Document:

EXECUTIVE

      EMPLOYMENT
        AGREEMENT

      Roger
        E. Girard

      

      This
        Employment Agreement, is made and entered into as of October 6, 2005, between
        ISORAY, INC., a Minnesota corporation (the “Company”),
        and
        ROGER E. GIRARD, an individual residing at 8039 NE 150th
        Street,
        Kenmore, Washington 98028 (“Employee”).

      

      RECITALS:

      

      A.    Employee
        is and has been the Chief Executive Officer of the Company’s subsidiary
        corporation, IsoRay Medical, Inc., a Delaware corporation (“IMI”),
        and
        IMI and the Company desire to have the continuing benefit of Employee’s
        knowledge, experience and services in the operation of the Company;
        and

      

      B.    Employee’s
        assistance to IMI was instrumental in consummating IMI’s merger with the Company
        (the “Merger”);
        and

      

      C.    The
        Board
        of Directors of the Company considers sound and vital management to be essential
        to the overall success of the Company and has decided to employ Employee
        on the
        terms and conditions set forth herein.

      

      AGREEMENT

      

      In
        consideration of the covenants and agreements set forth herein and other
        good
        and valuable consideration, the receipt and sufficiency of which is hereby
        acknowledged, the parties hereto agree as follows:

      

      1.    Definitions.  For
        purposes of this Agreement, the following terms shall have the meanings
        indicated:

      

      1.1    Company
        means
        IsoRay, Inc. or any successor entity.

      

      1.2    Company
        Board
        means
        the Company Board of Directors or the Board of Directors of any successor
        entity
        of Company.

      

      1.3    Effective
        Date.  The
        Effective Date of this Agreement is the date first set forth above.

      

      1.4    Good
        Reason
        means
        the occurrence of any of the following events to which Employee has not
        expressly agreed to in writing:

      

      (a)    A
        material reduction in Employee’s base salary as in effect on the Effective Date
        or renewal date of this Agreement, whichever occurs later; 

      

      (b)    A
        material reduction in any fringe benefit provided to the Employee below the
        level of such fringe benefit provided generally to other actively employed
        and
        similarly situated executives of the Company;

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      (c)    The
        change, in a materially adverse manner, of Employee's title, position, authority
        or responsibilities (including reporting responsibilities and
        authority);

      

      (d)    The
        failure of the Company to obtain the assumption of this Agreement by any
        successor, assignee, affiliate, or parent of the Company; and 

      

      (e)    Any
        material breach by the Company of any provision of this Agreement which is
        not
        cured by the Company within sixty (60) days written notice from Employee
        specifying the nature of such breach.

      

      1.5    Termination
        for Cause
        means
        the termination of employment of Employee by the Company Board because of
        Employee’s personal dishonesty, incompetence, willful misconduct, breach of
        fiduciary duty involving personal profit, intentional failure to perform
        his
        stated duties, willful violation of a material law, rule or regulation resulting
        in a detriment to the Company or reflecting upon the Company’s integrity (other
        than traffic infractions or similar offenses) or a material breach by Employee
        of any term of this Agreement and failure to cure such breach within sixty
        (60)
        days after receipt of written notice from the Company specifying the nature
        of
        such breach or to pay compensation to the Company deemed reasonable by the
        Company if the breach cannot be cured.

      

      For
        purposes of this Agreement, Employee’s termination of employment shall not be
        considered to be a Termination for Cause unless and until there shall have
        been
        delivered to Employee a copy of a resolution, duly adopted by the affirmative
        vote of not less than two-thirds of the entire membership of the Board at
        a
        meeting called and held for that purpose after reasonable notice to Employee
        and
        an opportunity for him, together with his counsel (if he elects to have counsel
        represent him), to be heard, finding that, in the good faith opinion of the
        Board, Employee is guilty of misconduct of the type described in this paragraph,
        and specifying the particulars thereof in detail, which determination shall
        be
        subject to a complete and de novo review as to reasonableness and good
        faith.

      

      1.6    Total
        and Permanent Disability
        means a
        physical or mental injury or illness of Employee that prevents him from
        performing his customary duties and which is expected to be of long continued
        and indefinite duration and that has caused Employee’s absence from service for
        at least sixty (60) days.

      

      2.    Employment.  The
        Company hereby employs the Employee and the Employee accepts employment on
        the
        terms and conditions set forth herein.

