Document:

Exhibit 4.12

                    INTELLECTUAL PROPERTY SECURITY AGREEMENT

      INTELLECTUAL PROPERTY SECURITY AGREEMENT (this "Agreement" dated as of
August 10, 2005, by and among Cape Systems Group, Inc., a New Jersey corporation
(the "Company"), and the secured parties signatory hereto and their respective
endorsees, transferees and assigns (collectively, the "Secured Party").

                              W I T N E S S E T H :

      WHEREAS, pursuant to a Securities Purchase Agreement, dated the date
hereof, between Company and the Secured Party (the "Purchase Agreement"),
Company has agreed to issue to the Secured Party and the Secured Party has
agreed to purchase from Company certain of Company's 10% Secured Convertible
Notes, due three years from the date of issue (the "Notes"), which are
convertible into shares of Company's Common Stock, par value $.005 per share
(the "Common Stock"). In connection therewith, Company shall issue the Secured
Party certain Common Stock purchase warrants (the "Warrants"); and

      WHEREAS, in order to induce the Secured Party to purchase the Notes,
Company has agreed to execute and deliver to the Secured Party this Agreement
for the benefit of the Secured Party and to grant to it a first priority
security interest in certain Intellectual Property (defined below) of Company to
secure the prompt payment, performance and discharge in full of all of Company's
obligations under the Notes and exercise and discharge in full of Company's
obligations under the Warrants; and

      NOW, THEREFORE, in consideration of the agreements herein contained and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:

            1. Defined Terms. Unless otherwise defined herein, terms which are
defined in the Purchase Agreement and used herein are so used as so defined; and
the following terms shall have the following meanings:

            "Software Intellectual Property" shall mean:

                  (a) all software programs (including all source code, object
code and all related applications and data files), whether now owned, upgraded,
enhanced, licensed or leased or hereafter acquired by the Company, above;

                  (b) all computers and electronic data processing hardware and
firmware associated therewith;

                  (c) all documentation (including flow charts, logic diagrams,
manuals, guides and specifications) with respect to such software, hardware and
firmware described in the preceding clauses (a) and (b); and

                  (d) all rights with respect to all of the foregoing,
including, without limitation, any and all upgrades, modifications, copyrights,
licenses, options, warranties, service contracts, program services, test rights,
maintenance rights, support rights, improvement rights, renewal rights and
indemnifications and substitutions, replacements, additions, or model
conversions of any of the foregoing.

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                  "Copyrights" shall mean (a) all copyrights, registrations and
applications for registration, issued or filed, including any reissues,
extensions or renewals thereof, by or with the United States Copyright Office or
any similar office or agency of the United States, any state thereof, or any
other country or political subdivision thereof, or otherwise, including, all
rights in and to the material constituting the subject matter thereof,
including, without limitation, any referred to in Schedule B hereto, and (b) any
rights in any material which is copyrightable or which is protected by common
law, United States copyright laws or similar laws or any law of any State,
including, without limitation, any thereof referred to in Schedule B hereto.

                  "Copyright License" shall mean any agreement, written or oral,
providing for a grant by the Company of any right in any Copyright, including,
without limitation, any thereof referred to in Schedule B hereto.

                  "Intellectual Property" shall means, collectively, the
Software Intellectual Property, Copyrights, Copyright Licenses, Patents, Patent
Licenses, Trademarks, Trademark Licenses and Trade Secrets.

                  "Obligations" means all of the Company's obligations under
this Agreement and the Notes, in each case, whether now or hereafter existing,
voluntary or involuntary, direct or indirect, absolute or contingent, liquidated
or unliquidated, whether or not jointly owed with others, and whether or not
from time to time decreased or extinguished and later decreased, created or
incurred, and all or any portion of such obligations or liabilities that are
paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from the Secured Party as a preference, fraudulent
transfer or otherwise as such obligations may be amended, supplemented,
converted, extended or modified from time to time.

                  "Patents" shall mean (a) all letters patent of the United
States or any other country or any political subdivision thereof, and all
reissues and extensions thereof, including, without limitation, any thereof
referred to in Schedule B hereto, and (b) all applications for letters patent of
the United States and all divisions, continuations and continuations-in-part
thereof or any other country or any political subdivision, including, without
limitation, any thereof referred to in Schedule B hereto.

                  "Patent License" shall mean all agreements, whether written or
oral, providing for the grant by the Company of any right to manufacture, use or
sell any invention covered by a Patent, including, without limitation, any
thereof referred to in Schedule B hereto.

