Document:

Exhibit 4.2

 

FARMERS & MERCHANTS BANCORP

 

And

 

COMPUTERSHARE TRUST, N.A.,

 

As Rights Agent

 

AMENDMENT NO. 1 TO RIGHTS AGREEMENT

 

Dated as of February 18, 2016

 

AMENDMENT NO. 1 TO

 

RIGHTS AGREEMENT

 

This Amendment No. 1, dated February 18, 2016 (the “Amendment”), amends that certain Rights Agreement, dated August 5, 2008 (the “Rights Agreement”), by and between Farmers & Merchants Bancorp, a Delaware corporation (the “Company”) and Computershare Trust, N.A., a federally chartered, limited purpose trust company (as successor to Registrar and Transfer Company) (the “Rights Agent”). Capitalized terms used in this Amendment but not defined in this Amendment are defined as set forth in the Rights Agreement.

 

WHEREAS, under Section 27 of the Rights Agreement, the Company and the Rights Agent may, from time to time, supplement or amend the Rights Agreement, subject to the terms of the Rights Agreement;

 

WHEREAS, the parties hereto desire to extend the Final Expiration Date of the Rights Agreement by seven (7) years from August 5, 2018 to August 5, 2025;

 

WHEREAS, pursuant to Sections 27 and 29 of the Rights Agreement, on November 19, 2015, the Board of Directors of the Company approved an amendment to the Rights Agreement to extend the Rights Agreement to and including August 5, 2025 and to effect certain other amendments described herein, and has delivered a copy of the duly approved resolution in respect thereof to the Rights Agent, and the execution of this Amendment by the Company and the Rights Agent have been in all respects duly authorized and approved by the Company and the Rights Agent; and

  

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

	 	
1.

	
Section 1(e) of the Rights Agreement is hereby amended by deleting the existing Section 1(e) and replacing that section with a new Section 1(e) as follows:

“Business Day shall mean any day other than a Saturday, a Sunday, a day on which the New York Stock Exchange is closed, or a day on which banking institutions in the State of California are authorized or obligated by law or executive order to close.”

	 	
2.

	
Section 1(d)(i) of the Rights Agreement is hereby amended by deleting the existing Section 1(d)(i) and replacing that section with a new Section 1(d)(i) as follows:

“(i) which such Person or any of such Person’s Affiliates or Associates beneficially owns, directly or indirectly, or has the right to become the beneficial owner (whether such right is exercisable immediately or only after the passage of time or the occurrence of conditions) pursuant to any agreement, arrangement or understanding, whether or not in writing (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), or upon the exercise of conversion rights, exchange rights, rights (other than the Rights), warrants or options, or otherwise;”

	 	
3.

	
Section 2 of the Rights Agreement is hereby amended by adding the following to the end thereof:

“Any such co-Rights Agent appointment shall be upon ten (10) days’ prior written notice to the Rights Agent, setting forth the respective duties of the Rights Agent and any co-Rights Agent.  The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omissions of any co-Rights Agent.”

		
4.

	
Section 3 of the Rights Agreement is hereby amended to add the following new Section 3(d) in appropriate numerical order:

 

2

“(d)     Notwithstanding the provisions of this Agreement, and for the avoidance of doubt, any reference in this Agreement to “certificates for Common Shares” shall include book entry Common Shares, book entry Common Shares shall be deemed Rights Certificates to the same extent as certificates for Common Shares, and the transfer of book entry Common Shares also constitutes a transfer of the right to receive Rights Certificates or the transfer of Rights associated with such book entry Common Shares to the same extent as certificates for Common Shares.  With respect to any book entry Common Shares, a legend in substantially similar form as the legend for certificates for Common Shares will be included in a notice to the record holder of such book entry Common Shares in accordance with applicable law. Notwithstanding the provisions of this section, neither the omission of a legend nor the failure to deliver the notice of such legend required hereby shall affect the enforceability of any part of this Agreement or the rights of any holder of Rights.”

 

		
5.

	
Section 5 of the Rights Agreement is hereby amended to replace the words “manually countersigned” in the second sentence with the words “countersigned manually or by facsimile signature”.

		
6.

	
Section 7(a) of the Rights Agreement is hereby amended by deleting the existing Section 7(a) and replacing that section with a new Section 7(a) as follows

“(a)   The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time after the Distribution Date (but not prior thereto) upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the principal office of the Rights Agent, together with payment of the Purchase Price for each one one-hundredth of a Preferred Share as to which the Rights are exercised, at or prior to the earliest of (i) the close of business on August 5, 2025 (the “Final Expiration Date”), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof (the “Redemption Date”), or (iii) the time at which such Rights are exchanged as provided in Section 24 hereof.”

		
7.

	
Section 7(b) of the Rights Agreement is hereby amended by deleting the existing Section 7(b) and replacing that section with a new Section 7(b) as follows:

“(b)   The Purchase Price for each one one-hundredth of a Preferred Share pursuant to the exercise of a Right shall be $1,600, shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below.”

		
8.

