EX 4.21


    ISORAY,
      INC.

    2008
      Employee Stock Option Plan

    1.    Purpose
      Of Plan.

    


    (a)    General
      Purpose.
      The
      purpose of the IsoRay,
      Inc. 2008 Employee Stock Option Plan ("Plan")
      is to
      further the interests of IsoRay, Inc., a Minnesota corporation (the "Corporation"),
      and
      its subsidiaries (i) by providing an incentive based form of compensation to
      the
      officers, key employees, consultants and service providers of the Corporation
      and of its subsidiaries, and (ii) by encouraging such persons to invest in
      shares of the Corporation's Common Stock, thereby acquiring a proprietary
      interest in its business and the business of its subsidiaries and an increased
      personal interest in its continued success and progress. 

    


    (b)    Tax
      Treatment. The
      Corporation shall have no liability to any optionee hereunder with respect
      to
      the tax treatment of any option granted and in effect under the Plan. However,
      the Plan is designed to be exempt from Section 409A ("Code
      Section 409A")
      of the
      Internal Revenue Code of 1986, as amended (the "Code").

    


    2.    Stock
      And Maximum Number Of Shares Subject To Plan.

    


    (a)    Description
      of Stock and Maximum Shares Allocated.
      The
      stock subject to the provisions of the Plan and issuable upon exercise of
      options granted under the Plan are shares of the Corporation's Common Stock,
      $.001 par value, which may be either unissued or treasury shares, as the
      Corporation's Board of Directors (the "Board")
      may
      from time to time determine. Subject to adjustment as provided in Section 7,
      the
      aggregate number of shares of Common Stock covered by the Plan and issuable
      upon
      exercise of all options granted hereunder shall be 2,000,000 shares, which
      shares shall be reserved for use upon the exercise of options to be granted
      from
      time to time.

    


    (b)    Restoration
      of Unpurchased Shares.
      If an
      option expires or terminates for any reason prior to its exercise in full and
      before the term of the Plan expires, the shares subject to, but not issued
      under
      such option shall again be available for other options thereafter
      granted.

    


    3.    Administration;
      Amendments.

    


    (a)    Administration.
      The Plan
      shall be administered by the Board or by a committee (the "Committee")
      to
      which administration of the Plan, or of part of the Plan, is delegated by the
      Board (in either case, the "Administrator").
      The
      Board shall appoint and remove members of the Committee in its discretion in
      accordance with applicable laws. If necessary in order to comply with Rule
      16b-3
      promulgated by the Securities and Exchange Commission ("Rule
      16b-3"),
      or any
      successor rule thereto, and Section 162(m) of the Code, the Committee shall,
      in
      the Board's discretion, be comprised solely of "non-employee directors" within
      the meaning of Rule 16b-3 and "outside directors" within the meaning of Section
      162(m) of the Code. The foregoing notwithstanding, the Administrator may
      delegate nondiscretionary administrative duties to such employees of the
      Corporation as it deems proper and the Board, in its absolute discretion, may
      at
      any time and from time to time exercise any and all rights and duties of the
      Administrator under the Plan. 

     


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    (b)    Subject
      to the other provisions of this Plan, the Administrator shall have the
      authority, in its discretion: (i) to grant options; (ii) to determine the Fair
      Market Value of the Common Stock subject to options; (iii) to determine the
      exercise price of options granted; (iv) to determine the persons to whom, and
      the time or times at which, options shall be granted (each, a "Grantee"),
      and
      the number of shares subject to each option; (v) to interpret this Plan; (vi)
      to
      prescribe, amend, and rescind rules and regulations relating to this Plan;
      (vii)
      to determine the terms and provisions of each option granted (which need not
      be
      identical), including but not limited to, the time or times at which options
      shall vest and be exercisable; (viii) with the consent of the Grantee, to
      modify, amend, terminate or replace any option; (ix) to defer (with the consent
      of the Grantee) the exercise date of any option; (x) to authorize any person
      to
      execute on behalf of the Corporation any instrument evidencing the grant of
      an
      option; and (xi) to make all other determinations deemed necessary or advisable
      for the administration of this Plan. The Administrator may delegate
      nondiscretionary administrative duties to such employees of the Corporation
      as
      it deems proper. 