                  "Security Agreement" shall mean the a Security Agreement,
dated the date hereof between Company and the Secured Party.

                  "Trademarks" shall mean (a) all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, service marks, logos and other source or business identifiers, and the
goodwill associated therewith, now existing or hereafter adopted or acquired,
all registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any state thereof or any other
country or any political subdivision thereof, or otherwise, including, without
limitation, any thereof referred to in Schedule B hereto, and (b) all reissues,
extensions or renewals thereof.

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                  "Trademark License" shall mean any agreement, written or oral,
providing for the grant by the Company of any right to use any Trademark,
including, without limitation, any thereof referred to in Schedule B hereto.

                  "Trade Secrets" shall mean common law and statutory trade
secrets and all other confidential or proprietary or useful information and all
know-how obtained by or used in or contemplated at any time for use in the
business of the Company (all of the foregoing being collectively called a "Trade
Secret"), whether or not such Trade Secret has been reduced to a writing or
other tangible form, including all documents and things embodying, incorporating
or referring in any way to such Trade Secret, all Trade Secret licenses,
including each Trade Secret license referred to in Schedule B hereto, and
including the right to sue for and to enjoin and to collect damages for the
actual or threatened misappropriation of any Trade Secret and for the breach or
enforcement of any such Trade Secret license.

            2. Grant of Security Interest. In accordance with Section 3(m) of
the Security Agreement, to secure the complete and timely payment, performance
and discharge in full, as the case may be, of all of the Obligations, the
Company hereby, unconditionally and irrevocably, pledges, grants and
hypothecates to the Secured Party, a continuing security interest in, a
continuing first lien upon, an unqualified right to possession and disposition
of and a right of set-off against, in each case to the fullest extent permitted
by law, all of the Company's right, title and interest of whatsoever kind and
nature in and to the Intellectual Property (the "Security Interest").

            3. Representations and Warranties. The Company hereby represents and
warrants, and covenants and agrees with, the Secured Party as follows:

                  (a) The Company has the requisite corporate power and
authority to enter into this Agreement and otherwise to carry out its
obligations thereunder. The execution, delivery and performance by the Company
of this Agreement and the filings contemplated therein have been duly authorized
by all necessary action on the part of the Company and no further action is
required by the Company. This Agreement constitutes a legal, valid and binding
obligation of the Company enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditor's rights
generally.

                  (b) The Company represents and warrants that it has no place
of business or offices where its respective books of account and records are
kept (other than temporarily at the offices of its attorneys or accountants) or
places where the Intellectual Property is stored or located, except as set forth
on Schedule A attached hereto;

                  (c) The Company is the sole owner of the Intellectual Property
(except for non-exclusive licenses granted by the Company in the ordinary course
of business), free and clear of any liens, security interests, encumbrances,
rights or claims, and is fully authorized to grant the Security Interest in and
to pledge the Intellectual Property. There is not on file in any governmental or
regulatory authority, agency or recording office an effective financing
statement, security agreement, license or transfer or any notice of any of the
foregoing (other than those that have been filed in favor of the Secured Party
pursuant to this Agreement) covering or affecting any of the Intellectual
Property. So long as this Agreement shall be in effect, the Company shall not
execute and shall not knowingly permit to be on file in any such office or
agency any such financing statement or other document or instrument (except to
the extent filed or recorded in favor of the Secured Party pursuant to the terms
of this Agreement), except for a financing statement covering assets acquired by
the Company after the date hereof, provided that the value of the Intellectual
Property covered by this Agreement along with the Collateral (as defined in the
Security Agreement) is equal to at least 150% of the Obligations.

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                  (d) The Company shall at all times maintain its books of
account and records relating to the Intellectual Property at its principal place
of business and its Intellectual Property at the locations set forth on Schedule
A attached hereto and may not relocate such books of account and records unless
it delivers to the Secured Party at least 30 days prior to such relocation (i)
written notice of such relocation and the new location thereof (which must be
within the United States) and (ii) evidence that the necessary documents have
been filed and recorded and other steps have been taken to perfect the Security
Interest to create in favor of the Secured Party valid, perfected and continuing
first priority liens in the Intellectual Property to the extent they can be
perfected through such filings.

                  (e) This Agreement creates in favor of the Secured Party a
valid security interest in the Intellectual Property securing the payment and
performance of the Obligations and, upon making the filings required hereunder,
a perfected first priority security interest in such Intellectual Property to
the extent that it can be perfected through such filings.

