions of paragraphs 2 (to the extent fees are payable irrespective of
        whether a transaction is consummated), 3 (to the extent expenses have been
        incurred prior to termination), 4 (the second and third sentences only),
        5, 6,
        7, 8, 9, 10 and 11 of this Agreement shall remain operative and in full force
        and effect regardless of (i) any investigation made by or on behalf of Punk,
        Ziegel & Company or any Indemnified Person (as defined in the
        Indemnification Agreement (which is hereafter defined)), (ii) the consummation
        of any Potential Transaction or (iii) any termination of this Agreement.
        In
        addition, if within twelve (12) months following the termination of this
        Agreement any Potential Transaction is consummated with any Investor contacted
        by Punk, Ziegel & Company during the term of this Agreement or the Company
        or any of its affiliates enter into an agreement regarding a Potential
        Transaction which at any time thereafter results in a Potential Transaction
        being consummated with any Investor contacted by Punk, Ziegel & Company
        during the term of this Agreement, the Company shall pay, in full, the
        Transaction Fee as provided for in paragraph 2. In the event that any similar
        financing transaction or any merger, acquisition, change of control transaction
        or sale of all or substantially all of the assets of the Company shall be
        consummated with any Investor contacted by Punk, Ziegel & Company during the
        term of this Agreement, the Company shall pay to Punk, Ziegel & Company a
        mutually agreed upon fee reflecting industry standards for such transactions
        of
        such type. Punk, Ziegel & Company shall provide a complete list of those
        parties contacted regarding an investment in IsoRay upon closing and/or
        termination of the engagement contract. Such a list is deemed confidential
        and
        is not to be disseminated to anyone other than IsoRay employees and members
        of
        the Board of Directors of IsoRay

      

      6. Confidentiality
        of Advice; Publicity.
        Except
        as otherwise provided in this paragraph, any written or other advice rendered
        by
        Punk, Ziegel & Company pursuant to its engagement hereunder is solely for
        the use and benefit of the Company and shall not be publicly disclosed in
        whole
        or in part, in any manner or summarized, excerpted from or otherwise publicly
        referred to or made available to third parties, other than representatives
        and
        agents of the Company who also shall not disclose such information, in each
        case, without Punk, Ziegel & Company’s prior approval, unless in the opinion
        of counsel and after consultation with Punk, Ziegel & Company, such
        disclosure is required by law. In addition, Punk, Ziegel & Company may not
        be otherwise publicly referred to without its prior written
        consent.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          IsoRay,
            Inc. 

          March
            14, 2007

          Page
            4

        

      

      Upon
        consummation of the Potential Transaction, Punk, Ziegel & Company may, at
        its own expense, place announcements or advertisements in financial newspapers
        and journals describing its services hereunder; provided, however, that Punk,
        Ziegel & Company receives prior approval by the Company (which approval
        shall not be unreasonably withheld) for any such announcement or advertisements.
        

      

      The
        Company acknowledges that Punk, Ziegel & Company and its affiliates are in
        the business of providing financial services and consulting advice to others.
        Nothing herein contained shall be construed to limit or restrict Punk, Ziegel
        & Company in conducting such business with respect to others, or in
        rendering such advice to others, except as such advice may relate to matters
        relating to the Company’s business and properties and that might compromise
        confidential information delivered by the Company to Punk, Ziegel &
Company.

      

      7. Obligations
        Limited.
        Punk,
        Ziegel & Company shall have no obligation to make any independent appraisals
        of assets or liabilities or any independent verification of the accuracy
        or
        completeness of any information provided it in the course of this engagement
        and
        shall have no liability in regard thereto. 

      

      8. Third
        Party Beneficiaries.
        This
        Agreement and the Indemnification Agreement are made solely for the benefit
        of
        the Company, Punk, Ziegel & Company and other Indemnified Persons and their
        respective successors, assigns, heirs and personal representatives, and no
        other
        person shall acquire or have any right under or by virtue of this Agreement
        or
        the Indemnification Agreement.

      

      9. Representations
        and Warranties.
        The
        Company represents and warrants that this Agreement has been duly authorized,
        executed and delivered by the Company and constitutes a legal, valid and
        binding
        obligation of the Company.

      

      10. Indemnification.
        In
        connection with and as part of the engagement contemplated herein, the parties
        have entered in to a separate indemnification agreement (the "Indemnification
        Agreement"), which sets forth certain other agreements between the parties
        hereto. In the event of any conflict between this Agreement and the
        Indemnification Agreement, the terms and provisions of the Indemnification
        Agreement shall control and this Agreement shall be deemed to be amended
        and
        modified accordingly. 