	
Section 18 of the Rights Agreement is hereby amended in the first paragraph by deleting the second and third sentences thereof and replacing those sentences with new sentences, respectively, as follows:

 

“The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability or expense (including the reasonable documented fees and expenses of outside legal counsel), incurred without gross negligence, bad faith or willful misconduct (which gross negligence, bad faith or willful misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction) on the part of the Rights Agent, for action taken or omitted to be taken by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises.  This Section 18 and Section 20 hereof shall survive the exercise or expiration of the Rights, the expiration or termination of this Agreement and the resignation, replacement, or removal of the Rights Agent.”

 

		
9.

	
Section 18 of the Rights Agreement is hereby amended in the second paragraph by adding the following language to the end thereto:

 

“The Rights Agent shall not be deemed to have knowledge of any event of which it was supposed to receive notice thereof hereunder, and the Rights Agent shall be fully protected and shall incur no liability for failing to take action in connection therewith, unless and until it has received such notice in writing.”

 

		
10.

	
Section 20(c) of the Rights Agreement is hereby amended by deleting the existing Section 20(c) and replacing that section with a new Section 20(c) as follows:

 

3

“The Rights Agent shall be liable hereunder to the Company and any other Person only for its gross negligence, bad faith or willful misconduct (which gross negligence, bad faith or willful misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction). Any liability of the Rights Agent under this Agreement will be limited to the amount of annual fees paid by the Company to the Rights Agent.  Anything in this Agreement to the contrary notwithstanding, in no event shall the Rights Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever (including, but not limited to, lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage and regardless of the form of action.”

 

		
11.

	
Section 21 of the Rights Agreement is hereby amended by deleting the existing first sentence of Section 21 and replacing that sentence with a new sentence as follows:

“The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days’ notice in writing mailed to the Company in accordance with Section 26 hereof, and to each transfer agent of the Common Shares by traceable mail, in the event that the Rights Agent or one of its Affiliates is not also the transfer agent for the Company.”

		
12.

	
Section 21 of the Rights Agreement is hereby amended by inserting the following new sentence at the end thereof:

“In the event the transfer agency relationship in effect between the Company and the Rights Agent terminates, the Rights Agent will be deemed to have resigned automatically and be discharged from its duties under this Agreement as of the effective date of such termination, and the Company shall be responsible for sending any required notice.”

		
13.

	
Section 26 of the Rights Agreement is hereby amended by deleting the existing Rights Agent notice address and replacing it as follows:

“Computershare Trust Company, N.A.

250 Royall Street

Canton, Massachusetts, 02021

Attn: Client Services”

		
14.

	
Section 27 of the Rights Agreement is hereby amended by inserting the following new language at the end thereof:

“Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent will duly execute and deliver any supplement or amendment hereto requested by the Company, provided that such supplement or amendment does not adversely affect the rights, duties or obligations of the Rights Agent under this Agreement.”

		
15.

	
The Rights Agreement is hereby amended by inserting a new Section 34 as follows:

“Force Majeure.  Notwithstanding anything to the contrary contained herein, the Rights Agent shall not be liable for any delays or failures in performance resulting from acts beyond its reasonable control including, without limitation, acts of God, terrorist acts, shortage of supply, breakdowns or malfunctions, interruptions or malfunction of computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war, or civil unrest.”

		
16.

	
Exhibits A, B, and C to the Rights Agreement shall be deemed amended in a manner consistent with this Amendment.  Each reference in Exhibits A, B, and C to the Rights Agreement to the date “August 5, 2018” shall be replaced with the date “August 5, 2025.”  Each reference in Exhibits A, B, and C to the Rights Agreement to the purchase price of “$1,200” shall be replaced with “$1,600.”

 

4

		
17.

	
Except as expressly set forth in this Amendment all other terms of the Rights Agreement shall remain in full force and effect.

 

		
18.

	
This Amendment and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State.

 

		
19.

	
This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.  A signature to this Amendment executed and/or transmitted electronically shall have the same authority, effect, and enforceability as an original signature.

 

		
20.

	
This Amendment shall be effective as of the date first above written and all references to the Rights Agreement (including each reference to “hereof,” “hereunder,” “hereto,” “herein,” “hereby,” and each similar reference contained in the Rights Agreement, such as “this Agreement”) shall, from and after such time, be deemed to be references to the Rights Agreement as amended hereby.

		
21.

	
The undersigned officer of the Company, being duly authorized on behalf of the Company, hereby certifies in his capacity as an officer on behalf of the Company to the Rights Agent that this Amendment is in compliance with the terms of the Rights Agreement, including Section 27 thereof.

		
22.

	
By its execution and delivery hereof, the Company directs the Rights Agent to execute this Amendment.

IN WITNESS WHEREOF, the Company and the Rights Agent have executed this Amendment effective as of the date first above written.

 

	
 

	
THE COMPANY:

	
 

	
 

	
 

	
FARMERS & MERCHANTS BANCORP

	
 

	
 

	
 

	
 

	
By:

	
/s/Kent A. Steinwert

	
 

	
 

	
 

	
 

	
Name:

	
 Kent A. Steinwert

	
 

	
 

	
 

	
 

	
Title:

	
President and Chief Executive Officer

 

	
 

	
THE RIGHTS AGENT:

	
 

	
 

	
 

	
COMPUTERSHARE INC.