                  (f) Upon request of the Secured Party, the Company shall
execute and deliver any and all agreements, instruments, documents, and papers
as the Secured Party may request to evidence the Secured Party's security
interest in the Intellectual Property and the goodwill and general intangibles
of the Company relating thereto or represented thereby, and the Company hereby
appoints the Secured Party its attorney-in-fact to execute and file all such
writings for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed; such power being coupled with an interest is irrevocable
until the Obligations have been fully satisfied and are paid in full.

                  (g) The execution, delivery and performance of this Agreement
does not conflict with or cause a breach or default, or an event that with or
without the passage of time or notice, shall constitute a breach or default,
under any agreement to which the Company is a party or by which the Company is
bound. No consent (including, without limitation, from stock holders or
creditors of the Company) is required for the Company to enter into and perform
its obligations hereunder.

                  (h) The Company shall at all times maintain the liens and
Security Interest provided for hereunder as valid and perfected first priority
liens and security interests in the Intellectual Property to the extent they can
be perfected by filing in favor of the Secured Party until this Agreement and
the Security Interest hereunder shall terminate pursuant to Section 11. The
Company hereby agrees to defend the same against any and all persons. The
Company shall safeguard and protect all Intellectual Property for the account of
the Secured Party. Without limiting the generality of the foregoing, the Company
shall pay all fees, taxes and other amounts necessary to maintain the
Intellectual Property and the Security Interest hereunder, and the Company shall
obtain and furnish to the Secured Party from time to time, upon demand, such
releases and/or subordinations of claims and liens which may be required to
maintain the priority of the Security Interest hereunder.

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                  (i) The Company will not transfer, pledge, hypothecate,
encumber, license (except for non-exclusive licenses granted by the Company in
the ordinary course of business), sell or otherwise dispose of any of the
Intellectual Property without the prior written consent of the Secured Party.

                  (j) The Company shall, within ten (10) days of obtaining
knowledge thereof, advise the Secured Party promptly, in sufficient detail, of
any substantial change in the Intellectual Property, and of the occurrence of
any event which would have a material adverse effect on the value of the
Intellectual Property or on the Secured Party's security interest therein.

                  (k) The Company shall permit the Secured Party and its
representatives and agents to inspect the Intellectual Property at any time, and
to make copies of records pertaining to the Intellectual Property as may be
requested by the Secured Party from time to time.

                  (l) The Company will take all steps reasonably necessary to
diligently pursue and seek to preserve, enforce and collect any rights, claims,
causes of action and accounts receivable in respect of the Intellectual
Property.

                  (m) The Company shall promptly notify the Secured Party in
sufficient detail upon becoming aware of any attachment, garnishment, execution
or other legal process levied against any Intellectual Property and of any other
information received by the Company that may materially affect the value of the
Intellectual Property, the Security Interest or the rights and remedies of the
Secured Party hereunder.

                  (n) All information heretofore, herein or hereafter supplied
to the Secured Party by or on behalf of the Company with respect to the
Intellectual Property is accurate and complete in all material respects as of
the date furnished.

                  (o) Schedule A attached hereto contains a list of all of the
subsidiaries of Company.

                  (p) Schedule B attached hereto includes all Licenses, and all
Patents and Patent Licenses, if any, owned by the Company in its own name as of
the date hereof. Schedule B hereto includes all Trademarks and Trademark
Licenses, if any, owned by the Company in its own name as of the date hereof.
Schedule B hereto includes all Copyrights and Copyright Licenses, if any, owned
by the Company in its own name as of the date hereof. Schedule B hereto includes
all Trade Secrets and Trade Secret Licenses, if any, owned by the Company as of
the date hereof. To the best of the Company's knowledge, each License, Patent,
Trademark, Copyright and Trade Secret is valid, subsisting, unexpired,
enforceable and has not been abandoned. Except as set forth in Schedule B, none
of such Licenses, Patents, Trademarks, Copyrights and Trade Secrets is the
subject of any licensing or franchise agreement. To the best of the Company's
knowledge, no holding, decision or judgment has been rendered by any
Governmental Body which would limit, cancel or question the validity of any
License, Patent, Trademark, Copyright and Trade Secrets . No action or
proceeding is pending (i) seeking to limit, cancel or question the validity of
any License, Patent, Trademark, Copyright or Trade Secret, or (ii) which, if
adversely determined, would have a material adverse effect on the value of any
License, Patent, Trademark, Copyright or Trade Secret. The Company has used and
will continue to use for the duration of this Agreement, proper statutory notice
in connection with its use of the Patents, Trademarks and Copyrights and
consistent standards of quality in products leased or sold under the Patents,
Trademarks and Copyrights.