      

      11. Miscellaneous.
        The
        Agreement shall be governed by and construed in accordance with the laws
        of the
        State of New York, without regard to its principles of conflicts of laws.
        The
        Company hereby irrevocably submits to the exclusive jurisdiction of the federal
        and state courts located in the Borough of Manhattan in connection with any
        action, suit or proceeding under, arising out of or otherwise relating to
        this
        Agreement, and waives any objection or defense that it may have to the laying
        of
        such venue. Punk, Ziegel & Company hereby agrees, and the Company hereby
        agrees on its own behalf and, to the extent permitted by applicable law,
        on
        behalf of its security holders, to waive any right to trial by jury with
        respect
        to any claim, counterclaim or action arising out of the engagement, Punk,
        Ziegel
& Company’s performance thereof or this Agreement.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          IsoRay,
            Inc. 

          March
            14, 2007

          Page
            5

        

      

       

      We
        are
        delighted to work with you on this assignment. Please confirm that the foregoing
        correctly sets forth our agreement and your intent to be bound by and to
        perform
        the terms hereof by signing and returning to us the enclosed duplicate of
        this
        Agreement. In addition, please sign and return to us a copy of the
        Indemnification Agreement.

      

      
        	 	
                Very
                  truly yours,

              
	 	 
	 	
                Punk,
                  Ziegel & Company, L.P.

              
	 	 
	 	 
	 	
                By:
                  /s/ Edwin A.
                  Gordon               
                  

              

      

             

      Accepted
        and Agreed to

      as
        of the
        date hereof:

      

      IsoRay,
        Inc.

      

      

      By: /s/
        Roger E. Girard

            
        CEO/Chairman

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      INDEMNIFICATION
        AGREEMENT

      

      In
        connection with the engagement of Punk, Ziegel & Company, L.P ("Punk, Ziegel
& Company") by IsoRay, Inc. pursuant to a letter agreement, dated March 14,
        2007, between IsoRay (the “Company”) and Punk, Ziegel & Company (the
        "Engagement Agreement"), Punk Ziegel & Company and the Company hereby agree
        as set forth herein. For purposes of the remainder of this Indemnification
        Agreement, unless the context otherwise requires, "Punk, Ziegel & Company"
        shall include Punk, Ziegel & Company, any affiliated entity, and each of
        their respective officers, directors, employees, partners and controlling
        persons within the meaning of the federal securities laws and the successors,
        assigns, heirs and personal representatives of the foregoing persons
        (collectively, the “Indemnified Persons”).

      

      The
        Company will indemnify Punk, Ziegel & Company against any losses, claims,
        damages, liabilities, costs and expenses (including, without limitation,
        any
        legal or other expenses incurred in connection with investigating, preparing
        to
        defend or defending against any action, claim, suit or proceeding, whether
        commenced or threatened and whether or not Punk, Ziegel & Company is a party
        thereto, or in appearing or preparing for appearance as a witness), based
        upon,
        relating to or arising out of or in connection with advice or services rendered
        or to be rendered pursuant to the Engagement Agreement or the Original Letter,
        the transaction contemplated thereby or Punk, Ziegel & Company’s actions or
        inactions in connection with any such advice, services or transaction
        (including, but not limited to, any liability arising out of (i) any
        misstatement or alleged misstatement of a material fact in any offering
        materials (including any "Offering Materials" (as defined in the Engagement
        Agreement)) and (ii) any omission or alleged omission from any offering
        materials (including any "Offering Materials" (as defined in the Engagement
        Agreement")), including, without limitation of a material fact necessary
        to make
        the statements therein, in light of the circumstances under which they were
        made, not misleading), except to the extent that any such loss, claim, damage,
        liability, cost or expense results solely from the gross negligence or bad
        faith
        of Punk, Ziegel & Company in performing the services which are the subject
        of the Engagement Agreement. If for any reason the foregoing indemnification
        is
        unavailable to Punk, Ziegel & Company or insufficient to hold it harmless,
        then the Company shall contribute to the amount paid or payable by Punk,
        Ziegel
& Company as a result of such loss, claim, damage or liability in such
        proportion as is appropriate to reflect the relative benefits received by
        the
        Company and its stockholders on the one hand and Punk, Ziegel & Company on
        the other hand, or, if such allocation is not permitted by applicable law,
        not
        only such relative benefits but also the relative fault of the Company and
        Punk,
        Ziegel & Company, as well as any relevant equitable considerations;
        provided, however, that, to the extent permitted by applicable law, Punk,
        Ziegel
& Company shall not be responsible for amounts which in the aggregate are in
        excess of the amount of all fees actually received from the Company in
        connection with the engagement. No person guilty of fraudulent misrepresentation
        (as such term has been interpreted under Section 11(f) of the Securities
        Act of
        1933) shall be entitled to contribution from any person who was not guilty
        of
        such fraudulent misrepresentation. Relative benefits to Punk, Ziegel &
Company, on the one hand, and the Company and its stockholders, on the other
        hand, with respect to the engagement shall be deemed to be in the same
        proportion as (i) the total value paid or proposed to be paid or received
        or
        proposed to be received by the Company or its stockholders, as the case may
        be,
        pursuant to the Potential Transaction, whether or not consummated, contemplated
        by the engagement bears to (ii) all fees paid to Punk, Ziegel & Company by
        the Company in connection with the engagement. Punk, Ziegel & Company shall
        not have any liability to the Company in connection with the engagement,
        except
        to the extent of its gross negligence or willful misconduct.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          IsoRay,
            Inc. 