	
 

	
 

	
 

	
 

	
By:

	
/s/ Peter Duggan

	
 

	
 

	
 

	
 

	
Name:

	
 Peter Duggan

	
 

	
 

	
 

	
 

	
Title:

	
Senior Vice President

 

 

5Exhibit 10.89

 

ISORAY, INC.

NOTICE OF GRANT OF STOCK OPTION

 

Thomas C. LaVoy (the
“Participant”) has been granted an option (the “Option”) to purchase certain
shares of Stock of IsoRay, Inc. pursuant to the IsoRay, Inc. 2014 Employee Stock Option Plan (the “Plan”),
as follows:

 

	Date of Option Grant:	February 15, 2016
	 	 
	Number of Option Shares:	250,000
	 	 
	Exercise Price:	$0.69
	 	 
	Initial Exercise Date:	Date of Option Grant
	 	 
	Initial Vesting Date:	February 15, 2016
	 	 
	Option Expiration Date:	The date ten (10) years from the Date of Option Grant.
	 	 
	Tax Status of Option:	Nonstatutory Stock Option.  (Enter “Incentive” or “Nonstatutory.”  If 

blank, this Option will be a Nonstatutory Stock Option.)

 

Vested Shares: Except
as provided in the Stock Option Agreement, the number of Vested Shares (disregarding any resulting fractional share) as of any
date is determined by multiplying the Number of Option Shares by the “Vested Ratio” determined as of
such date as follows:

 

	 	Vested Ratio
	Prior to Initial Vesting Date	0
	 	 
	On Initial Vesting Date, provided the Participant’s Service has not terminated prior to such date	

1/1

 

By their signatures
below, the Company and the Participant agree that the Option is governed by this Notice and by the provisions of the Plan and the
Stock Option Agreement, both of which are attached to and made a part of this document. The Participant acknowledges receipt of
copies of the Plan and the Stock Option Agreement, represents that the Participant has read and is familiar with their provisions,
and hereby accepts the Option subject to all of their terms and conditions.

 

	ISORAY, INC.	 	PARTICIPANT	 
	 	 	 	 
	By:	 /s/ Brien Ragle	 	/s/ Thomas C. LaVoy	 
	 	 	Signature            Thomas C. LaVoy	 
	 	 	 	 
	Its:	 CFO	 	February 15, 2016	 
	 	 	Date	 

 

		ATTACHMENTS:	2014 Employee Stock Option Plan, as amended to the Date of Option Grant; Stock Option Agreement
and Exercise Notice

  

     

     

    

 

ISORAY, INC.

STOCK OPTION AGREEMENT

 

IsoRay, Inc. has granted
to the individual (the “Participant”) named in the Notice of Grant of Stock Option (the “Notice”)
to which this Stock Option Agreement (the “Option Agreement”) is attached an option (the “Option”)
to purchase certain shares of Stock upon the terms and conditions set forth in the Notice and this Option Agreement. The Option
has been granted pursuant to and shall in all respects be subject to the terms and conditions of the IsoRay, Inc. 2014 Employee
Stock Option Plan (the “Plan”), as amended to the Date of Option Grant, the provisions of which are incorporated
herein by reference. By signing the Notice, the Participant: (a) represents that the Participant has received copies of, and has
read and is familiar with the terms and conditions of, the Notice, the Plan and this Option Agreement, (b) accepts the Option subject
to all of the terms and conditions of the Notice, the Plan and this Option Agreement, and (c) agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board (or the Committee, if a Committee has been appointed) upon any questions
arising under the Notice, the Plan or this Option Agreement.

 

		1.	Definitions
                                         and Construction.

 

1.1Definitions.
Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Notice or the Plan.

 

1.2Construction.
Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision
of this Option Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural
shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires
otherwise.

 

		2.	Tax
                                         Consequences.

 

2.1Tax Status
of Option. This Option is intended to have the tax status designated in the Notice.

 

(a)Incentive
Stock Option. If the Notice so designates, this Option is intended to be an Incentive Stock Option within the meaning of
Section 422(b) of the Code, but the Company does not represent or warrant that this Option qualifies as such. The Participant should
consult with the Participant’s own tax advisor regarding
the tax effects of this Option and the requirements necessary to obtain favorable income tax treatment under Section 422 of
the Code, including, but not limited to, holding period requirements. (NOTE TO PARTICIPANT: If the Option is exercised more than
three (3) months after the date on which you cease to be an Employee (other than by reason of your death or permanent and total
disability as defined in Section 22(e)(3) of the Code), the Option will be treated as a Nonstatutory Stock Option and not as an
Incentive Stock Option to the extent required by Section 422 of the Code.)

 

    	 	 1	 

     

    

 

(b)Nonstatutory
Stock Option. If the Notice so designates, this Option is intended to be a Nonstatutory Stock Option and shall not be treated
as an Incentive Stock Option within the meaning of Section 422(b) of the Code.