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                  (q) With respect to any Intellectual Property:

                        (i) such Intellectual Property is subsisting and has not
                  been adjudged invalid or unenforceable, in whole or in part;

                        (ii) such Intellectual Property is valid and
                  enforceable;

                        (iii) the Company has made all necessary filings and
                  recordations to protect its interest in such Intellectual
                  Property, including, without limitation, recordations of all
                  of its interests in the Patents, Patent Licenses, Trademarks
                  and Trademark Licenses in the United States Patent and
                  Trademark Office and in corresponding offices throughout the
                  world and its claims to the Copyrights and Copyright Licenses
                  in the United States Copyright Office and in corresponding
                  offices throughout the world;

                        (iv) other than as set forth in Schedule B, the Company
                  is the exclusive owner of the entire and unencumbered right,
                  title and interest in and to such Intellectual Property and no
                  claim has been made that the use of such Intellectual Property
                  infringes on the asserted rights of any third party; and

                        (v) the Company has performed and will continue to
                  perform all acts and has paid all required fees and taxes to
                  maintain each and every item of Intellectual Property in full
                  force and effect throughout the world, as applicable.

                  (r) Except with respect to any Trademark or Copyright that the
Company shall reasonably determine is of negligible economic value to the
Company, the Company shall:

                        (i) maintain each Trademark and Copyright in full force
                  free from any claim of abandonment for non-use, maintain as in
                  the past the quality of products and services offered under
                  such Trademark or Copyright; employ such Trademark or
                  Copyright with the appropriate notice of registration; not
                  adopt or use any mark which is confusingly similar or a
                  colorable imitation of such Trademark or Copyright unless the
                  Secured Party shall obtain a perfected security interest in
                  such mark pursuant to this Agreement; and not (and not permit
                  any licensee or sublicensee thereof to) do any act or
                  knowingly omit to do any act whereby any Trademark or
                  Copyright may become invalidated;

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                        (ii) not, except with respect to any Patent that it
                  shall reasonably determine is of negligible economic value to
                  it, do any act, or omit to do any act, whereby any Patent may
                  become abandoned or dedicated; and

                        (iii) notify the Secured Party immediately if it knows,
                  or has reason to know, that any application or registration
                  relating to any Patent, Trademark or Copyright may become
                  abandoned or dedicated, or of any adverse determination or
                  development (including, without limitation, the institution
                  of, or any such determination or development in, any
                  proceeding in the United States Patent and Trademark Office,
                  United States Copyright Office or any court or tribunal in any
                  country) regarding its ownership of any Patent, Trademark or
                  Copyright or its right to register the same or to keep and
                  maintain the same.

                  (s) Whenever the Company, either by itself or through any
agent, employee, licensee or designee, shall file an application for the
registration of any Patent, Trademark or Copyright with the United States Patent
and Trademark Office, United States Copyright Office or any similar office or
agency in any other country or any political subdivision thereof or acquire
rights to any new Patent, Trademark or Copyright whether or not registered,
report such filing to the Secured Party within five business days after the last
day of the fiscal quarter in which such filing occurs.

                  (t) The Company shall take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, United States Copyright Office or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the Patents, Trademarks and Copyrights, including,
without limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.

                  (u) In the event that any Patent, Trademark or Copyright
included in the Intellectual Property is infringed, misappropriated or diluted
by a third party, promptly notify the Secured Party after it learns thereof and
shall, unless it shall reasonably determine that such Patent, Trademark or
Copyright is of negligible economic value to it, which determination it shall
promptly report to the Secured Party, promptly sue for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and to
recover any and all damages for such infringement, misappropriation or dilution,
or take such other actions as it shall reasonably deem appropriate under the
circumstances to protect such Patent, Trademark or Copyright. If the Company
lacks the financial resources to comply with this Section 3(t), the Company
shall so notify the Secured Party and shall cooperate fully with any enforcement
action undertaken by the Secured Party on behalf of the Company.

            4. Defaults. The following events shall be "Events of Default":

                  (a) The occurrence of an Event of Default (as defined in the
Notes) under the Notes;

                  (b) Any representation or warranty of the Company in this
Agreement or in the Security Agreement shall prove to have been incorrect in any
material respect when made;

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                  (c) The failure by the Company to observe or perform any of
its obligations hereunder or in the Security Agreement for ten (10) days after
receipt by the Company of notice of such failure from the Secured Party; and

                  (d) Any breach of, or default under, the Warrants.