          March
            14, 2007

          Page
            2

        

      

      The
        Company also agrees to promptly upon demand reimburse Punk, Ziegel & Company
        for its legal and other expenses reasonably incurred by it in connection
        with
        investigating, preparing to defend, or defending any lawsuits, investigations,
        claims or other proceedings in connection with any matter referred to in
        or
        otherwise contemplated by the Engagement Agreement or the Original Letter;
        provided, however, that in the event a final judicial determination is made
        to
        the effect that Punk, Ziegel & Company is not entitled to indemnification
        hereunder, Punk, Ziegel & Company will remit to the Company any amounts that
        have been so reimbursed.

      

      The
        Company shall not be liable for any settlement of any action, claim, suit
        or
        proceeding (or for any related losses, damages, liabilities, costs or expenses)
        if such settlement is effectuated without its written consent, which shall
        not
        be unreasonably withheld. The Company further agrees that it will not settle
        or
        compromise or consent to the entry of any judgment in any pending or threatened
        action, claim, suit or proceeding in respect of which indemnification or
        contribution may be sought hereunder (whether or not Punk, Ziegel & Company
        is a party therein) unless the Company has obtained an unconditional release
        of
        Punk, Ziegel & Company, from all liability arising therefrom. The
        reimbursement, indemnity and contribution obligations of the Company set
        forth
        in this Indemnification Agreement shall be in addition to any liability which
        the Company may otherwise have to Punk, Ziegel & Company. 

      

      The
        Company represents and warrants that this Indemnification Agreement has been
        duly authorized, executed and delivered by the Company and constitutes the
        legal, valid and binding obligation of the Company.

      

      Any
        Indemnified Persons that are not signatories to this Indemnification Agreement
        shall be deemed to be third party beneficiaries of this Agreement. 

      

      This
        Indemnification Agreement shall be governed by and construed in accordance
        with
        the laws of the State of New York, without regard to its principles of conflicts
        of laws. The Company hereby irrevocably submits to the exclusive jurisdiction
        of
        the federal and state courts located in the Borough of Manhattan in connection
        with any action, suit or proceeding under, arising out of or otherwise relating
        to this Indemnification Agreement, and waives any objection or defense that
        it
        may have to the laying of such venue. Punk, Ziegel & Company and the Company
        each hereby agrees to waive any right to trial by jury with respect to any
        claim, counterclaim or action arising out of this Indemnification
        Agreement.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          IsoRay,
            Inc. 

          March
            14, 2007

          Page
            3

        

      

      This
        Indemnification Agreement shall survive any termination of the Engagement
        Letter.

      

      Entered
        in to on the 14th day of March, 2007. 

      

      
        	 	
                Punk,
                  Ziegel & Company, L.P.

              
	 	 
	 	 
	 	
                By:
                  /s/ Edwin A.
                  Gordon                                             
                  

              
	 	 
	 	
                IsoRay,
                  Inc.

              
	 	 
	 	 
	 	
                By: /s/
                  Roger E.
                  Girard                                               
                  

              
	 	
                       
                  CEO/Chairman

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