 

2.2ISO Fair Market
Value Limitation. If the Notice designates this Option as an Incentive Stock Option, then to the extent that the Option
(together with all Incentive Stock Options granted to the Participant under all stock option plans of the Participating Company
Group, including the Plan) becomes exercisable for the first time during any calendar year for shares having a Fair Market Value
greater than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount will be treated as
Nonstatutory Stock Options. For purposes of this Section 2.2, options designated as Incentive Stock Options are taken into
account in the order in which they were granted, and the Fair Market Value of stock is determined as of the time the option with
respect to such stock is granted. If the Code is amended to provide for a different limitation from that set forth in this Section 2.2,
such different limitation shall be deemed incorporated herein effective as of the date required or permitted by such amendment
to the Code. If the Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason
of the limitation set forth in this Section 2.2, the Participant may designate which portion of such Option the Participant
is exercising. In the absence of such designation, the Participant shall be deemed to have exercised the Incentive Stock Option
portion of the Option first. Separate certificates representing each such portion shall be issued upon the exercise of the Option.
(NOTE TO PARTICIPANT: If the aggregate Exercise Price of the Option (that is, the Exercise Price multiplied by the Number of Option
Shares) plus the aggregate exercise price of any other Incentive Stock Options you hold (whether granted pursuant to the Plan or
any other stock option plan of the Participating Company Group) is greater than $100,000, you should contact the Chief Financial
Officer of the Company to ascertain whether the entire Option qualifies as an Incentive Stock Option.)

 

		3.	Administration
                                         of Agreement.

 

All questions of interpretation
concerning this Option Agreement shall be determined the Board. All determinations by the Board shall be final and binding upon
all persons having an interest in the Option. Any Officer shall the authority to act on behalf of the Company with respect to any
matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the
Officer has apparent authority with respect to such matter, right, obligation, or election.

 

		4.	Exercise
                                         of the Option.

 

4.1Right to Exercise.

 

(a)In General.
Except as otherwise provided herein, the Option shall be exercisable on and after the Initial Exercise Date set forth and prior
to the termination of the Option (as provided in Section 6) in an amount not to exceed the Number of Option Shares less the number
of shares previously acquired upon exercise of the Option. In no event shall the Option be exercisable for more shares than the
Number of Option Shares, as adjusted pursuant to Section 9.

 

    	 	 2	 

     

    

 

(b)ISO Exercise
Limitation. If this Option is designated as an Incentive Stock Option in the Notice, then notwithstanding the provisions
of Section 4.1(a) and except as provided in Section 4.1(c), the aggregate Fair Market Value of the shares of Stock with respect
to which the Participant may exercise the Option for the first time during any calendar year, when added to the aggregate Fair
Market Value of shares subject to other options designated as Incentive Stock Options and granted to the Participant under other
stock option plans of the Participating Company Group prior to the Date of Option Grant which options are exercisable for the first
time during the same calendar year, shall not exceed One Hundred Thousand Dollars ($100,000). For purposes of the preceding sentence,
options designated as Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair
Market Value of shares of stock shall be determined as of the time the option with respect to such shares is granted. Such limitation
on exercise shall be referred to in this Option Agreement as the “ISO Exercise Limitation.” If
Section 422 of the Code is amended to provide for a different limitation from that set forth in this Section 4.1(b),
the ISO Exercise Limitation shall be deemed amended effective as of the date required or permitted by such amendment to the Code.
The ISO Exercise Limitation shall terminate upon the earlier of (i) the Participant’s termination of Service, (ii) the
day immediately prior to the effective date of a Corporate Transaction in which the Option is not Assumed or Replaced as provided
in Section 8, or (iii) the day ten (10) days prior to the Option Expiration Date. Upon such termination of the ISO Exercise
Limitation, the Option shall be deemed a Nonstatutory Stock Option to the extent of the number of shares subject to the Option
that would otherwise exceed the ISO Exercise Limitation.

 

(c)Exception
to ISO Exercise Limitation. Notwithstanding any other provision of this Option Agreement, if compliance with the ISO Exercise
Limitation as set forth in Section 4.1(b) will result in the exercisability of any Vested Shares being delayed more than thirty
(30) days beyond the date such shares become Vested Shares (the “Vesting Date”), the Option shall be
deemed to be two (2) options. The first option shall be for the maximum portion of the Number of Option Shares that can comply
with the ISO Exercise Limitation without causing the Option to be unexercisable in the aggregate as to Vested Shares on the Vesting
Date for such shares. The second option, which shall not be treated as an Incentive Stock Option as described in section 422(b)
of the Code, shall be for the balance of the Number of Option Shares; that is, those such shares which, on the respective Vesting
Date for such shares, would be unexercisable if included in the first option and thereby made subject to the ISO Exercise Limitation.
Shares treated as subject to the second option shall be exercisable on the same terms and at the same time as set forth in this
Option Agreement; provided, however, that (i) Section 4.1(b) shall not apply to the second option and (ii) each such
share shall become a Vested Share on the Vesting Date such share must first be allocated to the second option pursuant to the preceding
sentence. Unless the Participant specifically elects to the contrary in the Participant’s written notice of exercise, the
first option shall be deemed to be exercised first to the maximum possible extent and then the second option shall be deemed to
be exercised.