            5. Duty To Hold In Trust. Upon the occurrence of any Event of
Default and at any time thereafter, the Company shall, upon receipt by it of any
revenue, income or other sums subject to the Security Interest, whether payable
pursuant to the Notes or otherwise, or of any check, draft, note, trade
acceptance or other instrument evidencing an obligation to pay any such sum,
hold the same in trust for the Secured Party and shall forthwith endorse and
transfer any such sums or instruments, or both, to the Secured Party for
application to the satisfaction of the Obligations.

            6. Rights and Remedies Upon Default. Upon occurrence of any Event of
Default and at any time thereafter, the Secured Party shall have the right to
exercise all of the remedies conferred hereunder and under the Notes, and the
Secured Party shall have all the rights and remedies of a secured party under
the UCC and/or any other applicable law (including the Uniform Commercial Code
of any jurisdiction in which any Intellectual Property is then located). Without
limitation, the Secured Party shall have the following rights and powers:

                  (a) The Secured Party shall have the right to take possession
of the Intellectual Property and, for that purpose, enter, with the aid and
assistance of any person, any premises where the Intellectual Property, or any
part thereof, is or may be placed and remove the same, and the Company shall
assemble the Intellectual Property and make it available to the Secured Party at
places which the Secured Party shall reasonably select, whether at the Company's
premises or elsewhere, and make available to the Secured Party, without rent,
all of the Company's respective premises and facilities for the purpose of the
Secured Party taking possession of, removing or putting the Intellectual
Property in saleable or disposable form.

                  (b) The Secured Party shall have the right to operate the
business of the Company using the Intellectual Property and shall have the right
to assign, sell, lease or otherwise dispose of and deliver all or any part of
the Intellectual Property, at public or private sale or otherwise, either with
or without special conditions or stipulations, for cash or on credit or for
future delivery, in such parcel or parcels and at such time or times and at such
place or places, and upon such terms and conditions as the Secured Party may
deem commercially reasonable, all without (except as shall be required by
applicable statute and cannot be waived) advertisement or demand upon or notice
to the Company or right of redemption of the Company, which are hereby expressly
waived. Upon each such sale, lease, assignment or other transfer of Intellectual
Property, the Secured Party may, unless prohibited by applicable law which
cannot be waived, purchase all or any part of the Intellectual Property being
sold, free from and discharged of all trusts, claims, right of redemption and
equities of the Company, which are hereby waived and released.

            7. Applications of Proceeds. The proceeds of any such sale, lease or
other disposition of the Intellectual Property hereunder shall be applied first,
to the expenses of retaking, holding, storing, processing and preparing for
sale, selling, and the like (including, without limitation, any taxes, fees and
other costs incurred in connection therewith) of the Intellectual Property, to
the reasonable attorneys' fees and expenses incurred by the Secured Party in
enforcing its rights hereunder and in connection with collecting, storing and
disposing of the Intellectual Property, and then to satisfaction of the
Obligations, and to the payment of any other amounts required by applicable law,
after which the Secured Party shall pay to the Company any surplus proceeds. If,
upon the sale, license or other disposition of the Intellectual Property, the
proceeds thereof are insufficient to pay all amounts to which the Secured Party
is legally entitled, the Company will be liable for the deficiency, together
with interest thereon, at the rate of 15% per annum (the "Default Rate"), and
the reasonable fees of any attorneys employed by the Secured Party to collect
such deficiency. To the extent permitted by applicable law, the Company waives
all claims, damages and demands against the Secured Party arising out of the
repossession, removal, retention or sale of the Intellectual Property, unless
due to the gross negligence or willful misconduct of the Secured Party.

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            8. Costs and Expenses. The Company agrees to pay all out-of-pocket
fees, costs and expenses incurred in connection with any filing required
hereunder, including without limitation, any financing statements, continuation
statements, partial releases and/or termination statements related thereto or
any expenses of any searches reasonably required by the Secured Party. The
Company shall also pay all other claims and charges which in the reasonable
opinion of the Secured Party might prejudice, imperil or otherwise affect the
Intellectual Property or the Security Interest therein. The Company will also,
upon demand, pay to the Secured Party the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its counsel and of any
experts and agents, which the Secured Party may incur in connection with (i) the
enforcement of this Agreement, (ii) the custody or preservation of, or the sale
of, collection from, or other realization upon, any of the Intellectual
Property, or (iii) the exercise or enforcement of any of the rights of the
Secured Party under the Notes. Until so paid, any fees payable hereunder shall
be added to the principal amount of the Notes and shall bear interest at the
Default Rate.