    


    (c)    All
      questions of interpretation, implementation, and application of this Plan shall
      be determined by the Administrator. Such determinations shall be final and
      binding on all persons. 

    


    (d)    Exercise
      Price.
      Upon
      the grant of any option, the Administrator shall specify the exercise price
      for
      the shares issuable upon exercise of options granted, which exercise price
      shall
      in no event be less than 100% of the Fair Market Value per share on the date
      such option is granted. Non-qualified options granted under this Plan shall
      not
      be discounted; accordingly they are intended to be exempt from Code Section
      409A. 

    


    (e)    Fair
      Market Value.
      The
      Fair Market Value of a share of Common Stock on any particular day shall be
      determined as follows:

    


    (i)    If
      the
      Common Stock is readily tradable on an established securities market, its Fair
      Market Value shall be determined, in accordance with regulations under Code
      Section 409A, by any of the following methods selected and consistently followed
      by the Administrator from time to time: (i) the last sale before or the first
      sale after the grant; (ii) the closing price on the trading day before or the
      trading day of the grant; (iii) the arithmetic mean of the high and low prices
      on the trading day before or the trading day of the grant; or (iv) any other
      reasonable method using actual transactions in the Common Stock as reported
      by
      such market. 

     

    (ii)    If
      the
      Common Stock is not readily tradable on an established securities market, its
      Fair Market Value shall be determined in good faith by the Administrator by
      a
      reasonable application of a reasonable valuation method, taking into
      consideration all relevant factors as provided in regulations under Code Section
      409A, or the Administrator may consistently apply, from time to time, one of
      the
      valuation methods presumed to be reasonable as set forth in said regulations.
      

    


    (d)    Option
      Grant Date.
      Except
      in the case of advance approvals described in Section 4(a), the date of grant
      of
      an option under this Plan shall be the date as of which the Administrator
      approves the grant with respect to at least the following determinable features:
      the identity of the Grantee, type of grant, number of shares, exercise price,
      vesting schedule and expiration date. For this purpose, the


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    default
      provisions of the Plan shall be deemed incorporated into any grant to the extent
      that other terms are not specified for the grant.

    


    (e)    Interpretation.
      The
      interpretation and construction by the Administrator of the terms and provisions
      of this Plan and of the agreements governing options and rights granted under
      the Plan shall be final and conclusive. No member of the Administrator shall
      be
      liable for any action taken or determination made in good faith.

    


    (f)    Amendments
      to Plan.
      The
      Administrator may, without action on the part of the shareholders of the
      Corporation, make such amendments to, changes in and additions to the Plan
      as it
      may, from time to time, deem proper and in the best interests of the
      Corporation; provided that the Administrator may not, without consent of the
      Grantee, take any action which disqualifies any option granted under the Plan
      as
      an incentive stock option for treatment as such or which adversely affects
      or
      impairs the rights of a Grantee of any option outstanding under the
      Plan.

    


    (g)    Termination
      of the Plan.
      This
      Plan
      may be abandoned, suspended, or terminated at any time by the Administrator;
      provided, however, that abandonment, suspension, or termination of this Plan
      shall not affect any options then outstanding under this Plan. 

    


    4.    Participants;
      Duration Of Plan.

    


    (a)    Eligibility
      and Participation.
      Options
      may be granted in the total amount for the period as allocated by the
      Administrator as provided in Section 4(b) below only to persons who at the
      time
      of grant are key employees of, consultants to, or service providers to the
      Corporation or its subsidiaries or others who qualify under the general purpose
      of the Plan stated above in Section 1. The term "employee"
      includes
      an officer or director who is an employee of the Company. The term "consultant"
      includes
      persons employed by, or otherwise affiliated with, a consultant. The
      Administrator may approve the grant of options under this Plan to persons who
      are expected to become employees or consultants of the Corporation, but are
      not
      employees or consultants at the date of approval, and the date of approval
      shall
      be deemed to be the date of grant unless otherwise specified by the
      Administrator. However, no such options approved in anticipation of hire by
      the
      Corporation shall be exercisable or validly existing and in effect before the
      actual date of hire. If an incentive stock option is granted in anticipation
      of
      employment as provided above, the option shall be deemed granted, without
      further approval, on the date the grantee assumes the employment relationship
      forming the basis for such grant, and, in addition, satisfies all requirements
      of this Plan for options granted on that date.