 

4.2Method of Exercise.
Exercise of the Option shall be by written notice to the Company, which must state the election to exercise the Option, the number
of whole shares of Stock for which the Option is being exercised and such other representations and agreements as to the Participant’s
investment intent with respect to such shares as may be required pursuant to the provisions of this Option Agreement. The written
notice must be signed by the Participant and must be delivered in person, by certified or registered mail, return receipt requested,
by confirmed facsimile transmission, or by such other means as the Board may permit, to the Chief Financial Officer of the Company,
or other authorized representative of the Participating Company Group, prior to the termination of the Option as set forth in Section
6, accompanied by full payment of the aggregate Exercise Price for the number of shares of Stock being purchased. The Option shall
be deemed to be exercised upon receipt by the Company of such written notice, the aggregate Exercise Price, and, if required by
the Company, such executed agreement.

 

    	 	 3	 

     

    

 

4.3Payment of
Exercise Price.

 

(a)Forms
of Consideration Authorized. Except as otherwise provided below, payment of the aggregate Exercise Price for the number
of shares of Stock for which the Option is being exercised shall be made (i) in cash, by check, or cash equivalent, (ii) by
tender to the Company, or attestation to the ownership, of whole shares of Stock owned by the Participant having a Fair Market
Value not less than the aggregate Exercise Price, (iii) by means of a Cashless Exercise, as defined in Section 4.3(b), or (iv)
by any combination of the foregoing.

 

(b)Limitations
on Forms of Consideration.

 

(i)Tender of Stock.
Notwithstanding the foregoing, the Option may not be exercised by tender to the Company, or attestation to the ownership, of shares
of Stock to the extent such tender or attestation would constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company’s stock. The Option may not be exercised by tender to the Company, or attestation
to the ownership, of shares of Stock unless such shares either have been owned by the Participant for more than six (6) months
(and not used for another option exercise by attestation during such period) or were not acquired, directly or indirectly, from
the Company.

 

(ii)Cashless Exercise.
A “Cashless Exercise” means the delivery of a properly executed notice together with irrevocable instructions
to a broker in a form acceptable to the Company providing for the assignment to the Company of the proceeds of a sale or loan with
respect to some or all of the shares of Stock acquired upon the exercise of the Option pursuant to a program or procedure approved
by the Company (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated
from time to time by the Board of Governors of the Federal Reserve System). The Company reserves, at any and all times, the right,
in the Company’s sole and absolute discretion, to decline to approve or terminate any such program or procedure.

 

4.4Tax Withholding.
At the time the Option is exercised, in whole or in part, or at any time thereafter as requested by the Company, the Participant
hereby authorizes withholding from payroll and any other amounts payable to the Participant, and otherwise agrees to make adequate
provision for (including by means of a Cashless Exercise to the extent permitted by the Company), any sums required to satisfy
the federal, state, local and foreign tax withholding obligations of the Participating Company Group, if any, which arise in connection
with the Option, including, without limitation, obligations arising upon (i) the exercise, in whole or in part, of the Option,
(ii) the transfer, in whole or in part, of any shares acquired upon exercise of the Option, (iii) the operation of any
law or regulation providing for the imputation of interest, or (iv) the lapsing of any restriction with respect to any shares
acquired upon exercise of the Option. The Option is not exercisable unless the tax withholding obligations of the Participating
Company Group are satisfied. Accordingly, the Company shall have no obligation to deliver shares of Stock until the tax withholding
obligations of the Participating Company Group have been satisfied by the Participant.

 

    	 	 4	 

     

    

 

4.5Certificate
Registration. Except in the event the Exercise Price is paid by means of a Cashless Exercise, the certificate for the
shares as to which the Option is exercised shall be registered in the name of the Participant, or, if applicable, in the names
of the heirs of the Participant.

 

4.6Restrictions
on Grant of the Option and Issuance of Shares. The grant of the Option and the issuance of shares of Stock upon exercise
of the Option shall be subject to compliance with all applicable requirements of federal, state or foreign securities laws. The
Option may not be exercised if the issuance of shares of Stock upon exercise would constitute a violation of any applicable federal,
state or foreign securities laws, or any other laws or regulations, or the requirements of any stock exchange or market system
upon which the Stock may then be listed. In addition, the Option may not be exercised unless (i) a registration statement
under the Securities Act shall at the time of exercise be in effect with respect to the shares issuable upon exercise or (ii) in
the opinion of legal counsel to the Company, the shares issuable upon exercise may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities Act. THE PARTICIPANT IS CAUTIONED THAT THE OPTION MAY
NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE PARTICIPANT MAY NOT BE ABLE TO EXERCISE THE OPTION
WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from any regulatory body having jurisdiction
the authority, if any, deemed by the Company’s legal counsel
to be necessary to lawfully issue and sell any shares subject to the Option shall relieve the Company of any liability in respect
of the failure to issue or sell such shares. As a condition to the exercise of the Option, the Company may require the Participant
to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation
and to make any representation or warranty with respect thereto as may be requested by the Company.