            9. Responsibility for Intellectual Property. The Company assumes all
liabilities and responsibility in connection with all Intellectual Property, and
the obligations of the Company hereunder or under the Notes and the Warrants
shall in no way be affected or diminished by reason of the loss, destruction,
damage or theft of any of the Intellectual Property or its unavailability for
any reason.

            10. Security Interest Absolute. All rights of the Secured Party and
all Obligations of the Company hereunder, shall be absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this Agreement,
the Notes, the Warrants or any agreement entered into in connection with the
foregoing, or any portion hereof or thereof; (b) any change in the time, manner
or place of payment or performance of, or in any other term of, all or any of
the Obligations, or any other amendment or waiver of or any consent to any
departure from the Notes, the Warrants or any other agreement entered into in
connection with the foregoing; (c) any exchange, release or nonperfection of any
of the Intellectual Property, or any release or amendment or waiver of or
consent to departure from any other Intellectual Property for, or any guaranty,
or any other security, for all or any of the Obligations; (d) any action by the
Secured Party to obtain, adjust, settle and cancel in its sole discretion any
insurance claims or matters made or arising in connection with the Intellectual
Property; or (e) any other circumstance which might otherwise constitute any
legal or equitable defense available to the Company, or a discharge of all or
any part of the Security Interest granted hereby. Until the Obligations shall
have been paid and performed in full, the rights of the Secured Party shall
continue even if the Obligations are barred for any reason, including, without
limitation, the running of the statute of limitations or bankruptcy. The Company
expressly waives presentment, protest, notice of protest, demand, notice of
nonpayment and demand for performance. In the event that at any time any
transfer of any Intellectual Property or any payment received by the Secured
Party hereunder shall be deemed by final order of a court of competent
jurisdiction to have been a voidable preference or fraudulent conveyance under
the bankruptcy or insolvency laws of the United States, or shall be deemed to be
otherwise due to any party other than the Secured Party, then, in any such
event, the Company's obligations hereunder shall survive cancellation of this
Agreement, and shall not be discharged or satisfied by any prior payment thereof
and/or cancellation of this Agreement, but shall remain a valid and binding
obligation enforceable in accordance with the terms and provisions hereof. The
Company waives all right to require the Secured Party to proceed against any
other person or to apply any Intellectual Property which the Secured Party may
hold at any time, or to marshal assets, or to pursue any other remedy. The
Company waives any defense arising by reason of the application of the statute
of limitations to any obligation secured hereby.

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            11. Term of Agreement. This Agreement and the Security Interest
shall terminate on the date on which all payments under the Notes have been made
in full and all other Obligations have been paid or discharged. Upon such
termination, the Secured Party, at the request and at the expense of the
Company, will join in executing any termination statement with respect to any
financing statement executed and filed pursuant to this Agreement. 12. Power of
Attorney; Further Assurances.

                  (a) The Company authorizes the Secured Party, and does hereby
make, constitute and appoint it, and its respective officers, agents, successors
or assigns with full power of substitution, as the Company's true and lawful
attorney-in-fact, with power, in its own name or in the name of the Company, to,
after the occurrence and during the continuance of an Event of Default, (i)
endorse any notes, checks, drafts, money orders, or other instruments of payment
(including payments payable under or in respect of any policy of insurance) in
respect of the Intellectual Property that may come into possession of the
Secured Party; (ii) to sign and endorse any UCC financing statement or any
invoice, freight or express bill, bill of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications and notices in connection
with accounts, and other documents relating to the Intellectual Property; (iii)
to pay or discharge taxes, liens, security interests or other encumbrances at
any time levied or placed on or threatened against the Intellectual Property;
(iv) to demand, collect, receipt for, compromise, settle and sue for monies due
in respect of the Intellectual Property; and (v) generally, to do, at the option
of the Secured Party, and at the Company's expense, at any time, or from time to
time, all acts and things which the Secured Party deems necessary to protect,
preserve and realize upon the Intellectual Property and the Security Interest
granted therein in order to effect the intent of this Agreement, the Notes and
the Warrants, all as fully and effectually as the Company might or could do; and
the Company hereby ratifies all that said attorney shall lawfully do or cause to
be done by virtue hereof. This power of attorney is coupled with an interest and
shall be irrevocable for the term of this Agreement and thereafter as long as
any of the Obligations shall be outstanding.