    


    (b)    Allotment.
      The
      Administrator shall determine the aggregate number of shares of Common Stock
      which may be optioned from time to time but the Administrator shall have sole
      authority to determine the number of shares and the recipient thereof to be
      optioned at any time. The Administrator shall not be required to grant all
      options allocated by the Administrator for any given period if it determines,
      in
      its sole and exclusive judgment, that such grant is not in the best interests
      of
      the Corporation. The grant of an option to any person shall neither entitle
      such
      individual to, nor disqualify such individual from, participation in any other
      grant of options under the Plan.


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    (c)    Duration
      of Plan.
      The
      term of the Plan, unless previously terminated by the Board, is ten years or
      until January 8, 2018. No option shall be granted under the Plan unless granted
      within ten years after the adoption of the Plan by the Board, but options
      outstanding on that date shall not be terminated or otherwise affected by virtue
      of the Plan's expiration.

    


    (d)    Approval
      of Shareholders.
      If the
      Administrator issues any incentive stock options, solely for the purposes of
      compliance with the Code provisions pertaining to incentive stock options,
      the
      Plan shall be submitted to the shareholders of the Corporation for their
      approval at a regular meeting to be held within twelve months after adoption
      of
      the Plan by the Board. Shareholder approval shall be evidenced by the
      affirmative vote of the holders of a majority of the shares of Common Stock
      present in person or by proxy and voting at the meeting. If the shareholders
      decline to approve the Plan at such meeting or if the Plan is not approved
      by
      the shareholders within twelve months after its adoption by the Board, no
      incentive stock options may be issued under the Plan but all options granted
      under the Plan shall remain in full force and effect regardless of shareholder
      approval and the Plan may be used for future nonincentive stock option
      issuances. If shareholders fail to approve the Plan, all previously issued
      incentive stock options shall be automatically converted to non-qualified stock
      options.

    


    5.    Terms
      And Conditions Of Options.

    


    (a)    Individual
      Agreements.
      Options
      granted under the Plan shall be evidenced by agreements in such form as the
      Administrator from time to time approves, which agreements shall substantially
      comply with and be subject to the terms of the Plan, including the terms and
      conditions of this Section 5.

    


    (b)    Required
      Provisions.
      Each
      agreement shall state (i) the total number of shares to which it pertains,
      (ii)
      the exercise price for the shares covered by the option, (iii) the time at
      which
      the option becomes exercisable, (iv) the scheduled expiration date of the
      option, (v) the vesting period(s) for such options, (vi) the timing and
      conditions of issuance of any stock option exercise, and (vii) whether the
      option is an incentive or non-qualified stock option.

    


    (c)    Period.
      No
      option granted under the Plan shall be exercisable for a period in excess of
      ten
      years from the date of its grant. All options granted shall be subject to
      earlier termination in the event of termination of employment, retirement or
      death of the Grantee as provided in Section 6 or as otherwise set forth in
      the
      agreement granting the option. Unless otherwise provided in the agreement
      granting the stock option itself, an option may be exercised in full or in
      part
      at any time or from time to time during the term thereof, or provide for its
      exercise in stated installments at stated times during such term.

    


    (d)    No
      Fractional Shares.
      Options
      shall be granted and exercisable only for whole shares; no fractional shares
      will be issuable upon exercise of any option granted under the
      Plan.