 

4.7No Fractional
Shares. The Participant acknowledges and agrees that the Company will not issue fractional shares upon the exercise
of the Option, and the number of Shares in the event of such an exercise shall be rounded down to the nearest whole number.

 

		5.	Nontransferability
                                         of the Option.

 

The Option may be exercised
during the lifetime of the Participant only by the Participant or the Participant’s
guardian or legal representative and may not be assigned or transferred in any manner except by will or by the laws of descent
and distribution. Following the death of the Participant, the Option, to the extent provided in Section 7, may be exercised by
the Participant’s legal representative or by any person empowered
to do so under the deceased Participant’s will or under the
then applicable laws of descent and distribution.

 

    	 	 5	 

     

    

 

		6.	Termination
                                         of the Option.

 

The Option shall terminate
and may no longer be exercised after the first to occur of (a) the Option Expiration Date, (b) the last date for exercising
the Option following termination of the Participant’s Service
as described in Section 7, or (c) a Corporate Transaction to the extent provided in Section 8.

 

		7.	Effect
                                         of Termination of Service.

 

If the Participant’s
Service terminates for any reason, including but not limited to Disability, death or Cause, the Option, to the extent unexercised
and exercisable by the Participant on the date on which the Participant’s
Service terminated, may be exercised by the Participant (or the Participant’s
guardian, legal representative or other person who acquired the right to exercise the Option by reason of the Participant’s
death) at any time prior to the Option Expiration Date. Unless otherwise defined in a contract of employment or service between
the Participant and a Participating Company, for purposes of this Option Agreement, “Cause” shall have
the meaning given such term in the Plan.

 

		8.	Corporate
                                         transaction.

 

8.1Termination
of Option to Extent Not Assumed in Corporate Transaction. Effective upon the consummation of a Corporate Transaction, the Option
shall terminate. However, the Option shall not terminate to the extent it is Assumed in connection with the Corporate Transaction.

 

8.2Acceleration
of Award Upon Corporate Transaction. In the event of a Corporate Transaction and:

 

(a)for the portion
of the Option that is Assumed or Replaced, then the Option (if Assumed), the replacement Option (if Replaced), or the cash incentive
program (if Replaced) automatically shall become fully vested, exercisable and payable and be released from any repurchase or forfeiture
rights (other than repurchase rights exercisable at Fair Market Value) for all of the shares of Stock at the time represented by
such Assumed or Replaced portion of the Option immediately upon termination of the Participant’s Service, if such Service
is terminated by the successor company or the Company without Cause or voluntarily by the Participant with Good Reason within twelve
(12) months after the Corporate Transaction; and

 

(b)for the portion
of the Option that is neither Assumed nor Replaced, such portion of the Option shall automatically become fully vested and exercisable
and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market Value) for all
of the shares of Stock at the time represented by such portion of the Option, immediately prior to the specified effective date
of such Corporate Transaction, provided however that such accelerated portion of the Option shall terminate under Section
8.1 to the extent not exercised prior to the consummation of such Corporate Transaction.

 

    	 	 6	 

     

    

  

		9.	Adjustments
                                         for Changes in Capital Structure.

 

Subject to any required
action by the stockholders of the Company, in the event of any change in the Stock effected without receipt of consideration by
the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock
dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar
change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of
the Company in a form other than Stock (excepting normal cash dividends) that has a material effect on the Fair Market Value of
shares of Stock, appropriate and proportionate adjustments shall be made in the number, Exercise Price and class of shares subject
to the Option, in order to prevent dilution or enlargement of the Participant’s rights under the Option. For purposes of
the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt
of consideration by the Company.” Any fractional share resulting from an adjustment pursuant to this Section 9 shall
be rounded down to the nearest whole number, and in no event may the Exercise Price of the Option be decreased to an amount less
than the par value, if any, of the stock subject to the Option. Such adjustments shall be determined by the Board, and its determination
shall be final, binding and conclusive.

 

		10.	Rights
                                         as a Stockholder, Employee or Consultant.

 

The Participant shall
have no rights as a stockholder with respect to any shares covered by the Option until the date of the issuance of a certificate
for the shares for which the Option has been exercised (as evidenced by the appropriate entry on the books of the Company or of
a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for
which the record date is prior to the date such certificate is issued, except as provided in Section 9. If the Participant is an
Employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement
between a Participating Company and the Participant, the Participant’s
employment is “at will” and is for no specified term. Nothing in this Option Agreement shall confer upon the Participant
any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company
Group to terminate the Participant’s Service as an Employee
or Consultant, as the case may be, at any time. Nothing in this Option shall confer on any person any legal or equitable right
against the Company, directly or indirectly, or give rise to any cause of action at law or in equity against any Participating
Company. The Option granted hereunder shall not form any part of the wages or salary of Participant for purposes of severance pay
or termination indemnities, irrespective of the reason for termination of employment. Under no circumstances shall any person ceasing
to be an employee of any Participating Company be entitled to any compensation for any loss of any right or benefit under this
Option or the Plan which such employee might otherwise have enjoyed but for termination of employment, whether such compensation
is claimed by way of damages for wrongful or unfair dismissal, breach of contract or otherwise.