                  (b) On a continuing basis, the Company will make, execute,
acknowledge, deliver, file and record, as the case may be, in the proper filing
and recording places in any jurisdiction, including, without limitation, the
jurisdictions indicated on Schedule C, attached hereto, all such instruments,
and take all such action as may reasonably be deemed necessary or advisable, or
as reasonably requested by the Secured Party, to perfect the Security Interest
granted hereunder and otherwise to carry out the intent and purposes of this
Agreement, or for assuring and confirming to the Secured Party the grant or
perfection of a security interest in all the Intellectual Property.

                                       10
<PAGE>

                  (c) The Company hereby irrevocably appoints the Secured Party
as the Company's attorney-in-fact, with full authority in the place and stead of
the Company and in the name of the Company, from time to time in the Secured
Party's discretion, to take any action and to execute any instrument which the
Secured Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including the filing, in its sole discretion, of one or more
financing or continuation statements and amendments thereto, relative to any of
the Intellectual Property without the signature of the Company where permitted
by law.

            13. Notices. All notices, requests, demands and other communications
hereunder shall be in writing, with copies to all the other parties hereto, and
shall be deemed to have been duly given when (i) if delivered by hand, upon
receipt, (ii) if sent by facsimile, upon receipt of proof of sending thereof,
(iii) if sent by nationally recognized overnight delivery service (receipt
requested), the next business day or (iv) if mailed by first-class registered or
certified mail, return receipt requested, postage prepaid, four days after
posting in the U.S. mails, in each case if delivered to the following addresses:

If to the Company:                   Cape Systems Group, Inc.
                                     3619 Kennedy Road
                                     South Plainfield, NJ  07080
                                     Attention:  Chief Executive Officer
                                     Telephone:  (908) 756-2000
                                     Facsimile:   (908)  756-2332

With a copy to:                      Sichenzia Ross Friedman Ference LLP
                                     1065 Avenue of the Americas
                                     New York, NY  10018
                                     Attention:   Gregory Sichenzia, Esq.
                                     Telephone:  (212) 930-9700
                                     Facsimile:   (212) 930-9725

If to the Secured Party:             AJW Partners, LLC
                                     AJW Offshore, Ltd.
                                     AJW Qualified Partners, LLC
                                     New Millennium Capital Partners, II, LLC
                                     1044 Northern Boulevard
                                     Suite 302
                                     Roslyn, New York  11576
                                     Attention:  Corey Ribotsky
                                     Facsimile:  516-739-7115

With copies to:                      Ballard Spahr Andrews & Ingersoll, LLP
                                     1735 Market Street, 51st Floor
                                     Philadelphia, Pennsylvania  19103
                                     Attention:  Gerald J. Guarcini, Esquire
                                     Facsimile: 215-864-8999

                                       11
<PAGE>

            14. Other Security. To the extent that the Obligations are now or
hereafter secured by property other than the Intellectual Property or by the
guarantee, endorsement or property of any other person, firm, corporation or
other entity, then the Secured Party shall have the right, in its sole
discretion, to pursue, relinquish, subordinate, modify or take any other action
with respect thereto, without in any way modifying or affecting any of the
Secured Party's rights and remedies hereunder.

            15. Miscellaneous.

                  (a) No course of dealing between the Company and the Secured
Party, nor any failure to exercise, nor any delay in exercising, on the part of
the Secured Party, any right, power or privilege hereunder or under the Notes
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.

                  (b) All of the rights and remedies of the Secured Party with
respect to the Intellectual Property, whether established hereby or by the Notes
or by any other agreements, instruments or documents or by law shall be
cumulative and may be exercised singly or concurrently.

                  (c) This Agreement and the Security Agreement constitute the
entire agreement of the parties with respect to the subject matter hereof and is
intended to supersede all prior negotiations, understandings and agreements with
respect thereto. Except as specifically set forth in this Agreement, no
provision of this Agreement may be modified or amended except by a written
agreement specifically referring to this Agreement and signed by the parties
hereto.

                  (d) In the event that any provision of this Agreement is held
to be invalid, prohibited or unenforceable in any jurisdiction for any reason,
unless such provision is narrowed by judicial construction, this Agreement
shall, as to such jurisdiction, be construed as if such invalid, prohibited or
unenforceable provision had been more narrowly drawn so as not to be invalid,
prohibited or unenforceable. If, notwithstanding the foregoing, any provision of
this Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions of
this Agreement and without affecting the validity or enforceability of such
provision or the other provisions of this Agreement in any other jurisdiction.