    


    (e)    Method
      of Exercising Option.
      Options
      shall be exercised by written notice to the Corporation, addressed to the
      Corporation at its principal place of business. Such notice shall state the
      election to exercise the option and the number of shares with respect to which
      it is being exercised, and shall be signed by the person exercising the option.
      Such notice shall be accompanied by payment in full of the exercise price for
      the number of shares being purchased. Payment may be made in cash or by
      bank


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    cashier's
      check, or if required by the terms of the option itself, by allocating
      compensation due to the Grantee by the Corporation or by any of its subsidiaries
      to the Corporation as payment for the exercise price. In lieu of cash, if
      permitted by the option itself, such payment may be made in whole or in part
      with shares of the same class of stock as are then subject to the option,
      delivered in lieu of cash concurrently with such exercise, the shares so
      delivered to be valued on the basis of the fair market value of the stock
      (determined in a manner specified in the instrument evidencing the option)
      on
      the day preceding the date of exercise. In such case, prior to the acceptance
      of
      such shares, the Grantee shall supply the Administrator with written
      representations and warranties, including without limitation a representation
      and warranty that the Grantee has good and marketable title to such shares
      free
      and clear of liens and encumbrances. Alternatively, if permitted by the option
      itself, the Grantee may, in lieu of using previously outstanding shares
      therefore, use some of the shares as to which the option is then being
      exercised. The Corporation shall deliver a certificate or certificates
      representing the option shares to the purchaser as soon as practicable after
      payment for those shares has been received. If an option is exercised by any
      person other than the Grantee, such notice shall be accompanied by appropriate
      proof of the right of such person to exercise the option. All shares that are
      purchased and paid for in full upon the exercise of an option shall be fully
      paid and non-assessable. In any case, no option shall be exercisable until
      a
      written stock option agreement in form satisfactory to the Corporation is
      executed by the Corporation and the Grantee. No option shares shall be issued
      until full payment therefor has been made, and until any tax withholding
      obligations have been satisfied in a manner acceptable to the Corporation.
      

    


    (f)    No
      Rights of a Shareholder.
      A
      Grantee shall have no rights as a shareholder with respect to shares covered
      by
      an option. No adjustment will be made for dividends with respect to an option
      for which the record date is prior to the date a stock certificate is issued
      upon exercise of an option. Upon exercise of an option, the holder of the shares
      of Common Stock so received shall have all rights of a shareholder of the
      Corporation as of the date of issuance.

    


    (g)    Effect
      of Plan on Employment Status. The
      fact
      that the Administrator has granted an option to a Grantee under this Plan shall
      not confer on such Grantee any right to employment or continuation of services
      with the Corporation or to a position as an officer or an employee of the
      Corporation, nor shall it limit the right of the Corporation to remove such
      Grantee from any position held by the Grantee or to terminate the Grantee 's
      employment at any time.

    


    (h)    Compliance
      with Law.
      No
      shares of Corporation Common Stock shall be issued or transferred upon the
      exercise of any option unless and until all legal requirements applicable to
      the
      issuance or transfer of such shares have been completed.

    


    (i)    Other
      Provisions.
      The
      option agreements may contain such other provisions as the Administrator deems
      necessary to effectuate the sense and purpose of the Plan, including covenants
      on the Grantee's part not to compete and remedies to the Corporation in the
      event of the breach of any such covenant.

    


    (j)    Incentive
      Stock Options. Some
      one
      or more of the options granted under the Plan may be intended to qualify as
      an
"incentive
      stock option"
      as
      defined in Section 422 of the Code, and any grant of such an option shall
      clearly specify that such option is intended to so qualify and shall include
      such


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    provisions
      and conditions as are necessary to qualify the option as an "incentive
      stock option"
      within
      the meaning of Section 422 of the Code. If no such specification is made, an
      option granted hereunder shall not be intended to qualify as an "incentive
      stock option."
      The
      employees eligible to be considered for the grant of incentive stock options
      hereunder are any persons regularly employed by the Corporation in a managerial
      capacity on a full-time, salaried basis. Options granted under this Plan which
      are designated as incentive stock options shall be subject to the following
      terms and conditions: 

    


    (i)    Exercise
      Price.
      

    


    (1)    Except
      as
      set forth in Section 5(j)(i)(2), the exercise price of an incentive stock option
      shall be determined in accordance with the applicable provisions of the Code
      and
      shall in no event be less than the Fair Market Value (determined in accordance
      with Section 3(e)) of the stock covered by the option at the time the option
      is
      granted. 