 

		11.	Notice
                                         of Sales Upon Disqualifying Disposition.

 

The Participant shall
dispose of the shares acquired pursuant to the Option only in accordance with the provisions of this Option Agreement. In addition,
if the Notice designates this Option as an Incentive Stock Option, the Participant shall (a) promptly notify the Chief Financial
Officer of the Company if the Participant disposes of any of the shares acquired pursuant to the Option within one (1) year after
the date the Participant exercises all or part of the Option or within two (2) years after the Date of Option Grant and (b) provide
the Company with a description of the circumstances of such disposition. Until such time as the Participant disposes of such shares
in a manner consistent with the provisions of this Option Agreement, unless otherwise expressly authorized by the Company, the
Participant shall hold all shares acquired pursuant to the Option in the Participant’s
name (and not in the name of any nominee) for the one-year period immediately after the exercise of the Option and the two-year
period immediately after Date of Option Grant. At any time during the one-year or two-year periods set forth above, the Company
may place a legend on any certificate representing shares acquired pursuant to the Option requesting the transfer agent for the
Company’s stock to notify the Company of any such transfers.
The obligation of the Participant to notify the Company of any such transfer shall continue notwithstanding that a legend has been
placed on the certificate pursuant to the preceding sentence.

 

    	 	 7	 

     

    

 

		12.	Legends.

 

The Company may at
any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates representing
shares of Stock subject to the provisions of this Option Agreement. The Participant shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired pursuant to the Option in the possession of the Participant
in order to carry out the provisions of this Section. Unless otherwise specified by the Company, legends placed on such certificates
shall include, but shall not be limited to, the following:

 

12.1“THE SECURITIES
EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE
IS MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT.”

 

12.2“THE SHARES
EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION
AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (“ISO”). IN ORDER TO OBTAIN
THE PREFERENTIAL TAX TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO [INSERT DISQUALIFYING DISPOSITION
DATE HERE]. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT,
THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED
UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER’S
NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE.”

 

    	 	 8	 

     

    

 

		13.	Restrictions
                                         on Transfer of Shares.

 

No shares of Stock
acquired upon exercise of the Option may be sold, exchanged, transferred (including, without limitation, any transfer to a nominee
or agent of the Participant), assigned, pledged, hypothecated or otherwise disposed of, including by operation of law, in any manner
which violates any of the provisions of this Option Agreement and any such attempted disposition shall be void. The Company shall
not be required (a) to transfer on its books any shares that have been transferred in violation of any of the provisions set
forth in this Option Agreement or (b) to treat as owner of such shares, accord the right to vote as such owner or pay dividends
to any transferee to whom such shares have been so transferred.

 

		14.	Miscellaneous
                                         Provisions.

 

14.1Binding Effect.
Subject to the restrictions on transfer set forth herein, this Option Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators, successors and assigns.

 

14.2Termination
or Amendment. The Board may terminate or amend the Plan or the Option at any time; provided, however, that except as provided
in Section 8.1 in connection with a Corporate Transaction, no such termination or amendment may adversely affect the Option or
any unexercised portion hereof without the consent of the Participant, unless such termination or amendment is necessary to comply
with any applicable law or government regulation or is required to enable the Option, if designated an Incentive Stock Option in
the Notice, to qualify as an Incentive Stock Option. No amendment or addition to this Option Agreement shall be effective unless
in writing.

 

14.3Notices.
Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent
that this Option Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery or upon deposit
in the United States Post Office, by registered or certified mail, with postage and fees prepaid, addressed to the other party
at the address shown below that party’s signature or at such
other address as such party may designate in writing from time to time to the other party.

 

14.4Employment
Agreement. The terms and provisions of the employment agreement, if any, between Participant and any Participating Company
(the “Employment Agreement”) that relate to or affect this Option are incorporated herein by reference.
Notwithstanding the provisions of this Option, in the event of any conflict or inconsistency between the terms and conditions of
this Option and the terms and conditions of the Employment Agreement, the terms and conditions of the Employment Agreement shall
be controlling.

 

    	 	 9	 

     

    

 

14.5Integrated
Agreement. The Notice, this Option Agreement and the Plan, together with any employment, service or other agreement with the
Participant and a Participating Company referring to the Option, will constitute the entire understanding and agreement of the
Participant and the Participating Company Group with respect to the subject matter contained herein or therein and supersedes any
prior agreements, understandings, restrictions, representations, or warranties among the Participant and the Participating Company
Group with respect to such subject matter other than those as set forth or provided for herein or therein. To the extent contemplated
herein or therein, the provisions of the Notice and the Option Agreement shall survive any exercise of the Option and shall remain
in full force and effect.