      

      2.1    Term.
        The
        term
        of this Agreement shall commence on the date hereof and shall end on the
        close
        of business on the day before the fourth anniversary of the date of
        commencement, unless terminated in accordance with the provisions of
        Section 3 hereof. After the fourth anniversary of the date of commencement,
        the term hereof shall be extended automatically for an additional one
        (1) year on each anniversary date hereof beginning, unless prior to
        ninety
        (90) days before any such anniversary date the Company Board decides to modify
        the term of, or to terminate in accordance with the provisions of Section 3
        of this Agreement. 

      

      2.2    Duties
        and Responsibilities.  Employee
        shall serve as Chief Executive Officer of the Company and be responsible
        for
        managing all of the ongoing operations of the Company, such duties to include,
        maximizing the efficiency of operations, reviewing the performance and
        compensation of all personnel of the Company, attending meetings from time
        to
        time at the headquarters of the Company.

       

      
        
           

        

        
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      2.3    Compensation;
        Fringe Benefits.  During
        the term of this Agreement and so long as Employee’s employment has not been
        subject to Termination for Cause, he shall be entitled to the salary and
        other
        employment benefits provided in this Section 2.3 notwithstanding the
        level
        of compensation or benefits received by similarly situated employees. Employee
        shall be entitled to an annual salary of no less than $180,000 payable pursuant
        to the Company’s employment compensation policy as may exist from time to time,
        with increases as may be made from time to time in accordance with the Company’s
        regular salary administration practices as applied to executive officers
        of the
        Company, and which annual salary shall be increased to $220,000 effective
        January 1, 2006. On or before January 1, 2006, the Company Board shall
        establish, in its sole discretion, written performance objectives for Employee,
        and if Employee has met these performance objectives on or before July 1,
        2006,
        then effective July 1, 2006, Employee’s annual salary shall be increased to
        $300,000. Employee shall also be eligible to receive bonus payments under
        a
        bonus plan as established by the Board based upon performance goals established
        in writing and agreed to by Employee and the Board within ninety (90) days
        of
        the Effective Date and each anniversary of the Effective Date. Employee shall
        be
        entitled to reimbursement for business expenses and automobile or other
        transportation allowances on a basis no less favorable to Employee than in
        accordance with the policy of the Company on the Effective Date. Employee
        shall
        also be entitled to continuing participation, consistent with past practices,
        in
        all other employee benefit plans and practices of the Company in place on
        the
        Effective Date, including, without limitation, life, long-term disability
        and
        accident insurance, employee savings and investment plans, stock plans, medical,
        dental, hospitalization and other welfare benefit plans, and vacation plans,
        without any material reduction in the value of the benefits previously provided
        to Employee by IMI. 

      

      3.    Termination.  Employee’s
        employment under this Agreement shall terminate upon the occurrence of any
        one
        of the following events:

      

      3.1    Total
        and Permanent Disability.  In
        the event that Employee suffers Total and Permanent Disability, the Company
        may
        terminate Employee’s employment, but shall be obligated to continue Employee’s
        then regular salary and continue his benefits hereunder for a one year period.
        Employee agrees, in the event of any dispute under this Section, to submit
        to a
        physical examination by a licensed physician selected by the Company, the
        cost
        of such examination to be paid by the Company, and the decision as to Employee’s
        disability shall be conclusive and binding upon the Company and Employee.
        Nothing contained herein shall be construed to affect Employee’s rights under
        any disability insurance or similar policy, whether maintained by the Company,
        Employee or another party.

      

      3.2    Death.  This
        Agreement shall terminate upon the death of the Employee and no further
        liability to Employee or to Employee’s estate hereunder shall remain other than
        the payment, within ninety (90) days of the termination, of any accrued but
        unpaid compensation as set forth in Section 2.3 hereof. Nothing contained
        herein
        shall be construed to affect Employee’s rights under any life insurance or
        similar policy, whether maintained by the Company, or another
        party.

       

      
        
           

        

        
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      3.3    Termination
        for Cause or Other Than For Good Reason.  The
        Company may terminate Employee’s employment for cause. The Company shall have no
        further obligation to pay salary or benefits hereunder after the date of
        any
        Termination for Cause or termination by Employee other than for Good Reason,
        but
        shall be obligated to pay, within ninety (90) days of the termination, any
        accrued but unpaid compensation as set forth in Section 2.3 hereof.