    


    (2)    The
      exercise price of an incentive stock option granted to any person who owns,
      directly or by attribution under the Code (currently Section 424(d)), stock
      possessing more than ten percent of the total combined voting power of all
      classes of stock of the Corporation or of any subsidiary (a "Ten
      Percent Shareholder")
      shall
      in no event be less than 110% of the Fair Market Value (determined in accordance
      with Section 3(e)) of the stock covered by the option at the time the option
      is
      granted. 

    


    (ii)    Disqualifying
      Dispositions.
      If
      stock acquired by exercise of an incentive stock option granted pursuant to
      this
      Plan is disposed of in a "disqualifying
      disposition"
      within
      the meaning of Section 422 of the Code, the holder of the stock immediately
      before the disposition shall promptly notify the Administrator in writing of
      the
      date and terms of the disposition and shall provide such other information
      regarding the option as the Administrator may reasonably require. 

    


    (iii)    Vesting.
      Notwithstanding any other provision of this Plan, incentive stock options
      granted for any particular Grantee under all incentive stock option plans of
      the
      Corporation and its subsidiaries may not "vest" for more than $100,000 in Fair
      Market Value of stock (measured on the grant dates(s)) in any calendar year.
      For
      purposes of the preceding sentence, an option "vests"
      when it
      first becomes exercisable. If, by their terms, such incentive stock options
      taken together would vest to a greater extent than the foregoing vesting limit
      in a calendar year, and unless otherwise provided by the Administrator, the
      vesting limitation described above shall be applied by deferring (only to the
      extent necessary to satisfy the $100,000 limit) the exercisability of those
      incentive stock options or portions of incentive stock options which have the
      highest per share exercise prices. The incentive stock options or portions
      of
      incentive stock options whose exercisability is so deferred shall become
      exercisable on the first day of the first subsequent calendar year during which
      they may be exercised, as determined by applying these same principles and
      all
      other provisions of this Plan including those relating to the expiration and
      termination of incentive stock options. In no event, however, will the operation
      of this Section 5(j)(iii) cause an incentive stock option to vest before its
      terms or, having vested, cease to be vested. To the extent that any portion
      of
      an incentive stock option cannot be deferred to any later calendar year, then
      the portion of such incentive stock option that


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    exceeds
      the foregoing annual vesting limit for the last calendar year in which any
      portion of that incentive stock option is permitted to vest as an incentive
      stock option, shall be converted and treated thereafter as a non-qualified
      stock
      option under the Plan and the Grantee shall be notified of that conversion.
      

    


    (iv)    Term.
      Notwithstanding Section 5(c), no incentive stock option granted to any Ten
      Percent Shareholder shall be exercisable more than five years after the date
      of
      grant. 

    


    6.    Termination
      Of Employment; Assignability; Death.

    


    (a)    Termination
      of Employment.
      Except
      as otherwise set forth in this Section 6 and except with respect to options
      granted to consultants and service providers, the termination of which will
      be
      determined by the agreement with such consultant or service provider or by
      the
      Administrator, if any Grantee ceases to be an employee of the Corporation or
      of
      any subsidiary of the Corporation, other than for death, disability or discharge
      for cause, such holder (or successors or transferees) may, within six months
      after the date of termination, but in no event after the stated expiration
      date,
      purchase some or all of the shares with respect to which such Grantee was
      entitled to exercise such option, on the date such employment relationship
      terminated and the option shall thereafter be void for all purposes provided,
      however, that if such exercise of the option would result in liability for
      the
      Grantee under Section 16(b) of the Securities Exchange Act of 1934, as amended
      (the "Exchange
      Act"),
      then
      such six-month period automatically shall be extended until the tenth day
      following the last date upon which Grantee has any liability under Section
      16(b)
      (but in no event after the stated expiration date). Any termination of an
      agreement pursuant to which services are rendered to the Corporation or of
      any
      subsidiary of the Corporation by any party who is a Grantee, without a renewal
      of that agreement or entry into a similar successor agreement, may be treated as
      a termination of the employment of the Grantee. A Grantee's employment shall
      not
      be deemed to terminate by reason of sick leave, military leave or other leave
      of
      absence approved by the Corporation, for as long as the period of any such
      leave
      does not exceed 90 days or, if longer, the duration of the Grantee's right
      to
      reemployment by the Corporation or any subsidiary as guaranteed either
      contractually or by statute.

