ISORAY,
        INC.

      


      Amended
        And Restated 2005 Employee Stock Option Plan

      


      1.    Purpose
        Of Plan.

      


      (a)    General
        Purpose.
        The
        purpose of the IsoRay,
        Inc. Amended and Restated 2005 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 current and former officers and key employees 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)    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 Internal Revenue Code of 1986, as amended
        (the "Code"),
        and
        any grant of such an option shall clearly specify that such option is intended
        to so qualify. 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.

      


      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
        by Board.
        The Plan
        shall be administered by the Board with full power to administer the Plan,
        to
        interpret the Plan and to establish and amend rules and regulations for its
        administration. 

      


      (b)    Exercise
        Price.
        Upon
        the grant of any option, the Board 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, except for options granted in exchange for options issued
        under the IsoRay Medical, Inc. 2004 Employee Stock Option Plan, which shall
        have
        the exercise price specified on the options being exchanged. 

      


      
        
           

        

        
           

          
            

          

        

        
           

        

      

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

      


      (1)    If
        the
        shares are listed or admitted to trading on any securities exchange, the
        fair
        market value shall be the average sales price on such day on the New York
        Stock
        Exchange, or if the shares have not been listed or admitted to trading on
        the
        New York Stock Exchange, on such other securities exchange on which such
        stock
        is then listed or admitted to trading, or if no sale takes place on such
        day on
        any such exchange, the average of the closing bid and asked price on such
        day as
        officially quoted on any such exchange;

      


      (2)    If
        the
        shares are not then listed or admitted to trading on any securities exchange,
        the fair market value shall be the average sales price on such day or, if
        no
        sale takes place on such day, the average of the reported closing bid and
        asked
        price on such date, in the over-the-counter market as furnished by the National
        Association of Securities Dealers Automated Quotation ("NASDAQ"),
        or if
        NASDAQ at the time is not engaged in the business of reporting such prices,
        as
        furnished by any similar firm then engaged in such business and selected
        by the
        Board; or

      


      (3)    If
        the
        shares are not then listed or admitted to trading in the over-the-counter
        market, the fair market value shall be the amount determined by the Board
        in a
        manner consistent with Treasury Regulation Section 20-2031-2 promulgated
        under the Code or in such other manner prescribed by the Secretary of the
        Treasury or the Internal Revenue Service.

      


      (4)    If
        the
        Board determines that the price as determined in Section 3(c)(1) - (3) above
        does not represent the fair market value of a share of Common Stock, the
        Board
        may then consider such other factors as it deems appropriate and then fix
        the
        Fair Market Value for the purposes of this Plan.

      


      (d)    Interpretation.
        The
        interpretation and construction by the Board 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 Board shall be liable for
        any
        action taken or determination made in good faith.

      


      (e)    Amendments
        to Plan.
        The
        Board may, without action on the part of the stockholders 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 Board may not, without consent of the holder, 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 the
        holder
        of any option outstanding under the Plan.

      


      (f)    Termination
        of the Plan.
        This
        Plan
        may be abandoned, suspended, or terminated at any time by the Board; 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 Board
        as
        provided in Section 4(b) below only to persons who at the time of
        grant are
        current or former key employees of the Corporation or its subsidiaries or
        others
        who qualify under the general purpose of the Plan stated above in
        Section 1.

      


      
        
           

        

        
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      (b)    Allotment.
        The
        Board shall determine the aggregate number of shares of Common Stock which
        may
        be optioned from time to time but the Board shall have sole authority to
        determine the number of shares and the recipient thereof to be optioned at
        any
        time. The Board shall not be required to grant all options allocated by the
        Board 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)    Limitation
        on Grant of Incentive Stock Options.
        Notwithstanding
        any other provision of this Plan, no person shall be granted an "incentive
        stock option"
        under
        this Plan which would cause such person's "annual
        vesting amount"
        to
        exceed $100,000.00. With respect to any calendar year, a person's "annual
        vesting amount"
        is the
        aggregate fair market value of stock subject to incentive stock options with
        respect to which such options are first exercisable during such calendar
        year.
        For purposes of the foregoing, the aggregate fair market value of stock with
        respect to which "incentive
        stock options"
        are
        first exercisable during any calendar year shall be determined by taking
        into
        account all such options granted to such person under all incentive stock
        option
        plans of the Corporation or of any of its parent or subsidiary
        corporations.