      

      3.4    Good
        Reason.  Employee
        may terminate Employee’s employment for Good Reason at any time during the term
        of this Agreement. In the event Employee terminates his employment for Good
        Reason, or the Company terminates Employee’s employment “without cause”, the
        Company shall be obligated to continue Employee’s then regular salary and
        continue his benefits hereunder for a one year period. 

      

      4.    Covenant
        Not to Compete and Confidentiality.

      

      4.1    Covenant
        Not to Compete.  Employee
        shall not engage in any business or perform any service, directly or indirectly,
        or have any interest, whether as a proprietor, partner, employee, investor,
        principal, agent, consultant, director or officer, in any enterprise which
        manufactures radioisotopes or radioactive brachytherapy devices for commercial
        purposes in the United States or which is in competition with the business
        of
        the Company (i) during the term of his employment, or (ii) one
        (1) year after the termination of this Agreement; provided,
        however, that
        this
        Covenant Not to Compete shall not apply if Employee’s employment is terminated
        by the Company without cause; or by Employee for Good Reason; or if Employee
        makes himself available for employment by the Company at the end of the term
        of
        this Agreement upon similar terms and conditions to those contained herein
        and
        the Company thereupon refuses to employ Employee. Nothing in this Section 4
        shall be deemed to prohibit Employee from purchasing less than five percent
        (5%)
        of the outstanding shares of any corporation whose shares are traded on a
        national exchange and which, at the time of purchase, is not engaged in
        competition with the Company.

      

      If
        any
        court shall determine that the duration or geographical limit of the foregoing
        restriction is unenforceable, it is the intention of the parties that the
        foregoing restriction shall not be terminated but shall be deemed amended
        to the
        extent required to render it valid and enforceable, such amendment to apply
        only
        with respect to the operation of this Section 4 in the jurisdiction
        of the
        court that has made the adjudication.

      

      4.2    Confidential
        Information.  Employee
        acknowledges that he has and will have access to trade secrets and confidential
        business information of the Company and IMI throughout the term of this
        Agreement and that any such trade secret or confidential information, regardless
        of whether Employee alone or with others developed any such trade secret
        or
        confidential information, shall be and shall remain the property of the Company.
        During the term of this Agreement and after termination of employment, Employee
        shall not, either voluntarily or involuntarily, on either his own account,
        as a
        member of a firm, or on behalf of another employer or otherwise, directly
        or
        indirectly use or reveal to any person, partnership, corporation or association
        any trade secret or confidential information of the Company, its parent,
        subsidiaries, or affiliates. Such trade secrets shall include, but shall
        not be
        limited to, business plans, marketing plans or programs, financial information,
        forecasts, compensation arrangements, contracts (whether leases, financing
        arrangements, or other contracts) customer lists, and business opportunities.
        The term “trade secrets” shall not include information generally available to
        the public or a governmental agency except such term “trade secrets” shall
        include information provided to the Securities and Exchange Commission or
        other
        governmental agency on a confidential basis. Employee will not make available
        to
        any person, partnership, limited liability company, corporation or association,
        or retain after termination of employment, any Company or IMI policy manuals,
        contracts or other written materials.

      
        
           

        

        
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      4.3    Injunctive
        Relief.  Employee
        acknowledges that the restrictions contained in this Section 4 are
        a
        reasonable and necessary protection of the immediate interests of the Company
        and IMI and that any violation of these restrictions would cause substantial
        injury to the Company and IMI. In the event of a breach or threatened breach
        by
        Employee of these restrictions, each of the Company and IMI shall be entitled
        to
        apply to any court of competent jurisdiction for an injunction restraining
        Employee from such breach or threatened breach; provided,
        however,
        that the
        right to apply for an injunction shall not be construed as prohibiting either
        the Company or IMI from pursuing any other available remedies for such breach
        or
        threatened breach.

      

      5.    Binding
        Effect; Assignment.  This
        Agreement shall be binding upon and inure to the benefit of Employee, the
        Company and their respective heirs, executors, administrators, successors
        and
        assigns; provided,
        however,
        that
        Employee may not assign his rights hereunder without the prior written consent
        of the Company and may not assign his obligations hereunder. The Company
        may
        assign either its rights or obligations hereunder to any of its subsidiaries
        or
        affiliated corporation or to any successor to substantially all of the assets
        or
        business of the Company.

      

      6.    Amendments.  This
        Agreement may not be amended, modified or supplemented in any respect except
        by
        a subsequent written agreement executed by the Company and
        Employee.