    


    (b)    Assignability.
      Options
      granted under the Plan and the privileges conferred thereby shall not be
      assignable or transferable, unless the Administrator provides otherwise. If
      an
      assignment or transfer is permitted by the Administrator, options shall be
      exercisable by such assignee or transferee as set forth in this Section
      6.

    


    (c)    Disability.
      If the
      employment of the Grantee is terminated due to permanent and total disability
      as
      defined in Section 22(e)(3) of the Code, the Grantee (or permitted transferee
      of
      the Grantee) may exercise the options, in whole or in part, to the extent they
      were exercisable on the date when the Grantee's employment terminated, at any
      time prior to the expiration date of the options or within one year of the
      date
      of termination of employment, whichever is earlier. 

    


    (d)    Discharge
      for Cause.
      If the
      employment of the Grantee with the Corporation or any of its subsidiaries is
      terminated due to discharge for cause, the options shall terminate upon receipt
      by the Grantee of notice of such termination or the effective date of the
      termination, whichever is earlier. Discharge for cause shall include discharge
      for personal dishonesty, willful misconduct in performance


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    of
      duties, failure, impairment or inability to perform required duties, breach
      of
      fiduciary duty or conviction of any felony or crime of moral turpitude. The
      Administrator shall have the sole and exclusive right to determine whether
      the
      Grantee has been discharged for cause for purposes of the Plan and the date
      of
      such discharge.

    


    (e)    Death
      of Holder.
      If a
      Grantee dies while in the Corporation's or any of its subsidiaries' employ
      or
      while rendering consulting or other services to the Corporation or to any of
      its
      subsidiaries, an option shall be exercisable within twelve months after the
      date
      of death, but in no event after the stated expiration date thereof, by the
      person or persons ("successors")
      to whom
      the Grantee's rights pass under will or by the laws of descent and distribution
      or by transferees of the Grantee, as the case may be, but only to the extent
      that the holder was entitled to exercise the option at the date of death. An
      option may be exercised (and payment of the option price made in full) by the
      successors or transferees only after written notice to the Corporation,
      specifying the number of shares to be purchased or rights to be exercised.
      Such
      notice shall comply with the provisions of Section 5(e).

    


    (f)    Employment
      Agreement Provisions.
      Notwithstanding anything to the contrary in this Section 6, the provisions
      in an
      employee's employment agreement with the Corporation or any of its subsidiaries
      relating to vesting and exercise of options upon such employee's termination,
      resignation, disability or death shall control the vesting and exercise of
      the
      options granted to such employee.

    


    7.    Certain
      Adjustments.

    


    (a)    Capital
      Adjustments.
      Except
      as limited by Section 422 of the Code, the aggregate number of shares of Common
      Stock subject to the Plan, the number of shares covered by outstanding options,
      and the price per share stated in such options shall be proportionately adjusted
      for any increase or decrease in the number of outstanding shares of Common
      Stock
      of the Corporation resulting from a subdivision or consolidation of shares
      or
      any other capital adjustment or the payment of a stock dividend or any other
      increase or decrease in the number of such shares effected without receipt
      by
      the Corporation of consideration therefor in money, services or
      property.

    