      


      (d)    Duration
        of Plan.
        The
        term of the Plan, unless previously terminated by the Board, is ten years
        or
        until May 27, 2015. 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.

      


      (e)    Approval
        of Stockholders.
        If the
        Board 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 stockholders of the Corporation for their approval at
        a
        regular meeting to be held within twelve months after adoption of the Plan
        by
        the Board. Stockholder 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 stockholders decline to approve the
        Plan
        at such meeting or if the Plan is not approved by the stockholders 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 stockholder approval and the Plan may be used for
        future nonincentive stock option issuances. If stockholders fail to approve
        the
        Plan, all previously issued incentive stock options shall be automatically
        converted to nonincentive stock options.

      


      5.    Terms
        And Conditions Of Options And Rights.

      


      (a)    Individual
        Agreements.
        Options
        granted under the Plan shall be evidenced by agreements in such form as the
        Board 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, and (vi) the timing and conditions of issuance of any stock
        option
        exercise.

      


      
        
           

        

        
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      (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 holder 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.
        The
        method for exercising options granted to former employees of the Corporation
        or
        of its subsidiaries shall be set forth in the agreement granting the option
        itself. All other 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. 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 optionholder, 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.

      


      (f)    No
        Rights of a Stockholder.
        An
        optionholder shall have no rights as a stockholder 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 stockholder
        of the
        Corporation as of the date of issuance.

      


      (g)    Effect
        of Plan on Employment Status. The
        fact
        that the Board has granted an Option to an Optionee under this Plan shall
        not
        confer on such Optionee any right to employment 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 Optionee from any position held by
        the
        Optionee or to terminate the Optionee'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.

      


      
        
           

        

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

      


      6.    Termination
        Of Employment; Assignability; Death.

      


      (a)    Termination
        of Employment.
        Except
        as otherwise set forth in this Section 6, if any optionholder 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 optionholder was entitled to exercise such option,
        on the
        date such employment relationship terminated and the option shall thereafter
        be
        void for all purposes. 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 an optionholder, without a renewal of that agreement
        or
        entry into a similar successor agreement, may be treated as a termination
        of the
        employment of the third party.

      


      (b)    Assignability.
        Options
        granted under the Plan and the privileges conferred thereby shall not be
        assignable or transferable, unless the Board provides otherwise. Options
        shall
        be exercisable by such transferee as set forth in this
        Section 6.

      


      (c)    Disability.
        If the
        employment of the optionholder is terminated due to disability, the optionholder
        (or transferee of the optionholder) may exercise the options, in whole or
        in
        part, to the extent they were exercisable on the date when the optionholder'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. For purposes of this Plan, the term "disability" shall be defined
        in
        the same manner as such term is defined in Section 22(e)(3) of the
        Code.

      


      (d)    Discharge
        for Cause.
        If the
        employment of the optionholder with the Corporation or any of its subsidiaries
        is terminated due to discharge for cause, the options shall terminate upon
        receipt by the optionholder 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 Board shall
        have the sole and exclusive right to determine whether the optionholder has
        been
        discharged for cause for purposes of the Plan and the date of such
        discharge.

      


      (e)    Death
        of Holder.
        If
        optionholder dies while in the Corporation's or any of its subsidiaries'
        employ,
        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 holder's rights pass under will or by the laws of descent and distribution
        or by transferees of the optionholders, 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).

      


      
        
           

        

        
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      (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 Securities Exchange Act of 1934 ("34
        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 this 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 this option shall be effective only upon receipt by the
        Corporation from the officer or key employee (or his 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 Board 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
        Board. 

      


      
        
           

        

        
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      (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 Optionees, 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. 

      


      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. 

      


      The
        Corporation shall have the right to deduct from any other compensation of
        the
        option holder any federal, state or local income taxes (including FICA) required
        by law to be withheld with respect to the granting or exercise of any
        options.

      


      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 Delaware
        shall govern and control the validity, interpretation, performance, and
        enforcement of this Plan.

      


      
        
           

        

        
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      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.

      


      Dated
        as of
        the 28th
        day of
        July, 2005.

      


      
        	 	 	 
	 	ISORAY,
                INC.,
a Minnesota corporation
	 
 	 
 	 
 
	 	By:  	/s/ Roger
                Girard
	 	
                
Roger
                Girard
	 	Chief
                Executive Officer




       

      
        
           

        

        
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