      

      7.    Miscellaneous.

      

      7.1    Entire
        Agreement.  This
        Agreement rescinds and supersedes any other agreement, whether oral or written,
        relating to Employee’s employment by the Company and IMI, including without
        limitation that certain Employment Agreement between Employee and IMI (the
        “Prior Agreement”), and contains the entire understanding between the parties
        relative to the employment of Employee, there being no terms, conditions,
        warranties, or representations other than those contained or referred to
        herein,
        and no amendment hereto shall be valid unless made in writing and signed
        by both
        of the parties hereto. As of the Effective Date, Employee shall have no further
        rights, and the Company no further obligations, under the Prior Agreement.
        Without limiting the generality of the foregoing, Employee expressly
        acknowledges and agrees that the incentive bonus set forth in Section 4
        thereof is no longer in effect and that all employee benefits set forth therein
        have been replaced by such benefits provided by the Company
        hereunder.

       

      
        
           

        

        
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      7.2    Governing
        Law.  This
        Agreement shall be interpreted and construed in accordance with the laws
        of the
        State of Washington as applied to residents of Washington without regard
        to
        conflicts of law principles.

       

      7.3    Severability.  In
        the event that any provisions herein shall be legally unenforceable, the
        remaining provisions nevertheless shall be carried into effect.

      

      7.4    Attorneys’
        Fees.  In
        the event of any litigation between the parties hereto arising out of the
        terms,
        conditions and obligations expressed in this Agreement, the prevailing party
        in
        such litigation shall be entitled to recover reasonable attorneys’ fees incurred
        in connection therewith.

      

      7.5    Notices.  All
        notices required or permitted to be given hereunder shall be deemed given
        if in
        writing and delivered personally or sent by telex, telegram, telecopy, or
        forwarded by prepaid registered or certified mail (return receipt requested)
        to
        the party or parties at the following addresses (or at such other addresses
        as
        shall be specified by like notices), and any notice, however given, shall
        be
        effective when received:

      

      To
        Employee:

      

      Roger
        E.
        Girard

      8039
        NE
        150th
        Street

      Kenmore,
        Washington 98028 

      

      To
        Company:

      

      IsoRay,
        Inc.

      350
        Hills
        Street, Suite 106

      Richland,
        WA 99354

      

      7.6    Waiver.  The
        waiver by any party of a breach of any provision of this Agreement by the
        other
        shall not operate or be construed as a waiver of any subsequent breach of
        the
        same provision or any other provision of this Agreement.

      

      7.7    Counterparts.  This
        Agreement may be executed in one or more counterparts, each of which shall
        be
        deemed an original, but all of which together shall constitute one and the
        same
        instrument.

      

      7.8    Headings.  The
        subject headings to the sections in this Agreement are included for purposes
        of
        convenience only and shall not affect the construction or interpretation
        of any
        of its provisions.

      

      7.9    Construction.  Each
        party has had the opportunity to set forth in this Agreement all matters
        related
        to the subject hereof. The Company and Employee acknowledge the binding legal
        effect of this Agreement, that this Agreement has been negotiated by the
        parties
        hereto and that each party has, to the extent desired, sought legal counsel
        related to the terms, conditions and effect of this Agreement.

       

      
        
           

        

        
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      7.10 Assistance
        in Litigation.  Employee
        shall upon reasonable notice, furnish such information and reasonable assistance
        to the Company as it may reasonably require in connection with any litigation
        in
        which it is, or may become, a party either during or after
        employment.

       

      7.11 Limited
        Effect of Waiver by Company.  Should
        the Company waive breach of any provision of this Agreement by the Employee,
        that waiver will not operate or be construed as a waiver of further breach
        by
        the Employee.

      

      IN
        WITNESS WHEREOF, the parties have executed this Agreement as of the date
        first
        hereinabove written.

       

      
        	 	 	 
	 	COMPANY:
	 	 
	 	ISORAY, INC., a Minnesota
                corporation
	 
 	 
 	 
 
	 	By:  	/s/ Michael
                K. Dunlop
	 	
                
                  
Its: Chief
                  Financial Officer

              

        	Attest:	 	 	EMPLOYEE:
	 	 	 	
              
	 	 	 	 
	/s/ David
                J. Swanberg	 	 	/s/ Roger
                E. Girard
	
                

                Secretary

              	 	 	
                

                Roger
                  E. Girard

              

      

       

      
        
           

        

        
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