    (b)    Corporate
      Reorganizations. Upon
      the
      dissolution or liquidation of the Corporation, or upon a reorganization, merger
      or consolidation of the Corporation as a result of which the outstanding
      securities of the class then subject to options hereunder are changed into
      or
      exchanged for cash or property or securities not of the Corporation's issue,
      or
      any combination thereof, or upon a sale of substantially all of the property
      of
      the Corporation to, or the acquisition of stock representing more than eighty
      percent (80%) of the voting power of the stock of the Corporation then
      outstanding by another corporation or by a group of persons who are required
      to
      file a Form 13D under the Exchange Act, the Plan shall terminate, and all
      options theretofore granted hereunder shall terminate, unless provision be
      made
      in writing in connection with such transaction for the continuance of the Plan
      or for the assumption of options covering the stock of a successor employer
      corporation, or a parent or a subsidiary thereof, with appropriate adjustments
      as to the number and kind of shares and prices, in which event the Plan and
      options theretofore granted shall continue in the manner and under the terms
      so
      provided. If the Plan and unexercised options shall terminate pursuant to the
      foregoing sentence, all persons entitled to exercise any unexercised portions
      of
      options then outstanding shall have the right, at such time prior to the
      consummation of the transaction causing such termination as the Corporation
      shall designate, to


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    exercise
      the unexercised portions of their options, including the portions thereof which
      would, but for this paragraph entitled "Corporate
      Reorganizations,"
      not yet
      be exercisable.

    


    8.    Compliance
      With Legal Requirements. 

    


    (a)    For
      Investment Only.
      If, at
      the time of exercise of an option, there is not in effect as to the option
      shares being purchased a registration statement under the Securities Act of
      1933, as amended (or any successor statute) (collectively, the "1933
      Act"),
      then
      the exercise of that option shall be effective only upon receipt by the
      Corporation from the Grantee (or Grantee's legal representatives or heirs)
      of a
      written representation that the option shares are being purchased for investment
      and not for distribution. 

    


    (b)    Listing
      and Registration of Option Shares. Any
      Option granted under the Plan shall be subject to the requirement that if at
      any
      time the Administrator shall determine, in its discretion, that the listing,
      registration, or qualification of the shares covered thereby upon any securities
      exchange or under any state or federal law or the consent or approval of any
      governmental regulatory body is necessary or desirable as a condition of, or
      in
      connection with, the granting of such option or the issuance or purchase of
      shares thereunder, such option may not be exercised in whole or in part unless
      and until such listing, registration, qualification, consent, or approval shall
      have been effected or obtained free of any conditions not acceptable to the
      Administrator. 

    


    (c)    Compliance
      with Section 16 of the Securities Exchange Act of 1934.
      It is
      the intention of the Corporation that the Plan and options hereunder satisfy
      and
      be interpreted in a manner, that, in the case of Grantees, satisfies the
      applicable requirements of Rule 16b-3 promulgated under Section 16(b) of the
      Exchange Act, so that such persons will be entitled to the benefits of Rule
      16b-3 or other exemptive rules under Section 16 of the Exchange Act and will
      not
      be subject to avoidable liability thereunder. If any provision of the Plan
      or of
      any option agreement would otherwise frustrate or conflict with the intent
      expressed in this Paragraph 8(c), that provision to the extent possible shall
      be
      interpreted and deemed amended so as to avoid such conflict. To the extent
      of
      any remaining irreconcilable conflict with such intent, the provision shall
      be
      deemed void as applicable to any person who is subject to Section 16 of the
      Exchange Act. Unless exempted by the Administrator, if an officer or director
      who is subject to the provisions of Section 16(b) of the Exchange Act exercises
      an option within six months of the grant of such option, the shares acquired
      upon exercise of such option may not be disposed of until six months after
      the
      date of grant of such option.

    


    (d)    Compliance
      with Code Section 409A.
      Notwithstanding anything to the contrary contained herein, to the extent that
      the Administrator determines that any option granted under the Plan is subject
      to Code Section 409A and unless otherwise specified in the applicable option
      agreement, the option agreement evidencing such option shall incorporate the
      terms and conditions necessary for such option to avoid the consequences
      described in Code Section 409A(a)(1), and to the maximum extent permitted under
      applicable law (and unless otherwise stated in the applicable option agreement),
      the Plan and the option agreements shall be interpreted in a manner that results
      in their conforming to the requirements of Code Section 409A(a)(2), (3) and
      (4)
      and any Department of Treasury or Internal Revenue Service regulations or other
      interpretive guidance issued under Code Section 409A (whenever issued, the
      "Guidance").
      Notwithstanding anything to the contrary in this Plan (and unless the option
      agreement provides otherwise, with specific reference to this sentence), to
      the
      extent that a Grantee


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    holding
      an option that constitutes "deferred
      compensation"
      under
      Code Section 409A and the Guidance is a "specified employee" (also as defined
      thereunder), no distribution or payment of any amount shall be made before
      a
      date that is six months following the date of such Grantee's "separation
      from service"
      (as
      defined in Code Section 409A and the Guidance) or, if earlier, the date of
      the
      Grantee's death.