 

14.6Applicable
Law. This Option Agreement shall be governed by the laws of the State of Minnesota as such laws are applied to agreements between
Minnesota residents entered into and to be performed entirely within the State of Minnesota.

 

14.7Counterparts.
The Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

 

14.8Consultation
with Professional Tax and Investment Advisors. The holder of this Option acknowledges that the grant, exercise, vesting or
any payment with respect to this Option, and the sale or other taxable disposition of the shares of Stock acquired pursuant to
the exercise thereof, may have tax consequences pursuant to the Code or under local, state or international tax laws. The holder
further acknowledges that such holder is relying solely and exclusively on the holder's own professional tax and investment advisors
with respect to any and all such matters (and is not relying, in any manner, on any Participating Company or any of its employees
or representatives). Finally, the holder understands and agrees that any and all tax consequences resulting from the Option and
its grant, exercise, vesting or any payment with respect thereto, and the sale or other taxable disposition of the shares of Stock
acquired pursuant to the Plan, is solely and exclusively the responsibility of the holder without any expectation or understanding
that any Participating Company or any of its employees or representatives will pay or reimburse such holder for such taxes or other
items.

 

    	 	 10	 

     

    

 

	 ̈	Incentive Stock Option	 	Participant: 	 	 
	 ̈	Nonstatutory Stock Option	 	 	 	 
	 	 	 	Date: 	 	 

 

 

STOCK OPTION EXERCISE NOTICE

 

IsoRay, Inc.

Attention: Chief Financial Officer

________________________

________________________

 

 

Ladies and Gentlemen:

 

1.Option. I was granted
an option (the “Option”) to purchase shares of the common stock (the “Shares”)
of IsoRay, Inc. (the “Company”) pursuant to the Company’s
2014 Employee Stock Option Plan (the “Plan”), my Notice of Grant of Stock Option (the “Notice”)
and my Stock Option Agreement (the “Option Agreement”) as follows:

 

	Date of Option Grant:	 	 	 
	 	 	 	 
	Number of Option Shares:	 	 	 
	 	 	 	 
	Exercise Price per Share:	 	$	 

 

 

2.Exercise of Option.
I hereby elect to exercise the Option to purchase the following number of Shares, all of which are Vested Shares, in accordance
with the Notice and the Option Agreement:

 

	Shares Purchased:	 	 	 
	 	 	 	 
	Exercise Price (Shares  X  Price per Share)		$ 	 

 

3.Payments. I enclose
payment in full of the total exercise price for the Shares in the following form(s), as authorized by my Option Agreement:

 

 

	 ̈	 Cash:	$ 	 
	 	 	 	 
	 ̈	Check:$ 	$ 	 
	 	 	 	 
	 ̈	Tender of Company Stock:	Contact Company	 
	 	 	 	 
	 ̈	Cashless Exercise:	Contact Company	 

 

    	 	 1	 

     

    

 

4.Tax Withholding.
I authorize payroll withholding and otherwise will make adequate provision for the federal, state, local and foreign tax withholding
obligations of the Company, if any, in connection with the Option. If I am exercising a Nonstatutory Stock Option, I enclose payment
in full of my withholding taxes, if any, as follows: 

 

(Contact Company for amount of tax due.)

 

 

	 ̈
	Cash:	$ 	 
	 	 	 	 
	 ̈	Check:	$ 	 

 

I understand that ownership of
the Shares will not be transferred to me until the total Exercise Price and all applicable withholding taxes have been paid.

 

5.Participant Information.

 

	My address is:	 	 
	 	 	 
	 	 	 
	 	 	 
	My Social Security Number is:	 	 

 

6.Notice of Disqualifying
Disposition. If the Option is an Incentive Stock Option, I agree that I will promptly notify the Chief Financial Officer
of the Company if I transfer any of the Shares within one (1) year from the date I exercise all or part of the Option or within
two (2) years of the Date of Option Grant.

 

7.Tax Consequences.
I understand that there may be adverse federal or state tax consequences as a result of my purchase or disposition of the Shares.
I also acknowledge that I have been advised to consult with a tax advisor in connection with the purchase of disposition of the
Shares. I am not relying on the Company for tax advice.

 

8.Binding Effect.
I agree that the Shares are being acquired in accordance with and subject to the terms, provisions and conditions of the Option
Agreement, to all of which I hereby expressly assent. This Agreement shall inure to the benefit of and be binding upon my heirs,
executors, administrators, successors and assigns.

 

I understand that I
am purchasing the Shares pursuant to the terms of the Plan, the Notice and my Option Agreement, copies of which I have received
and carefully read and understand.

 

	 	 	 	Very truly yours,	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 		
	 	 	 	(Signature)	 
	 	 	 	 	 
	Receipt of the above is hereby acknowledged.	 	 	 
	 	 	 	 	 
	ISORAY, INC.	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	By:  	 	 	 	 
	 	 	 	 	 
	Title:  	 	 	 	 
	 	 	 	 	 
	Dated:  	 	 	 	 

 

    	 	 2

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