                  (e) No waiver of any breach or default or any right under this
Agreement shall be considered valid unless in writing and signed by the party
giving such waiver, and no such waiver shall be deemed a waiver of any
subsequent breach or default or right, whether of the same or similar nature or
otherwise.

                  (f) This Agreement shall be binding upon and inure to the
benefit of each party hereto and its successors and assigns.

                  (g) Each party shall take such further action and execute and
deliver such further documents as may be necessary or appropriate in order to
carry out the provisions and purposes of this Agreement.

                                       12
<PAGE>

                  (h) This Agreement shall be construed in accordance with the
laws of the State of New York, except to the extent the validity, perfection or
enforcement of a security interest hereunder in respect of any particular
Intellectual Property which are governed by a jurisdiction other than the State
of New York in which case such law shall govern. Each of the parties hereto
irrevocably submit to the exclusive jurisdiction of any New York State or United
States Federal court sitting in Manhattan county over any action or proceeding
arising out of or relating to this Agreement, and the parties hereto hereby
irrevocably agree that all claims in respect of such action or proceeding may be
heard and determined in such New York State or Federal court. The parties hereto
agree that a final judgment in any such action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by law. The parties hereto further waive any objection to
venue in the State of New York and any objection to an action or proceeding in
the State of New York on the basis of forum non conveniens.

                  (i) EACH PARTY HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING
OF ANY DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATER OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR
EACH PARTY TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY
RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY WILL
CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY
FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL, AND THAT SUCH PARTY HAS KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHTS TO
A JURY TRIAL FOLLOWING SUCH CONSULTATION. THIS WAIVER IS IRREVOCABLE, MEANING
THAT, NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IT MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS AND SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. IN THE
EVENT OF A LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.

                                       13
<PAGE>

                  (j) This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       14
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.

                                        CAPE SYSTEMS GROUP, INC.

                                        By: /s/ NICHOLAS TOMS
                                            ---------------------
                                            Nicholas Toms
                                            Chief Executive Officer

                                        AJW PARTNERS, LLC
                                        By: SMS Group, LLC

                                        By: /s/ COREY S. RIBOTSKY
                                            -------------------------
                                            Corey S. Ribotsky
                                            Manager

                                        AJW OFFSHORE, LTD.
                                        By: First Street Manager II, LLC

                                        By: /s/ COREY S. RIBOTSKY
                                            -------------------------
                                            Corey S. Ribotsky
                                            Manager

                                        AJW QUALIFIED PARTNERS, LLC
                                        By: AJW Manager, LLC

                                        By: /s/ COREY S. RIBOTSKY
                                            -------------------------
                                            Corey S. Ribotsky
                                            Manager

                                        NEW MILLENNIUM CAPITAL PARTNERS II, LLC
                                        By:  First Street Manager II, LLC

                                        By: /s/ COREY S. RIBOTSKY
                                            ---------------------
                                            Corey S. Ribotsky
                                            Manager

                                       15ISORAY,
        INC.

      Amended
        and Restated 2005 Stock Option Plan

       

      1.    Purpose
        Of Plan.

       

      (a)    General
        Purpose.
        The
        purpose of the IsoRay,
        Inc. Amended and Restated 2005 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 directors, officers, key employees and service
        providers of the Corporation, its subsidiaries, and their predecessor companies
        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
        1,800,000 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 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 directors, key employees of, or service providers to the
        Corporation, its subsidiaries or their predecessor companies, or others who
        qualify under the general purpose of the Plan stated above in Section 1,
        whether or not such persons are also members of the Board; provided, however,
        that no incentive stock option may be granted to a director of the Corporation
        unless such person is also an executive employee of the
        Corporation.

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

       

      (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.

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

       

      (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.

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

       

      (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 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 and except with respect to
        options
        granted to current and former consultants, the termination of which will
        be
        determined by the agreement with such consultant or by the Board, if any
        optionholder ceases to be a director or 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 or directorship
        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 or directorship 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 or directorship terminated, at any time prior to
        the
        expiration date of the options or within one year of the date of termination
        of
        employment or directorship, 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 or directorship 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
        or while rendering consulting 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 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).

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

       

      (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 director, officer, key employee or service provider
        (or his
        legal representatives or heirs) of a written representation that the Option
        Shares are being purchased for investment and not for distribution.

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

       

      (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. 

       

      (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.

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      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

      

       

       

      
        
           

        

        
          8

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