    


    9.     Application
      Of Funds.

    


    The
      proceeds received by the Corporation from the sale of Common Stock pursuant
      to
      the exercise of options will be used for general corporate
      purposes.

    


    10.     Withholding
      Of Taxes. 

    


    At
      the
      time of exercise of an option and as a condition thereto, or at such other
      time
      as the amount of such obligations becomes determinable (the "Tax
      Date"),
      the
      Grantee shall remit to the Corporation in cash all applicable federal and state
      withholding and employment taxes. Such obligation to remit may be satisfied,
      if
      authorized by the Administrator in its sole discretion, after considering any
      tax, accounting and financial consequences, by the Grantee's (i) tendering
      to
      the Corporation previously owned shares of stock or other securities of the
      Corporation with a fair market value equal to the required amount, or (ii)
      agreeing to have shares of common stock (with a fair market value equal to
      the
      required amount) which are acquired upon exercise of the option withheld by
      the
      Corporation, subject to the following limitations: 

     

    (a)    Any
      election pursuant to clause (ii) above by a Grantee subject to Section 16 of
      the
      Exchange Act shall either (x) be made at least six months before the Tax Date
      and shall be irrevocable; or (y) shall be made in (or made earlier to take
      effect in) any 10-day period beginning on the third business day following
      the
      date of release for publication of the Corporation's quarterly or annual summary
      statements of earnings and shall be subject to approval by the Administrator,
      which approval may be given at any time after such election has been made.
      In
      addition, in the case of (y), the option shall be held at least six months
      prior
      to the Tax Date.

     

    (b)    Any
      election pursuant to clause (i) above, where the Grantee is tendering shares
      issued pursuant to the exercise of an Option, shall require that such shares
      be
      held at least six months prior to the Tax Date. 

     

    Any
      of
      the foregoing limitations may be waived (or additional limitations may be
      imposed) by the Administrator, in its sole discretion, if the Administrator
      determines that such foregoing limitations are not required (or that such
      additional limitations are required) in order that the transaction shall be
      exempt from Section 16(b) of the Exchange Act pursuant to Rule 16b-3, or any
      successor rule thereto. In addition, any of the foregoing limitations may be
      waived by the Administrator, in its sole discretion, if the Administrator
      determines that Rule 16b-3, or any successor rule thereto, is not applicable
      to
      the exercise of the option by the optionee or for any other reason. Any
      securities tendered or withheld in accordance with this Section 10 shall be
      valued by the Corporation as of the Tax Date.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    11.    Expenses
      Of Administration Of Plan.

     

    All
      costs
      and expenses incurred in the operation and administration of this Plan shall
      be
      borne by the Corporation or one or more of its subsidiaries.

    


    12.    Governing
      law.

     

    Without
      regard to the principles of conflicts of laws, the laws of the State of
      Minnesota shall govern and control the validity, interpretation, performance,
      and enforcement of this Plan.

    


    13.    Inspection
      Of Plan.

    


    A
      copy of
      this Plan, and any amendments thereto or modification thereof, shall be
      maintained by the Secretary of the Corporation and shall be shown to any proper
      person making inquiry about it. 

    


    14.    Nonexclusivity
      Of The Plan.

     

    The
      adoption of the Plan shall not be construed as creating any limitations on
      the
      power of the Corporation to adopt such other incentive arrangements as it may
      deem desirable, including, without limitation, the granting of stock options
      other than under the Plan. 

     

     

    Dated
      as of
      the 8th
      day of
      January, 2008.

     

    ISORAY,
      INC.,

    a
      Minnesota corporation

     

     

    By: 
      /s/
      Roger
      Girard

      
        

      

    

    Roger
      Girard

    Chief
      Executive Officer